I thought that government guaranteed deposits were supposed to stop bank runs. But apparently it does not work all that well. This from the Telegraph…..

About £1 billion was withdrawn by panicking Northern Rock customers on Friday, as fears for the bank’s future sent shock waves through the City and caused its shares to crash.

The company’s phone lines were jammed for most of the day, its website crashed and the 72 branches were besieged by thousands of worried customers after it admitted having to ask the Bank of England for emergency funding.

I have yet to read a good explanation for what Northern Rock’s problem is. But it is not going to be an independent company for long at any rate.

China is now learning why it unwise to subsidize your exporters with an artificially weak currency. Sure it makes your exports more competitive on the global market. But it also makes your imports more expensive.

As it happens, one of China’s most important imports is food. This from Macro Man….

As is generally the case, China marches to a somewhat different drumbeat to the rest of the world. So while the West has been snoozing, it’s been all action in China with the release of a (yet another) higher-than-expected CPI report and a 4.5% decline in equities. While the latter is but a blip, the former has now reached its highest level in more than ten years, and thus merits some attention.

As has been the case throughout the year, food prices account for the bulk of the rise in CPI. Non-food-price inflation remains fairly steady at around 1%, which has encouraged many China watchers to presume that the current bout of inflation need not be met with aggressive policy tightening. Just as Clara Peller asked “Where’s the beef?” in the 1980’s, the question here appears to be “Where’s the pass-though?”

Is that the right question, though? After all, a number of non-food items (energy, most conspicuously) fall under the aegis of price controls and thus should not be expected to show a price rise. And given the number of Chinese citizens living on a subsistence or quasi-subsistence basis, it is surely not in the best interests of a regime focused on stability to see food inflation (which has now hit 18.2%!) foment unrest in the hinterland.

Macro Man’s whole post is well worth reading.

This week at Acme I totally neglected the program to reduce shipping errors. I didn’t have any time for it. I was busy doing nothing.
Through no fault of my own, I got conscripted into a project to do nothing. The goal of the project was to see what kind of information transactions occurred during the Click Here to continue reading.

I always have mixed feeling when I read Martin Hutchinson. He is neither a starry eyed free marketer nor a bleeding heart liberal. Rather, he is a conservative in the original sense of the word. He does not like change.

Thus, you can usually count on him to argue that things were better in the good old days. Were markets more regulated 50 years ago? That was better then now according Mr. Hutchinson. Was there less welfare 50 years ago? That was better then now according Mr. Hutchinson.

I don’t have the same kind of uncritical appreciation for the past that Mr. Hutchinson has. But my biggest problem with him is his apparent belief that we can just change the laws back to what they use to be and society will follow meekly along back to the good old days. In reality though, culture changes law, law does not change culture.

All that is just to say that I fully support the central point of Mr. Hutchinson rant against Fannie Mae and Freddie Mac. But I have to disagree with his assertion that the modern day financial elites are just rent seekers who add no value.

Value is in the eye of the beholder. In the good old days, a community would save enough for its own mortgage needs through local financial institutions. That made capital cheaper in absolute terms. But that also required disciplinal and sacrifice on the part of the culture.

The value the current day financial elite provide is that they get the money for mortgage without anyone in this country needing to save. But for such magic to occur you need highly paid magicians. Plus, you have to make a deal with the devil.

But that is what the baby boomers wanted so no one should pretend that they are the unfortunate victims of the evil elites.

This week’s essay is something that everyone who is an adult (or thinking of becoming an adult) should read. Even if you read through Mortgage Origination Channels for UberNerds without understanding anything in it you will still benefit. At least you will have an idea of what it is that you do not understand about how mortgages work in this country.

I am not saying that every adult should read this essay because of the all the problems that mortgages are currently causing in the economy as whole. Rather, it is the way that all this complexity can personally effect you that makes this a must read. Indeed, the one flaw of this essay is that it does not spell out clearly how this can all go wrong for the consumer.

For example, let us say that you take out a loan with bank a. Now let us say that bank a sells the servicing rights to your mortgage (and if you don’t know what servicing rights are that is why you need to read the essay) to outfit c.

Now remember that most mortgages require you to pay your property taxes in with your monthly mortgage payments. This is to protect the people who loaned you the money from having the house get sold for back taxes. If that happened they would losses their money without having any recourse.

With that in mind, let us say that outfit c neglects to put the money you are paying towards your property taxes in the escrow account like they are suppose to. When the tax bill comes due, it is not going to be paid by outfit c. You will most likely be unaware of this until you receive notice that unless you pay the back taxes and penalties, your house is going to be put up to auction by the tax man.

All this because of the actions of a company that you never even signed a contract with.