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Thursday, April 10, 2014

Views from FYR of Macedonia: Russia, the West, America

Views from FYR of Macedonia: Russia, the West, America

After sharing with some people an article on new software for US military cargo helicopters to take more autonomous decisions*, a Macedonian in the group wrote (Spanish):
Si, tenemos suerte y los rusos nos defienden. Si no estamos j[xxx]dos con los americanos y sus maquinas de muerte

Translation: Yes we are lucky that the Russians defend us. If not, we would be [doomed] by the Americans and their Machines of Death.

The article: Navy Drones With a Mind of Their Own. WSJ, Apr 5, 2014. http://online.wsj.com/news/articles/SB10001424052702303532704579481510076347466

 

Friday, March 21, 2014

The Responsible Way to Rein in Super-Fast Trading - by Gary Cohn

The Responsible Way to Rein in Super-Fast Trading. By Gary Cohn
At Goldman Sachs, we would back these measures to limit the risk and instability that technology gains brought.
WSJ, March 20, 2014 8:05 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303563304579447692855042948

Equity-market structure in the U.S. has made important advances over the past 20 years, promoting greater transparency and liquidity. Three powerful forces have been at work: technology, regulation and competition. The result has been narrower spreads, faster execution and lower overall explicit costs to trading stocks.

With the overwhelming majority of transactions now done over multiple electronic markets each with its own rule books, the equity-market structure is increasingly fragmented and complex. The risks associated with this fragmentation and complexity are amplified by the dramatic increase in the speed of execution and trading communications.

In the U.S., there are 13 public exchanges and nearly 50 alternative trading systems. Regulation NMS (National Market System), adopted in 2007, requires that market participants route their orders to the exchange that displays the best public price at any given time. This has increased both the number of linkages in the market and the speed at which transactions are done. The Securities and Exchange Commission has correctly called for an "assessment of whether market structure rules have kept pace with, among other things, changes in trading technology and practices."

In the past year alone, multiple technology failures have occurred in the equities markets, with a severe impact on the markets' ability to operate. Even though industry groups have met after the market disruptions to discuss responses, there has not been enough progress. Execution venues are decentralized and unable to agree on common rules. While an industry-based solution is preferable, some issues cannot be addressed by market forces alone and require a regulatory response. Innovation is critical to a healthy and competitive market structure, but not at the cost of introducing substantial risk.

Regulators and industry participants, including asset managers, broker-dealers, exchanges and trading firms, have all put forth ideas and reforms. We agree with a number of their concerns and propose the following four principles:

• First, the equity market needs a stronger safety net of controls to reduce the magnitude and frequency of disruptions. A fragmented trading landscape, increasingly sophisticated routing algorithms, constant software updates and an explosion in electronic-order instructions have made markets more susceptible to technology failures and their consequences.

We propose that all exchanges adopt a stringent set of uniform, SEC-mandated execution controls to reduce errors. In addition to limit-up, limit-down rules that prevent trades from occurring outside a specified price band, pre-trade price and volume limits should be implemented to block problematic orders from entering the market. Mechanisms should also be introduced to halt a firm's, market maker's or other entity's trading when an established threshold is breached, thus minimizing the uncontrolled accumulation of trades.

• Second: Create incentives to reduce excessive market instability. The economic model of the exchanges, as shaped by regulation, is oriented around market volume. Volume generates price discovery and liquidity, which are clearly beneficial. But the industry must recognize how certain activities related to volume can place stress on a market infrastructure ill-equipped to deal with it.

Electronic-order instructions connect the objectives of buyers and sellers to actions on exchanges. These transaction messages direct the placement, cancellation and correction of orders, and in recent years they have skyrocketed. In the 2010 "flash crash," a spike in the volume of these messages exacerbated volatility, overwhelming the market's infrastructure.

According to industry analysis, since 2005 the flow of these order instructions sent through U.S. stock exchanges has increased more than 1000%, yet trade volume has increased by only 50%. One consequence of the enormous growth in order-message traffic is that increasingly the quote that an investor sees isn't the price he or she can transact, as orders often get canceled at lightning-quick speeds.

Currently there is no cost to market participants who generate excessive order-message traffic. One idea would be to consider if regulatory fees applied on the basis of extreme message traffic—rather than executions alone—are appropriate and would enhance the underlying strength and resiliency of the system. Regulators in Canada and Australia have adopted this approach.

• Third: Public market data should be disseminated to all market participants simultaneously. Exchanges currently disseminate prices and transaction data to the SEC-sanctioned distributor for all investors, but exchanges may also send this information directly to private subscribers. While the data leave the exchange simultaneously, the public data are delayed because they go through the intermediary's processing infrastructure. The public aggregator should release information to all market participants at the same time.

Removing the possibility of differentiated channels for market data also reduces incentives that favor investment in the speed of one channel over the stability and resiliency of another. Instability creates and compounds market disruptions. Stable and accurate market data is one of the most important elements of market safety; it is the backbone of the market that must weather the most extreme periods.

• Fourth: Give clearing members more tools to limit risk. A central clearing house with strong operational and financial integrity can reduce credit risk, increase liquidity and enhance transparency through enforced margin requirements and verified and recorded trades. But because clearing members extend credit, the associated risks must be recognized. Tools like pre-trade credit checks and being able to monitor positions and credit on an intraday basis are essential. Clearing firms use various tools like margin and capital adequacy to manage their risk, but exchanges should also provide uniform mechanisms for clearers to set credit limits and to revoke a client's ability to trade immediately upon request, when necessary.

U.S. markets today are the deepest, most liquid in the world and serve an indispensable role in allocating capital. That means the companies that have the greatest potential to innovate and grow will get the capital they need to create jobs, build new industries and ensure a vibrant economy. Investors have benefited significantly from technology and innovation, but the speed and complexity at which our markets operate aren't being matched with the operational and control environment to support them.

Mr. Cohn is president and chief operating officer of Goldman Sachs

Tuesday, March 4, 2014

Shedding Some Light on Shadow Banking - Don't let a vaguely sinister label for this useful financing prompt harmful regulations

Shedding Some Light on Shadow Banking. By Tony James
Don't let a vaguely sinister label for this useful financing prompt harmful regulations.
WSJ, Mar 04, 2014
http://online.wsj.com/news/articles/SB10001424052702304255604579408991330843998

The term "shadow banking" is one of those Orwellian terms that can undermine critical thought. It has a negative, vaguely sinister connotation about a source of financing that is an essential and desirable part of the financial system. As discussion about the regulation of nonbank entities begins in earnest, it's time to clear the air about what these institutions are and how they operate.

Shadow banking—or more accurately, market-based financing—is simply the provision of capital by loans or investments to some companies by other companies that are not banks. Examples include insurance companies, credit investment funds, hedge funds, private-equity funds, and broker dealers. These institutions do not operate in the dark. Market-based finance in the U.S. amounts to trillions of dollars and is significantly larger than the country's entire banking system.

Mark Carney, Governor of the Bank of England, has correctly noted the role of shadow banking in "diversifying the sources of financing of our economies in a sustainable way." For example, traditional bank financing is not always available for many small- and medium-size companies. Market-based financing has fueled the creation of companies (and thousands of jobs) in many industries. It has rescued companies on the edge of bankruptcy and saved the jobs associated with them. And market-based financing has built warehouses, manufacturing plants and hotels, such as the Four Seasons Hotel and Residences in downtown New York City, when traditional banks could not, or would not, provide capital.

Large banks concentrate risk in relatively few hands, which can pose a risk to the economic system. That is not the case for market-based financing. Risks are safely dispersed across many sophisticated investors who can readily absorb any potential losses. Unlike traditional banks, market-based funds do not borrow from the Federal Reserve, nor do they rely on government-guaranteed deposits. Substantially all their capital comes from well-advised institutional investors who know what they are getting into, and understand the associated risks. Bank depositors (and taxpayers) on the other hand, do not typically know what a bank's investments are or how risky they may be.

Typically, market-based funds also lack the elements that are sources of systemic instability, including high leverage and interdependence. Each investment within a fund is independent and not cross-collateralized or supporting a common debt structure. Losses in any one fund are without recourse to any other fund or to the manager of the capital.

In addition, investors in many market-based funds, including credit investment funds, hedge funds and private-equity funds often cannot instantly withdraw their capital, unlike depositors in banks. Large, sudden withdrawals can lead to runs on the bank or force "fire sales" of assets. With stable, in-place capital, these funds can provide a critical source of liquidity to trading markets in times of turmoil.

Of course, some regulation may be appropriate for nonbank entities that present bank-like risks to financial stability or that lend to consumers. But let's not forget that it was the regulated entities that were the source of almost all the systemic risk in the financial crisis.

Regulations are far from a panacea and would need to be carefully constructed to ensure that the enormous economic benefits of market-based financing are not lost through inappropriate and stifling regulatory policies established for large, deposit-taking banks.

While banks in the U.S. are better capitalized and much safer today than before the financial crisis, market-based financing—shadow banking, if you prefer—still brings enormous economic advantages to a wide range of businesses and employees, and fills a real gap in the market.

