Showing posts from July, 2011

What if US failed to increase Debt Ceiling? (31 July 2011)

Deadline gets closer and closer, yet US have not come out a concrete solution to calm the world. Whether tax increases should be included in a deficit reduction agreement or not, both Democrats and Republicans are standing firm without compromise. Republicans insist that any deal to cut deficits should involve spending cuts only while Democrats have been demanding both spending cuts and tax increases.

Although Finance Malaysia reckons that the Congress would pass the bill to increase debt ceiling, let us analyzed and prepare for the unfortunate outcome. What if the debt ceiling limit is not raised by 2nd August?
US bondholders will get paid first, while other payments such as social security, military payment, and Medicare services will stall.Downgrading by rating agencies is unavoidable, which will lead to an increase in Treasury's borrowing costs.US will be losing its AAA ratings, damaging the important role of USD as one of the world's preferred currency.USD will slump to yet…

A Deal Is Coming

The White House and Congressional leaders will soon announce a deal to raise the US government debt ceiling. Surprise! Surprise! This will be a victory for no one, except politicians. The debt will spiral on and should reach $ 20 trillion within seven or eight years. By 2025 we should soar over $ 30 Trillion. By that time, there will be no fix and we will face the Greece scenario without a European Central Bank handy to delay the inevitable.

So, the politicians will cheer that the system has worked. But, actually, the system, once again, failed. It simply continues the US on the path to ultimate bankruptcy. Without seriously reforming social security and medicare, we will come to a time when there is no way to avoid bankruptcy except dishonoring the social security and medicare promises to folks who are, by then, already dependent upon them. This is the endgame that Obama and the politicians are taking us to.

The rest of the Obama agenda will continue to stifle US economic grow…

US Debt Ceiling: What is that exactly?

Time is running out. We still have 3 more days to the very decisive day of 2nd August 2011 for US politicians to reach an agreement to increase the US debt ceiling. Everyday we heard this word "Debt Ceiling" repeating be it via TV, radio, newspaper and social media, but do we exactly know what does it mean? Once again, Finance Malaysia blog strive to provide the knowledge to public regarding the most discussed economic issue now. So, what is debt ceiling?

The debt ceiling is a cap set by Congress on the amount of debt that the federal government can legally borrow. The cap applies to debt owed to the public plus debt owed to federal government trust funds such as those for social security and Medicare.
Why US need debt ceiling? With debt ceiling, US can only borrow to finance their budget with the limit given. This will put a stop on the amount US can borrow to avoid US from over borrowing, which is very dangerous for the economic health of US.
What is the current limit? The curre…

No Growth Obamanomics

So here we are, puffing along at 1 percent for the first half of 2011 -- the worst economic recovery in modern history. So much for "hope and change."

There are only two real economic issues: 1) freeing up the economy so that it can recover; 2) reforming the entitlements so the country doesn't go bankrupt. Neither of these items are on Obama's agenda.

You wonder why Obama hasn't noticed the utter failure of his economic agenda. By now, you would think he would begin to get a clue. But, it doesn't seem that way. He still seems to think that the economy is someone else's fault. If only we taxed businesses more, they would hire more people, he seems to think. How about more regulation, how about more unionization, how about more lawsuits, how about more demonizing millionaires and billionaires? That ought to bring about a lot of new jobs!

I am still puzzled as to whether Obama is a fool, or simply doesn't care, or does he have a master plan and th…

Robert Samuelson Has It Right

Robert Samuelson's article in this morning's New York Times is right on target. Samuelson zeroes in on our fiscal problem and lays it at the feet of our subsidies for the elderly. Yes, subsidies. The idea that social security and medicare represent a safety net does not accord with the facts, as Samuelson notes. The elderly are by no means as poor as the White House would have you believe. Transferring money from working Americans to retired Americans is often a "reverse Robin Hood" exercise. Folks with less income and few assets are often subsidizing the upper incomes. As Samuelson notes more than 25 percent of the over 65 population have assets that exceed $ 250,000, which is a lost more than the asset base of the folks subsidizing them.

It is time we disabused ourselves of the notion that social security and medicare are helping poor people. Poor people die earlier than rich people. Folks that live into their 80s and 90s are disproportionately well off com…

It's Downgrade Time

The US is on course for a ratings agency downgrade from AAA to AA. This has nothing whatever to do with the debt limit extension debate. The only mild relevance to the debt limit debate is the missed opportunity to use the debt ceiling discussion to begin to take steps to reign in the entitlements.

