Category Archives: Finance

US Mexicans Returning Home

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Mexicans are staying in Mexico or moving back from the US.

Between 2009 and 2014, the Mexican population in the U.S. declined by 1,140,000 as well over 1 million left their wealthy northern neighbor to go back to their country of origin, according to the Mexican National Survey of Demographic Dynamics (ENADID).  One clue to the recent change in the trend is in current perceptions: today one-third of Mexicans believe their standard of living would be no higher north of the border, compared to less than one-quarter who thought so in 2007. And less than half (48%) believe life would be better in the U.S.  The ENADID survey also indicated that family ties had played a large part in the rising numbers of Mexicans moving back south of the border: six in 10 of those who said they had lived in the U.S. five years ago but were back in Mexico as of last year cited reunification with loved ones as the main reason. Just 14% said they had been deported.

Mexicans Going Home from US

Iran Discusses Oil Production as Sanctions are Lifted

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Iran is returning the world, at the conference table on foreign policy matters and now asking for accomodations on oil production.

OPEC should make room for increased Iranian crude production within its ceiling of 30 million barrels a day, the nation’s oil minister said, adding the group will probably leave that limit unchanged when it meets next month.

Iran has asked OPEC to accommodate its return to previous production levels when international sanctions are lifted, Bijan Namdar Zanganeh told reporters in Tehran. Iran plans to add 1 million barrels a day within five to six months of the curbs being removed and that increase should be within OPEC’s production ceiling, Amir Hossein Zamaninia, deputy minister for commerce & international affairs, said in Tehran on Saturday.

Brent crude tumbled more than 60 percent since the middle of last year as OPEC followed Saudi Arabia’s strategy of defending its share of the global market against competitors such as U.S. shale producers. The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, has been pumping above its target level for 17 months. It is scheduled to meet on Dec. 4 to discuss the ceiling.

“I don’t expect to receive any new agreement” at the OPEC meeting, Zanganeh said. “OPEC is producing more than its approved ceiling and I asked them to reduce production and to respect the ceiling, but it doesn’t mean we won’t produce more because it is our right to return to the market.”

Iran was OPEC’s second-largest producer before sanctions over its nuclear program were tightened in 2012. The nation, which reached an agreement with world powers in July over the trade restrictions, is currently the group’s fifth-largest supplier, pumping 2.7 million barrels a day last month, according to data compiled by Bloomberg.

“I sent a letter to OPEC to consider our return to the market and to manage it,” Zanganeh said. “We don’t need to receive any permission from any organization for our return to the previous level of production. It is a sovereign right.”

Most OPEC members see $70 a barrel as a fair price for oil, Zanganeh said. Brent crude last traded at that level in December, days after OPEC gathered in Vienna and opted to resist calls from members including Venezuela to cut output. Brent settled near $45 a barrel in London on Nov. 20.

Venezuela President Nicolas Maduro is scheduled to meet Russian President Vladimir Putin in Tehran on Nov. 23 to work together on oil prices, he said on state television last week. Russia, which isn’t a member of OPEC, is facing competition in Europe after Saudi Arabia reduced pricing for buyers in northwest Europe and started selling in established Russian markets such as Poland.

Russia was lobbied last year by Venezuela as it sought to coordinate action with non-OPEC producers to halt the collapse in oil prices. Global supply and demand is best balanced by the market, Russian Energy Minister Alexander Novak said Saturday in Tehran. Any discounts on Russian crude are a matter for the oil companies and not the Energy Ministry, Novak said.

Iran's Oil Production

ISIS Elusive?

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IS and its ilk are skilled recruiters, using the internet and informal networks. They can therefore rely on a steady flow of terrorists ready and willing to fight. Instead of going through a tightly controlled and highly competitive recruitment process, IS has a well-funded web and social media propaganda campaign disseminating videos of brutal violence and destruction to appeal to potential followers. It also distributes an English language magazine,.

Taking advantage of improvements in technology and transportation, the Islamic State (like al-Qaeda) contrasts with past terrorist groups that remained more domestic and nationalist. Today’s terrorist groups are transnational – European and North African recruits are incorporated into cells based in Europe and beyond. Unable to migrate to fight in Syria, they are being used to stage attacks in the countries in which they are based.

Driven by ideology, the conventional terrorist organisations of yesteryear mostly received their support from state sponsors. But today, most terrorist groups engage in organised criminal activities to keep their organisations thriving. IS has flexible and lucrative sources of funding. Most of this comes from illicit proceeds from occupying territory such as controlling banks, oil and gas reservoirs, extortion and theft of economic assets. IS also earns funds by donations from non-profits and foreign fighters.

