Opinion

Ben Walsh

from Felix Salmon:

Counterparties: The tasks of the proletariat in the present recession

Ben Walsh
Sep 12, 2012 22:22 UTC

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The financial crisis and subsequent recession hasn't just chipped away at Americans' net worth. A new Pew poll shows it has affected their economic self-image as well -- 32% of all adults now consider themselves lower class, up from 25% in 2008.

Not only has the lower class grown, but its demographic profile also has shifted. People younger than 30 are disproportionately swelling the ranks of the self-defined lower classes. The shares of Hispanics and whites who place themselves in the lower class also are growing.

Specifically, 39% of 18 to 29 year-olds and 40% of Hispanics consider themselves lower class, increases of 14 and 10 percentage points, respectively, since 2008. Three-quarters of the lower class think "it’s harder now to get ahead than it was 10 years ago".

In that gloomy sense, America's burgeoning lower class has something in common with its shrinking middle class. An earlier Pew survey found "85% of self-described middle-class adults say it is more difficult now than it was a decade ago for middle-class people to maintain their standard of living".

from Felix Salmon:

Counterparties: Privatizing AIG

Ben Walsh
Sep 10, 2012 20:55 UTC

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On August 23, the NY Fed successfully unloaded the last of its toxic AIG mortgage-backed securities. Now, the US Treasury is selling $18 billion of its AIG shares to the public, with an additional $2.7 billion available to cover investor demand. (Citi, Deutsche Bank, Goldman and JPMorgan are carrying Uncle Sam's water as joint global coordinators.)

The sale will bring the government's stake down from 53% to as low as 15%, as Damian Paletta, Erik Holm and Serena Ng write in the WSJ:

from Felix Salmon:

Counterparties: Draghi makes his move

Ben Walsh
Sep 6, 2012 22:03 UTC

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Mario Draghi has made his leaked proposal official: the European Central Bank will buy unlimited amounts of troubled euro zone debt on the open markets in an effort to push down sovereign borrowing costs. The NYT's Jack Ewing and Steven Erlanger write that the plan puts the ECB's "unlimited financial clout behind an effort to protect Spain and Italy from financial collapse" and "effectively spreads responsibility for repaying national debts to the euro zone countries".

The plan, called "Outright Monetary Transactions" (OMT), will purchase bonds maturing in the next three years, after countries have made a request to the euro zone's bailout fund and fully agreed to its conditions. If countries renege on their promises in areas like banking reform or fiscal policy overhauls, the ECB will terminate the bond purchases. Importantly, the ECB will not have seniority over private bondholders.

from Felix Salmon:

Counterparties: Europe’s shrinking money funds

Ben Walsh
Sep 5, 2012 22:40 UTC

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The sovereign debt crisis has put European money market funds in an intolerable position. Many European MMFs promise not to "break the buck" -- or let the net asset values of their holdings fall below 1 euro per share. At the same time, these funds are following their US counterparts by avoiding an ever-growing pool of risky (and high-yielding) continental assets.

Unfortunately for funds obliged to invest inside the euro zone, short-term assets are increasingly moving toward negative yields. This, of course, is bad news for fund managers and investors alike. Fund managers, the FT's Ajay Makan writes, are now becoming a lot less willing to swallow their losses:

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