But, alas, no one was interested in reigning in the entitlements. So, the downgrade is now inevitable. Look for the downgrade to take place in a friendlier environment. It won't happen this week or next. But, it will certainly take place before year end.

The problem is that no one in Congress votes on entitlement spending. Entitlement spending is part of the "mandated" budget items. The spending on entitlements has no limit other than population growth I suppose. There are no funds available in the future to fund the entitlements, so selling treasury bonds is the only way to fund the entitlements until no one will buy our bonds anymore. That day is probably coming withi…

Back the Boehner Plan

Nothing good will come of this. The Boehner plan is not a good plan. It is not even close to a good plan. Unless the entitlements are tackled, there can be no real progress on the debt problem.

Nevertheless, it is now going to be either the Boehner plan or the Reid plan (which is basically to do nothing at all). So, it is time to get behind the Boehner plan, which is only slightly better than nothing at all.

At least the adoption of the Boehner plan (as modified by the Senate) will be a stinging defeat for our big spending President, and that alone is worth something.

The Phony Crisis

President Obama and his Democratic allies are shrieking daily that the world is going to come an end if the debt ceiling isn't raised. Why aren't the financial markets singing the same tune? The stock market and, more tellingly, the treasury markets are showing no signs of concern. During the two to three weeks of intense negotiations and the failure of negotiations, the markets have done mostly nothing. The stock market, on balance, is up and the treasury market is pretty much flat. So, where is the panic in financial markets?

Last Saturday, Treasury Secretary Tim Geithner was seen on Fox News hoping against hope that markets would collapse Sunday night if no debt deal was reached. So. No debt deal was reached and the markets yawned. The President, Tim Geithner, Ben Bernanke and the Democratic Congressional leadership are all praying (in the open and before microphones) all day and night that financial markets will show some concern for the phony crisis that they have …

The Poorest Among Us

Obama is forever excoriating "the rich" and claiming that he represents the average American and the "poorest among us." Really? Is that why Warren Buffett and Bill Gates and George Soros are so supportive of Obama?

The brunt of the current recession is being borne, not by Buffett, Gates and Soros, but by the "poorest among us." If you look at the data on unemployment, the unemployed are concentrated among those with the lowest education levels and concentrated among minorities. The rich and comfortable are doing fine under the Obama regime. That's why so many of the "comfortable left" support Obama and his administration.

Obama and Pelosi will never have to look for a job. Neither has spent a day in the private sector hoofing it. They fly in charter aircraft and government financed airplanes far above the common folk. It is easy to pontificate from that elevated position.

"Let them eat cake" is an expression that never grows…

Same Old Tune

Nothing new in Obama's world. It's still about rich folks paying their fair share (regardless of the impact on employment). This is a silly joke. Raising tax rates does not raise revenue; eliminating deductions does not raise tax revenue. Obama is interested in only one thing: redistribution of wealth. Raising taxes won't get that done either, because it won't really increase revenues from the wealthy.

Boehner is trying to do the right thing. He gets it. But, even Boehner doesn't appreciate the seriousness of the US's predicament. Even the Boehner plan will lead to an ultimate US default. Obama would just speed up the timetable for default.

A "no" vote is still the right vote on the debt limit increase.

You are the "Big Corporations"

When Obama speaks of the "Big Corporations," he is talking about the average American. The average American owns the big corporations through their pension funds, mutual funds, and through the foundations and endowments that they support. There isn't some rich corporation guy out there to go after. If you tax Exxon, then the average American's stock holdings suffer and the average American's future pension payments will be less.

So, what Obama should say is "Let's go after the Big Corporations, so that the average American can retire on less money." The facts are that taxing large corporations is a tax that is almost totally borne by folks who buy their products and own their shares -- that's middle America.

So, if you want Americans to retire with a significantly lower standard of living, then, by all means, tax the heck out of the corporations that they own.

Voting "No" May Prevent Default

Default on the treasury debt is less likely if the debt limit extension is not approved. After all, less than $ 10 trillion of the ($ 14.3) national debt is made up of outstanding treasury securities (bills, notes and bonds). Something like $ 2.5 trillion is the social security trust fund (a figment of everyone's imagination) and another $ 2 trillion is held by various government agencies.

Default is virtually impossible if the debt ceiling extension is voted down, since the debt service requires relatively small amounts of money and social security can be completely funded (through the so-called trust fund) without increasing the national debt by a single penny. So where is the default?

