the visible hand

it is the theory which decides what can be observed – einstein

Archive for August, 2009

Stiglitz on the deficit and the dollar…

Posted by ecoshift on August 29, 2009

Joseph E. Stiglitz — Farewell to the Dollar as the World’s Currency of Choice

…international markets understand that the United States may face strong incentives to reduce the real value of its debts through inflation, which makes each dollar owed worth less. If market players are worried about inflation (or even if they are worried that others might be worried) that is bad news for the dollar. Holding dollars today represents risk without reward: The returns to U.S. Treasury bills are near zero, and even those most confident in the Federal Reserve must acknowledge the chance that things will not go smoothly.

For decades, other nations have held dollars in their central bank reserves, seeking to give confidence to their country and currency. But in a globalized economy, why should the entire financial system depend on the vagaries of what happens in America?

The current system is not only bad for the world, it is bad for the United States, too….

Like it or not, out of the ashes of this debacle a new and more stable global reserve system is likely to emerge, and for the world as a whole, as well as for the United States, this would be a good thing. It would lead to a more stable worldwide financial system and stronger global economic growth. The current system entails developing countries putting aside hundreds of billions of dollars a year — only weakening global demand and contributing to our economic difficulties. Also, there is something a little unseemly about poor countries lending the United States trillions of dollars, now at an interest rate of close to zero.

Discussions on the design of the new system are already underway. The United Nations’ Commission of Experts on Reforms of the International Monetary and Financial System …described a number of alternatives.

The United States has resisted these changes, but they will come regardless, and it’s better for us to participate in the construction of a new system than have it happen without us. The United States has seen great advantages with the dollar as the world’s reserve currency of choice, particularly the ability to borrow at low interest rates seemingly without limit. But we haven’t seen the costs as clearly: the inevitable trade deficits, the instability, the weaker global economy. The benefits to us are likely to shrink, and rapidly so, as countries shift their holdings away from the dollar.


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Barney Frank and Ron Paul… HR1207 in October?

Posted by ecoshift on August 29, 2009

I approve. Hopefully GS.com will have slightly less influence over policy and lending.


H.R. 1207: 111th Congress
Federal Reserve Transparency Act

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“arbitrary” FCC cable market share cap?

Posted by ecoshift on August 29, 2009

Just trying to protect the consumer from the results of ruinous competition. No doubt.


Court tosses “arbitrary” FCC cable market share cap – Ars Technica

“Cable companies are forbidden from controlling more than 30 percent of the pay TV market in the US, though the FCC refuses to include satellite broadcasters and new services like FiOS in its calculations—even after being ordered to do so by a federal court. The court has now vacated the entire rule, making media concentration Comcastic! once more.”

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Ruinous competition…

Posted by ecoshift on August 29, 2009

Competition Policy in Distressed Industries

Excerpt from Remarks as Prepared For Delivery to ABA Antitrust Symposium: Competition as Public Policy
CARL SHAPIRO
Deputy Assistant Attorney General for Economics
Antitrust Division
U.S. Department of Justice
May 13, 2009

“Ruinous Competition”

During an economic downtown, some industries will inevitably have substantial excess capacity. Under these circumstances, the prices resulting from competition may fail to provide many of the suppliers in the industry with a normal, risk-adjusted rate of return on capital. This may be true even for firms that are relatively efficient and have done a good job anticipating the needs of customers. The risk that a general economic downturn will reduce the rate of return on invested capital is, of course, but one of the many risks associated with business investments. Indeed, in many industries it is normal and expected that firms will experience some periods during which the risk-adjusted rate of return on capital is above normal, and other periods when it is below normal. Sound competition policy should not allow firms to restrict competition to avoid downside risks in their rate of return, any more than sound competition policy should intervene to deprive successful firms of their upside returns when times are good.(37)

These days, it is unlikely that well-counseled firms will explicitly argue that they need to be saved from “ruinous” or “cutthroat” competition. But, under one name or another, this idea is likely to resurface. For example, two merging firms may well argue that ongoing competition will leave them with insufficient profits to make valuable and necessary investments to serve consumers. This is effectively a version of the “ruinous competition” argument that should be treated skeptically.

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solar panel price drops

Posted by ecoshift on August 28, 2009

Homeowners Shopping for Solar Panels Find Prices Have Dropped – NYTimes.com

…the cost of solar panels has plunged lately, changing the economics for many homeowners. Mr. Hare ended up paying $77,000 for a large solar setup that he figures might have cost him $100,000 a year ago.

…The price drops — coupled with recently expanded federal incentives — could shrink the time it takes solar panels to pay for themselves to 16 years, from 22 years, in places with high electricity costs, according to Glenn Harris, chief executive of SunCentric, a solar consulting group. That calculation does not include state rebates, which can sometimes improve the economics considerably.

American consumers have the rest of the world to thank for the big solar price break.

Until recently, panel makers had been constrained by limited production of polysilicon, which goes into most types of panels. But more factories making the material have opened, as have more plants churning out the panels themselves — especially in China.

“A ton of production, mostly Chinese, has come online,” said Chris Whitman, the president of U.S. Solar Finance, which helps arrange bank financing for solar projects.”

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Newly evolved fur coat

Posted by ecoshift on August 27, 2009

Newly evolved fur coat a quick hit in Nebraska – life – 27 August 2009 – New Scientist

Deer mice have pulled off the opposite trick to the famous peppered moth, evolving a light coat to disguise themselves from predators. What’s more, they did it even though their ancestors had no genes for light coats….