In Europe, where banks are less well capitalized, the need for market-based financing is even more critical. As the G-20's Financial Stability Board noted in its policy framework last August, market-based financing creates "competition in financial markets that may lead to innovation, efficient credit allocation and cost reduction."

It is critical that any misunderstanding of the shadow banking system does not result in regulations that undermine the many thousands of companies and jobs that need market-based financing to survive and grow.

Mr. James is president and chief operating officer of Blackstone, a global investment and advisory firm.

Saturday, February 22, 2014

Diversify Europe's Financial Grid. By Alberto Gallo

Diversify Europe's Financial Grid. By Alberto Gallo
Euro-zone lenders hold assets worth more than €30 trillion, three times the output of the euro area.
http://online.wsj.com/news/articles/SB10001424052702304914204579394612843250876
WSJ, Feb 20, 2014

European banks remain vulnerable to another financial crisis. Capital buffers are too small, creditor bail-ins too low and emergency resolution mechanisms still inadequate to insulate governments from losses that could arise from a system-wide failure. In short, we need a new formula for financial stability.

A banking crisis today would still cost European sovereigns between 2% and 10% of GDP. The final bill would depend on many factors, the size of the initial loss being only one. Others include how much is mitigated by the banks' own capital reserves, by pre-existing government backstops and by any money that can be recouped by bailing-in bondholders.

The size of a country's banking system is also critical. By that measure, Europe's banks remain too big to fail.

Euro-zone lenders have shrunk their balance sheets by a total of €4.4 trillion since the second quarter of 2012, but still hold assets worth more than €30 trillion, according to the European Central Bank. That's three times the output of the euro area and far outstrips the U.S., where bank assets are less than GDP.

And if European banks are too big, they're also still undercapitalized. Capital is adequate relative to risk-weighted assets, against which "capital ratios" are measured, but falls short as a proportion of the banks' total asset base and of potential losses.

To make their capital ratios look better, many banks have reduced their risk-weighted assets over the past few years, often by "optimizing" their internal risk models. More than one-third of European banks now have less than 30% risk-weighted assets over total (RWA), some as low as 20%. This means a bank's "10% capital ratio" is effectively equal to €2 of capital for every €100 of assets (20% RWA times 10% equals €2). That's too low, especially for systemic banks whose balance sheets are as large as a country's GDP.

Regulators recognize the issue and are trying to introduce an absolute floor on capital: the Basel committee's 3% leverage ratio prescribes a minimum €3 of capital over assets. But even this would not have helped troubled banks such as Dexia or Anglo Irish, which lost the equivalent of 4% and 20% of their assets during the 2008-09 crisis, respectively.

We estimate that to stand on their own feet, banks need a leverage ratio of about 5.8% of capital over assets. This is consistent with the approach of Swiss and U.S. regulators, who recommend a 6% leverage ratio. It means euro-zone banks would need to raise an additional €492 billion of capital—more than six times the €80 billion that the European Banking Authority says they raised in 2013.

Another solution would be to increase bail-in requirements or state backstops. German Finance Minister Wolfgang Schäuble recently proposed speeding up the formation of Europe's Single Resolution Fund, a bank-financed pool of money planned to help wrap up or restructure failing banks. But the proposed €55 billion that would be available in the fund pales in comparison to the potential losses generated by bank failures, even if a bail-in were to be implemented first. We estimate the fund could help one large or two mid-sized institutions withstand failure, at best.

These backstops are also very difficult to put into action—the decision to restructure or resolve a bank has to pass through national committees, the European Commission, the Single-Resolution Mechanism (whose fine-print is still being drafted), and various other boards. Not a weekend job.

Regulators need a more comprehensive approach to making banks safe. It must encompass the total size of capital reserves, the size and structure of banking systems, and rules that can efficiently bail-in bondholders. Regulators are moving in the right direction, but they have not gone far enough.

Ultimately, I believe that Europe will be free from the threat of failing banks only once it has a smaller banking system and a more diversified supply of credit.

Think of credit like an energy grid: In Europe, 80% to 90% of the energy comes from banks—the coal or nuclear plants of the system. If something goes wrong with them, the costs will be high, the collateral effects toxic, and the damage could take years to clean up.

We need more "renewable energy" in the form of non-bank sources of credit. That means bonds, securitizations, and lending from insurance companies and asset managers. Only then will Europe be free from its banks.

Mr. Gallo is the head of macro-credit research at the Royal Bank of Scotland. The views expressed are his own.

Thursday, February 13, 2014

How Dodd-Frank Doubles Down on 'Too Big to Fail'

How Dodd-Frank Doubles Down on 'Too Big to Fail'
Two major flaws mean that the act doesn't address problems that led to the financial crisis of 2008.
http://online.wsj.com/news/articles/SB10001424052702304691904579345123301232800 
By Charles W. Calomiris And Allan H. Meltzer WSJ, Feb. 12, 2014 6:44 p.m. ET

The Dodd-Frank Act, passed in 2010, mandated hundreds of major regulations to control bank risk-taking, with the aim of preventing a repeat of the taxpayer bailouts of "too big to fail" financial institutions. These regulations are on top of many rules adopted after the 2008 financial crisis to make banks more secure. Yet at a Senate hearing in January, Elizabeth Warren asked a bipartisan panel of four economists (including Allan Meltzer ) whether the Dodd-Frank Act would end the problem of too-big-to-fail banks. Every one answered no.

Dodd-Frank's approach to regulating bank risk has two major flaws. First, its standards and rules require regulatory enforcement instead of giving bankers strong incentives to maintain safety and soundness of their own institutions. Second, the regulatory framework attempts to prevent any individual bank from failing, instead of preventing the collapse of the payments and credit systems.

The principal danger to the banking system arises when fear and uncertainty about the value of bank assets induces the widespread refusal by banks to accept each other's short-term debts. Such refusals can lead to a collapse of the interbank payments system, a dramatic contraction of bank credit, and a general loss in confidence by consumers and businesses—all of which can have dire economic consequences. The proper goal is thus to make the banking system sufficiently resilient so that no single failure can result in a general collapse.

Part of the current confusion over regulatory means and ends reflects a mistaken understanding of the Lehman Brothers bankruptcy. The collapse of interbank credit in September 2008 was not the automatic consequence of Lehman's failure.
 
Rather, it resulted from a widespread market perception that many large banks were at significant risk of failing. This perception didn't develop overnight. It had evolved steadily and visibly over more than two years, while regulators and politicians did nothing.

Citibank's equity-to-assets ratio, measured in market value—the best single comprehensive measure of a bank's financial strength—fell steadily from about 13% in April 2006 to about 3% by September 2008. And that low value reflected an even lower perception of fundamental asset worth, because the 3% market value included the value of an expected bailout. Lehman's collapse was simply the match in the tinder box. If other banks had been sufficiently safe and sound at the time of Lehman's demise, then the financial system would not have been brought to its knees by a single failure.

To ensure systemwide resiliency, most of Dodd-Frank's regulations should be replaced by measures requiring large, systemically important banks to increase their capacity to deal with losses. The first step would be to substantially raise the minimum ratio of the book value of their equity relative to the book value of their assets.

The Brown-Vitter bill now before Congress (the Terminating Bailouts for Taxpayer Fairness Act) would raise that minimum ratio to 15%, roughly a threefold increase from current levels. Although reasonable people can disagree about the optimal minimum ratio—one could argue that a 10% ratio would be adequate in the presence of additional safeguards—15% is not an arbitrary number.

At the onset of the Great Depression, large New York City banks all maintained more than 15% of their assets in equity, and none of them succumbed to the worst banking system shocks in U.S. history from 1929 to 1932. The losses suffered by major banks in the recent crisis would not have wiped out their equity if it had been equal to 15% of their assets.

Bankers and their supervisors often find it mutually convenient to understate expected loan losses and thereby overstate equity values. The problem is magnified when equity requirements are expressed relative to "risk-weighted assets," allowing regulators to permit banks' models to underestimate their risks.

This is not a hypothetical issue. In December 2008, when Citi was effectively insolvent, and the market's valuation of its equity correctly reflected that fact, the bank's accounts showed a risk-based capital ratio of 11.8% and a risk-based Tier 1 capital ratio (meant to include only high-quality, equity-like capital) of about 7%. Moreover, factors such as a drop in bank fee income can affect the actual value of a bank's equity, regardless of the riskiness of its loans.

For these reasons, large banks' book equity requirements need to be buttressed by other measures. One is a minimum requirement that banks maintain cash reserves (New York City banks during the Depression maintained cash reserves in excess of 25%). Cash held at the central bank provides protection against default risk similar to equity capital, but it has the advantage of being observable and incapable of being fudged by esoteric risk-modeling.

Several researchers have suggested a variety of ways to supplement simple equity and cash requirements with creative contractual devices that would give bankers strong incentives to make sure that they maintain adequate capital. In the Journal of Applied Corporate Finance (2013), Charles Calomiris and Richard Herring propose debt that converts to equity whenever the market value ratio of a bank's equity is below 9% for more than 90 days. Since the conversion would significantly dilute the value of the stock held by pre-existing shareholders, a bank CEO will have a big incentive to avoid it.

