What We Read Today 18 August 2014

August 18th, 2014
in econ_news, syndication

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

  • Fed blow to banks over ‘living wills’ (Gina Chon, Financial Times) The Financial Times has obtained information about confidential letters sent to banks by the Fed and the FDIC on 05 August when they rejected a number of drafts of "living wills". The specific guidance included prohibition of assuming access to the Fed discount window when the bank faced failure.

Follow up:

From the Financial Times:

Critics say that instead of creating an environment for an orderly resolution that would avoid the kind of panic that ensued after the failure of Lehman Brothers, regulators are creating more risk by making a bank's failure theoretically inevitable. They added that the prohibition defeats the purpose of the discount window and the role of the Fed as the lender of last resort.

"How are you supposed to write these living wills if the assumptions regulators are making are false and inaccurate?" asked one US commentator. "They are disconnected from what would happen in the real world."

But the Fed and the Federal Deposit Insurance Corporation, which are under pressure to avoid government bailouts in any future crisis, want to force the banks to come up with emergency plans that do not involve any government aid, even when it comes to the discount window, which is available only to banks that are in trouble rather than failing.

Econintersect: Apparently the banks are trying to treat the living wills as bailout prescriptions whereas the intent should be to describe an orderly process of conducting final rights (dissolution or reorganization).

  • Campaign against Scottish independence suffers narrowing of poll lead (Mure Dickle, Financial Times) As the late September vote approaches the support for separation of Scotland from England appears to be gaining support. Earlier this month a poll showed the vote against separation favored by 56% to 44% for. Two polls announced over the weekend shows a narrower majority. One was 55% to 45% and the other 52% to 48%.
  • Humanity May Face Choice by 2040: Conventional Energy or Drinking Water (knarf, Doomstead Diner) Several studies have projected that the growing use of water in energy production (especially cooling for electricity generating plants) and the need for water for human consumption are racing toward a saturation point where available water becomes insufficient. There is about a quarter of a century before the planet hits the wall based on current research.
  • How to Pay off Your Debts (Cina Coren, Daily Forex) Many ways people try to get out of debt are outright mistakes, according to this author, a former Wall Street broker and financial advisor. Her recommendations are quite simple and solid - everyone can do what she suggests but many don't try.
  • What Is the Price of Perfect Equality? (Shannon Chamberlain, The Atlantic) Some of the best analyses lie not in the field of economics, but in books like The Giver—dystopian tales sitting on shelves marked Young Adult. If you dislike inequality you may find that you would like perfect equality even less. It is a possible only in a world where all individual options are determined by formula and some sort of dispassionate "ruling council". Econintersect suggests that inequality has its "benefits" to society as well as its "penalties". Can one reduce the penalties without also reducing the benefits? Be careful what you wish for.
  • WPI to average 5.4 p.c. in FY15: Barclays (The Hindu) A Barclays research report estimates that inflation will change only modestly in India for 2015, with wholesale price slightly higher and consumer prices moderately lower. Wholesale inflation (WPI) is likely to average around 5.4% and CPI (Consumer Price Index) should be between 7% and 7.5%. In July WPI was 5.19% and CPI was 7.96%.

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