Saturday Reads Around the Internets - Financial Sector Grows

shocknews Welcome to the weekly roundup of great articles, facts and figures. These are the weekly finds that made our eyes pop.


Financial Sector Continues to Grow

Like a suffocating monster, the financial sector continues to grow, now 8.4% of total GDP.

New research by New York University economist Thomas Philippon suggests that the financial sector is enormously outsized. He finds that, despite all the advances in information technology since the 1980s, the financial sector has become steadily less efficient: All that it has been gained from increased computing power and vast communications networks has been taken away, and then some, “by increases in trading activities whose social value is difficult to assess.”

The upshot, says Mr. Philippon, is that finance’s share of GDP really ought to be about two percentage points lower than it is now. The industry’s travails may be far from over.


Half of American's Can't Come Up with $2k in Emergency Bucks

No surprise, but a new study shows half of the population cannot scrape up $2,000 dollars for an emergency. The Wall Street Journal:

The survey asked a simple question, “If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need?” In the U.S., 24.9% of respondents reported being certainly able, 25.1% probably able, 22.2% probably unable and 27.9% certainly unable. The $2,000 figure “reflects the order of magnitude of the cost of an unanticipated major car repair, a large copayment on a medical expense, legal expenses, or a home repair,” the authors write. On a more concrete basis, the authors cite $2,000 as the cost of an auto transmission replacement and research that reported low-income families claim to need about $1500 in savings for emergencies.

Financial fragility isn’t limited to low-income groups.


Huge Percent of Those Who Lost Jobs Pushed into Part Time Work

The Altanta Fed dug out a startling statistic when looking at lost income for workers.

part time workers who lost jobs 2011

In the above chart, the fraction of re-employed workers who lost a full-time job during 2007–09 and were working at a part-time job at the time of the 2010 survey was 20 percent—well above historical levels.


Murdoch's Phone Hacking Victims Total 800

This is just disgusting. The U.K. police are announcing 800 people have been victims of tabloid/Fox News media mongol, Robert Murdoch.

The police said Saturday the final number of victims of phone hacking by Rupert Murdoch’s News of the World will be around 800 people, far fewer than originally thought.

The Scotland Yard officer leading the investigation into the scandal at the now-defunct tabloid said police had been in touch with everyone whose mobile phone voicemails were illegally accessed.

As late as a month ago Scotland Yard had said it identified 5,800 potential hacking victims, based largely on names found in the notes of Glenn Mulcaire, a private investigator jailed for phone-hacking in 2007.


Bloomberg Blasts Back at the Fed

We already covered Bloomberg's report, but after the Fed claimed it was egrecious errors, Bloomberg blasted back:

While Bernanke’s letter and an accompanying four-page staff memo posted on the Fed’s website didn’t mention any news organizations by name, Bloomberg News has published a series of articles this year examining the bailout. The latest, “Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress,” appeared Nov. 28.

“Bloomberg stands by its reporting,” said Matthew Winkler, editor-in-chief of Bloomberg News, who responded to the criticisms today on “Surveillance Midday” with Tom Keene.

Here is a point-by-point response by Bloomberg News to the Fed staff memo.


Give it Up for Fracking

In spite of the EPA acknowledging fracking is polluting ground water, various special interests still try to deny it's happening.

The U.S. Environmental Protection Agency announced Thursday for the first time that fracking — a controversial method of improving the productivity of oil and gas wells — may be to blame for causing groundwater pollution.

The EPA's found that compounds likely associated with fracking chemicals had been detected in the groundwater beneath Pavillion, a small community in central Wyoming where residents say their well water reeks of chemicals. Health officials last year advised them not to drink their water after the EPA found low levels hydrocarbons in their wells.

The EPA announcement could add to the controversy over fracking, which has played a large role in opening up many gas reserves, including the Marcellus Shale in the eastern U.S. in recent years.

