OIL SPECULATORS

Published in El Nuevo Herald on April 20, 2012

In the U.S., in 2003, barrels of oil were traded at $ 30, in July 2008 that price was $ 147 and gasoline was supplied, as today, to a national average of about $ 4 a gallon. There can be many causes of the rising cost of fuel is, known, for example, that wars in the Persian Gulf have decreased production in countries such as Iraq, Kuwait and Libya. It is also said that members of the Organization of Petroleum Exporting Countries (OPEC) did not want to over-exploit the oil fields and therefore have limited extraction. Two huge countries like China and India have been increasing their consumption. From a purely economic standpoint, this is a problem of supply and demand: if the supply decreases and demand increases, oil price increases. However, there are examples showing that the presence of speculators in oil negotiations is primarily responsible for the increase in the price of gasoline in the United States.

In a congressional hearing in June 2008, several financial experts testified before the House Energy and Commerce Committee that "eliminating excessive speculation in oil futures market, could reduce the price of gasoline by 50%."

That same month, the House of Representatives passed a bill called the Energy Markets Emergency Act of 2008 whereby the Mercantile Futures Commission "would have the required authority to order the immediate brake to excessive speculation, price distortion, sudden or unreasonable fluctuations in the same or any other illegal activity to cause market disruption, preventing this reflect the true balance between supply and demand. "

On July 25, 2008, the Republicans blocked the bill in the Senate, 60 votes were needed and only obtained 50 with 43 votes against. Republican senators argued then that it should legislate to increase oil output by allowing more drilling off the coast, as well as a full development in the vast territories on the West Coast oil.

Despite the continued reports of excessive speculation in energy markets, Futures Trade Commission (CFTC) refused to take any action, for example, in the quarter July to September 2008, three major investment banks with a presence in Wall Street, obtained a profit of $ 35.000 million on oil futures contracts. With a purely speculative activity like this, you get a brutal gain in three months. The main problem is the vendors and / or operators of funds to future buyers of this market. It may be that sometimes sellers are buyers and vice versa, that is, it's like to charge and be the change yourself. This lends itself to many interpretations.

The activities in the oil futures markets are many and complex. Normally, there are two types of investors: those who really want to make sure that the purchase price does not vary too much (these are mainly refineries), the others are speculators, who typically are banks and stockbrokers.

These hedge funds accepting initial deposit work known as margin. For example, the investor wants to buy $ 20 million in crude and deposits a million in cash. If low, it is deducted from the million. If the price raises, it is added to the million . In other words, the investor freeze the price. Wins when increases, loses if decreases.

For 2009 the oil futures market traded 1000 million barrels a day, but world oil production was only 85 million, which means that over 90% were speculators who renegotiated the barrels.

Since the actual cost of extracting a barrel is on average $ 11, priced at $ 100 or more is a real speculative abuse.

Although in July 2010, it was adopted a new regulation, (The Dodd-Frank Wall Street Reform Act) requiring that all directors in the futures market with at least $ 150 million capital are federally registered, in reality has happened to most of the said directors, they have declared only $ 100 million capital. In this way they will be only under the supervision of that state and not under the federal law.

The solution is to ban the involvement of speculators in futures markets. The other solution is unlikely because we live in a free market economy; that oil is not quoted on any market on U.S. or a single federal agency is responsible for setting the selling price to refineries. Thus, the price of gasoline will represent its real value.

Benjamin F. DeYurre

Economist and Journalist

REPUBLICAN ECONOMIC OFFER

Published in El Nuevo Herald on April 04, 2012

Barring a phenomenon, between the two Republican, Mitt Romney and Rick Santorum, is the candidate that will challenge President Obama in the upcoming elections. Each has its platform in which the economy plays a role. Then, I will outline what are their main economic proposals and how they compare with the deals of the Obama Administration.

• Mitt Romney

Increase the federal budget to reach $ 19.5 billion. Considers that citizens have lost about $ 11 trillion in net worth. This means that each year Americans spend $ 400 billion less. Even with this consideration, Romney opposed the stimulus plan Obama signed $ 787 billion in February 2009 and known as American Recovery and Reinvestment Act . In other words, the candidate seeks to increase public spending, but rejects President Obama wants to increase it.