Default is almost certain to occur within a few years, if the debt ceiling limit is increased. Within eight years we will be staring at nearly $ 30 trillion in debt with a GDP still in the teens (of trillions). Then, there will be no hope. Too many folks will be on social security and medicare…

So Far, So Good

Three cheers for the debt negotiations stalemate. What this shows, thus far, is that some are serious about achieving substantial cuts in government spending and that some are not serious. That is truly revolutionary. For generations, Republicans and Democrats have joined hands to "make government work" by increasing the government spending trajectory without providing the funding to support that trajectory.

It is easy to promise benefits. It is much harder to figure out how to pay for them. This is the lesson the Western world is learning from California to the European underbelly.

That is why the current stalemate is such good news. For the first time, it looks like some politicians are serious about facing up to our coming fiscal disaster. Unfortunately, President Obama is not among those politicians. But, we already knew that. Obama is mired in the rhetoric of class warfare and is unconcerned about unemployment, the stagnant economy, and the exploding national d…

New Fund: AmAsia Pacific REITs

Despite the current high level of share market globally, especially in Asia, there is still hanging fruits waiting for investor to grab. One of it was REITs, which lags behind its share market peers in terms of valuation. With this, AmMutual launched their latest fund which focuses on REITs investment on 18th July 2011.

The fund aims to provide regular income and to a lesser extent capital appreciation by investing in REITs. To achieve the investment objective, 70% to 98% of the fund's NAV will be invested in REITs listed in Asia Pacific region, which includes but not limited to Australia, Hong Kong, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand. In addition to country diversification, the Fund will also diversify into different REITs sectors such as residential, commercial and industrial. The fund will hold between 2% to 30% of its NAV in liquid assets.

Strategy Employed... The manager employs an active allocation strategy, which means the asset allocat…

Another Quick Fix for Greece

Germany has agreed to a new Eurozone bailout for Greece amounting to a $ 157 guarantee for Greek debt. Gradually, Germany and France are underwriting the sick Greek economy. While most observers are concerned about "contagion" spreading to Spain and Portugal, the real "contagion" is that Germany and France are en route to becoming a future Greece. The strategy of throwing good money after bad will ultimately bring the financial status of German and French sovereign debt under scrutiny.

Nothing in the bailout package alters the fact that Greek sovereign debt is growing daily and will continue to swell to ever higher numbers. There will be more hand wringing and bailouts down the road until the road comes to an end and Germany and France become the focus.

The only plus tick in the package announced today is that bondholders take an estimated twenty percent haircut on their principal. That is good news. But, it is not enough.

The cold facts are: 1) the Eurozone i…

New Fund: HwangDBS China Select Fund

The Fund is a wholesale feeder fund that aims to achieve capital appreciation over the long term by investing in a collective investment scheme, namely the China Select Fund, a Cayman Islands-domiciled sub-fund of Citi Investment Trust (Cayman) II managed by Citigroup First Investment Management Limited (the "Target Fund"). Being a wholesale fund in nature, this Fund is open for sale to Qualified Investors only.

The Manager will invest a minimum of 95% to maximum of 99.8% of the Fund's NAV in units of the Target Fund and a maximum 5% in deposits. The base currency of the Target Fund is US dollar.
3 reasons to invest in this fund:

What is the permitted investments for the Target Fund? It is expected that approximately 70% to 100% of the Target Fund's portfolio will be invested directly and indirectly in equity securities issued by companies which are listed or being offered in an initial public offer on official stock markets in Hong Kong, China (A Share and B Share marke…

European Bank Stress Tests -- More Government Obfuscation

So where are the tough regulators that were supposed to come with all the bailouts? European politicians are now blaming the messengers that are telling them that their banking systems are done for. The so-called "stress tests" on European banks were absurd. They assumed, for example, that no European country will ever default! Well, if no European country will ever default, then what's the problem?

Politicians are all for regulation -- unless you need it. Then, the politicians no longer want regulation. Witness the attack by European politicians on the rating agencies. Now that the rating agencies are doing their job, the politicians are angry. Go figure.

If there were no regulatory bodies at all and no European Central Bank (ECB), then, by now, markets would have reigned in the excesses of the PIIGS countries by denying them new funding. Eliminating new funding is, in the end, the only solution to Europe's woes. The market could have done that easily, but g…

Why Are We Protecting Banks and Wealthy Bondholders?

