Robert Samuelson’s Social Security Demagoguery – Robert Samuelson is once again calling for cuts to Social Security and Medicare, ostensibly in the name of generational fairness. Samuelson makes the now common argument that a hugely disproportionate share of government spending goes to these programs that primarily serve the elderly. Of course, using Samuelson logic we should also complain that a hugely disproportionate share of government expenditures go the very wealthy. The reason that the wealthy get a disproportionate share of government expenditures is that they bought government bonds which pay interest. The reason that the elderly get a disproportionate share of government benefits is that they paid Social Security taxes and Medicare taxes that were intended to support these programs. What is remarkable about Samuelson’s piece is that there is absolutely zero effort to consider any real issues of generational equity in a piece that is ostensibly devoted to the topic. For example, there is no discussion of the fact that the current generation of near retirees experienced an unprecedented period of wage stagnation over their working lifetime. The median hourly wage in 2010 is less than 10 percent higher than it was in 1973. By contrast, the Social Security trustees project that average hourly wages will rise by more than 40 percent over the next three decades.
Crude oil price hits two-year high amid concerns over demand – The price of crude oil struck a two-year high yesterday on the back of supply concerns as blizzards hammered north-eastern parts of the US – but the price receded in later trading after uncertainty about Chinese fuel demand. At the same time, Kuwait’s oil minister, Sheikh Ahmad Al-Abdullah Al-Sabah, said the global economy can withstand an oil price of $100 a barrel.Other Arab members of the Organisation of the Petroleum Exporting Countries (Opec) said they would probably decide against boosting output in 2011 because the market was well supplied. Earlier in the day oil futures slipped below $91 a barrel as analysis began to emerge on the move of China’s central bank to raise key interest rates over the weekend. However, US crude for February settled 51 cents lower at $91 a barrel, after hitting an intraday peak of $91.88 – the highest since October 2008. ICE Brent crude rose 12 cents to $93.89 a barrel
Crude Oil Price Hits 2-Year High, Now $94 -Oil rose to a two-year high in New York on speculation that China’s monetary tightening will sustain economic growth in the world’s largest energy user, Bloomberg News reported yesterday. In Abuja, leading global auditors, KPMG, has submitted the interim report on forensic audit of the Nigerian National Petroleum Corporation (NNPC) to the Federal Government with the final report due for submission in the first or second week of January 2011. Oil futures increased for a sixth day, the longest rally in seven weeks, after the People’s Bank of China boosted benchmark one-year lending and deposit rates by 25 basis points on December 25, the second increase since mid-October. Brent (the equivalent of Nigeria’s Bonny Light) price has now hit $94.52 per barrel, the highest since October 2008. Nigeria’s budget benchmark for 2011 is $65, raising hopes that the country may now begin to rebuild its excess crude account (ECA) as well as foreign reserves.
Gasoline prices reach all-time high for Christmas – Gasoline prices continued rising over the weekend, bringing the first Christmas in which the national average for a gallon of unleaded gasoline was more than $3, according to the AAA. While the auto club reported a national average of $3.042 a gallon on Monday, the average price in the Pittsburgh metropolitan area was $3.129 a gallon. Driving forces behind the unusual increase in gas prices since Labor Day range from French refinery workers to Wall Street investors. The most obvious cause is a decrease in the supply of gasoline, especially on the East Coast. The U.S. Department of Energy reported that in late August gasoline inventories on the East Coast were 11 million barrels higher than their five-year average. By the end of November, inventories had fallen to nearly 3 million barrels below the five-year average.
New House Science Committee chair Ralph Hall (R-TX) threatens to subpoena climate scientists – Rep. Ralph Hall (R-TX) plans to pursue an aggressive pro-oil agenda as the incoming chair of the House Science and Technology Committee. In an interview with the Dallas Morning News this month, the “unconditional champion of fossil fuels” described his zeal for the “holy grail” of the oil industry — the Arctic National Wildlife Refuge — discussed issuing subpoenas to interrogate climate scientists, and explained why the BP disaster “didn’t dampen his enthusiasm for offshore drilling.” Hall described the BP explosion that killed eleven men, injured dozens, and led to the despoilment of the Gulf of Mexico as a “tremendous,” “blossoming” flower of energy: “As we saw that thing bubbling out, blossoming out – all that energy, every minute of every hour of every day of every week – that was tremendous to me. That we could deliver that kind of energy out there – even on an explosion.”
Why are Irish Political Leaders so Keen to Collude with the Bank Regulator in Covering Up Blatant Regulatory Breaches at Unicredit Ireland? – –Dublin, by way of the proudly-named International Financial Services Centre, a sparkling new development in the old docks, is “home to more than half of the world’s top 50 financial institutions”. But as the Irish financial crisis wears on, this glitter invites unpleasing comparisons: it simply looks meretricious. What Dublin and, let’s say, Bangkok, a favoured destination for paedophilic sex tourists, have in common, is a service offering based on activities forbidden overseas. Where they differ is in the amount of money involved, but each capital makes some money out of predatory or adventurous incomers, and needs slack local laws, slack local law enforcement, and pimps and procurers (or their analogues). That’s not so very different from the business plan for the City of London after Big Bang, to be honest, or a dozen offshore financial centres, but in Ireland this variant of mercantilism been pursued with a great deal of energy and rigour, to disastrous effect, as this latest story attests, once again. Back in September 2007 Unicredit Bank Ireland’s risk manager resigned. Firing or losing risk managers can be a very bad sign, indeed: here is another sighting at Merrill Lynch ($50Bn of CDO losses, taken over by Bank of America) and another at HBOS (losses 2008-9: £17.1Bn, part nationalised). Those two firms were train wrecks, urged to destruction by utterly reckless top management. At Unicredit, the resignation matter was a bit more technical : massive breaches of liquidity requirements (banks are required to ensure that cash inflows equal at least 90 per cent of cash outflows forecast over the relevant period). Over to Ireland’s Village magazine for the details:
The Wall of Worry for 2011 is a Big One, as usual – These are things I’m keeping an eye on, or trying to find out more about. That isn’t a prediction that any of them will blow up, nor that nothing else will, just a round-up of the bees in my bonnet. If you’ve been following Naked Capitalism you are up to speed on most of this. There are one or two gaps to fill in, though, and I certainly owe readers some more about Unicredit. I touch on one part of that sprawling bank today, and when I have puzzled out a way through its convolutions, I will have a go at more.
Foreclosuregate – LPS and the servicers
RMBSgate – trustees, RMBS, and misrepresentations
CMBS – which way will it go?
Unemployment, the foreclosure pipeline, and house prices
Irish politics…and then Lloyds-HBOS and RBS, German banks
Eurozone rollover risk in Spain, Portugal and Italy; Spanish RE loans
UK rollover risk; the beginnings of austerity in the UK; commercial property loans.
The non-Eurozone EU and FX risk (1): Hungary and others, local currency versus EUR and CHF, impact on Unicredit and Austrian banks, with a spillover to Switzerland?
The non-Eurozone EU and FX risk (2): GBP/EUR… then Lloyds-HBOS and RBS and the UK? Or French and German banks?
Unicredit and Italy? Long shot…
China – Scylla: infrastructure development loans, land loans and RE-secured loans to companies, and Charybdis: popular discontent about thwarted property ownership aspirations; inflation.
Creeping onto the radar – The price of oil.
Wildcard – Anything from Wikileaks