Liquidity Solves Liquidity Crises: We Need Solvency to Solve a Solvency Crisis

Burning the Midnight Oil for a Brawny Recovery

Courtesy of Matthew Yglesias:

Reader A.M. wants answers I can’t really provide:

We should recapitalize the banks with printed money.

Well, no, we shouldn't ... at least, that is not the main route to a solution.
Printing money solves a liquidity crisis, which is a shortage of liquid assets by solvent firm.

Printing money does not solve a solvency crisis, because money from the Fed does not generate income for commercial banks. The fundamental problem of the commercial banking system is that that they pursued higher income by pretending that high risk, high yield assets were low risk, high yield assets, and so the contingency reserves that they should have been building up based on the massive systemic risks in their portfolios were instead distributed as if it was profit income.

What we need are commercial banks that are both solvent and liquid and that not only can but will lend to business and consumers once the recession bottoms out so that it is possible for injections in addition to government spending to be pumped into GDP.

And we need to do it on the basis of stable leverages and growing incomes … growing leverage on the back of stagnant income has been tried and has been found wanting.

For reference, see further discussion by Jerome a Paris in contemplating the following graph, and what it means about the US economy:

The 110mph Triple-C passenger train: Ohio, Now Is The Time

Burning the Midnight Oil for a Brawny Recovery

This is information from the Midwest High Speed Rail Blog, Ohio Proposed Budget Includes Developing Passenger Rail Between 4-5 Cities (who themselves give a h/t to Transportation for America):
"

As part of a two-year, $7.5 billion proposed budget, Ohio plans to continue developing passenger rail service connecting four cities Cleveland, Columbus, Dayton and Cincinnati (DispatchPolitics) - and possibly including a link to Toledo. Rail advocacy group All Aboard Ohio supports the so-called "3-C" plan and describes it here.

"



More System maps here

From the DispatchPolitics article, the static:

The rail element of the budget did not sit as well with some state representatives. Until Amtrak completes a study of potential ridership and revenue this summer, state officials don't know how much the train system would cost.

Of course, in the Financial Viability chapter of the Ohio Rail Development Commission planning for the Ohio Hub, the Triple-C corridor is the strongest corridor, projected to be able to gain revenues 180% of operating costs as the core of the Ohio Hub and MidWest Rapid Rail System is brought online ... so waiting for the Amtrak ridership analysis to confirm that its a strong corridor seems to be a delaying tactic, precisely so the politicians can say things like:

"I'm not saying that I'm opposed to passenger rail, but show me the numbers," said Rep. Cheryl L. Grossman, R-Grove City."

... assuming that their constituents are ignorant about the volume of numbers that have already been produced.

The most important point, here, is that this is a seed project. The Triple-C is such a good corridor for 110mph Rapid Rail that it should quickly achieved an operating surplus. Then the operating surplus can be used to fund state bonds to provide a state match to Federal funding down the track, to continue building out the entire system.

And of course, because of the geography of the US and the history of Chicago as a rail hub, the complete Ohio Hub project fills in the missing link between the Empire Corridor in New York and Keystone Corridor in Pennsylvania and the Mid-Western Rapid Rail System centered on Chicago and extending into Indiana, Michigan and Ohio to its east; Wisconsin, Minnesota, Iowa, Missouri and Kansas to its west; and the Amtrak corridor to Memphis and NOLA to its south.

If the well-practice bullshit and delaying tactics of HSR denialists is allowed to prevail, its not just an Ohio issue ... it will slow the growth of Rapid Rail connections in an areas stretching from New York State to Kansas.

Burning Fires

Vertical Wind Turbines Put New Spin on Advertising by Triple Pundit (MatteR Network)
BBC Covers Peak Oil: A Farm for the Future by Chris Vernon (The Oil Drum)
Ford Sneaks Up On Electric Car Future (HybridCars)
Indian Cities Recognize that Solving the Climate Crisis Doesn’t Involve Promoting Automobiles by Yonah Freemark (TransportPolitic)

You're From Ohio, You Idiot, Don't Screw With Our Train

Crossposted: Docudharma, ProgressiveBlue, The Economic Populist, and also at Agent Orange.