Who owns Greek debt and Italian Debt and Portuguese debt and so forth? Banks own a lot of it and somehow that is why we are supposed to support a bailout. Why?

If banks made bad decisions and ended up putting their money up to fund folks that can't pay them back, why should taxpayers pony up? That's all that's going on in the Eurozone. Let these countries work out their debt problems with their creditors like private citizens must do. Why are banks priveleged in this deal?

What's more, if every time German and French banks make stupid decisions, their governments intervene to prevent them from taking their punishment, then why shouldn't they simply keep making stupid decisions? Why not? Taxpayers will step up to the plate and take the bad decisions off their hands.

The usual hue and cry by the bailout proponents is that a financial and economic debacle will occur if we let those who made bad decisions suffer the consequences of their own bad decisions. Really?…

New IPO: Bumi Armada

Bumi Armada Bhd (BAB) is seeking a listing on 21st July 2011 with an enlarged share capital of 2.93bn shares of RM0.20 each on the Main Market of Bursa Malaysia. Based on the retail IPO price of RM3.03 per share, BAB will have a market capitalization of RM8.87bn. It expects to raise gross proceeds of about RM1.95bn from the flotation. Some 38% of the proceeds will be used to pare down bank borrowings while 29% and 28% will be used for capital expenditure and working capital respectively. The balance 5% will be used to pay listing expenses.

Company Profile Bumi Armada Berhad is the largest owner and operator of offshore support vessels in Malaysia and is an established and trusted service partner in the oil and gas industry. It had established a strong position in FPSO systems, a growing Transport & Installation business and competency in management of large projects.
With head office in Kuala Lumpur, Malaysia and shore-bases in several countries around the globe, BAB currentl…

Is He Dumb or Devious?

Obama's press conference today was masterful -- Mr. Niceguy, pleading for reason. If you do what he wants, you virtually guarantee a generation or two of economic stagnation and a potential total collapse of the US economy within a dozen years. But, listening to him, you would think that all all is well, except for the intransigence of a few (Republican) politicians intent on helping the super rich.

Surely he knows better. Getting millionaires and billionaires to pay more taxes isn't even one of the options, given the tax code. Raising tax rates simply guarantees economic stagnation, as potential employers shift assets around to avoid the taxman. So much for job creation.

Obama seems to want to usher in a permanent decline in US economic growth. we come. Is he watching the Eurozone? They have already adopted the Obama plan.

Maybe, just maybe, economic stagnation is the real goal of this Administration.

The US Will Default Sooner or Later -- Why Not Now?

There is little question that the US is headed for an ultimate default on its sovereign debt. This is almost guaranteed to take place within less than 20 years. So why not simply do it now while the debt is relatively small. Defaulting on 14.5 Trillion is a whole lot better than defaulting on $ 40 trillion, which is probably where we will be in fifteen to twenty years.

Yes, it will be painful. Yes, it will be disruptive. But why create three times the problem for our children and our grandchildren. Why not deal with it now?

Simply default and then make the necessary adjustments. The markets will force a rationality on government that the politicians are not likely to ever be able to do.

A default now is a whole lot better solution than a much, much bigger default in fifteen years.

Should we invest in Commodities or Resources? (July 2011)‏

Unlike real estate, assets type such as commodities and resources investments tend to be highly volatile. This kind of assets classes is suitable for high risk takers. Knowing the characteristic of the assets classes is important to suit your investment objectives so that a correct investment decision was made. However, I noticed that many investors confused about Commodities and Resources, and they often lumped them as SAME. Is it true? Let's look at it separately (not together).

Commodities vs Resources?
Yes. Both is similar, yet there are some differences between them. First, let's talk about commodities. Commodities for me were comprised of metals such as copper, iron ore, silver, gold, platinum... Although many of us includes energy assets such as oil and gas into it, we can categorize it as an asset class which we can't consume with our mouth. Sometime, it was called hard commodities.

Meanwhile, Resources are soft commodities. They comprises agriculture p…

Blinder Has Blinders On

Alan Blinder has an op-ed in the Wall Street Journal that reveals in stark terms the irrelevance of modern macroeconomics. Blinder is a Princeton economics professor and former Vice Chairman of the Federal Reserve. He is often trotted out by the Democratic Party to defend big spending by Congress or inflationary monetary policy by the Federal Reserve. He's back on the podium this morning asking:

"What might a real job-creation program look like?"