There is plenty of room to debate the details, but the essential reform is to place responsibility for absorbing a bank's losses on banks and their owners. Dodd-Frank institutionalizes too-big-to-fail protection by explicitly permitting bailouts via a "resolution authority" provision at the discretion of government authorities, financed by taxes on surviving banks—and by taxpayers should these bank taxes be insufficient. That provision should be repealed and replaced by clear rules that can't be gamed by bank managers.
 
Mr. Calomiris is the co-author (with Stephen Haber ) of "Fragile By Design: The Political Origins of Banking Crises and Scarce Credit" (Princeton, 2014). Mr. Meltzer is the author of "Why Capitalism?" (Oxford, 2012). They co-direct (with Kenneth Scott ) the new program on Regulation and the Rule of Law at the Hoover Institution.

Saturday, January 25, 2014

Number of new antibacterial-drug approvals in the US


Source: Drug Makers Tiptoe Back Into Antibiotic R&D. By Hester Plumridge
As Superbugs Spread, Regulators Begin to Remove Roadblocks for New Treatments
WSJ, Jan 23, 2014
http://online.wsj.com/news/articles/SB10001424052702303465004579322601579895822

Saturday, December 28, 2013

MRSA Infections, swine effluent lagoons, and farm consolidations

Answering to some comments in a book review, 'In Meat We Trust,' by Maureen Ogle (http://online.wsj.com/news/articles/SB10001424052702303482504579177742158078278), WSJ, Dec. 17, 2013 6:36 p.m. ET:

A recent paper* in a FAO publication summarizes advances in hog manure management. Obviously, the cases mentioned are small in comparison with the great consolidated farms, but even so, there are multiple ways to manage better the effluents and some useful ways to profit from the lagoons/catchments are shown here.

@Mr Evangelista: I got access to the paper** you mentioned. If interested you may ask for it. I'd like, though, to calm down things. As it says other paper*** published at the same time, which it is likely it is the one Mr Blumenthal mentioned:
"In 2011,we estimated the overall number of invasive MRSA infections was 80 461; 31% lower than when estimates were first available in 2005"

The reasons are not well understood (several explanations are offered), but that is not relevant now. The important idea is that despite increasing consolidation of farm operations and an increasing population (from approx 295 million in 2005 to approx 311 million in 2011), there are 31% less MRSA infections.


References

* Intensive and Integrated Farm Systems using Fermentation of Swine Effluent in Brazil. By I. Bergier, E. Soriano, G. Wiedman and A. Kososki. In Biotechnologies at Work for Smallholders: Case Studies from Developing Countries in Crops, Livestock and Fish. Edited by J. Ruane, J.D. Dargie, C. Mba, P. Boettcher, H.P.S. Makkar, D.M. Bartley and A. Sonnino. Food and Agriculture Organization of the United Nations, 2013. http://www.fao.org/docrep/018/i3403e/i3403e00.htm

** High-Density Livestock Operations, Crop Field Application of Manure, and Risk of Community-Associated Methicillin-Resistant Staphylococcus aureus Infection in Pennsylvania. By Joan A. Casey, MA; Frank C. Curriero, PhD, MA; Sara E. Cosgrove,MD, MS; Keeve E. Nachman, PhD, MHS; Brian S. Schwartz, MD,MS. JAMA Intern Med. Vol 173, No. 21, doi:10.1001/jamainternmed.2013.10408

*** National Burden of InvasiveMethicillin-Resistant Staphylococcus aureus Infections, United States, 2011. By Raymund Dantes, MD, MPH; Yi Mu, PhD; Ruth Belflower, RN, MPH; Deborah Aragon, MSPH; Ghinwa Dumyati, MD; Lee H. Harrison, MD; Fernanda C. Lessa, MD; Ruth Lynfield, MD; Joelle Nadle, MPH; Susan Petit, MPH; Susan M. Ray, MD; William Schaffner, MD; John Townes, MD; Scott Fridkin, MD; for the Emerging Infections Program–Active Bacterial Core Surveillance MRSA Surveillance Investigators. JAMA Intern Med. Vol 173, No. 21, doi:10.1001/jamainternmed.2013.10423

Thursday, December 26, 2013

Views from Japan: Abe Visit to Yasukuni Shrine

Views from Japan: Abe Visit to Yasukuni Shrine

1  Abe Visit to Controversial Japanese Shrine Draws Rare U.S. Criticism. By George Nishiyama
Visit to Yasukuni Raises Concern Premier Shifting Focus From Economy to Nationalistic Goals
Wall Street Journal, Dec. 26, 2013 3:04 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304483804579281103015121712

[...]

Mr. Abe visited Tokyo's Yasukuni Shrine on Thursday, triggering strong criticism from Beijing and Seoul, but also a rare disapproval by Washington, which has pushed the Asian neighbors to mend ties that are strained by territorial disputes and differences over wartime history.

Many Asian nations that suffered from Japan's wartime actions view Yasukuni as a symbol of Tokyo's past militarism because it honors not just Japan's war dead but also some convicted World War II war criminals, including Hideki Tojo, who was prime minister for most of the war.

"The United States is disappointed that Japan's leadership has taken an action that will exacerbate tensions with Japan's neighbors," said the U.S. Embassy in Tokyo on its website, in an unusual direct criticism of Japan's leader by its main ally.

Mr. Abe has repeatedly said he regretted not visiting the shrine during his first tenure as prime minister from 2006 to 2007 and said his critics misunderstood his intentions. "I offered my respects to those who lost their precious lives for our country, and prayed that their souls may rest in peace," he told reporters after the visit. "I have no intention at all of hurting the feelings of the Chinese or the South Korean people."

Although a well-known conservative who has stated that changing the pacifist constitution drafted by the occupying U.S. forces was his "life's work," Mr. Abe had adopted an economy-first policy after taking office in December 2012, putting his nationalist agenda on the back burner.

His so-called Abenomics policy featuring government spending and monetary stimulus has spurred consumption, resulting in the Japanese economy recording the strongest expansion among industrialized nations in the first half of this year, although the country's growth rate slowed in the third quarter.

The improved economy has helped make Mr. Abe one of the most popular Japanese leaders in recent years, with his support ratings hovering around 60% for most of the past year.

All of that has come as a relief to Washington, which faces a rising military power in China and is wary of the regional tensions developing into physical confrontations. The U.S. has also tired of a revolving door of short-lived Japanese prime ministers.

During an October visit to Tokyo, U.S. Secretary of State John Kerry and Defense Secretary Chuck Hagel paid respects at the Chidorigafuchi National Cemetery, a tomb for Japan's unknown war dead, in a move widely seen as a message to Mr. Abe that there are alternatives to Yasukuni.

While Mr. Abe had refrained from going to Yasukuni until Thursday, on the anniversary of his taking office, some of his cabinet ministers had visited, each time inviting protests from China and South Korea. Mr. Abe's visit, the first by a prime minister in seven years, drew angry responses from the neighbors.

China's foreign minister summoned Japan's ambassador to protest and criticized Thursday's visit as the latest attempt by Mr. Abe to gloss over Japan's militaristic past. "Under these conditions, not only does the Japanese leader not show restraint, but instead makes things worse by manufacturing another incident over history," spokesman Qin Gang said in a statement. "Japan must bear all the consequences arising from this."

Seoul also decried the move. "Our government cannot but deplore and express anger about Japanese Prime Minister Shinzo Abe's visit to the Yasukuni Shrine despite concerns from neighboring countries and the international community," said Yoo Jin-Ryong, a South Korean spokesman.

Analysts in the region agreed the move would further deteriorate relations. The development is severe, said Wang Shaopu, director of Japan Institution at Shanghai Jiao Tong University. "It will worsen China-Japan's already bad-enough relations."

Others said Mr. Abe had gone ahead with the visit because he felt he had nothing to lose given that ties were already frayed. While he has visited all of the Association of Southeast Asian Nations, he has yet to visit China or South Korea nor has he held formal bilateral meetings with their leaders.

"Mr. Abe probably thought that a visit to Yasukuni at this point wouldn't have too much of an impact on prospects of future summits with Beijing and Seoul considering how chances already seemed slim," said Masafumi Kaneko, a senior research fellow at the Center for International and Strategic Studies at PHP Institute.

Mr. Abe's aides said what they cared about most was the U.S. reaction. "The biggest, or should I say, the only concern is what the U.S. would say," said a senior government official who was aware of the prime minister's plans in advance. He expressed confidence that the ties between the allies wouldn't be affected, noting that President Barack Obama was relying on the prime minister to help seal a deal over a trans-Pacific free-trade forum and to move forward plans to relocate U.S. troops in the region.

The government official said Mr. Abe intended to stick to making economic recovery the top priority, stressing how investors would start to see deregulatory measures—the last of the three pillars of his economic policy—in action in the new year. "We intend to keep the ball rolling for Abenomics," the official said.