By not relying on foreign funding, the group is not vulnerable to a sudden loss of support. Additionally, the group’s motives also mutate. Lucrative criminal opportunities motivate the group. They also provide a constant flow of funding for further attacks.

Holding territory

Occupying territory is also a something that distinguishes terrorist-hybrid organizations from terrorist groups of the past. Typically it is insurgencies that hold territories by force, whereas terrorist groups have been too weak to hold territory and must rely on a safe haven provided either passively or actively by a state sponsor.

IS holds territory roughly the size of Belgium, which it uses as a base to train its militias and conduct and plan its operations. More than 60% of its funds goes towards paying its military. By holding territory and providing services to the people who live there, it can operate more freely than groups which lack a large base for its headquarters.

Though the organization is transnational and cellular, it also has a robust organization capable of planning carefully orchestrated attacks and offering the financial and logistical support necessary to make its attacks highly deadly. The Paris attacks were too sophisticated and effective to be the work of leaderless resistance or lone-wolf terrorism. As the French prime minister, Manuel Valls, said, they were very probably planned from the top in Syria, rather than by an autonomous cell based in France.

But in spite of its unusually clear hierarchical leadership structure, simply killing IS’s top leaders and destroying its resources and supply lines will still be ineffective. The only way to deal effectively with the group will require a long-term plan of eliminating the deep sources of frustration in the region, such as government corruption, mismanagement and state violence.

Isis Power

Pressures of Financing Anti-terror Security

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Security measures will be costly for western countries.

French President Francois Hollande’s increased spending to boost security in the wake of the deadly attacks in Paris should be given special treatment under Europe’s budget rules, European Commission President Jean-Claude Juncker said.

“We are faced with terrorist acts. France and other countries need additional means and these additional means should not be dealt with on the same footing as regular spending,” Juncker told an audience in Brussels on Wednesday.

Following the assaults in the French capital that killed at least 129 people on Nov. 13, Hollande said he is ready to breach the European Union’s budget-deficit ceiling to spend whatever is needed to ensure security. He promised more money for intelligence services, additional police officers and no cuts to the army’s personnel numbers.

“For an extraordinary situation we need extraordinary spending,” Juncker said on Wednesday. “And it goes the same for other countries,” he added.

The European Commission has already said that extra spending by governments to deal with the influx of refugees into the bloc may receive a reprieve under the budget rules, which include an annual deficit limit of 3 percent of gross domestic product.

When nations are faced with “unusual events outside the control of the government,” then spending can be increased without drawing sanctions, the commission said on Nov. 17. While the statement referred to refugee-related spending, Commission Vice President Valdis Dombrovskis said the EU executive would assess the impact of France’s security spending.

Financing Security

Entrepreneur Alert: High Tech Toilets?

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Luxury toilets a big item for big spenders.

Guarded by heavy metal gates, it feels like a secret base in the heart of Tokyo. Inside a typical office building in the Akihabara district is a high-tech factory that is created for use by anyone with innovative ideas.

To the uninitiated, a makerspace is a physical housing area (it could be a library or a community centre, for instance) that provides technology, manufacturing equipment and/or educational opportunities to the public.

Here the Toto electric toilet seat with water spray feature was created.

Japan has long pioneered high-tech toilets. This one allows users to check blood pressure, urine protein, weight and body fat on the control panel.

Is this an opportunity for creative entrepreneurs around the world?

High Tech Toilets

Chinese Slowdown Slows Baltic Shipping

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The cost of shipping commodities fell to a record, amid signs that Chinese demand for iron ore and coal is slowing, hurting the industry’s biggest source of cargoes.  The Baltic Dry Index, a measure of shipping rates for everything from coal to ore to grains, fell to 504 points on Thursday, the lowest data from the London-based Baltic Exchange going back to 1985. Among the causes of shipowners’ pain is slowing economic growth in China, which is translating into weakening demand for imported iron ore that’s used to make the steel.

Baltic Shipping

Warren Tackles Women’s Pay

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Elizabeth Warren proposes a women’s economic agenda.

“Achieving pay equality for women isn’t enough,” Senator Elizabeth Warren, D.-Mass., said.  “We have to make sure that all workers – men and women – are earning enough to live on.”

A recent Economic Policy Institute study shows that the gender pay gap has closed some 40 percent. It’s not because women are earning more. It’s because men are earning less.