Dig this answer:

"Creating jobs costs money -- whether it's via tax cuts or more spending." Could have fooled me. Would it really be possible to spend more than Blinder and his allies have done in the past three years.

Blinder, like most other Democrats, believes that the cost of labor is irrelevant in the decision to hire. So long as you believe cost doesn't figure into the hiring decision, you will never be able to understand our current unemployment problems.

New IPO: OldTown

OldTown Bhd is a home-grown proprietor involved in the white coffee business that also operates with an extensive chain of cafes in Malaysia. The group has a total of 182 café outlets in Malaysia, Singapore and Indonesia. It also distributes its coffee and other beverage products particularly in Malaysia, Singapore and Hong Kong although its products are also marketed worldwide. Inspired to provide quality white coffee to Malaysians, the group's founders Go Ching Mun and Tan Say Yap created their own instant white coffee formula in 1999. The duo established their manufacturing operations in the same year under the "OLDTOWN" brand name and in 2005, expanded vertically into the food services segment under the "OLD TOWN WHITE COFFEE" brand name until today.
How far can the coffee's aroma go?
OldTown plans to open 27 more outlets in FY11, which will bring the total number of outlets to 209. The group also plans to relocate its food processing operations and manu…


Uncertainty has been the big buzzword. No one wants to hire anyone because of uncertainty, according to Obama and the media. Really? I think the problem is the opposite.

It seems fairly certain that the environment for business is pretty terrible. The White House hates business and businessmen. The regulators have declared war on American business. Taxes have already gone up dramatically and the plan is to increase taxes even more. Litigation costs and employer mandates are an everyday reality. The minimum wage is up over 20 percent in just the last five years. So, what is uncertain?

If you want a good business environment, move your business to Asia or parts of Eastern Europe.

The problem that the US has is one of certainty, not uncertainty. Obama is a certain, calamitous, reality for American business and for American workers.

Italy and Spain are Now Coming on Stage

Poor Greece was getting lonely. Now come the big boys -- Italy and Spain. These guys have between them nearly nine times as much sovereign debt as our pals in Greece. Wonder how deep the French and German banks are willing to go to bail these guys out. Poor little old Portugal and Ireland -- they must feel neglected -- they've been forced off the front page by Greece and now along comes Italy and Spain.

I wonder if Italy will consider selling off the Colosseum in Rome. That should fetch a pretty price. Spain could let go of a few bullfighting rings and maybe some El Greco paintings (he wasn't Spanish anyway, he was Greek). I should have gone into the sovereign debt bailout consulting business. It looks like it has legs.

So, the ECB continues to believe that if we simply increase the amount of debt in the Eurozone by about 10 percent per year, we can solve the Eurozone debt problems. An interesting view.

Markets aren't as dumb as the ECB (and as the ECB wishes the m…

So, Where's The Mystery?

Persistent high levels of unemployment unlike any economic recovery since the 1930s. Why?

If you knew that there was a large supply of apples at the stores that no one was buying, what would you suppose to be the reason? Your first thought might be the price. Maybe the price of apples is so high that no one wants to buy any. If they were free, someone would buy them. So, somewhere between free and the current price, there is a price that will get the apples off the store shelves.

The same is true with unemployment. At the right price, any business would hire. So, what's wrong with the price? Well, for one thing, imagine you hired someone and then told them a joke that they found offensive. They could then sue you for a few hundred thousand dollars. You could probably settle the suit out of court for $ 100,000 and that's that. So, what was the price of that employee again? Notice, I didn't even have to tell you the employee's pay rate. It is clear that the emp…

Certain Disaster is not "The Certainty We Need"

The President is still singing the same old tune that has sunk the US into the worst economic recovery in our nation's history. According to Obama what the country needs is the announcement of a deal (no matter what it is) to raise the debt ceiling. That would certainly remove uncertainty ... no question. Simply increasing the debt ceiling with a minimal effort to deal with reducing spending virtually guarantees US insolvency within a generation.

You don't really need a trained economist to see why the Obama Administration has created the worst economic recovery in US history. Just imagine what you would do if your goal was to prevent the US from recovering the dynamic engine of the 1980s and 1990s. What you would do is precisely what Obama has done.

Begin by demonizing business and business people. Make it clear that anyone who makes money is really the enemy of the country. Find ways to make labor so expensive and non-competitive that outsourcing and massive domestic …

9.2% and Rising

The race is on. Will unemployment reach a new high before the national debt does? The bankruptcy of Obama's economic policies is there for all to see. The media might try to deny it, but the truth is the economy is not really recovering. Why? Obama economic policies!