But Mr. Abe may have miscalculated the U.S. response, analysts said. "The U.S. reaction was unexpected. Mr. Abe is moving to bolster the Japan-U.S. alliance, and the focus is whether they can move beyond just a military alliance, and share values," said Koji Murata, a political-science professor and the president of Doshisha University. "The U.S. may be frustrated at Mr. Abe, who is obsessed with history issues."

Diplomatic feuds have shown they can affect business interests in the region. After the previous Japanese government nationalized disputed islands in the East China Sea in September 2012, Chinese consumers boycotted Japanese products, dealing a serious blow to Japanese firms, including car makers.

But the Tokyo stock market took Mr. Abe's visit to the shrine in stride on Thursday, finishing higher. Investors said other factors, including a weaker yen, were more important than diplomatic issues.

[...]

—Alexander Martin, Kosaku Narioka and James T. Areddy contributed to this article.



2  A Japanese citizen weighs in:
hello,

this is a pretty simple issue... it's a thing about "mind" or "philosophy" for Japanese and "political" for China or Korea. it'd not been a problem until middle of 80s indeed. they are just always looking for something to claim or criticize Japan to let us compromise us one-sidedly. they are just trying to do this in the name of human-right. Japan has to be 100% evil, and they have to be 100% victims forever. so they will never forgive us no matter how we apologized.
if PM Abe didn't do it, they would find something another.

it's not known very much in other countries, but Japan's already apologized many times, paid much and supported in many ways even the countries didn't let their citizens know about that. 
major Japanese started to think it looks waste of time and effort to make a good relationship with them any longer.

more than 70% of Japanese agree with PM Abe's Yasukuni visit this time in a survey of a TV channel (this is so-called "liberal" channel). we all know he just wants to thank people who worked and died for this country, and wishes peace. 
personally, i go to the shrine when i'm in Tokyo (my grand father died in WW2).

have a good new year!

Wednesday, December 18, 2013

The Volcker Ambiguity - The triumph of political discretion over financial clarity

The Volcker Ambiguity. WSJ Editorial 
The triumph of political discretion over financial clarity.
Wall Street Journal, Updated Dec. 11, 2013 3:52 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304744304579250393935144268

Just in time for Christmas, financial regulators have come down the chimney with a sackful of billable hours for securities lawyers. Truly a gift that keeps on giving, the Volcker Rule adopted on Tuesday by five federal agencies will create a limitless supply of ambiguity and the need for experienced counsel.

We supported former Federal Reserve Chairman Paul Volcker's simple idea: Don't let federally insured banks gamble in the securities markets. Taxpayers shouldn't be forced to stand behind Wall Street trading desks. What we can't support is the "Volcker Rule" that was first distorted in the 2010 Dodd-Frank law and has now been grinded and twisted into 71 pages of text plus 882 more pages of explanation after three years of agency sausage-making.

The general idea is to prevent "proprietary trading," in which a bank makes trades not at a customer's request but simply for its own account. Or at least some trades. The rule's new trading restrictions do not apply when Wall Street giants are trading debt issued by the U.S. government, state and local governments, government-created mortgage giants Fannie Mae and Freddie Mac, and in some circumstances foreign governments and even local or regional foreign governments.


You'll notice a pattern here. Like so many recent financial regulations, the Volcker Rule offers banks and investors big incentives to lend money to governments rather than private businesses. One Wall Street objection to the Volcker Rule has been that it will reduce liquidity in America's capital markets. And fear of a lack of liquidity in the market for government debt—especially Treasurys and European sovereign debt—is precisely the reason politicians and regulators have gone to such lengths to exempt government bonds from Volcker. Maybe Wall Street has a point.

What we don't know about the new rule are important details that will only become clear over time. At least that's according to Commissioner Daniel Gallagher of the Securities and Exchange Commission, who dissented on Tuesday along with fellow Republican appointees Michael Piwowar of the SEC and Scott O'Malia of the Commodity Futures Trading Commission.

Mr. Gallagher said the vote occurred in "contradiction of our procedural rules for voting on major rule releases, including the longstanding guideline that Commissioners should be given thirty days to review a draft before a vote." He added, "Not until five days ago did we have anything even resembling a voting draft, giving us less than a week to review the nearly one thousand pages of the adopting rule. In short, under intense pressure to meet an utterly artificial, wholly political end-of-year deadline, this Commission is effectively being told that we have to vote for the final rule so we can find out what's in it."

Lawyers will certainly find plenty of opportunities for judgment calls that will generate all those billable hours. Banks are still allowed to make markets in securities and to underwrite the issuance of new stocks and bonds, all of which often requires them to hold securities in anticipation of customer demand.

Banks also retain some ability to hedge—to make trades for the purpose of offsetting other risks that they've taken on for clients. The work required to define the difference between legal market-making, underwriting and hedging on the one hand and illegal proprietary trading on the other will now be ample enough to spark a new building boom at downtown D.C. law offices.

Rest assured banks will find loopholes. And rest assured some of the Volcker rule-writers will find private job opportunities to help with that loophole search once they decide to lay down the burdens of government service.

The long, convoluted Volcker process and result illustrate the central problem of Dodd-Frank: the belief that regulators given ever more discretion to craft ever more complicated regulations will yield a safer financial system. The Bank of England's Andrew Haldane and Vasileios Madouros have shown the opposite is true. The complexity of banking rules before the crisis failed to prevent catastrophic risks and made the job of addressing the crisis harder by obscuring the true condition of giant banks.

Especially with banking regulation, simple rules that are difficult for lobbyists and bankers to game are likely to work far better. Bankers would know what to expect and couldn't cry ambiguity if they crossed a line. And regulators would be far more likely to spy violations. The danger with this Volcker Complexity is that we'll get litigation, investing loopholes, and greater financial costs, but not a safer system.

Friday, December 6, 2013

New meat regulations could spark a trade war with Canada and Mexico and will raise costs

This Label Will Raise the Cost of Your Steak. By Scott George and Randy Spronk
New meat regulations could spark a trade war with Canada and Mexico.
Wall Street Journal, Dec. 5, 2013 6:42 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303670804579234642364948248

Right before Thanksgiving, while Congress was on break, federal meat labeling regulations took effect that could result in Americans paying higher prices on everything from beef and pork to apples and maple syrup. While legislators, as part of the continuing farm bill negotiations, are considering a fix to the Country of Origin Labeling (Cool) statute, the regulations implementing it went into effect Nov. 23.

The new Cool rules require more detailed labels on meat derived from animals born outside the United States. Labels must now list the country in which livestock were born, raised and slaughtered. For example, a package of rib-eye steak might be labeled: "Born in Canada, Raised and Slaughtered in the United States."

The previous Cool rules required less detailed labeling, such as "Product of Canada and the United States." Ironically, the U.S. Department of Agriculture issued the new rules in May in an effort to improve the previous Cool rules, which the World Trade Organization last year ruled discriminated against Canada, Mexico and other U.S. trading partners.

Not surprisingly, Canada and Mexico are also fighting the new, more stringent rules at the WTO. Should the trade organization rule in their favor, our North American neighbors will likely retaliate against U.S. products through tariffs that will limit U.S. exports and kill American jobs. Canada, the second-largest export market for U.S. agricultural products, valued in 2012 at $20.6 billion, already has a preliminary retaliation list that includes fresh pork and beef, bakery goods, rice, apples, wine, maple syrup and furniture.

U.S. cattle ranchers and hog farmers who purchase livestock from Canada or Mexico will be affected by those retaliatory tariffs in a number of ways. Most crucially to those of us in the industry, the duties will prompt U.S. beef and pork exports to fall while American farmers and ranchers who import animals will see significant cost increases.

Alpha 3 Cattle Company in Amarillo, Texas, for example, imports roughly 38,000 feeder cattle a year from Mexico. When the original Cool law took effect in 2009, meat packers, fearing consumers would be less inclined to buy meat labeled "Product of Mexico and the United States" and incurring added costs to label mixed-origin meat, discounted Alpha 3's Mexican-origin animals by $35 a head. That alone cost Alpha 3 more than $1 million.

Under the new Cool regulations, the company expects the discount to be even higher, or for packing plants to stop processing Mexican-born cattle altogether. Why? Because under the new regulations those animals—and the meat from them—now need to be tracked, verified and segregated from U.S.-born cattle. (The 2009 law allowed co-mingling of animals.)

A Michigan hog farmer who gets most of his feeder pigs from Canada, and who took a financial hit when the labeling law took effect in 2009, has been told by the packing plant to which he sends his animals that he'll have a 10-hour window each week to get his Canadian-born hogs to market. That will be nearly impossible to accomplish—it's 32 truckloads—and it will be extremely costly.

That's because the new regulations will force the packing plant to shut down the lines processing U.S.-born hogs and switch to processing Canadian-born ones—which spend five of their six months in the U.S.—so that pork cuts can be tracked, labeled and kept separate. That's a logistical headache and a huge expense for the plant, which will likely pay the hog farmer less for his Canadian-born hogs and charge consumers more for the meat from those animals.