Wages for all workers have been suppressed, because of national policies consciously adopted to guarantee that most of the wealth being created through increased productivity goes to those who are already the richest, most powerful people in America.

It hasn’t always been this way. For decades following the end of World War II, Gould said, pay for the vast majority of American workers went up as productivity rose.

Then economic policies turned against workers. Productivity grew 72.2 percent between 1973 and 2014, but hourly pay for the typical worker rose just 0.20 percent annually. From 2000 to 2014, the gap between productivity and pay grew faster and wider. Productivity rose 21.6 percent but pay increased only 1.8 percent for the typical worker.

If the fruits of higher productivity had been shared with those who had produced the wealth instead of being lapped up by the top one or two percent, Gould said, no one with a full time job would be living in poverty today. Overall, wages would be up 70 percent.

However, because of current economic policies some 35 million working Americans are living in poverty. Many are working two or three jobs.

In presenting the Women’s Economic Agenda, Senator Warren pointed out that more than half of low wage workers are women and that some 14 million children are being brought up in poverty.

“This is an economic issue,” Warren said, “but it is also an issue of American values. No one who works full time should be living in poverty.”

Schedules That Work bill

Warren discussed her Schedules That Work bill. If passed (which is unlikely in today’s Republican-controlled congress) it would prevent employers from calling workers in at the last minute. It would also stop managements from calling workers in, deciding they aren’t needed and sending them home without pay.

“Women especially need some control over their work schedules,” Warren said, “because a large number have sole responsibility for children. How can you plan for childcare if you don’t know what your schedule will be day to day?”

“Congressional representatives such as myself,” DeLauro said, “can take off as many days as we want to. Yet, one quarter of all workers have been fired or threatened with being fired for taking just one day off to take care of their kids.”

Women’s Economic Agenda

EPI’s economic agenda for women addresses the issues Sen. Warren and Rep. DeLauro discussed. It calls for equal pay that’s also a living wage. It stresses the importance of fair scheduling and paid family and medical leave.

“Women in unions are more likely to be paid higher wages and have access to needed benefits and protections. When unions are strong, those benefits and protections spread to nonunion workers as well.”

The agenda also calls for raising the minimum wage for all workers and eliminating the subminimum wage;  the nation must protect and strengthen Social Security and pensions.

The agenda ends by calling for national monetary policies that “prioritize wage growth and very low unemployment.”

Women's Pay?

 

 

118 Years to Cure Gender Pay Gap?

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Will it take 118 years to close the women’s pay gap?

A recent report from the World Economic Forum suggests this time frame.

It says progress on closing the gap has stalled in recent years at a time when more women are entering the workplace.

In fact, nearly a quarter of a billion more women are in the global workforce today than a decade ago.

In several countries, more women are now going to university than men but – crucially – this is not necessarily translating into more women occupying skilled roles or leadership positions.

The WEF report looks at whether men and women have the same rights and opportunities in each country in four areas: health, education, economic participation and political empowerment.

Gender Pay Gap

Curbing the Tentacles of the Big Banks

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The Federal Reserve is on the verge of relinquishing the tools it used to rescue American International Group Inc. and Bear Stearns Cos. That probably won’t appease lawmakers who’ve said they’re still concerned the central bank might abuse its powers as the lender of last resort.

After the Fed released an initial proposal almost two years ago, a bipartisan group of lawmakers including Democratic Senator Elizabeth Warren complained that it didn’t go far enough and left regulators too much wiggle room to orchestrate a backdoor bailout that violates the intent of Congress. Yellen, testifying before a House panel this month, rejected the idea that the Fed should relinquish its role as potential savior in a crisis.

Warren and other lawmakers argue the expectation that the Fed will rescue failing banks, incentivizes reckless behavior on Wall Street. Lawmakers also are trying to shrink the number of banks that receive heightened supervision from the Fed and are threatening to boost Congress’ authority over the Federal Reserve Bank of New York, which oversees giant U.S. lenders such as JPMorgan Chase & Co. and Citigroup Inc.

Before Dodd-Frank, the central bank had the authority “in unusual and exigent circumstances” to lend to virtually any company or person, thanks to section 13(3) of the Federal Reserve Act. In March 2008, the Fed, then led by Ben S. Bernanke, used that power to extend credit to Bear Stearns through JPMorgan, which acquired the failing securities firm. Six months later the Fed began a bailout program to keep insurer AIG afloat.
Now the Fed is prohibited from rescuing individual firms, but Dodd-Frank permits the central bank to provide “broad-based” liquidity to the financial system if it gets the approval of the Treasury secretary. Though Dodd-Frank laid out the basic emergency lending restrictions, the Fed has to write the policies and procedures.