Burning the Midnight Oil for a Brawny Recovery

"Tell me how spending $8 billion,"

asked House Minority Leader John Boehner (R-OH) on the floor,

"in this bill to have a high-speed rail line between Los Angeles and Las Vegas is going to help the construction worker in my district."

(h/t Matthew Yglesias)

Now, lets look at the Federally Designated Corridors -- and you have to gave a designated corridor to get any of the $8b.


Yup, no corridor to Vegas. Oh, and what's that we see ... two, count 'em TWO corridors through Ohio ... Cleveland to Chicago and Cleveland / Columbus / Dayton / Cincinnati.

Indeed, the Triple-C route ... which at present has no interurban rail service, because back in 1960, Columbus was a little cow town of 300,000, and its growth to a metro area of 1m+ happened during Amtrak's long struggle to avoid the ax ... goes right past Boehner's District.

And look more closely, at the full fledged Ohio Hub:


... if we can roll out the system, Boehner's constituents will be able to catch a train in outer northern Cincinnati or Dayton and get to Philadelphia, or New York, or DC. Now, y'all who live in big metro areas might think that's a long trip ... but the reality for someone living in Boehner's district heading to one of those destinations is normally a much longer drive to an airport, then a puddle jumper to a hub, then a flight to the destination.

And getting "shovel ready" projects on the corridor is straightforward. Since the Ohio Hub is designed along existing rail rights of way, there are few alignment headaches to hammer out. And since it is targeted to being a 110mph Rapid Rail system, one of the essential projects required will be upgrading crossings to the quad gates, speed-sensitive train detectors, and improved signaling to allow crossing at 110mph.

That is, a large number of small upgrade projects, spread across the state. Including projects just east of Boehner's own district, therefore certain to be employing some of Boehner's own constituents.

Look, Boehner -- can I call you John? No? How about Clueless Dick, would that be alright? -- you are trying to undermine work for your own constituents, to get a substantial down payment on a transport system that will, one day, be highly valued by your constituents.

When they do the redistricting, I hope they take your "safe" Republican district and do to you what you SOB's did to Franklin County Democrats after the 2000 Census. I just want to see you defending your fight against jobs and economic opportunity in Southwestern Ohio in a swing district.

Now that would be Change that I would Really Truly Believe In!

The Broken Political Economy of the Bail-Out

Burning the Midnight Oil for a Brawny Recovery

Joseph Stiglitz on the Political Economy of the Bail-Out: Who's At the Table?



Or as your humble correspondent wrote at Obama's Emergency Banking Act of 2009 (European Tribune):

One thing that becomes clear from the ...
... Geithner proposal is who the "them" is ... if the banks turn out to be unable to service their debt and senior preferred shares, then the recourse is to convert senior preferred shares to common shares to dilute the equity of the shareholders.

The solution to not having enough money to pull toxic assets out of the system to get enough of the toxic assets out of the hands of all of the big money center banks to ensure that they can continue to act as big money center banks ... rather than the alternate view of the task at hand, in the terms of ensuring a sufficient subsystem of non-zombie banks to be able to provide the finance sector services required by Main Street if there is a recovery in 2010 or 2011 ... is to subsidize the acquisition of toxic assets by speculators.

The "them" he is not giving up is the senior management and overpaid specialists for the big money center banks. And, seemingly, he continues to view a main function of the banking system to act as a middleman between financial individuals and financial markets, with hundreds of billions of dollars under his direct control to be aimed at socializing losses so that the process can continue.

IOW, the people that have to be the main target of any hidden nationalization of the banking system aimed at ensuring that what was once its primary function (but which it "outgrew" over the past thirty years in the "market centric" Anglo disease countries) is not sacrificed to acting as a middleman between wealthy individuals and financial markets.

However, bank shareholders ... many of them, indirectly, small individuals and small business via the pension funds, insurance companies and other institutional investors providing "Main Street" financial services ... well, if it goes pear shaped, they can take a haircut. You gotta have your priorities, after all.