Concerning the real estate market, Romney is in favor of not intervening in foreclosure processes, letting them run their course and hit bottom, then allow investors to buy these properties, repair, and then renting and re-enter the market . This differs radically from the recent agreement by the Department of Justice in the Obama Administration with major banks holding mortgages in the country, through which these banks modify loans by $ 25 billion to those homeowners whose debt is greater than the current value of their homes . This is preventing a massive foreclosure that was the next to appear.

While Republicans opposed the passage of a law criminalizing the importation of Chinese goods if China came to see that artificially manipulating its currency to encourage exports, Romney has said that to eliminate the unequal trade between the U.S. and China, is able to resist this manipulation of currency and raise tariffs on Chinese imports. However, Romney was against imposing sanctions on China for its trade abuses in 2011-2012.

Romney agrees not to raise taxes. As governor of Massachusetts, Romney supported the second round of tax cuts proposed and approved by President George W. Bush. This position is diametrically opposed to the offer proposed by Democrats to raise taxes on the wealthiest class, which constitutes 2% of the population but accounts for over 90% of businesses in general.

• Rick Santorum

Intelligently, more blame former President Bush to President Obama for the current crisis. According to Santorum, "Bush set the precedent and this was a bad precedent."

Santorum is in favor of reducing government spending and simplify the tax code, but proposes to completely eliminate corporate taxes for manufacturers who repatriate their profits to the U.S. or other countries. Of course, it would be even more important for the U.S. if these manufacturers were located in U.S. territory and not in China or other countries. In this regard the administration of President Obama has said that those companies that manufacture on American soil will be entitled to take-offs and tax exemptions.

Santorum also said in the Wall Street Journal that "to restore U.S. Competitiveness, all other corporate taxes should be lowered to half and set at a flat rate of 17.5%." During a recent televised speech tycoon Warren Buffet on CNBC, it declared, "is a myth that U.S. corporate taxes are high and are strangling American competitiveness." By contrast, according to Buffett, the corporate tax rate in the U.S. is among the lowest in the industrialized countries, reaching in 2011 an actual cash value of only 12%. Indeed, Buffett deepens stating that U.S. corporate profits have been the highest in the last 50 years since they were 10.1% of gross domestic product, which refers to the value of goods and services produced in the country officially.

Many may agree with the conservative, for example, against abortion and gay marriage, and vice versa. This means there may be conservative Democrats and liberal Republicans. However, the focus in the coming presidential elections will be the economy. As are the times, with unemployment soaring by shifting technological and continuous creation of American jobs to China and other countries, imposing a solution, although not to everyone's taste, is necessary. In this sense, the Republican economic offer does not seem an appropriate response.

Sometimes the regulations are necessary to heading ships. The air and sea traffic has its own regulations, if carried a heavy load slows the trip. If you spend a lot during the journey passengers would be unhappy. However, the most important thing is that the ship will not sink or fall off the plane.

BENJAMIN F. DeYURRE

Economist and journalist.