The lawmakers urged the Fed to revise its proposal to establish both clear time limits for how long banks could receive emergency lending and procedures for the orderly unwinding of such programs. They asked Yellen to improve how the Fed defines terms such as insolvent and broad-based. To prevent the so-called moral hazard associated with the Fed’s lending authority, the group requested that any emergency loans be made at unfavorable, or penalty, interest rates.

Yellen has indicated that she might partly, but not entirely, appease the politicians. The Fed expects to release the final rule by the end of November and will address “concerns about the definition of broad-based eligibility, insolvent borrowers, and penalty rates,” she told the House panel. She didn’t discuss the lawmakers’ other requests.  Yellen also must contend with Republican efforts led by Shelby to limit the Fed’s authority. Legislation he drafted that would reduce Fed oversight of regional banks, including eliminating stress tests for many of them, was added to a spending bill that Congress must pass next month to avert a federal government shutdown.

Tentacles of the Big Banks

Financial Regulation for Crowdfunding?

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Robert Shiller writes:  If one were seeking a perfect example of why it’s so hard to make financial markets work well, one would not have to look further than the difficulties and controversies surrounding crowdfunding in the United States. After deliberating for more than three years, the US Securities and Exchange Commission (SEC) last month issued a final rule that will allow true crowdfunding; and yet the new regulatory framework still falls far short of what’s needed to boost crowdfunding worldwide.

True crowdfunding, or equity crowdfunding, refers to the activities of online platforms that sell shares of startup companies directly to large numbers of small investors, bypassing traditional venture capital or investment banking.

Regulators outside the US have often been more accommodating, and some crowdfunding platforms are already operating. For example, Symbid in the Netherlands and Crowdcube in the United Kingdom were both founded in 2011. But crowdfunding is still not a major factor in world markets. And that will not change without adequate – and innovative – financial regulation.

There is a conceptual barrier to understanding the problems that officials might face in regulating crowdfunding, owing to the failure of prevailing economic models to account for the manipulative and devious aspects of human behavior. Economists typically describe people’s rational, honest side, but ignore their duplicity. As a result, they underestimate the downside risks of crowdsourcing.

The risks consist not so much in outright fraud – big lies that would be jailable offenses – as in more subtle forms of deception. It may well be open deception, with promoters steering gullible amateurs around a business plan’s fatal flaw, or disclosing it only grudgingly or in the fine print.

It is not that people are completely dishonest. On the contrary, they typically pride themselves on integrity. It’s just that their integrity suffers little lapses here and there – and not always so little in aggregate.

The SEC’s new rules for crowdfunding are complex, because they address a complicated problem. The concept underlying crowdfunding is the dispersal of information across millions of people. Most people, even the cleverest, cannot grasp the next breakthrough business opportunity. Those who can are dispersed.

The problem is that the promise of genuine “unique information” comes with the reality of vulnerability to deception. That’s why channeling dispersed knowledge into new businesses requires a regulatory framework that favors the genuinely enlightened and honest. Unfortunately, the SEC’s new crowdsourcing rules don’t go as far as they should.

The SEC with rulemaking for crowdfunding platforms specified that no startup can use them to raise more than $1 million a year. This is practically worthless in terms of limiting the scope for deception. In fact, including this provision was a serious mistake, and needs to be corrected with new legislation. A million dollars is not enough, and the cap will tend to limit crowdfunding to small ideas.

Some of the SEC rules do work against deception. Notably, crowdfunding platforms must provide communication channels “through which investors can communicate with one another and with representatives of the issuer about offerings made available.”

That is a good rule, fundamental to the entire idea of crowdfunding. But the SEC could do more than just avow its belief in “uncensored and transparent crowd discussions.” It should require that the intermediary sponsoring a platform install a surveillance system to guard against interference and shills offering phony comments.

The SEC and other regulators could go even further. They could nudge intermediaries to create a platform that summarizes commenters’ record and reputation. Indeed, why not pay commenters who accumulate “likes” or whose comments on issuers turn out to be valuable in light of evidence of those enterprises’ subsequent success?

For the financial system as a whole, success ultimately depends on trust and confidence, both of which, like suspicion and fear, are highly contagious. That’s why, if crowdfunding is to reach its global potential, crowdphishing must be prevented from the outset. Regulators need to get the rules right (and it would help if they hurried up about it).

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