So why is the U.S. risking trade retaliation and prohibitive cost increases on American producers and consumers of meat? Groups that support Cool, such as the U.S. Cattlemen's Association and the Consumer Federation of America, think U.S. consumers will buy American if they see a "Product of the United States" label. But since the 2009 law went into effect, the USDA says there's been little effect on demand for U.S. meat, and that consumers buy primarily based on taste and price. Most Americans know, even if their legislators don't, that all meat products, regardless of their country of origin, must pass the same USDA safety regulations.

When the Cool proposal was first debated in Congress, the U.S. meat industry said it would be a costly program with little if any benefit to consumers. The USDA estimated it would cost $2.5 billion to implement and nearly $212 million annually over 10 years to maintain.

With our North American neighbors set to impose tariffs on dozens of U.S. products, livestock producers and meat packers facing greater costs and American consumers ultimately bearing higher prices, it appears that assessment was an understatement.

Mr. George is a cattleman from Cody, Wyo., and president of the National Cattlemen's Beef Association. Mr. Spronk is a hog farmer from Edgerton, Minn., and president of the National Pork Producers Council.

Sunday, December 1, 2013

Views from Japan on the air-defense zone recently claimed by Beijing

Views from Japan on the air-defense zone recently claimed by Beijing

1  Excerpts from Japan Questions China's Policing of Defense Zone. By Yuka Hayashi
Officials Also Address Apparent Differences With U.S. Over Response
Wall Street Journal, Dec. 1, 2013 11:50 a.m. ET
http://online.wsj.com/news/articles/SB10001424052702303562904579230894060384128

"I was taken aback when I heard this," Yukio Okamoto, a former senior foreign ministry official, said in an interview Sunday with NHK. "I can't think of any case like this in the past where the U.S. took a step that hurt Japan's interests over an issue related directly to Japan's national security in a way visible to the whole world."
 
"We have confirmed through diplomatic channels that the U.S. government didn't request commercial carriers to submit flight plans," Prime Minister Shinzo Abe said Sunday during a visit to a regional city.

Speaking privately, Japanese officials say Washington has yet to coordinate views among different branches of the government and come up with a unified stance that can be conveyed to Tokyo properly.
[...]

Satoshi Morimoto, a former defense minister who teaches security at Takushoku University, said defense minister Onodera's remarks suggest China wasn't able to "conduct a scramble against American planes even as they flew through its new zone." Japan must determine whether China has the capability to monitor the whole expanse of its new ADIZ using radar located on the mainland and whether its pilots have the experience and expertise to go after foreign planes, Mr. Morimoto said on the NHK program.


2  a Japanese citizen:

実際この問題は簡単ではないと思われるが、日本としては、アメリカには中国の理不尽な行為及び要求を一切認めないよう望んでいる(日本政府は各航空会社に対して、中国の要求に答えないよう通達した)。日本とアメリカが一枚岩でこの件に対処すべきだとの考えが支配的である。ただ、アメリカと日本では航空会社に関する事情が異なるのは理解できる。
今後のバイデン副大統領との会談で日米の協力を確認することを期待する。まさかアメリカが中国に宥和的に方針変換することはないと信じたいが...。
この問題には韓国も絡んできており、複雑化している。今後どうなっていくのか注視せざるを得ない。
[transliteration: Jissai kono mondai wa kantande wa nai to omowa reruga, Nihon to shite wa, Amerika ni wa Chūgoku no rifujin'na kōi oyobi yōkyū o issai mitomenai yō nozonde iru (nipponseifu wa kaku kōkūkaisha ni taishite, Chūgoku no yōkyū ni kotae Nai yō tsūtatsu shita). Nihon to Amerika ga ichimaiiwa de kono-ken ni taisho subekida to no kangae ga shihai-tekidearu. Tada, Amerika to Nihonde wa kōkūkaisha ni kansuru jijō ga kotonaru no wa rikai dekiru. Kongo no baiden fuku daitōryō to no kaidan de Nichibei no kyōryoku o kakunin suru koto o kitai suru. Masaka Amerika ga Chūgoku ni yūwa-teki ni hōshin henkan suru koto wa nai to shinjitaiga.... Kono mondai ni wa Kankoku mo karande kite ori, fukuzatsu-ka shite iru. Kongo dō natte iku no ka chūshi sezaruwoenai.]

honestly, we Japanese has been sick and tired of China's movements lately... some journalists analyze Xi _jinping can't control the force any longer. and underground disorder's coming overground.

a citizen

China Unveils IPO Guidelines - Regulator Says It Will Leave Judging Value, Risks to the Market

China Unveils IPO Guidelines Ahead of Expected New-Offering Flood. By Amy Li
Regulator Says It Will Leave Judging Value, Risks to the Market
Wall Street Journal, Dec. 1, 2013 1:21 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304017204579229691357340398

China moved closer to ending a 13-month moratorium on initial public offerings, releasing guidelines on fundamental changes to the way companies will raise funds in the country's stock market.

At the same time, China unveiled rules that will allow listed companies to issue preferred shares, offering firms—especially banks—a fresh channel for funding to shore up their capital bases.

The long-awaited launch of the IPO reform plan indicates an imminent restart of the country's IPO market, where more than 760 firms are queuing for listings. The China Securities Regulatory Commission, which issued the guidelines, said companies might begin listing as soon as January.

China shut the door to IPOs in the country in November 2012, just before a once-in-a-decade leadership transition, in an effort to support the long-suffering stock market, analysts said.

Two weeks ago, China's top leaders had promised, in a blueprint for economic and social policies over the next decade, that they would push for reforms of the stock-issuance system while promoting fundraising activities in the equity market through a variety of channels.

The reform plan marks a significant easing of government control over China's IPO market, which channeled 488 billion yuan ($80 billion) to issuers in 2010.

The plan shifts toward a so-called registration-based IPO system, widely used in developed markets, in which the regulator focuses on whether a firm seeking a listing meets the requirements for information disclosure.

Currently, China has an approval-based IPO system where the regulator focuses on whether an issuer can sustain its operations and whether it will be able to stay profitable. One criticism of the current system is that it can take years for some companies to get listed while the regulator has often given preferential treatment to the country's large but poorly managed state-owned enterprises, allowing them to jump the queue and float shares within just a few months.

In most Western markets, regulators determine if companies have met specific legal and financial requirements, and then allow them to list, leaving it up to investors whether to buy the stocks.

"We believe the reform laid out the groundwork for an introduction of a registration-based IPO system," the CSRC said in a transcript of answers to questions from reporters on the overhaul plan.

China's current approval-based IPO system has long been criticized for distorting supply and demand and artificially inflating valuations of new listings in one of the world's largest stock markets. Listing aspirants have had to endure an application process that can include roughly 10 rounds of reviews lasting as long as several years to receive approval from the country's securities regulator, which determines whether the company has met thresholds in terms of revenues, profits and the like.

Even after a company has secured listing approval, the fate of its IPO still lies in the hands of the regulator. When market conditions are strong, the regulator tends to release the supply of IPOs, often resulting in frenzied buying and high prices. But when investors' mood is poor, authorities can halt new listings to avoid further depressing the market.

The CSRC said it would focus on reviewing compliance by companies planning IPOs, while it will let investors and the market judge the value and risks of IPOs. Once a company gets the go-ahead to seek an IPO, the commission said it would allow the market to decide the timing of it and how the issue will work.

Following the release of the guidelines, firms seeking IPOs will need around one month to prepare, the commission estimated. Around 50 firms are expected to have IPO preparation done in time for them to list by January 2014, the commission added.

The review of stock offerings will focus on the information disclosure of the issuer, according to the guidelines. Also included in guidelines were rules about the pricing of stocks, share placements, responsibilities of market participants, and measures to crack down on fraudulent listing.

"The market-oriented reform will make the issuer and intermediaries shoulder more responsibility while strengthening the protection for smaller investors," said Wang Jianyong, a partner with Haiwen & Partners, a law office that advises companies seeking a listing in China.

Issuers, underwriters and other intermediaries should commit to compensate investors that suffer losses because of falsehoods, misleading statements or major omissions in IPO documents, according to the guidelines.

The new rules say controlling stakeholders, as well as board members and senior executives who own shares, should commit that they won't sell shares below the IPO price for two years after a six-month lockup period during which they can't sell shares. If the shares of a firm close below the IPO price six months after listing, these shareholders must promise to extend the lockup period by at least another six months.

An increase in the supply of shares from new listings is likely to cause short-term pain to the prices of small stocks trading on the country's startup board, ChiNext, said Sinolink Securities 600109.SH +0.18% analyst Huang Cendong.

Mr. Wang of Haiwen said, "The sentiment in the stock market will likely be hurt with the coming IPO restart."

However, Beijing's effort to push forward market-oriented reforms could enhance investors' expectations for the longer term, Mr. Wang added.

The guidelines also clarify the time span of the review procedure. The commission will make a decision on whether to approve a listing in three months after accepting an IPO application.