The industry has long contended that fracking is safe, but environmentalists and some residents who live near drilling sites say it has poisoned groundwater.


Masters Degree, $50k in Debt, No Good Job

What this story ignores is the never ending use of immigration to displace U.S. workers as well as the catering to international students at universities. With that, guess who can't get a job even with a Masters degree.

Laura Sayer, unsure of what she wanted to do after graduating from college in 2006, figured a master’s degree was “a safe bet.”

With $5,000 in undergraduate loans from her time at the University of Cincinnati, Sayer was set back $50,000 more after completing the Interdisciplinary Master’s Program in Humanities and Social Thought at New York University. The 27-year-old now makes about $45,000 a year as an administrative assistant for a nonprofit group, a job that didn’t require her advanced degree.



Who got $586 billion in Fed swaps?

The Fed has offered foreign swaps to the tune of $586 billion and no one knows who actually got them because foreign countries do not disclose.

I'm sure there will be more to this story, but Bloomberg has the latest.

If you demand disclosure, possible to crash the system? Don't know about that one.

US-UK special relationship

These swaps have been ongoing for years. What's new is the demand for transparency. Also, there was the recent (30 November 2011) announcement that the Fed and others would be lowering the interest rate by one-half percent.

From Bloomberg --

As part of a currency-swap plan active from 2007 to 2010 and revived to fight the European debt crisis, the Fed lends dollars to other central banks, which auction them to local commercial banks. Lending peaked at $586 billion in December 2008.

The swaps are separate from Fed emergency loans to banks and other businesses that peaked at $1.2 trillion in December 2008, including about $538 billion that European financial companies borrowed directly, according to a Bloomberg News examination of available data.  ....

Biggest Foreign Borrower

The U.K.’s Royal Bank of Scotland Group Plc (RBS) was the biggest foreign borrower, drawing $84.5 billion in October 2008. UBS, based in Zurich, got $77.2 billion, while Frankfurt-based Deutsche Bank AG (DBK) took $66 billion and London-based Barclays Plc (BARC) borrowed $64.9 billion, according to the Bloomberg data.

That the UK has opted out of EU deliberations on monetary policy isn't necessarily detrimental to the rest of the EU, but may be a sign of problems ahead for the USA. Here's a summary of why that is, using data drawn from a graph published recently at Jesse's Café Américain (graph borrowed from Haver Analytics, Morgan Stanley Research).

The graph shows all debt (public and private) as percentage of GDP for each of the G10. The UK towers above all others, due to a financial sector debt some six times the UK's GDP.

IMO, the bad news for us (U.S.) is that we are probably still in our traditional "special relationship" with the UK, especially when it comes to our bloated deregulated and corrupted financial sector. It probably won't be Europe where we will catch the plague -- it will probably be the UK, or what is generally termed the 'City of London' financial colossus.

See, article on UK-US special relationship.

Nothing against our historic special relationship. I admire much about modern Great Britain and, of course, Winston Churchill and the British people during World War II. But ... could London Bridge be falling down?

special reserve currency

My understanding is the reserve currency status enables countries to run much high GDP to debt ratios.

I have another one, CEO pay, which I cannot seem to get to their actual report, so I'll deal with this when I can get some solid aggregate data.

The Guardian is reporting pure highway robbery in CEO pay, no surprise.

This year's survey shows CEO pay packages have boomed: the top 10 earners took home more than $770m between them in 2010. As stock prices began to recover last year, the increase in CEO pay outstripped the rise in share value. The Russell 3000 measure of US stock prices was up by 16.93% in 2010, but CEO pay went up by 27.19% overall. For S&P 500 CEOs, the largest companies in the sample, total realised compensation – including perks and pensions and stock awards – increased by a median of 36.47%. Total pay at midcap companies, which are slightly smaller than the top firms, rose 40.2%.

btw 2old4okeydoke

When you're not around adding comments with often a lot of more details which add to the post, highly informative, the site really suffers. Glad to see your comments!