THE BANKING CRISIS

Published in El Nuevo Herald on March 02, 2012

Among the major problems affecting the world economy is the performance of banks. Closely linked to the activities of a capitalist market, the banking sector, in both U.S. and Europe, has been undermined  its volume of operations, mainly in their ability to lend.
For a long period of moderation, 1985-2006, banks profits were coming  expressed by the difference between their lending and deposit rates. That is, banks charge higher interest on loans they grant, that by having to pay interest to savers for the money they place in them. Since banks have greatly reduced its loan portfolio in the U.S., they have had to propose innovative ways to generate revenue, such as a $ 6.00 fee for people, no customers, who  redeem a check in their offices. They have also increased the discounts for using debit cards to other networks unaffiliated to the issuer bank.
Banks typically use a significant portion of public deposits to generate income. Regularly, they placed those funds in the capital market to earn higher interest rates in the short term. They also make other investments in diverse businesses such as real estate. Perhaps the most decisive factor in this current financial crisis is that banks have increased too much its assets  while its capital has remained virtually unchanged. In other words, banks have continued to use public money to acquire more and more properties. And this exponential increase of their assets has been to satisfy the appetite of its shareholders, who naturally seek a greater return on their investment. Now, why is so important that banks increase their capital too? Because if there is a drop in the capital market, the bank would have resources to absorb that loss without investors and savers are affected, even though the existence of deposit insurance protection, which is very limited.
Banks regularly, when they have many assets, they make bond issues secured or guaranteed by other assets. These bonds raise funds from the public but commit the bank issuing such bond, who have to pay the face value of this document at its due date. In 2007, the rating agency Standard and Poor's and Moody's awarded the highest category (AAA) to many bond issues considered as Collateralized Debt Obligation (CDO). With this high rating, which virtually guaranteed the payment of these bonds at maturity, investors turned to the market by purchasing the bonds that turned out to be mostly a fiasco because the guarantees they had, were more than 50% mortgages finishing in foreclosure. This is part of the famous "toxic debt" held by banks and perhaps the main reason that drove the economic crisis, that also could be called the biggest mistake known in economic history. To compensate for this error, it can be argued that it was difficult to predict the collapse of the real estate market. However, one could also say that all bubbles burst, and this was a housing bubble.
The current crisis has many sides and in it the role of banks is essential. Recently the Obama administration reached an agreement for $ 25,000 million with the Banking Association through which, the most important banks holding mortgages, provide loan modifications to customers whose debts exceed the present value of their homes. Many questions will arise concerning unemployment, income or credit history. However, decisions must be made to prevent the collapse of the economy. The Government is trying to create jobs in U.S. instead of in China. It is trying to be more benevolent or modify the Credit Bureaus. The trading is becoming more transparent. The banks in turn are limiting salaries and juicy bonuses to their executives to be thus higher dividends from its shares.
Even facing this crisis, with medium-term solutions, banks and financial system will do well, by overcoming market failures, but emphasizing once again that the best known system is Capitalism, where toughness and interest are the gear that moves the machinery generating productive jobs and prosperity.


BENJAMIN F. DeYURRE
Economist and Journalist

MORTGAGES TO 80 YEARS TERM ?

Published in El Nuevo Herald on February 03, 2012

The risk rating agencies Standard & Poor's and Moody's continue to point a steady decline in the value of single family houses. Using the Case-Shiller index are predicting a scandalous fall to 12% for southern Florida in 2012. Although real estate agents say the area has been showing a slight increase due to the presence of international buyers, the truth is we have  to look for a solution to this problem while it encourages the construction sector, which is known as the ultimate creator of employment and thus one of the most dynamic element of economy. In this perspective, the idea of ​​implementing a mortagage inherited program, does not seem outlandish .

In Switzerland there are mortgages financing up to 100 years later. In Spain many mortgages are reaching age 90. In the UK you can transfer the mortgage payment from father to son.

This type of inherited mortgage carries a number of benefits; solve the housing crisis for young couples and recent graduates who often stay at home mother for lack of resources. Would combat the rentier economy by facilitating the acquisition of the property. Would encourage insurance companies that would issue policies in cases of loss of income and / or employment. Broaden the participation of lawyers, who would develop trust documents and contracts to ensure the inheritance of property and debts to the descendants. Require banks and other lending institutions re-launched its portfolio of loans and reactivate its grant of loans to individuals. Reduce legal and ilegal unemployment.

From the bank standpoint the interest rates should be variable. It is illogical to think that a loan can be granted to 80 year term with a fixed rate. The monthly payment for a debt of $ 100,000 at 4% in 30 years is $ 477. In 80 years would be $ 348. It would seem foolish not to pay $ 129 monthly instead of having to pay 50 years more of interest. This is offset by three special payments (balloon payments) at $ 20,000 each, one per generation. Thus, the amount financed to 80 years would now be a monthly payment of about $ 139, regardless of the fluctuation of a variable interest. Who does not acquire a house like this?

