Capital ratios are meant to help define a “good bank” for the public. The thought being a bank widely recognized and accepted as a good one will be far less susceptible to a run. But it’s the run regardless of capital ratios that destroys good banks as well as bad. The issue is, by and large, liquidity. Officials have erred [...]
Morgan Stanley is bit more complicated as a derivatives dealer than the Big 4. Those other banks hold most of their books at their bank subsidiaries. In this case, the term bank actually means something, the legal distinction of a depository institution. Each of the four banks, JPM, C, GS, and BofA, have a holding company umbrella over them like [...]
The essence of capitalism is not strictly capital. In the modern sense, the word capital has taken on other meanings, often where money is given as a substitute for it. When speaking about things like “hot money”, for instance, you wouldn’t normally correct someone referencing it in terms of “capital flows.” Someone that “commits capital” to a project is missing [...]
Score one for Chinese consistency. Back in December, Chinese officials suddenly announced that they were pulling back the Minxin PMI’s of smaller and mid-sized businesses in both manufacturing and services. Broadcasting the need for “major adjustments”, China Minsheng Banking Corp. and the China Academy of New Supply-side Economics had previously estimated a huge decline in economic activity suggested by their [...]
Our long wait is nearly over. The Fed meets this week and is widely expected to announce a reduction in their purchases of Treasuries and Mortgage Backed Securities. The consensus seems to be that the Fed will reduce its purchases by $10-20 billion per month with the emphasis on reducing Treasury purchases. The reasoning is that with the reduction in [...]
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