Until there is a better environment for the private economy, we will continue to get more of the same. Obama policies are turning the United States into a banana republic.

Republicans Preparing to Fold

Watch out. Here it comes again. John Boehner and Eric Cantor are planning another Republican collapse on the nation's fiscal nightmare. Obama and his allies seem to have scared the Republican leadership into accepting an essentially worthless "compromise" to get to a debt extension deal.

All the talk about how both sides have to give is silly. The nation's problems boil down to social security, medicare and medicaid. Nothing else matters. Cutting military spending, raising tax rates, and so forth are irrelevant and amount to mere political theater. If you don't tackle the entitlements in a serious way, then the next stop will be, within a few years, the beginning of a US default. The numbers make this outcome obvious.

We are four to five years behind Greece. If Republicans fold and accept another sham deal, then the country really has no hope of dealing with this situation and within a decade the US will begin to lower payments to those over 65 then rely…

Interviewing Young Malaysian Josheen Ma

Young, talented, and with a "God-heart". This is my descriptions on Josheen, who came from a small village in Kedah. She become popular after emerging as the winner of UTAR Model Search (UMS) 2010, Project One and Only Inter-varsity pageant. After winning the title of UMS 2010, she start to blog about her life and her dream via Via her blog, she managed to get some modelling jobs.

Currently, Josheen had just finished her internship. However, she chose to work differently from others by doing some charity work for underprivileged children. She love the kids unconditionally and coached them dare to dream and work to win. "I told myself, I should work harder to pursue my dream, thus they will know that I can do it, they can dream and win as well," said Josheen.
What course are you studying in UTAR? And, why you suddenly decided to participate in UMS 2010?
I am bachelor of social science-psychology year 3 students. I am a girl who really low self esteem b…

Buffett is Disingenuous

Warren Buffett was interviewed this morning by Becky Quick on CNBC and, once again, reiterated his pro - big government stance. He cited the national debt that existed at the end of World War II in the US which was 120% of GDP at the time. The fact that he cites that episode shows the extreme cynicism of Buffett and other Obama apologists. Everyone knows, as Buffett knows, that slowing spending after World War II amounted to producing fewer tanks, airplanes and war materials -- no tough political decisions there!

Today, the issue is cutting social security, medicare, and medicaid. Buffett considers cutting social security benefits as the equivalent of ordering fewer tanks for a war that has come to an end. Either Buffett is an idiot, which is doubtful, or he is a man with an agenda, which is more likely.

Buffett is the guy who constantly urges higher tax rates knowing full well that he won't have to pay them, since he is free to shift his income in ways that minimize taxes, so…

OSK Stock Picks for July 2011

While fears of an European sovereign debt default reverberating worldwide, Malaysia quietly outperformed most of the world in June as the Banking sector led the KLCI higher after the potential M&A of RHB Cap was called off . We had expected the KLCI to trend higher led by banks but our hope was founded on potential excitement driven by the merger rather than on sighs of relief that there would be no overpaying for RHB Cap. July looks to be a Strategist’s fantasy? With numerous announcements related to economic reform and infrastructure developments lined up for July, namely: 1 July – The launch of the ETP River of Life project involving the rehabilitation of the Klang River;5 July – The 7th ETP update during which the PM will also unveil PEMANDU’s efforts to classify some 37 policy change recommendations made in the NEM into 6 Strategic Reform Initiative (SRI) clusters that will signal real economic reform and serve as enablers to the ETP projects;8 July – The ground breaking ceremon…

Right on Floyd Norris

It is not often that I praise a New York Times article, but here goes. Floyd Norris's piece this morning on the European Central Bank's handling of Greek debt is right on. As Norris notes, all the ECB is doing is forcing private banks to roll over Greek debt and hold that debt at fictitious prices on their balance sheet. In effect, the ECB is forcing private banks to lie about the value of the assets on their balance sheets.

As Norris notes, lying about the values of your balance sheet assets was considered the great crime of 2008 that lead to the collapse of the US financial system. Now, regulators in Europe and the US are encouraging (forcing) private banks to lie about the value of their assets.

This is why regulation is such a joke and why the real crime is the enactment of Sarbanes-Oxley and Dodd-Frank. Regulators have never, ever uncovered anything of substance about our financial system. Where were they in the Madoff episode? Where were they in the Bear Stearns and…