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November 28, 2012

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Posted: 28 Nov 2012 12:06 AM PST

Tim Geithner: 'Pragmatic Deal Maker'?

Posted: 27 Nov 2012 10:44 AM PST

Robert Reich is worried:

Will Tim Geithner Lead Us Over or Around the Fiscal Cliff?, by Robert Reich: I'm trying to remain optimistic that the President and congressional Democrats will hold their ground over the next month as we approach the so-called "fiscal cliff."
But leading those negotiations for the White House is outgoing Secretary of Treasury Tim Geithner, whom Monday's Wall Street Journal described as a "pragmatic deal maker" because of "his long relationship with former Treasury Secretary Robert Rubin, for whom balancing the budget was a priority over other Democratic touchstones." ...
Both Rubin and Geithner are hardworking and decent. But both see the world through the eyes of Wall Street rather than Main Street. I battled Rubin for years in the Clinton administration because of his hawkishness on the budget deficit and his narrow Wall Street view of the world.
During his tenure as Treasury Secretary, Geithner has followed in Rubin's path — engineering a no-strings Wall Street bailout that didn't require the Street to help stranded homeowners, didn't demand the Street agree to a resurrection of the Glass-Steagall Act, and didn't seek to cap the size of the biggest bank, which in the wake of the bailout have become much bigger.  In an interview with the Journal, Geithner repeats the President's stated principle that tax rates must rise on the wealthy, but doesn't rule out changes to Social Security or Medicare. And he notes that in the president's budget (drawn up before the election), spending on non-defense discretionary items — mostly programs for the poor, and investments in education and infrastructure — are "very low as a share of the economy relative to Clinton." If "pragmatic deal maker," as the Journal describes Geithner, means someone who believes any deal with Republicans is better than no deal, and deficit reduction is more important than job creation, we could be in for a difficult December.

Not sure if this will make you feel more confident, but a recent post on the Treasury's blog from Jason Furman asserted that "Increasing Taxes on Middle-Class Families Will Hurt Consumer Spending." Unfortunately, it didn't say much about Social Security and Medicare. I am worried too.

Cyberattacks on Banks Escalating

Posted: 27 Nov 2012 10:16 AM PST

President of the Atlanta Fed, Dennis Lockhart:

...A real financial stabiliy concern ... is the potential for malicious disruptions to the payments system in the form of broadly targeted cyberattacks. Just in the last few months, the United States has experienced an escalating incidence of distributed denial of service attacks aimed at our largest banks. The attacks came simultaneously or in rapid succession. They appear to have been executed by sophisticated, well-organized hacking groups who flood bank web servers with junk data, allowing the hackers to target certain web applications and disrupt online services. Nearly all the perpetrators are external to the targeted organizations, and they appear to be operating from all over the globe. Their motives are not always clear. Some are in it for money, while others are in it for what you might call ideological or political reasons.
Unlike other cybercrime activity, which aims to steal customer data for the purpose of unauthorized transactions, distributed denial of service attacks do not necessarily result in stolen data. Rather, the intent appears to be to disable essential systems of financial institutions and cause them financial loss and reputational damage. The intent may be mischief on a grand scale, but also retaliation for matters not directly associated with the financial sector.
Banks have been defending themselves against cyberattacks for a while, but the recent attacks involved unprecedented volumes of traffic—up to 20 times more than in previous attacks. Banks and other participants in the payments system will need to reevaluate defense strategies. The increasing incidence and heightened magnitude of attacks suggests to me the need to update our thinking. What was previously classified as an unlikely but very damaging event affecting one or a few institutions should now probably be thought of as a persistent threat with potential systemic implications.
I'm drawing your attention to this area of risk... But I feel the need to be measured about the potential for severe financial instability from this source. In my judgment, cyberattacks on payments systems are not likely to have as deep or long lasting an impact on financial system stability as fiscal crises or bank runs, for example. Nonetheless, there is real justification for a call to action. ...
Even broad adoption of preventive measures may not thwart all attacks. Collaborative efforts should be oriented to building industry resilience. Resilience measures would be similar to those put in place in the banking industry to maintain operations in a natural disaster—multiple backup sites and redundant computer systems, for example.

'By 2035, We Project Oil Imports into the US of Only 3.4 Million Barrels a Day'

Posted: 27 Nov 2012 10:16 AM PST

Fatih Birol, chief economist of the International Energy Agency and chair of the World Economic Forum's Energy Advisory Board, discusses his projection that "the United States will become the world's leading oil producer within a few decades":

Q. The new report has attracted great press attention for its projection that the United States may soon become the world's leading oil producer. Can you discuss what you see as the greatest implications of this change, in terms of energy security, geopolitics and carbon emissions?

A. The most striking implications concern U.S. oil imports and international oil-trade patterns. The upward trend in production is partly responsible for a sharp fall in U.S. oil imports. By 2035, we project oil imports into the United States of only 3.4 million barrels a day, which implies a substantial (60 percent) reduction in oil-import bills. North America as a whole actually becomes a net oil exporter. In international oil markets, this accelerates the shift in trade patterns toward Asia, raising the geostrategic importance of trade routes between Middle East producers and Asian consumers.

But what should attract equal attention … is the essential role played by energy efficiency. I believe that energy efficiency has been an epic failure by policymakers in almost all countries. Its potential is huge but much of it remains untapped. Compared with today, savings from more rigorous vehicle fuel-economy standards could prompt a 30 percent fall in U.S. oil demand by 2035.

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