Standing start

The amount of genetic variation… suggests the mutation occurred less than 10,000 years ago, Linnen says – after the formation of the Sand Hills.

“An older mutation would show lots of variation,” she says.

Normally, to achieve such a rapid evolutionary shift a species needs to have an alternative version of a gene already in circulation. A change in conditions – such as trees becoming darker as they get covered in soot, in the case of the peppered moth – can then provide the selection pressure that causes the alternate gene to spread. But in deer mice the new version of Agouti spread rapidly from a standing start.

Woodruff says that these “de novo” mutations – which occur after a species has encountered the situation where they will be useful, rather than before – may be more important for evolution than biologists think.

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China Outdoes U.S. in Making Solar Products

Posted by ecoshift on August 25, 2009

China Outdoes U.S. in Making Solar Products – NYTimes.com

WUXI, China — President Obama wants to make the United States “the world’s leading exporter of renewable energy,” but in his seven months in office, it is China that has stepped on the gas in an effort to become the dominant player in green energy — especially in solar power, and even in the United States.

Chinese companies have already played a leading role in pushing down the price of solar panels by almost half over the last year. Shi Zhengrong, the chief executive and founder of China’s biggest solar panel manufacturer, Suntech Power Holdings, said in an interview here that Suntech, to build market share, is selling solar panels on the American market for less than the cost of the materials, assembly and shipping.

Backed by lavish government support, the Chinese are preparing to build plants to assemble their products in the United States to bypass protectionist legislation. As Japanese automakers did decades ago, Chinese solar companies are encouraging their United States executives to join industry trade groups to tamp down anti-Chinese sentiment before it takes root.

The Obama administration is determined to help the American industry. The energy and Treasury departments announced this month that they would give $2.3 billion in tax credits to clean energy equipment manufacturers. But even in the solar industry, many worry that Western companies may have fragile prospects when competing with Chinese companies that have cheap loans, electricity and labor, paying recent college graduates in engineering $7,000 a year.

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Asia’s Recovery Highlights China’s Ascendancy

Posted by ecoshift on August 25, 2009

Asia’s Recovery Highlights China’s Ascendancy – NYTimes.com
By NELSON D. SCHWARTZ
Published: August 23, 2009

PARIS — In past global slowdowns, the United States invariably led the way out, followed by Europe and the rest of the world. But for the first time, the catalyst is coming from China and the rest of Asia, where resurgent economies are helping the still-shaky West recover from the deepest recession since World War II.

Economists have long predicted that an increasingly powerful China would come to rival and eventually surpass the United States in economic influence. While the American economy is still more than three times the size of China’s, the nascent global recovery suggests that this long-anticipated change could arrive sooner than had been expected.

Such a shift would have significant ramifications for the United States and the rest of the West, even after the global economic recovery takes hold.

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The Fed makes a quiet, and early, withdrawal

Posted by ecoshift on August 25, 2009

Irwin Kellner: The Fed makes a quiet, and early, withdrawal – MarketWatch

“PORT WASHINGTON, N.Y. (MarketWatch) — Guess what? The Federal Reserve has not only stopped depositing copious amounts of liquidity into the economy — it now appears to be in the process of making a sizable withdrawal.

A close look at quantitative measures of monetary policy reveals a sudden change in trend. After growing at unprecedented rates for well over a year, these aggregates stopped rising several months ago and have since declined, according to data provided by the Federal Reserve Bank of St. Louis.

For example, the monetary base — the raw material for the money supply — has fallen at a seasonally adjusted annual rate of 8% from early April of this year through mid-August, after soaring at a 187% pace during the previous eight months. ”

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positive signs driven by short term factors

Posted by ecoshift on August 22, 2009

America’s housing market: Where it all began | The Economist
Aug 20th 2009 | NEW YORK

…Moreover, the positive signs in housing are partly driven by short-term factors. One is the tax credit for first-time buyers that was included in Mr Obama’s stimulus package: some are rushing to buy now because deals must close by November 30th to qualify. Annual tax refunds, handed out in recent months, may also have given the market a temporary lift. Attractive mortgage rates helped, too. But these have climbed off their historic lows, despite efforts to keep them down through the Fed’s purchases of mortgage-backed securities. Many expect them to rise further as ballooning government borrowing puts upward pressure on Treasury yields.

A glut of supply will also weigh on prices, thanks to a wave of repossessions. Foreclosures are running at record levels, with one in 355 of the nation’s homes receiving a filing in July alone. Seized properties now account for almost one in four sales (see chart 2). Increasingly, those losing their homes are supposedly safer borrowers with “prime” mortgages. They now account for more foreclosures than subprime borrowers, says the Mortgage Bankers Association (MBA).

With 1.8m homes already in foreclosure, a “similar amount” may be heading that way, reckons Torsten Slok, an economist at Deutsche Bank. Even those states that were the first to feel pain are still seeing a sharp increase in pre-foreclosure notices. In California one type of notice, for “trustee sales”, leapt by 32% from June to July, according to ForeclosureRadar, a website. Even more worryingly, delinquencies, the raw material for foreclosures, are still on the rise across much of the once-golden state. In Orange County nearly 7% of mortgages are at least three months overdue but not yet foreclosed, up from around 5% at the start of the year.

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