COULDN'T WATCH

The Mets did the business and have now taken the first two out of a best of seven against the Cubs.  I was ready, had Frank on singing "New York, New York......." and couldn't watch.  I mean, how the hell do you root against the Cubbies?  It would be like rooting against Lassie to find the missing child.  Not on, just not on.

Anyway, in the interim, there were few issues that came up that are interesting enough for comment. Mark Carney?  Bank of Canada?  Bank of England?  Infected with the Billy the Dud Syndrome of  being unable to keep his mouth shut?

One has to ask what is it with these guys?  For no apparent reason whatsoever, Carney felt he just had to discuss the grave credit risk posed by climate change (formally, global warming) because the future value of fossil fuels will decline as mankind moves away from their use and latches on to renewable energy, causing the financing of the same to be in real trouble.  Really?  Now I'm not going to debate the climate change thing  but merely point out that present plans by the real true-believers in the issue call for about 30% of all power to come from renewables by 2050.  I'm not really sure who is financing oil and gas 35 years out but I guess someone is for Mr. Carney to be so worried as Mr. Carney is, I am told, a very smart man.  I'm also wondering how the remaining 70% need is going to be covered, but that's a tale for another day.  Now if I was 21 and my retirement account consisted entirely of Exxon stock, I might have concerns, but I am not, and it does not, putting me in the same position as probably most people on the face of the earth.  But Mr. Carney is a smart man which is why he got the job as Governor, for people looked at his record at the Bank of Canada during the troubles of 2007-09 and said, "gee he's a smart man."  Canada remained unscathed.

Canada is also a country of 3 1/2 million square miles with a population of about 150, all of whom are employed in the business of extracting natural resource commodities--oil and gas for the most part--and selling them to other countries who don't have any or enough.  You might remember that this wasn't a bad business to be in for the first part of the 21st. Century and Canada was in it big time. Canada was smart enough as well not to have a Ginny or a Freddie or 30 year mortgages to people with no income which I guess was part of Mr. Carney's doing so maybe he is a really smart guy.  I keep wondering, however, why smart guys say dumb things.  Maybe he'll stop and focus on some issues that are more current.  I'm sure he knows what the are.   He's a really smart guy.


Then there is the deposit issue.  Under Dodd/Frank, there are deposits...and there are deposits.  Some are good and some are bad.  We don't like bad deposits that we call "hot money."  Hot money is that stuff that goes from here to there in the time it takes for someone to punch a computer's key, or as is becoming more frequent these days in the time it take one computer to tell another computer to "move it.'  The bad deposits are what we used to call in the old days "wholesale" or "corporate" deposits as opposed to "retail" deposits which are "good" deposits because, you see, the average Joe doesn't know or doesn't care enough to move his money when things aren't looking good.  Oh yeah, part of the lack of concern may be because those deposits are guaranteed  by the FDIC up to the tune of $250,000 per account which is generally beyond the monthly average balance of most Americans.

Anyway, the boys and girls who wrote Dodd/Frank (including Crazy Lizzy) convinced themselves that a good deal of the problems that were the cause of the creation of Dodd/Frank were in fact liquidity problems in the banks caused by the rush of hot money out the door.  Solution?  Simple.  Tax the banks for holding too much hot money by imposing heavy capital requirement over a set percentage as determined by the regulators.  Result?  The banks have begun charging customers to accept their deposits.

Now I'm not really sure who wins in all this but there certainly are a few losers, namely the banks and their customers which I am sure is not the best way in insure a safe banking system.  The terrible part of all this is that while it was certainly a bit spooky to see a Citibank operating with about 35% core deposits--"good" deposits in 2008--that wasn't why things turned upside down.  In assessing this, one might ask oneself what is the real purpose of a central bank, and one might come to the conclusion that is is to maintain or restore order, which, if defined as liquidity, to provide the same or make it clear that liquidity would be provided when needed.  In a situation such as that we faced, 5% more capital because of too many "hot" deposits does absolutely nothing when the uncertainty in exposure between the bank payment system makes any amount of capital below 100% meaningless.  Can a central bank perform this role in extremis?  Four trillion dollars on the balance sheet of QE assets makes me believe it can.

In the end, I don't mind silly statements or dumb laws that much but the result often is to obscure what really counts.  Mr. Carney may be wonderfully politically correct, but addressing the very real problems facing the European Union of which the UK is a member might well be a more meaningful exercise.  By the same token the writing of laws that do not address the major issue but are convenient in a political sense leading to a false sense of security among the body politic is almost criminal.  Anyway, the Cubbies have three on the trot in the Friendly Confines.  I've been offered a seat to one of them.  I don't think I can stand it.