With the new rules, a listing could happen as early as two or three months after the commission accepts an application, based on current administrative procedure, an investment banker said.

The commission said it may take around one year to review the IPO applications of more than 760 firms that are queuing for listing.

It gave underwriters more freedom in stock offerings, allowing them to reserve a certain amount of new shares to select investors, potentially benefiting brokerage firms with a strong institutional client base. Previously all new shares were sold through auctions.

But the commission also will require an underwriter to take on more responsibility, saying it will stop reviewing any applications submitted by an underwriter if a company it underwrites posts a net loss or a drop in profit of more than 50% in the same year as its IPO.

Along with the lifting of the IPO moratorium, Beijing moved to allow listed firms to issue preferred stock publicly, in a bid to give issuers a flexible direct financing tool, optimize the financing structure of firms and further mergers and acquisitions of firms. Currently, Chinese companies aren't allowed to issue preferred shares.

Under the guidelines on the trial issuance of preferred stocks, the State Council, the country's cabinet, said the private issuance of preferred stocks would also be available to listed firms, including those incorporated in mainland China but listed overseas, as well as unlisted public firms.

Preferred stock has priority over common stock in the distribution of corporate profits and upon liquidation, but shareholders of such stock have limited rights on corporate decision making, according to the definition provided by the guidelines.

Friday, November 29, 2013

Tesla Meets the Auto Regulators - Remember Toyota's invisible defect and drivers that are inordinately prone to "pedal misapplication"

Tesla Meets the Auto Regulators. By Holman W Jenkins 
The feds have opened a safety investigation into the Model S fires. Elon Musk should be worried.
WSJ, Nov 27, 2013
http://online.wsj.com/news/articles/SB10001424052702304465604579222051067101342

Look out, Elon Musk. Expecting rational results from regulatory agencies is often a recipe for disappointment.

Two of Mr. Musk's Tesla Model S cars burned up when road debris punctured the battery, a vulnerability not seen in other electric cars. Mr. Musk says his cars are no more fire-prone than gasoline cars. He claims to welcome a National Highway Safety Administration investigation into whether the cars are defective and warrant a recall.

Good luck with that. Mr. Musk is embroiled in a process that, he may soon discover, can quickly become more about politics than engineering. GM pickups with side-mounted gas tanks in the 1980s were necessarily more fire-prone in side collisions. Yet the truck's overall safety record was exemplary and the vehicle fully complied with federal fuel-system safety standards. That didn't stop the feds from eventually ruling the trucks defective, in response to over-the-top media and interest-group allegations against the company.


Those nearing ecstasy over the driverless car ought to sober up too. Tesla is not the only example of how unwelcoming our system of auto regulation is to new ideas. At a congressional hearing on the robotic car last week, a GM executive pleaded for "protection for auto makers and dealers from frivolous litigation for systems that meet and surpass whatever performance standards are established by the government." NHTSA's David Strickland was also present and seemed a lot more interested in extending his agency's remit to "things like, you know, navigation on an iPhone. . . . That is a piece of motor vehicle equipment and I think we have a very strong precedent."

And recall NHTSA's performance during the furor almost four years ago over alleged runaway Toyotas. Its then-overseer, Transportation Secretary Ray LaHood, happily participated in congressional hearings designed to flog for the benefit of trial lawyers the idea of a hidden bug in Toyota's electronic throttle control.

When the agency much more quietly came out with a report a year later debunking the idea of an electronic defect, notice how little good it did Toyota. The car maker still found it necessary to cough up $1.2 billion to satisfy owners who claimed their cars lost value in the media frenzy over a non-defect. Toyota has also seen the tide turning against it lately as it resists a deluge of accident claims.

At first, opposing lawyers were hesitant to emphasize an invisible defect that government research suggested didn't exist. That was a tactical error on their part. In an Oklahoma trial last month involving an 82-year-old woman driver, jurors awarded $3 million in compensatory damages and were ready to assign punitive damages in a complaint focused on a hypothetical bug when Toyota abruptly settled on undisclosed terms.

In another closely-watched trial set to begin in California in March, an 83-year-old female driver (who has since died from unrelated causes) testified in a deposition that she stepped on the brake instead of the gas. The judge has already ruled that if the jury decides to believe her testimony, it is entitled to infer the existence of a defect that nobody can find.

These cases, out of some 300 pending, were chosen for a reason. Study after study, including one last year by the University of North Carolina Highway Safety Research Center, finds that elderly female drivers are inordinately prone to "pedal misapplication." If Toyota can't prevail in these cases, the company might be wise to run up the white flag and seek a global settlement that some estimate at upwards of $5 billion—quite a sum for a non-defect.

Why do we mention this? These episodes describe the regulatory-cum-political thicket that Tesla wandered into when it started making cars. This thicket has served as a near-perfect barrier to entry to startup car makers for the better part of a century.

Even more so because Tesla's troubles come at a time when much bigger companies, with vast lobbying and political resources, are entering the market for high-end electric cars—including Cadillac, Porsche, BMW and Audi. Maybe this explains a note of hyperbole that has begun to creep into Mr. Musk's frequent blog postings. "If a false perception about the safety of electric cars is allowed to linger," he wrote last week, "it will delay the advent of sustainable transport and increase the risk of global climate change, with potentially disastrous consequences worldwide."

Federal regulators have been warned. They can always be denounced as climate criminals if they find the Tesla Model S defective. Maybe Mr. Musk is ready to play the political game after all.

Wednesday, November 27, 2013

IMF: Modifications to the Current List of Financial Soundness Indicators

Modifications to the Current List of Financial Soundness Indicators
IMF, November 14, 2013
http://www.imf.org/external/pp/longres.aspx?id=4832

Summary: The purpose of this paper is to inform Executive Directors on the outcomes of consultations conducted by the IMF’s Statistics Department (STA) on revising the current list of FSIs in response to the global financial crisis and the adoption of a new regulatory framework under the Basel III Accord. In addition, the G-20 Data Gaps Initiative calls on the IMF to review the FSI list (Recommendation no. 2). STA has undertaken these consultations in close collaboration with a broad-based group of national and international experts, international standard setting bodies, IMF’s relevant departments and all FSI-reporting countries and concerned international organizations.


EXECUTIVE SUMMARY (edited)

The Executive Board has requested that the list of financial soundness indicators (FSIs) be kept under review to ensure that they reflect the evolving priorities of Fund surveillance, the rapidly changing financial environment and the relative capacity of countries to compile FSIs. Accordingly, the purpose of this paper is to inform Executive Directors on the outcomes of consultations conducted by the IMF's Statistics Department (STA) on revising the current list of FSIs in response to the global financial crisis and the adoption of a new regulatory framework under the Basel III Accord. In addition, the G-20 Data Gaps Initiative calls on the IMF to review the FSI list (Recommendation no. 2). STA has undertaken these consultations in close collaboration with a broad-based group of national and international experts, international standard setting bodies, IMF
's relevant departments and all FSI-reporting countries and concerned international organizations.

As a result of these consultations, the list of FSIs has been revised. The revised FSI list includes new indicators to expand the coverage of the financial sector, including money market funds, insurance corporations, pension funds, other nonbank financial institutions, as well as non-financial corporations and households. Also, certain FSIs will be dropped due mainly to very limited reporting and comparability. Overall, 19 new FSIs will be added to the list and five will be dropped.

To improve usefulness and forward-looking features, FSIs for the sector as a whole would be enhanced with concentration and distribution measures. In this connection, STA is planning to conduct a pilot exercise with a set of FSI-reporting countries on a voluntary basis.

STA will continue to keep the Executive Board informed periodically on developments in the IMF's FSIs initiative, including its work on revising the FSI Compilation Guide.



---
Also, check the background paper: http://www.imf.org/external/pp/longres.aspx?id=4833

Alzheimer's Disease - The Puzzles, The Partners, The Path Forward

Alzheimer's Disease - The Puzzles, The Partners, The Path Forward
PhRMA, November 26, 2013
http://www.innovation.org/index.cfm/NewsCenter/Newsletters?NID=218

Alzheimer's is a debilitating neurodegenerative disease that currently afflicts more than 5 million people in the U.S. If no new medicines are found to prevent, delay or stop the progression of Alzheimer's disease, the number of affected people in America will jump to 15 million by 2050 and related healthcare costs could increase five-fold to $1.2 trillion, according to the Alzheimer's Association. In contrast, a medicine that delays onset of Alzheimer's disease by five years would lower the number of Americans suffering from the disease by nearly half and save $447 billion in related costs, in 2050.

America's biopharmaceutical companies are currently developing 73 potential new treatments and diagnostics for Alzheimer's, according to a recent report released by PhRMA. At a recent all day-forum, "Alzheimer's: The Puzzle, The Partners, The Path Forward," the Alzheimer's Association, Alzheimer's Drug Discovery Foundation, and PhRMA convened key stakeholders from the Alzheimer's community to discuss these therapies presently in development to treat the disease, as well as the current state of innovation and R&D for Alzheimer's disease treatments and diagnostics.

