Henry Kaufman says the business cycle is dead

Henry Kaufman (remember him? Dr Doom of the 1970s?) wrote an oped in the FT yesterday, "Markets and the Fed have to practise a new dance," suggests that we might not see economic cycles in the future, but "selective intervention" by the Fed. I suppose he means, although does not explicitly say, that business cycles will be replaced by carefully modulated boom and bust cycles. Puzzling it is, both what he means and why he wrote this essay.

I wonder if we should welcome a replacement of normal market forces with Fed decision-making.

Assets of big banks get really big. Deutsche, Barclays, HSBC, BNP exceed $2.5 tn each.

I could hardly believe this graphic in the FT yesterday. Despite increased capital requirements, slow lending growth, and write-offs, the assets of the big banks have been growing by leaps and bounds: Barclays was up 500% in the 10 years ending 2012, for example, to $2.5 trillion.

Is this why they're invading the USA?

Latin America has the highest crime rates in the world. Honduras has the highest murder rate in the world. It has 90.4 murder/100,000/year. (So everyone in Honduras has a one in ten chance of being murdered in any ten year period?) London, which had 112 murders in the past year, would have had 7,500 with Honduras' rate. Economist 7/12/2014

As we speak:

Embassies of Japan and Korea are hosting joint meetings of Japanese and Korean companies to encourage them to team up to counter increasing Chinese investment in Russia. Is this in keeping with our sanctions?

Water, water everywhere. . .

There is an interesting article on water in the FT (Wednesday, p9) on water. The top ten countries for freshwater, both surface water and groundwater, account for 60% of world's fresh water: 

 
Brazil - 12.1%
Russia - 9.3%
USA - 7.8%
China - 6.8%
Canada - 6.2%
Colombia - 5.4%
Indonesia - 4.7%
Peru - 3.7%
India - 3.5%
Myanmar 2.8%

India and China have problems, particularly India, with only 1/2 as much water as China. But will Colombia, Peru and Myanmar become to water what the Middle East is to oil? By far the biggest use of fresh water by humans is for irrigation (2/3rds of total.) All efforts at conservation other than limiting irrigation will have marginal impacts. It would be better to address supply than demand, since irrigation is, as Martha Stewart would say, "a good thing."

Too much of a good thing?

President Hollande of France wants to streamline local government.   (FT Tuesday, p4)  France has 13% of the population of the EU’s twenty-eight states, but it has one-third of EU local authorities.  There are 36,700 municipalities, 2,500 intercommunal groupings, 100 prefectures and 200 subprefectures.   The French refer to this as a “millefeuille” in light of these delectable , rich, buttery bureaucratic layers. 

According to Plato, reality resides in the forms.

It turns out that the accounting error at the Bank of America that derailed its dividend plans was really an error at the Federal Reserve.  The Fed provides forms to banks to calculate their regulatory capital.  The forms gave incorrect instructions, which BAC followed.  When the Fed noticed its mistake and corrected its instructions, a new, lower capital level resulted when the new instructions were followed. . . . Something similar just happened to me.  I just turned 65 and received a letter from Medicare explaining how to enroll on their website.  These instructions were incorrect because, it appears, the web site had been changed but the instruction letter had not.  (Probably a different department for the letter from that for the website.)  It goes without saying that BAC had to take the blame for fear of regulator retaliation.  (Faceless bureaucracies abhor red faces.)  The interaction between big government and big business produces big errors.  The interaction of big government and the individual is just inefficient and annoying.