Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
Asian shares hang on to gains, commodities battered (Reuters) Asian shares edged higher on Friday, while the dollar took a breather after stepping back from seven-month highs as investors grappled with the prospects of higher U.S. borrowing costs and slower global economic growth. Commodity prices were pressured, with copper near 6-1/2-year lows and a major sea freight index hitting its lowest level on record, underscoring worries over slackening world demand. European shares are seen slipping slightly a day after the Pan-European stock index .FTEU3 hit a three month high, with spreadbetters expecting Germany's DAX .GDAX to fall 0.3% and France's CAC 40 .FCHI 0.2%.
We were wrong about universal banking (Financial Times) Hat tip to Roger Erickson. Few cost efficiencies come from merging many functions in a single bank, according to John Reed. former CEO of Citibank. He goes on to say that "[m]ixing incompatible cultures is a problem all by itself. It makes the entire finance industry more fragile." Econintersect: In other words, universal banking offers no cost advantages to clients, customers or the economy but does magnify risk.
Why ISIS Has All the Money It Needs (Bloomberg) The Islamic State (ISIS) receives more than $500 million a year from oil and that is being attacked with renewed efforts by Russia, France and the U.S. But oil provides only a very small fraction of the revenues taken in by ISIS,
Emails reveal consumer protection agency's cozy ties (Politico) The Consumer Financial Protection Bureau worked hand-in-hand with a consumer nonprofit as it drafted payday lending regs. The Center for Responsible Lending spent hours consulting with senior Obama administration officials, giving input on how to implement the rule that would restrict the vast majority of short-term loans with interest rates often higher than 400%. The group regularly sent over policy papers, traded emails and met multiple times with top officials responsible for drafting the rule. At the same time, the group's financial services business, Self Help Credit Union, was pushing CFPB to support its own small-dollar loan product with a much lower interest rate as an alternative to payday loans.
Obamacare's Fate May Rest on Patience of Insurers Aetna, Anthem (Bloomberg) The fate of Barack Obama's signature health-care law may depend on how long Anthem Inc. and Aetna Inc., the dominant insurers in the Obamacare market, are willing to wait before starting to make money off it. The two insurers are on the hot seat now that UnitedHealth Group Inc. appears unlikely to linger as a seller on the Affordable Care Act's government-run markets. UnitedHealth, the U.S.'s largest health insurer, said Thursday that if it can't turn a profit, in 2017 it may quit the health plan marketplaces where millions of Americans buy coverage. Note: UnitedHealth is a relatively minor player in the Obamacare market but had been planning to expand in 2016 and beyond.
Rebooting the Eurozone: Step 1 - Agreeing a Crisis narrative (Voxeu.org) The Eurozone needs fixing, but it is impossible to agree upon the steps to be taken without agreement on what went wrong. This column introduces a new CEPR Policy Insight that presents a consensus-narrative of the causes of the EZ Crisis. It was authored by a dozen leading economists from across the spectrum. The consensus narrative is supported by a long and growing list of economists (14 names are attached to this report). An important conclusion in this article is that the EU provided a structure that provided "crisis amplifiers" when private debt expansion turned into a "'sudden stop' crisis".
London is now a true rival to Silicon Valley - but risks loom (City A.M.) In the UK, new company registrations are at an all-time high. Student entrepreneurship has doubled in the past four years. Corporates are, more than ever, seeking to incorporate startups in their innovation strategies. Accelerator programmes are appearing with such frequency that it is difficult to keep track. The UK is also leading the way internationally in crowdfunding, which has the potential to be a great boon for startups. Thanks to a relaxed regulatory approach, the industry is booming here - Nesta's research revealed that equity crowdfunding grew over 400% last year - and has rapidly progressed beyond seed funding into multi-million pound rounds.
China Has a $1.2 Trillion Ponzi Finance Problem (Bloomberg) Chinese borrowers are taking on record amounts of debt to repay interest on their existing obligations, raising the risk of defaults and adding pressure on policy makers to keep financing costs low. The amount of loans, bonds and shadow finance arranged to cover interest payments will probably rise 5% this year to a record 7.6 trillion yuan ($1.2 trillion). Dubbed "Ponzi finance" by Hyman Minsky, the use of borrowed funds to repay interest was seen by the late U.S. economist as an unsustainable form of credit growth that could precipitate financial crises.
China's rail freight drops faster in October (China Daily) A slump in China's railway freight volume, an indicator of economic activity, picked up pace in October, the country's top economic planner revealed on Wednesday. The railways carried 280 million tons of cargo in October, down 16.3% year-on-year, compared with a fall of 15.6% in September and 15.3% in August, according to data released by the National Development and Reform Commission (NDRC). In the first 10 months of 2015, rail freight slipped 11.9% from a year earlier to 2.8 billion tons, a sharper decline than the 11.4% decrease for the first nine months.
Chinese Savers Turn to Gold as Rest of the World Exits Holdings (Bloomberg) Stung by a $5 trillion stock-market collapse, an overbuilt property market and a devaluation of the yuan, Chinese investors are adding to bullion holdings that have already made them the world's largest consumers of the metal. A third straight annual decline in prices has failed to deter purchases, partly because there are few attractive alternatives for preserving assets.
China Coal Miner Gets Government Bailout Before Bonds Mature (Bloomberg) A Chinese state-owned coal miner said it will get a 3.8 billion yuan ($595.6 million) bailout from the local government before two bonds mature next month. Heilongjiang Longmay Mining Holding Group will use the money, which will be transferred to its account by Dec. 1, toward payments on 5 billion yuan of bonds due Dec. 5 and 800 million yuan of notes maturing Dec. 15, according to a company statement on Chinamoney's website Thursday.
Glenn Greenwald: US Determined to Control Venezuela's Oil (Glenn Greenwald, 10 Anniversary) Hat tip to Roger Erickson. Newly revealed U.S. espionage against Venezuelan state oil firm PDVSA violated the South American nation's sovereignty, journalist Glenn Greenwald said Wednesday, adding that Washington is determined to take control of Venezuela's resources.
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