Among the key areas of discussion were pre-competitive partnerships, including potential areas for collaboration and public-private partnerships, as well as pre-symptomatic clinical trials, which may help researchers understand the clinical heterogeneity of the disease and subsequent challenges in the use and adoption of clinical and functional endpoints in new clinical trial design.

Panelists included top industry and academic scientists, policymakers, patients, payers, and many others. Executives from the Alzheimer's Association and Alzheimer's Drug Discovery Foundation also discussed the path forward for Alzheimer's disease in relation to science and policy.

Continue the conversation online using the event hashtag #ALZpov

Friday, November 22, 2013

Control d'armes en acció: Els nois dolents enganyen i les democràcies no fan res

Les sancions contra l'Iran no es manipularan. . Per Douglas J. Feith
Control d'armes en acció: Els nois dolents enganyen i les democràcies no fan res.
Translation to Catalan of Sanctions on Iran Won't Be Cranked Back Up. By Un Liberal Recalcitrant
Wall Street Jounal, updated Nov. 18, 2013 7:24 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303914304579193652675971392

El president Obama vol que l'Iran suspengui parts del seu programa nuclear a canvi d'alleujar les sancions econòmiques internacionals. Els crítics sostenen que si Occident arriba a un acord en aquest sentit, l'Iran podria enganyar molt més fàcilment, molt abans que la resta del món pogués establir noves i dures sancions. Però el senyor Obama insisteix que relaxar les sancions és reversible : Si els iranians estan pel "no seguir endavant", va dir recentment a NBC News, "Podem anar endavant ".
Els acords de pau i el control d'armes tenen una llarga història que hauria de ser un advertiment contra aquestes garanties. Els països democràtics, durant molt de temps, no van poder aconseguir el que esperaven dels seus antagonistes no democràtics - i després es van veure incapaços o no van estar disposats a complir el tracte-.

Després de la Primera Guerra Mundial, els tractats de Versalles i Locarno van sotmetre Alemanya  a mesures de control d'armes, incloent la desmilitarització de Renània. Quan el règim nazi d'Alemanya, va remilitaritzar audaçment la Renània el 1936, ni la Gran Bretanya, ni França, ni cap altre signant del tractat va prendre cap tipus d’acció legal.

Aquest i d’altres incidents del segle XX van portar l’estratega dels EUA Fred Iklé a escriure un clarivident article el 1961 a la revista "Afers exteriors", titulat "Després de Detectar-ho - Què ?" Va sostenir : "Si signem un acord de control d'armes, hem de saber no només que som tècnicament capaços de detectar una violació, sinó que també nosaltres, o la resta del món, estarà en condicions de reaccionar eficaçment si es descobreix una violació, ja sigui legalment, política o militar. " Iklé va preveure que els soviètics violarien els seus acords i que als presidents dels Estats Units els resultaria difícil o impossible de posar remei a les violacions.

No obstant això, els EUA va fer una sèrie de tractats de control d'armes amb els soviètics i quan es van produir les violacions previstes, no va haver-hi cap tipus d'imposició, ni tan sols es va intentar.
Durant el govern de Reagan, les autoritats nord-americanes van detectar un enorme radar a la ciutat soviètica de Krasnoyarsk que violava el Tractat de Míssils Antibalístics del 1972. Malgrat la seva reputació de ser un escèptic en relació al control d'armes i de la línia dura anti - soviètica, Reagan va concloure que no tenia bones opcions, fora de la de queixar-se. Els EUA seguí per adherir-se al tractat per als següents 16 anys, fins que el president George W. Bush ho va retirar per raons no relacionades amb les violacions del tractat.

Una altra democràcia que no ha aconseguit complir els acords és Israel. Quan Israel va signar els Acords d'Oslo amb l'OAP el 1993, al després Ministre de Relacions Exteriors israelià Shimon Peres se li va preguntar què faria Israel si es es violés l'acord. Ell va declarar que era un tractat "reversible", assegurant que era escèptic i que si l'OAP trenqués les seves promeses de pau, Israel no només aturaria els recessos territorials, sinó que reprendria territoris ja negociats.
L'OAP va violar ràpidament el Tractat d’Oslo de diverses maneres, el més flagrant amb la Segona Intifada l’any 2000. Però cap govern israelià d'esquerra o de dreta mai va liquidar els acords, i encara menys revertir qualsevol retirada.

El que sol passar amb aquest tipus d'acords és el següent : Al costat democràtic, els líders polítics donen publicitat a l'acord per als seus votants significantlo com una gran fita diplomàtica de la que cal sentir-se’n orgullós. Per l’altra banda  -generalment el costat no democràtic, es porta a terme l’engany, la deshonestedat i l’agressió.

Els líders democràtics no tenen cap desig de detectar la violació perquè no volen admetre que l'acord o plusvàlua, per raons diverses, és una eina de relacions amb l’altra part i, òbviament, no volen pertorbar aquesta relació. En els casos que no es pot passar per alt la violació, afirmaran que l'evidència no és concloent. Però si és concloent, en menyspreen la importància de la infracció. Els funcionaris del costat democràtic de vegades actuen de facto com a advocats de la defensa per als tramposos.

Recordem el cas de Krasnoyarsk. Alguns funcionaris nord-americans en les reunions internes de l'administració en què he participat, van dir que no hem d’acusar els soviètics de violar el Tractat ABM, simplement perquè es va construir el radar en un camp de futbol  gran. Per desgràcia, però sostingut de forma descarada, vam haver d’esperar a que els soviètics el posesin en marxa..
Quan els funcionaris de l'OAP en la dècada de 1990 van violar el tractat d’Oslo per incitar a l'odi contra Israel i donar suport al terrorisme, els israelians que havien signat el tractat, van oferir excuses similars i vergonyoses tals com: "No ens importa el que diguin, només el que fan" i "Cal fer les paus amb els enemics, nopas  amb els amics. "

Un acord que realment desmantellés el programa nuclear iranià seria un èxit formidable. Però si Obama pot justificar el seu acord amb l'Iran només amb la promesa de “relaxar les sancions” als tramposos iranians, ningú donarà credibilitat al programa.. La història ensenya que hem d'esperar sempre l'engany, però no una aplicació efectiva del tractat.

Feith, investigador principal a l'Institut Hudson,  va exercir com subsecretari de Defensadels EUA per a la política ( 2001-05 ) i és l'autor de  "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism" (Harper, 2008)


--- Sanctions on Iran Won't Be Cranked Back Up. By Douglas J. Feith
Arms control in action: The bad guys cheat, and democracies do nothing.Wall Street Jounal, updated Nov. 18, 2013 7:24 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303914304579193652675971392

President Obama wants Iran to suspend parts of its nuclear program in return for easing international economic sanctions. Critics contend that if the West strikes a deal along these lines, Iran could cheat far more easily than the rest of the world could reinstate tough sanctions. But Mr. Obama insists that relaxing sanctions is reversible: If the Iranians are "not following through," he recently told NBC News, "We can crank that dial back up."

Peace and arms-control agreements have a long history that warns against such assurances. Democratic countries have time and again failed to get what they bargained for with their undemocratic antagonists—and then found themselves unable or unwilling to enforce the bargain.

After World War I, the Versailles and Locarno Treaties subjected Germany to arms-control measures, including demilitarization of the Rhineland. When Germany's Nazi regime boldly remilitarized the Rhineland in 1936, neither Britain, France nor any other treaty party took enforcement action.

This and other 20th-century incidents led U.S. strategist Fred Iklé to write a prescient 1961 "Foreign Affairs" article titled "After Detection—What?" He argued: "In entering into an arms-control agreement, we must know not only that we are technically capable of detecting a violation but also that we or the rest of the world will be politically, legally and militarily in a position to react effectively if a violation is discovered." Iklé foresaw that the Soviets would violate their agreements, and that U.S. presidents would find it difficult or impossible to remedy the violations.

Nevertheless, the U.S. made a series of arms-control treaties with the Soviets. When the predicted violations occurred, no enforcement actions were even attempted.

During the Reagan administration, U.S. officials detected a huge radar in the Soviet city of Krasnoyarsk that violated the 1972 Anti-Ballistic Missile Treaty. Despite his reputation as an arms-control skeptic and anti-Soviet hard-liner, Reagan concluded he had no good options other than to complain. The U.S. continued to adhere to the treaty for another 16 years, until President George W. Bush withdrew for reasons unrelated to violations.

Another democracy that has failed to enforce agreements is Israel. When Israel signed the Oslo Accords with the Palestine Liberation Organization in 1993, then-Israeli Foreign Minister Shimon Peres was asked what Israel would do if the agreement were violated. He declared it was "reversible," assuring skeptics that if the PLO broke its peace pledges, Israel would not only stop territorial withdrawals, but retake the land already traded.

The PLO promptly violated Oslo in various ways, most egregiously by launching the Second Intifada in 2000. But no Israeli government—on the left or right—ever terminated the Accords, let alone reversed any withdrawals.

