FDIC leader says banking system still poses significant risks

FIRST LOOK: FDIC’S HOENIG SAYS PUBLIC REMAINS AT RISK — FDIC Director Tom Hoenig will deliver a broad policy speech this morning at the AICPA-SIFMA conference in NYC.  Hoenig’s speech “says that the public remains at risk of having to pick up the pieces when the next financial setback occurs. The safety net continues to expand to cover activities and enterprises it was not intended to protect, resulting in subsidized risk taking by the largest financial firms and fueling their leverage. At the same time, the tolerance for leverage remains essentially unchanged, leaving us in a situation that is little different than before the recent crisis.  ...
“We can be confident that as time passes, this leverage again will be a problem and the public again will be left holding the bag. … Hoenig offers three recommendations to change this outcome by changing the framework and related incentives. They are: Changing the structure of the industry to ensure that the coverage of the safety net is narrowed to where it is needed … Simplifying and strengthening capital standards … Reestablishing a more rigorous examination program for the largest banks and bank holding companies to best understand the risk profile of both individual firms and financial markets.”

Essentially none of the problems that led to the 2008 banking crisis have been resolved.

China now analogous to Japan in the late 80's

That is the point of the essay When the Growth Model Changes, Abandon the Correlations by Dr. Michael Pettis.  He states "it is much more appropriate to compare China today with Japan in the late 1980s". 

Pettis backs this up by comparing the economic imbalances that existed for these two scenarios, concluding that China's economic imbalances today are much like those in Japan at its economic peak.

"Because of the serious imbalances China is much more like Japan in the late 1980s, with the major difference being that Japan never took debt, investment, and consumption imbalances to anywhere near the levels that China has taken them."

The conclusion that logically follows is that China is in for a long period of economic decline.  Their boom was generated by unsustainable buildups of imbalances and the reversing of this implies stagnance and decline in measures of economic activity.

Rethink the value of college

The cost of college has gone way up at the same time wages for graduates have declined. It's definitely time to reconsider the cost/benefit analysis for attending college.

Marketable skills can be developed in other ways.

Saudi Arabia crude oil production history

This chart shows Saudi production ramping exponentially during the 1960's and early 1970's. In my view this is the prime reason for the peaking of US domestic oil production during the same time frame.

Extremely low cost Saudi oil squeezed out higher cost production in the US.

The chart source is here.

Durable goods metric looks ugly

This measurement took a steep drop recently as the chart shows:

Such drops seem to coincide with recessions, at least recently.