Lunchtime Links 12-27
How overhauling derivatives died (Smith/Lynch, WSJ)
Debt ceiling raised $290 billion (Rogers, Politico) Another Xmas Eve vote. Dems had wanted to raise the ceiling at least $1.8 trillion to avoid having to raise it again before midterm elections, but they didn’t have the votes. Congress has bought itself about 4-6 weeks of breathing room. Senate Repubs made a showing of not voting for the measure, but had they been in the majority, you can bet they’d have done the same to avert default.
At tiny rates, saving money costs investors (Strom, NYT) “Duh” is the obvious response to this piece. Savers have been getting hammered ever since the Fed started dropping rates two years ago. Yet it’s well written and important to see in the paper of record. It makes the point that low rates are forcing many folks to chase risk. Low nominal rates would be fine IF the Fed were allowing the economy to delever/deflate as it clearly needs to. If the cost of goods/services is falling, then rates can be zero and savers still come out ahead. But the CPI has stayed positive, so savers lose. Of course punishing savers is precisely what economists like Paul “paradox-of-thrift” Krugman and Greg “confiscate-cash” Mankiw say is needed for the economy to recover. Krugman wants to steal savings via shock-and-awe deficit spending, i.e. future taxation. Mankiw would literally confiscate a portion of unspent savings.
Good news alert: Hunting trash for cash (Hudak, Orlando Sentinel) The recession is causing us to produce less trash. This is problematic for Covanta, which burns trash to create energy. But it’s great for the environment.
Investors see farms as way to grow Detroit (Huffstutter, LA Times) Urban renewal…
VIDEO: Stopping purse snatchers (LiveLeak)
Alcohol substitute that avoids drunkeness in development (Rodgers/Alleyne, Telegraph)
Japan’s “grass eaters” turn their back on macho ways (McCurry, Guardian) Twenty years of economic stagnation appears to be neutering Japan.
Teflon Buffett (Felix)