What typically happens with such agreements is the following: On the democratic side, political leaders hype the agreement to their voters as a proud diplomatic achievement. The nondemocratic side—typically an aggressive, dishonest party—cheats.

The democratic leaders have no desire to detect the violation because they don't want to admit that they oversold the agreement or, for other reasons, they don't want to disrupt relations with the other side. If they can't ignore the violation, they will claim the evidence is inconclusive. But if it is conclusive, they will belittle the significance of the offense. Officials on the democratic side sometimes even act as de facto defense attorneys for the cheaters.

Recall the Krasnoyarsk case. Some U.S. officials in internal administration meetings in which I participated said we should not accuse the Soviets of violating the ABM Treaty simply because they built the football-field-size radar. Rather, they disgracefully but brazenly argued, we should wait until the Soviets turned it on.

When PLO officials in the 1990s breached Oslo by inciting anti-Israel hatred and supporting terrorism, the Israelis who had made the deal offered similarly disgraceful excuses along the lines of: "We don't care what they say, only what they do," and "You have to make peace with your enemies, not with your friends."

An agreement that actually dismantled the Iranian nuclear program would be a formidable accomplishment. But if Mr. Obama can justify his deal with Iran only by promising to "crank up" the relaxed sanctions if and when the Iranian regime cheats, no one should buy it. History teaches that we should expect the cheating, but not effective enforcement.

Mr. Feith, a senior fellow at the Hudson Institute, served as U.S. undersecretary of defense for policy (2001-05) and is the author of "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism" (Harper, 2008).

Wednesday, November 13, 2013

L'Energia Verda és la realment subvencionada. Per Bjorn Lomborg


L'Energia Verda és la realment subvencionada. Per Bjorn Lomborg
Espanya malgasta l’1% del PIB en energies verdes
Les renovables reben tres vegades més diners per unitat d'energia que els combustibles Fòssils.
Wall Street Journal , 11 novembre 2013
Translation of Green Energy Is the Real Subsidy Hog to Catalan by Un Liberal Recalcitrant
http://online.wsj.com/news/articles/SB10001424127887324432404579051123500813210


Extractes :

Durant 20 anys el món ha provat de subvencionar l'energia verda en lloc de centrar-se en fer-la més eficient . Avui Espanya gasta al voltant de l'1% del PIB en energies verdes com la solar i l'eòlica . Aquests 11.000 milions d’euros anuals sobrepassen la despesa espanyola en educació superior .

A finals d’aquest segle, amb els actuals compromisos, aquests esforços dels espanyols hauran retardat l'impacte de l’escalfament global en unes seixanta- una hores, segons les estimacions del prestigiós model dinàmic integral econòmic-climàtic de la Universitat de Yale. ¿Milers de milions d’euros per a seixanta-una hores adicionals? És un mal negoci .
Però quan es critiquen aquests ineficients subsidis verds, poden estar sergurs de que els defensors assenyalaran que el planeta subsidia encara més els combustibles fòssils. No hauríem de fer-ho amb cap. Però la desinformació que envolta els subsidis energètics és considerable i ajuda a impedir que el món prengui mesures raonables .

Tres són els mites dels subsidis de combustibles fòssils que val la pena desmuntar. El primer és l'al·legació [ ... ] de que els EUA subsidien més els combustibles fòssils que les energies verdes. No és així.

[S'estima] que el 2010 [aquests] subsidis van arribar als $4.000 milions anuals. Això inclou $ 240 milions en inversions per a instal·lacions de carbó net [que a aquest traductor no li sembla una cosa molt allunyada del “rotllet verd”], [ i ] una deducció de despeses sobre l'amortització dels equips de control de la pol·lució [alguna cosa que els verds haurien aplaudir, en la meva humil opinió]. Les fonts renovables van rebre més del triple d’squesta xifra, uns 14.000 $ milions . En tot això no considerem $ 2.500 milions per a l’energia nuclear [que estalvia emissions de CO2].

Encara més del que sembla, és més gran la desviació real de real de la despesa a favor de l'energia verda perquè les turbines eòliques i altres fonts renovables produeixen molta menys Energia que els combustibles fòssils, i els EUA estan pagant més per menys. L'electricitat que s'obté a partir del carbó és subsidiat per les Nacions Unides un 5% d’un centau per cada kWh produït, mentre que l'eòlica rep prop d’un centau per kWh. Per a la solar, el cost per al contribuent és de 77 centaus per kWh .

Els crítics de subsidiar els combustibles fòssils, com el científic climàtic Jim Hansen, també indiquen que la immensa grandària dels subsidis slobals és l’evidència del poder que tenen les companyies de combustibles fòssils i els escèptics del canvi climàtic sobre els governs.
[Aquests] subsidis globals superen els de les renovables en dòlars nominals - $523 milers de milions sobre $88 millers de milions [per a les les renovables], segons l'Agència Internacional d'Energia. Però aquesta disparitat es reverteix si es té en compte la proporció. Els combustibles fòssils suposen més del 80% de l'energia global, mentre que la moderna energia verda suposa prop del 5%. Això vol dir que les renovables reben encara tres vegades més de diners per unitat d'energia.

Però encara més important: els crítics ignoren que aquests subsidis de combustibles fòssils pertanyen gairebé de forma exclusiva a països no occidentals. Dotze d’aquestes nacions són responsables del 75% dels subsidis globals d’aquests combustibles. Iran és el primer amb $82.000 milions anuals, seguit per l’Aràbia Saudita amb $61.000 milions. Rússia, Índia i Xina, apliquen un pressupost d’entre $30.000 i $40.000 milions i Veneçuela, Egipte, Iraq, Emirats Àrabs Units, Indonèsia, Mèxic i Algèria, la resta.

Aquests subsidis no tenen res a veure amb intentar de congraciar-se amb companyies petrolieres o amb fer-los un bon regal als escèptics de l'escalfament global. Aquesta despesa és una manera de que aquests governs comprin estabilitat política: a Veneçuela, la gasolina es ven a uns 5,9 centaus el galó [un galó són 3,8 litres] , el que li costa al govern uns $22.000 milions anuals, més del doble del que es gasta en sanitat.

Un Tercer mite el difon el recent informe de l'FMI, "Reforma dels Subsidis Energètics - lliçons i implications". L'Organització va anunciar el març passat que hi havia descobert uns $ 1.4 bilions de subsidis als combustibles fòssils que ningú havia vist . D’aquesta xifra , al·lega l'Informe, $ 700.000 milions vénen del món desenvolupat.

La gasolina i el dièsel dels EUA són receptors, en sí mateix, de prop de la meitat d’aquests 700.000 dòlars que l’FMI en diu subsidis. La gasolina i el dièsel haurien de tenir impostos més alts, atès l'informe, i així l’FMI considera aquests impostos no aplicats com a “subvencions” [Aquest traductor creu que aquestes idees tan brillants podria ser que sorgissin de la pròpia Administració Federal perquè casen amb les línies, o més ben dit, les corbes sinuoses del raonament de gent amb la preparació del Community Organizer in Chief]. Així, la pol·lució de l'aire acredita un impost de 34 centaus/galó, segons els models de l'FMI, mentre que els accidents de trànsit i la congestió haurien d’afegir prop d’un dòlar per galó .

A més hauria d’haver un IVA del 17% com en altres països, segons l'FMI, o prop de $0.80 per galó. Tots aquests impostos recaptarien $ 350.000, tractats ara per l’FMI com a subsidis.

[Això té diversos problemes.] L'Organització assumeix un cost social del CO2 de cinc vegades el que actualment té la Unió Europea. Els danys atribuïts a la pol·lució de l'aire són deu vegades més grans que les estimacions de la Unió Europea. ¿I què tenen a veure els accidents de trànsit amb els subsidis a la benzina?

Finalment, l’FMI Ignora a la pràctica els 49,5 centaus d'impostos sobre el galó de gasolina que el consumidor americà paga realment. Els models cancel·len, inexplicablement, aquest impost amb un "cost internacional d’enviament" [per mar, oleoductes, etc.] Però fins i tot si  vostè accepta les estimacions de l'FMI dels costos de la pol·lució i l'IVA a l'estil Europeu, el total del que parla l’FMI que no es recapta, es redueix només a 44 centaus / galó - menys que els impostos reals en les  EUA per centaus/galó [ ... ]
Les informacions inexactes com aquesta desinformen de manera innecessària la presa de decisions sobre polítiques públiques. Estic a favor d’acabar amb els subsidis globals als combustibles fòssils -i amb els subsidis a les energies verdes. Subsidiar energies verdes de primera generació, ineficients, fa als acomodats sentir bé en ells mateixos, però no transformarà els mercats energètics .

[ ... ]

El Dr Lomborg, director del Copenhagen Consensus Center , és l'autor de "How Much HaveGlobal Problems Cost the World? A Scoreboard from 1900 to 2050" ( Cambridge,  2013 ).

 --- 
Original, etc.: http://www.bipartisanalliance.com/2013/11/la-energia-verde-es-la-realmente.html