Roundup: November 20

Markets

Hank Paulson gave a "legacy" style speech today at the Reagan Library -- his longest and most complete defense of the administration's actions to date and his advice for his successors. Treasury today said it would backstop $5.6bn of money-market securities held by The Reserve's busted funds. GMAC has filed an application to become a bank holding company in order to benefit from the TARP. EconomPic highlights a particularly egregious use of TARP funds to pay for a golden parachute. Economix has an infographic tracking all the TARP spending so far.

The Swiss National Bank has cut its target rates 100bp in an unscheduled move, to "provide the Swiss franc money market with a generous and flexible supply of liquidity in order to bring the Libor down to the middle of the target range." The SNB is anticipating inflation below 2% as early as the end of the year. Google Trends seems to show that worries about deflation are growing.

Rumors of a bipartisan agreement on an auto bailout have been floating around all afternoon. The latest word is that nothing is likely to happen during the lame duck.

Credit indicators imply we are set for the worst period of defaults on investment-grade corporate bonds "since at least 1980."

Deutsche Bank is to cut 900 jobs. Chemicals producer BASF will cut output by 25% and cut hours for 20k employees. Catherine Rampell has a nice survey of the forces that will determine how many jobs are lost by a Big Three failure.

Russian foreign reserves dropped by $21.9bn to $435.5bn in the week of November 14, indicating more capital flight followed last week's devaluation of the currency. About 45% of reserves are held in USD, about 44% in EUR, about 10% in GBP, and the rest in JPY. The Russian stock markets were shut down today for the 35th time since the beginning of August, with Sberbank trading down 13%.

The IMF has approved its bailout package for Iceland. Britain is likely to break the Maastricht fiscal limits.

Sarkozy is punting a EUR6bn French sovereign wealth fund to be funded by the state and the Caisse des Depots to protect "national champions." Kavaljit Singh says it's a bad idea, founded on a baseless European paranoia about Middle Eastern and Asian sovereign wealth funds. (Sarkozy has also said he will hold his own economic summit.)

The largest UK mortgage securitization trust has had its first trigger event and will no longer pay its owner, raising the possibility that the trust as a whole might liquidate or restructure.

Markus Brunnermeier has an awesome chart showing the progress of the financial crisis so far through key interest rate spreads.

A new paper proposes another channel by which low short-term interest rates were transmitted to housing asset prices: pushing short-term rates down relative to 30-year mortgages made ARMs more attractive. Another asks if big bonuses lead to worse performance.

Grand Canyon, a Christian university, was the first US IPO in more than three months ($126mn offering) -- the last two IPOs to price, on August 11, were SPACs.

The Philly Fed manufacturing index showed its lowest level since October 1990. Initial jobless claims hit their highest levels today since July 1992. Japanese export volume declined 6.1% YoY in October, the largest decline since December 2001.

Auctions are failing -- for truffles.


World

Yin Weimin, China's minister for human resources and social security, described the unemployment problem as "critical" today.
The China Media Project looks at coverage of the mass incident in Gansu and concludes that China's new media control tactic -- of covering breaking news as it occurs, and publicly, rather than trying to suppress or downplay it -- is working, with Xinhua and other official accounts dominating worldwide coverage of the events, and international media captive to CCP spin. http://cmp.hku.hk/2008/11/20/1368/
Reports of violence by "urban management" (chengguan) officials are spreading. http://lawprofessors.typepad.com/china_law_prof_blog/2008/11/more-reports-of.html

The IAEA says that Iran is building its stockpile of enriched uranium and Syria may be building a nuclear reactor.

Fisticuffs erupted on the floor of the Iraqi parliament yesterday after Moqtada al-Sadr's supporters called for the parliament to reject the draft agreement on the state of US forces in Iraq. Sadrists attempted to drown out the second reading of the agreement today.

It appears that an American drone aircraft fired missiles for the first time outside of the northwestern tribal areas of Pakistan. The US ambassador has been summoned, and Pakistani generals are making impassioned pleas for cooperation instead of unilateralism.

Yet another round of talks has been scheduled between Zanu-PF and the MDC, to take place next week in South Africa. However, Zanu-PF has unilaterally drafted a constitutional amendment to put in place the mendacious SADC recommendations and sent it to Thabo Mbeki for approval. The MDC takes it as yet another sign of the insincerity of the Zanu-PF in these negotiations. South Africa is cutting $25mn in aid to help the process along.

Arizona governor Janet Napolitano is likely to be Obama's Secretary of Homeland Security; Penny Pritzker is being punted for Commerce Secretary.

US health insurers announced they would accept all applicants for insurance provided that the US mandate its citizens purchase health insurance. Where this scheme would be superior to proper socialized health care is another question.

Federal Judge Richard Leon has ordered five Algerian detainees at Guantanamo to be released immediately after habeas hearings found that their detention was justified for intelligence but was not enough to try them.

Red Sea nations are meeting to address Somali piracy after pirates reportedly demanded $25mn in ransom for the supertanker captured Saturday.

Iranian blogger Hossein Derakhshan -- a supporter of Ahmedinejad's regime -- has been arrested in Iran because he attended a blog conference in Israel.

South Korean activists are launching balloons filled with propaganda leaflets into the North.

World Politics Review says the Israeli elections will come down to a clash of personalities between Netanyahu and Tzipi Livni.

What do challenged ballots actually look like? Minnesota Public Radio publishes some examples showing the amazing diversity of things voters do other than fill in ovals.


Science

The Oil Drum continues its superlative series of posts reviewing the International Energy Agency's 2008 World Energy Outlook by looking at the estimates for the world's total oil production potential. They say the IEA relies too heavily on inflated estimates of reserves, predicted new discoveries, and technical change -- "but at least now we have some numbers we can discuss and analyze instead of a decade of blind faith in oil market economics."

The Conservative government in Canada has called for it and the U.S. to cooperate on a North American cap-and-trade plan. The difficulties of negotiating such a pact are manifold, not least of which is the baselining issue. Canada will exceed its Kyoto goals by the largest margin of any signatory, largely because of tar sands development that the government has promoted despite all objections over the past fifteen years.

Brazil will implement restrictions on the deforestation of the Amazon rainforest so that rainforest will not be cut down for sugarcane crops destined to become biofuels. These new zoning restrictions will also allow for the growth of acreage in sugarcane cultivation without putting pressure on land currently being used to grow food crops.

The USGBC has released a survey of the cost efficiency of green buildings in the LEED program; the median cost increase was 1.6%, and the mean fell at 2.5% for energy savings that averaged 33% annually, among other benefits (erosion control, alternative transportation, use of recycled materials, etc.). Across the board, the payback on this premium took between five and eight years to meet the upfront cost increase. With numbers like these, it is shameful that building codes across the country and world are not being rapidly updated.

A report in Nature Climate Change estimates US methane emissions at four times their official level, using ethane as a tracker of methane concentrations. Another report in the same issue points out the difficulty of measuring the lifetime of GHGs in the atmosphere; through reemission, knock-on effects, and the various uptake methods, human emissions of CO2 can remain effective for thousands of years, not the 5-200 reported the IPCC AR4.

EU farming ministers have agreed to changes in the Common Agricultural Policy, including liberalizing the European dairy market and transferring subsidies from production to conservation.

San Francisco has unveiled a variable pricing scheme for public parking to reduce car traffic during peak hours and increase the number of available spots.

The USDA will allow farmed fish to be labeled "organic" as long as 75% or more of their feed is organic; weak, industry-led regulations like these can undermine consumer confidence in labeling regulations. See "natural."