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In this post Gonzalo Lira fantasizes about whether Alan Greenspan, who was Chairman of the Federal Reserve Board from 1987 to 2006, should be tried for Crimes Against the Economy?
Gonzalo’s answer?: “Yes—absolutely. No question.
Below the four main charges against Greenspan:
One—Irresponsible Market Liquidity, Which Created Rampant Moral Hazard:
The Accused was instrumental in creating the pernicious policy mentality of “providing markets with necessary liquidity”—essentially, throwing money at every problem.
Two—The Fed’s Do-Not-Touch-the Financial-Services-Sector Policy:
The Accused was instrumental in creating a Do-Not-Touch attitude towards the banks, both investment and commercial—which of course led the financial sector to pursue incredibly stupid products and strategies: All in the name of “maintaining financial markets’ ability to innovate”. These “innovations” were directly to blame for the Global Financial Crisis, as they created unsustainable liabilities which sooner or later would lead to system-wide collapse.
Three—Subsidized Money, Which Radically Distorted The Economy:
This is probably the biggest crime Alan Greenspan committed as Federal Reserve Chairman: The so-called “Greenspan Put”.
For the twenty years of his tenure, the Accused—supposedly an avowed free marketeer—subsidized the cost of money. Rather than let the Fed funds rate more or less mirror what banks were lending among themselves, and tighten interest rates when the economy overheated (as his predecessors had done), Greenspan instead goosed the markets: His “targeted” Fed funds rate was forever undercutting what the financial markets were dictating, as to the true price of money.
Fourth and finally—Turning Economics Into a Religion with the “We Are Right Because Our God—Math—Is On Our Side” Fallacy, and Marginalizing the Heterodox.
The Accused—Alan Greenspan—reneged on his sworn mandate to maintain low inflation and full employment, and instead pursued a policy of maintaining—and increasing—aggregate asset values, whatsoever the cost. In other words, he actively pursued bubble-creation and inflated asset values, to the benefit of the financial services industry, and to the detriment of the U.S. and world economies as a whole.
The Conclusion:
Alan Greenspan furthermore created rampant moral hazard, and declined to carry out his sworn duty to regulate and monitor financial markets, and to curb usurious or unsafe financial products and services. Finally, he created the conditions that—quite possibly—will lead to a Treasury bond collapse and a hyperinflationary catastrophe.
The Prosecution rests.
Read the whole post here:
http://gonzalolira.blogspot.com
Read Also:
25 People to Blame for the Financial Crisis
The good intentions, bad managers and greed behind the meltdown
A list of 25 people to blame for the financial crisis by Time Magazine, that placed Greenspan at # 3.
Quarterly Financial Statistics for Enterprises (2nd Quarter)
Statistics Canada has just released the preliminary second quarter 2010 issue of the Quarterly Financial Statistics for Enterprises.
Highlights
Operating profits for Canadian corporations amounted to $61.7 billion in the second quarter, down 1.8% from the previous quarter.
This decrease followed three consecutive quarterly increases.
Overall, profits were down despite the fact that 15 of 22 industries reported higher profits.
Declines were led by corporations in the insurance industry, as well as the oil and gas industry.
In the non-financial sector, profits decreased by 1.5% to $46.4 billion, while among financial industries profits declined 2.7% to $15.3 billion.
However, on a year-over-year basis, profits in both sectors in the second quarter were roughly 28% above the levels in the second quarter of 2009.
Note:
Quarterly profit numbers referred to in the text are seasonally adjusted and are in current dollars. The quarterly financial estimates for the first quarter of 2010 have been revised.
Quarterly financial statistics for enterprises are based upon a sample survey and represent the activities of all corporations in Canada, except those that are government controlled or not-for-profit. An enterprise can be a single corporation or a family of corporations under common ownership and control, for which consolidated financial statements are produced.
Profits referred to in this analysis are operating profits earned from normal business activities. For non-financial industries, operating profits exclude interest and dividend revenue and capital gains/losses, whereas for financial industries, these are included along with interest paid on deposits.
Operating profits differ from net profits, which represent the after tax profits earned by corporations.
Non-financial sector
Operating profits for oil and gas extraction and support activities declined 13.9% to $4.3 billion between the first and second quarters of this year. The second quarter was characterized by a decline in exports and relatively stable oil prices.
Profits for retailers fell by 6.3% to $3.8 billion. Much of this decline came from clothing and department stores, where profits were down by $141 million. Similarly, operating profits in the wholesale trade industry decreased by 3.7% to $4.9 billion.
Operating profits for manufacturers remained relatively flat in the second quarter, rising 0.2% to $10.4 billion. This followed four consecutive quarters of growth.
Growth in motor vehicle and parts manufacturing, and computer and electronic product manufacturing largely offset the decline in profits in chemical, plastics and rubber products manufacturing, and primary metal manufacturing.
Profits in the mining and quarrying industry increased by $401 million to just under $2.0 billion, as certain commodity prices rose.
Financial sector
Profits of insurance carriers and related activities declined by $868 million to $1.6 billion.
Depository credit intermediation, mainly chartered banks, and non-depository credit intermediation tempered the decline with increases in profits of 5.3% and 13.1%, respectively.
For more information, please visit Statistics Canada:
http://www.statcan.gc.ca
A rental suite can help you pay off your mortgage but it could also turn into a nightmare if you become heavily dependent on that rent money and you have a mortgage on a house that you really can’t afford.
The rental suite option became more and more popular with the recent increases in house prices while mortgage rates remained at historic lows, combined with a large demand for accommodation below the $ 1,000 mark, especially among students going to university or young people starting out in the labor market.
