Daily Archives: October 3, 2016

It’s not just Deutsche. European banking is utterly broken

By Jeremy Warner – Nine years after the initial eruption, it still rumbles on, with the epicentre now moved from the US to Europe. Only it’s not the same crisis; in large measure, it is completely different.

Today’s mayhem is not so much the result of reckless bankers and asleep at the wheel regulators, but rather of the public policy response to the last crisis itself – that is to say, regulatory over-reach and central bank money printing.

It all goes to show that there is no mess quite so bad that government intervention to correct it won’t make even worse.

There are essentially four factors at work here. First, it’s virtually impossible to make money out of banking in a zero interest rate environment, frustrating attempts to rebuild capital buffers after the bad debt write-downs of recent years.

In circumstances where central banks have bought right along the yield curve, flattening it down to virtually nothing, the margin from maturity transformation all but disappears. more> https://goo.gl/KqGo7Y

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Courage and free speech

BOOK REVIEW

Free Speech: Ten Principles for a Connected World, Author: Timothy Garton Ash.
On Liberty, Author: John Stuart Mill.
Freedom for the Thought that We Hate, Author: Anthony Lewis.
No Enemies, No Hatred, Author: Liu Xiaobo.

By Timothy Garton Ash – There is no reason to understate, let alone to deny, a specifically Western tradition of courage in the advancement of free speech, one that can be traced from ancient Athens, through England, France and a host of other European countries, to the US, Canada and all the liberal democracies of today’s wider West. But it would be quite wrong to suggest that this habit of the heart is confined to the West. In fact, there have been rather few examples of such sturdy defiance in England in recent times, while we find them in other countries and cultures.

Consider, for instance, the Chinese dissident Liu Xiaobo. Liu was sentenced to 11 years’ imprisonment in 2009 for ‘subverting state power,’ Both his written response to the charges against him and his final speech in court are, like many of his earlier writings, lucid and courageous affirmations of the central importance of free speech. He definitely does not draw only on Western traditions.

Liu wrote: ‘I hope that I will be the last victim in China’s long record of treating words as crimes. Free expression is the base of human rights, the root of human nature and the mother of truth. To kill free speech is to insult human rights, to stifle human nature and to suppress truth.’ more> https://goo.gl/1rX0Zz

Updates from GE

Like A Diamond In The Rough, This Abrasive Material Finds Its Place In The Sun
By Mark Egan – In 1891, Edward Acheson was working at Thomas Edison’s famed Menlo Park laboratory, trying to make artificial diamonds by heating clay and powdered coke in an iron bowl with a carbon arc light. The result wasn’t pretty.

Instead of diamonds, he created silicon carbide—a hard and rough compound used for decades mostly as an abrasive in industrial sandpaper, grinding wheels and cutting tools, and later a grip tape for skateboard decks.

But Acheson’s accidental discovery is getting a second life as a miracle material for power management chips that could revolutionize everything from planes and locomotives to medical equipment. One of silicon carbide’s latest applications is inside solar inverters, the devices that switch direct current (DC) from solar panels into alternating current (AC) that flows from the wall outlet.

GE has been testing the first utility-scale prototype SiC inverter in the GE Power Conversion lab in Berlin for the past two years.

The technology included in the LV5+ Solar eHouse Solution solves another quandary facing solar plants—how to turn power plant transformers on and off safely. Shutting them down at night can cause voltage spikes, and reconnecting them to the grid produces a large inflow of current, putting mechanical stress on equipment and shortening its life.

As a result, many operators leave equipment on overnight, consuming a couple of kilowatts while the inverter is not producing power during the nighttime hours—a cost of $800,000 over a 100MW plant’s life.

Using intelligent controls, the LV5+ equalizes the voltage at the transformer and at the grid, allowing transformers to be connected or disconnected smoothly and cleanly.

The end result is more cost savings for customers, Schelenz says. more> https://goo.gl/OB1eYf

Wells Fargo’s Scandal Is a Harbinger of Doom

BOOK REVIEW

Makers and Takers: The Rise of Finance and the Fall of American Business, Author: Rana Foroohar.

By Rana Foroohar – The irony is that the Wells case isn’t about anything as complicated as Tier 1 capital requirements. It’s about straight-up fraud — tellers were incentivized to make profits above all else.

But why did the trouble come in the consumer division, as opposed to any of the more complicated areas of the business? That’s where the story becomes more interesting, illuminating a more fundamental problem in the business model of banking.

Finance has moved away from its original model of supporting companies (and thus, economic growth), and now makes the majority of its money buying and selling existing assets, as well as issuing corporate and consumer debt.

Until the 1980s, banks mainly took deposits and lent them out to new businesses, which then grew jobs and supported the economy. In the 1970s, for example, the majority of financial flows coming out of the largest U.S. financial institutions went into new business investment. Today, only 15% of it does.

Until we craft a financial system that is once again focused on its true economic function — funding new business, rather than issuing debt, creating asset bubbles, and focusing on boosting profit share at whatever cost — I fear that we can expect more of the bad behavior we’ve seen at Wells. more> https://goo.gl/3cgijT