Quotulatiousness

June 16, 2013

Chinese banks have a “hidden second balance sheet”

Filed under: China, Economics — Tags: , , — Nicholas @ 10:40

It’s been a while since I posted one of my links to articles about the Chinese economy. Time to redress that now:

“There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling,” she told The Daily Telegraph.

While the non-performing loan rate of the banks may look benign at just 1pc, this has become irrelevant as trusts, wealth-management funds, offshore vehicles and other forms of irregular lending make up over half of all new credit. “It means nothing if you can off-load any bad asset you want. A lot of the banking exposure to property is not booked as property,” she said.

[. . .]

Fitch warned that wealth products worth $2 trillion of lending are in reality a “hidden second balance sheet” for banks, allowing them to circumvent loan curbs and dodge efforts by regulators to halt the excesses.

This niche is the epicentre of risk. Half the loans must be rolled over every three months, and another 25pc in less than six months. This has echoes of Northern Rock, Lehman Brothers and others that came to grief in the West on short-term liabilities when the wholesale capital markets froze.

Mrs Chu said the banks had been forced to park over $3 trillion in reserves at the central bank, giving them a “massive savings account that can be drawn down” in a crisis, but this may not be enough to avert trouble given the sheer scale of the lending boom.

Overall credit has jumped from $9 trillion to $23 trillion since the Lehman crisis. “They have replicated the entire US commercial banking system in five years,” she said.

The ratio of credit to GDP has jumped by 75 percentage points to 200pc of GDP, compared to roughly 40 points in the US over five years leading up to the subprime bubble, or in Japan before the Nikkei bubble burst in 1990. “This is beyond anything we have ever seen before in a large economy. We don’t know how this will play out. The next six months will be crucial,” she said.

Latest installment of the corporate tax crusade

Filed under: Britain, Business — Tags: , — Nicholas @ 10:16

In Forbes, Tim Worstall explains why a company that has paid full corporate taxes on its income has no further legal or moral obligation to pay more:

Read that through again: they’re saying that the company has already paid full corporation tax on that money. And we don’t tax dividends going to people in foreign countries. Whatever the tax rate is there, we simply don’t tax them. Because of course that’s up to the country where the money goes to to tax: it’s not actually something that is taxable in the UK. For, obviously, they’ve already paid the full corporation tax due.

But it does actually get better. Those dividends, paid out of post tax (and do please note, post tax) profits wouldn’t be subject to further corporation tax in the UK either:

    The general rule is that dividends paid by a UK company to another UK company out of post-tax profits are exempt from further taxation.

That the recipient corporation is in the British Virgin Islands thus makes not one whit or iota of difference to the amount of corporation tax payable. So this is all really a rather strange complaint. Perhaps the newspaper has just got caught up in the frenzied atmosphere over the subject.

[. . .]

As to why this story is being blown up allow me to offer some speculation. There’s a group of people who are quite vociferous in their demands that the corporate tax system must be radically changed. Richard Murphy (who just for complete disclosure, used to write here at Forbes) is one of the leading lights of that group. Various members of the loose knit group have been behind all sorts of claims about Vodafone, Boots, Starbucks, Google, Apple and a number of other companies. The problem with the claims is that none of them have really stuck. There’s been absolutely no finding of illegality anywhere.

The claim has thus moved onto, well, OK, so it’s not illegal: all of these companies are indeed obeying the law. But we still don’t think they’re paying enough tax. Therefore the law must be changed simply because we think they should be paying more tax. Which is, when you think about it, a fairly extreme claim. Companies should pay more tax because a group of 20 or so people demand that they should be doing so?

Recognizing a sociopath

Filed under: Books, Health, Media — Tags: , , — Nicholas @ 10:06

At Marginal Revolution, Tyler Cowen discusses a book that may or may not be a dependable guide to sociopaths:

The author argues that sociopaths are often very smart, have a lot of natural cognitive advantages in manipulating data, and are frequently sought out as friends for their ability to appeal to others. It is claimed that, ceteris paribus, we will stick with the sociopath buddies, as we are quite ready to use sociopaths to suit our own ends, justly or not. It is claimed that for all of their flaws, many but not all sociopaths are capable of understanding what is in essence the contractarian case for being moral — rational self-interest — and sticking with it. Citing some research in the area (pdf), the author speculates that sociopaths may have an “attention bottleneck,” so they do not receive the cognitive emotional and moral feedback which others do, unless they decide very consciously to focus on a potential emotion. For sociopaths, top down processing of emotions is not automatic.

We even learn that (supposedly) sociopaths are often infovores. It seems many but not all sociopaths are relatively conscientious, and the author of this book (supposedly) teaches Sunday school and tithes ten percent to the church. It just so happens sociopaths sometimes think about killing or destroying other people, without feeling much in the way of remorse.

[. . .]

I cannot evaluate the scientific claims in this book, and would I trust the literature on sociopaths anyway, given that the author claims it is subject to the severe selection bias of having more access to the sociopathic losers and criminals? (I buy this argument, by the way.) It did occur to me however, that for the rehabilitation of sociopaths, whether through books or other means, perhaps they should consider…a rebranding exercise? But wait, “Sorry, I could not find synonyms for ‘sociopath’.”

If nothing else, this book will wake you up as to how little you (probably) know about sociopaths.

Not from the Scottish Tourist Board

Filed under: Britain, Humour — Tags: , — Nicholas @ 09:40

For more great reasons to love Scotland, click here.

Emmanuel Goldstein? Isn’t that some C-list celebrity from the 70s?

Filed under: Books, Government, Liberty, Media — Tags: , , — Nicholas @ 00:01

In Maclean’s, Colin Horgan says it’s the Huxley dystopia we’ve actually fallen into, rather than the Orwellian:

Over at the New Yorker, Ian Crouch wondered this week whether we really are living in some version of George Orwell’s Nineteen Eighty-Four. It seems like a perpetual question, but it has renewed relevance now, both in light of the revelations last week from the Glenn Greenwald at the Guardian that the National Security Association is, apparently, mining internet data from users (whether guilty or not), without their knowledge or consent, and because in the subsequent days, sales of Nineteen Eighty-Four skyrocketed.

But, as Crouch asked, are we living in Nineteen Eighty-Four? Not quite. It all looks pretty bad, and the nightmare scenario Orwell depicted is, technically speaking, quite possible but, Crouch noted, “all but the most outré of political thinkers would have to grant that we are far from the crushing, violent, single-party totalitarian regime of Orwell’s imagination.” Surely, though, this is not what was envisioned – even when the Patriot Act was debated back at the turn of the century, few (if any) could have envisioned that the laws might be one day stretched quite as far as they appear to have been under the Obama administration. So, if not Nineteen Eighty-Four then when? What time is this?

[. . .]

There are two ways for a culture to die, Neil Postman wrote back in the 1980s: One is Orwellian, “where culture becomes a prison,” and the second is Huxleyan, where “culture becomes a burlesque.” To answer Crouch’s question, we are living the second reality more than the first. Big Brother does not watch us by his choice; rather, as Postman put it, we watch him by ours. “Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance,” Postman wrote.

[. . .]

To paraphrase Postman, we have not been ruined by what we hate, but instead, as Huxley predicted, by what we love. We are prisoners to our own egoism and passivity, drowning in a sea of irrelevant streaming data, presented not in with any hierarchy or inherent importance, but as equal and unweighted. The Harlem Shake and Nyan Cat are just as relevant as a civil war in Syria or a democratic nation spying on its own citizens, just as being watched by millions of strangers via webcam or TV broadcast feels just the same as being watched by the government. And, as Huxley thought we might, we have convinced ourselves that is freedom.

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