By renting out a basement suite to a university student, you can charge enough rent so that after expenses, you can put some extra money towards your mortgage. The result is that you will pay off your mortgage in less years and in the process, save a large chunk in interest.
When you start number crunching to see if this makes financial sense, be aware that Canadian banks have toughened their standards for financing houses with a rental suite.
“Banks used to do a rent reduction, so that if you qualified to carry $1800 a month, and the tenant was carrying $500 and it was a legal unit, then they would take that amount off that you had qualified,” explained Diane Speer, of ReMax in Toronto.
“Or they would take some of the income and then discount, like if you’re getting $13,000 a year from a unit, they might add that into your income or take a percentage thereof. That’s constantly changing, too, the way they’re looking at it.”
“If it’s an illegal suite, you won’t get any break from the bank.”
And that brings up the issue of zoning: many rental suits in homes can be illegal, meaning the municipality hasn’t zoned a particular area for rental housing.
“But most neighbours will turn a blind eye because it’s been a way of living for so long a while and affordable housing is available in the neighbourhood. The only time I’ve really seen issues with them is somebody moved in who has three cars or somebody moved in who is an issue.”
Having decided that you really don’t mind sharing your house with a complete stranger, you will want to take extra care when holding auditions for your apartment and adopt more than a passing familiarity with provincial landlord-tenant legislation.
“A lot of people are so excited to get a tenant and get someone to pay that they’re not doing a credit check or not making sure on the application that the apartment is being rented to one person and not a family of six,” said Speer.
Speer observed that some of her clients will get in touch with the student housing office at local community colleges.
She has also done the landlord routine and said you just have to be smart about it.
“We were just always really cognizant of keeping the rent at an amount where we would get lots of applicants so that we could choose someone who we thought would be good, one person, a professional maybe who traveled, who wasn’t around,” said Speer,
“I think that if you don’t have standards there or do any kind of qualification or screening, it could be a nightmare and I’ve seen a lot of people go through it.”
Read more at:
http://ca.news.finance.yahoo.com
Contact us for more updated information on rental suites.
Canada’s economy produced a full month of better-than-expected economic data, helping to crank up inflationary pressure beyond expectations in February and put the Bank of Canada in the uncomfortable position of possibly breaking its pledge on interest rates.
Following the release of key inflation and retail sales data Friday from Statistics Canada, at least one Bay Street economics team revised upward its growth forecast for the first quarter by a full percentage point, and indicated more positive revisions could be in the offing.
The data, however, failed to power the Canadian dollar’s march to parity with its U.S. counterpart — although the loonie nonetheless made big gains Friday against the world’s other major currencies, as it set a three-decade high against the British pound and a 28-month high against the euro.
In all, Friday’s developments suggest the Canadian economy is roaring back at a pace that might be setting off warning bells at the Bank of Canada, which had conditionally pledged to keep its benchmark rate at 0.25 per cent until July to get the economy back on track.
“There is simply no mistaking that growth and inflation have more underlying power than even the most strident optimist would have believed just a few short months ago,”
said Douglas Porter, deputy chief economist at BMO Capital Markets, which accordingly upgraded its first-quarter GDP forecast for Canada Friday to 4.7 per cent expansion, from its previous 3.7 per cent expectation.
Retail sales was the last piece of data to emerge from January, and with that Porter said Canada produced an “unbelievable” full month of better-than-anticipated economic data. For the record, retail sales jumped 0.7 per cent in January, above the 0.6 per cent consensus.
However, when autos are excluded, sales surged 1.8 per cent, or the biggest one-month gain since late 2007. This was due, in part, to a 7.4 per cent increase in sales at outdoor supply stores, as households rushed to buy building supplies before the one-time federal home renovation tax expired on Feb. 1.
Meanwhile, all eyes were on February inflation data, which proved to be equally robust, with the core rate — watched closely by the Bank of Canada — posting a surge beyond the key two per cent threshold.
Statistics Canada core inflation, which strips out volatile-priced items such as food and energy, advanced 2.1 per cent year-over-year in February, whereas analysts anticipated a 1.7 per cent year-over-year increase.
The Bank of Canada’s last economic outlook, tabled in January, envisaged core inflation to average 1.6 per cent in the first quarter and 1.7 per cent in the second quarter. The central bank’s pledge on rates was conditional on its inflation outlook unfolding as anticipated.
“The Bank of Canada has all the evidence it needs to convince itself it doesn’t need emergency policy measures anymore, I think (the data) tells you the economy is firing on a lot of cylinders.
I continue to believe the bank will wait until July but they must be getting incredibly uncomfortable with that long of a wait”
said Andrew Pyle, wealth adviser and markets commentator with ScotiaMcLeod.
The inflation data come with a caveat, as the Vancouver Olympics drove up prices in some key areas, notably travel and lodging. Nevertheless, Porter said inflation would still be above the central bank’s forecast even if the Olympic-related numbers were adjusted.
Mark Carney, the Bank of Canada governor, might shed further light on the central bank’s outlook in a speech in Ottawa this coming Wednesday.
There was anticipation that robust inflation data could finally propel the loonie to parity with the U.S. dollar. That was not the case, however, as traders cashed in on profits and sought safety in U.S. dollars, largely due to uncertainty as to how the eurozone would deal with Greek debt problems, and an unexpected rate hike in India. The dollar closed Friday at 98.39 cents U.S., down slightly from the previous session.
“The market remains unwilling to take the final plunge (toward parity) without the support of improving global sentiment,” said Matthew Strauss, senior currency strategists at RBC Capital Markets.
Source:
edmontonjournal.com