Banks & cash - Part two

Perhaps the most striking characteristics of the agreement - which amends a draft first published in 2010 - is that banks will be allowed to include corporate bonds, some shares and high-quality residential mortgage backed securities in their permitted stocks of liquid assets.

This goes against the grain of central banking and regulatory orthodoxy. In particular, the inclusion of mortgage-backed securities will be seen by some as odd, since these proved to be wholly illiquid and unsellable in the summer of 2007.

If you believe that quantitative easing and the unprecedented creation of new money in much of the West - including the UK and US - risks debasing these assets over the long term, or if you believe that the credit worthiness of most Western governments is not what it was, then you would argue that banks are being encouraged to hold excessive stocks of assets that could end up becoming seriously and dangerously loss-making for them.

Banks & cash

Financial regulators and central bank governors from the world's biggest economies have made history by agreeing rules on the minimum quantities of cash and liquid or sellable assets that all banks must hold. It is an attempt to make banks less vulnerable to the kind of runs that shattered Northern Rock and Lehman Bros.

I still feel that Northern Rock should never have been saved, but that is another story.

There is an oddity at the heart of today's historic agreement by the oversight body of the Basel Committee on Banking Supervision, which for the first time will impose new minimum requirements for the amount of cash and liquid assets that banks all over the world will have to hold.

The oddity is that most banks already hold considerably more than the new minimum requirement - but the reason they already pass this threshold is because we continue to live in strange and perilous times, with many Western economies parlously weak and the financial system still stressed.

As pointed out by Sir Mervyn King - the governor of the Bank of England who chairs the oversight body of the Basel Committee, which is known as the Group of Governors and Heads of Supervision (GHOS) - the fundamental cause of the crises at these banks and others was that they had too little capital to absorb losses.

Larry Ellison confused about the Cloud

Larry Ellison was on stage at Oracle OpenWorld [about 3 years ago] telling us that the Cloud was a meaningless fad. Fast forward to OOW 2012 and it would be easy to believe that Oracle invented the cloud. At OOW 2012 he openly stated Oracle started to write Fusion Apps for the cloud 7 before. Dude! That is not true. You initiated a program to rewrite Fusion Apps to be a browser-based replacement for EBS, which then happily coincided with the whole cloud thing at a later date.

This is not a criticism of Oracle’s current cloud offerings. If the post had just been one discussing the current and future cloud offerings that would be fine. It’s the mocking tone, suggesting we are all idiots for believing that Oracle were never anything but at the forefront of the cloud scene. Trying to spin Larry as a godfather of the cloud with statements like, “an industry segment he helped to create and in which he’s been immersed for 14 years”, is extremely disappointing.

Cross jobs again...

Employees from arms dealers and defence firms that have recently signed huge government contracts are currently working at the MoD. BAE Systems and Rolls Royce, who have been awarded billions of pounds worth of MoD contracts over the last few months, have five employees inside the department.

The MoD is also employing staff from Babcock, who were awarded a £65 million contract in December. It is worth noting that Babcock had a contract for the Government's "work programme" which I had to attend, but they lost it.

The full list of MoD employees on secondment from private firms that have recently signed multi-million pound contracts with the department:

3 BAE Systems employees- £1.2 billion contract signed in December
2 Rolls Royce employees – £1 billion contract signed in June
1 Babcock employee – £65 million contract in December
1 Carillion employee – £45 million deal last year
1 Lend Lease employee – £17 million deal in June
1 GVA employee- appointed to identify contractors for Deepcut relocation in July

Jobs for the boys

Tim Smith former head of the FSA [Foods Standard Agency] has moved from the committee to group technical director in Tesco.

Tesco has always resisted the need for traffic light labelling, a move that the FSA has been trying to get everyone involved in, now we know where the sticking point was...

National Rifleman's Association

I've just found out that on Friday 14th December, 2012 on the NRA website, the following message appeared:-

"It's Friday, and this is your NRA news update. In Michigan gun owners with extra training will be allowed to carry concealed firearms in places such as schools and churches where they were previously off-limits. A bill that cleared both the House and Senate is now on its way to the Governor's desk for his signature."

Remember this is the very day of the shooting at the Sandy Hook school - coincidence?

Auld Lang Syne

I don’t do predictions, but it is popular with bloggers generally.

I suppose this means I think Chinese growth will keep plugging along at 8% plus, as that number seems to be embedded in market forecasts.  So if the markets are wrong then I will have also been wrong.  Ditto for any previous errors made by the market consensus.

This is also a time for New Year’s resolutions, but I am not in a position to be able to make one.

As I look back over the past 4 years of unemployment I see a steady deterioration in this country, they say that at the beginning of this centaury America took over from Britain as the great power, I do not think we will have to wait one hundred years for China to overtake America, especially after the new years debacle connected to the fiscal cliff.

I wonder what the average American thinks of their politicians which they have voted in to make policy and seem to be unable to make decisions...