Currently, the cost of any rent is $ 1,200 a month. With an income of $ 2.000 the rent represents 60% of revenue, which is certainly indicative of a crisis. This idea of ​​hereditary mortgage is a smart solution. The absence of a down payment would make the adoption of such a program requires a special regulation: is for people who marry for the first and only time. This would prevent unscrupulous traders repeatedly able to divorce.Many may ask, my children will have a debt? Yes, however, is he not born with a debt now and have nothing? Better that at birth, have a guaranteed housing.
BENJAMIN F. DeYURRE

Miami

THE RE-ELECTION OF PRESIDENT

Published in El Nuevo Herald on January 27, 2012

Prior to the election of President Obama, the previous four periods in the United States have been characterized by a re-election of incumbent president. In the case of Bill Clinton, the explosion of online technology catapulted the largest economic expansion in U.S. history. George W. Bush, having to face an unprecedented domestic terrorism, aroused the patriotism of Americans. Now President Obama, having inherited a country at war and mortgaged  has had to take measures unpopular in corporate sectors, but necessary for the purposes of safeguarding our economic model as we know it today.

These measures have a strong drag on the majority of the electorate, as they involve proposals to create jobs, guarantee insurance, fair treatment of immigrants and a special outreach to Hispanics. These are all trump cards for a second presidential term and differ substantially from the Republican offerings, represented by the Tea Party.

Particularly among Hispanics, the Democratic Party is conducting a centrist work, which stresses that the proposals and measures taken are not left-wing and have nothing to do whatsoever with absurd  communist theories, as many politicians want to show with purpose to discredit the Democrats.

On July 21, 2010, President Obama signed into law reform known as Dodd-Frank Wall Street Reform and Consumer Protection. This law simply regulate the manner in which operators of the stock market and consumers interact with other investment banks. In other words, the public offering of shares and other securities will now be more transparent and accessible to the general public.

On October 19, 2010, President Obama signed the executive order called White House Initiative on Educational Excellence for Hispanics. Through this act has been carried out across the country a series of round tables where each  Hispanic community's leaders meet with the principal directors of the White House to present cases and proposals on employment, health, insurance, mortgages, etc.. Undoubtedly this is a great approach to the Hispanic community.

In the last census, it was established that Hispanic small businesses employed 25% more workers than in the previous census. President Obama maintains a plan to help grow even more rapidly, to 250,000 Hispanic firms. This includes training and summer jobs for young people entering the labor market. 

Among other important measures and plans, President Obama is calling for the enactment of legislation that would make it illegal to refuse to hire job applicants just because they have some time unemployed.

The policy of laissez-faire is no longer a valid option. Now the economy can not self-adjust mainly because most actors only carry out orders issued in the market, ie prices and conditions must be accepted even if they lack income.

This is why the measures being taken by President Obama are not only necessary at this historical moment but also that the electorate is expected. Then, the trend in previous elections will continue. We headed for a re-election of President Obama.

BENJAMIN F. DeYURRE
Miami

IS THE DOLLAR FALLING BEHIND ?

Published in El Nuevo Herald on January 13, 2012

The Peterson Institute for International Economics recently estimated at 24% devaluation of the yuan against the dollar. Because in recent months was recovered by 4%, on December 27, 2011, the Treasury secretary, Timothy Geithner, has decided not to designate China a "currency manipulator". Instead it has decided to keep the pressure on China in international forums as the Group of 20 leading nations and the International Monetary Fund. As a campaign platform, Republican Mitt Romney says it will bring this case before the World Trade Organization.

China, meanwhile, and perhaps as a reaction to this pressure, recently made a pact with Japan and Thailand for trade without the presence of the U.S. dollar. Clearly, China is trying to start promoting the yuan in the Association of Southeast Asian Nations (ASEAN), thus establishing free trade zones. The exchange between China and Japan was $ 340.000 million last year, so that an agreement of this magnitude makes it the largest ever made. However, this figure languishes before the three domestic financial aid packages awarded by the U.S. government for more than $ 700.000 million each. This comparison allows us to appreciate the gigantism of the great American Union.

This important agreement without the intervention of the dollar, has yet to be implemented. In particular, banks have to open their build process of Credit Letters with yuan designation to be used in international trade. Up until now, the transactions in Yuans have been made in Hong Kong mainly. The U.S. trade deficit with China was $ 273.000 million last year. When this deal, China-Japan-Thailand is in full swing, you can expect a revaluation of the Yuan, which was far away from the financial turmoil caused by the crisis since 2008. If so, will trigger the interest rates and with it the prices of all Chinese products.
Major U.S. brands dominate the Chinese market, 350 Walmart stores, 400 McDonalds, hospital equipment are primarily GE and Boeing commands the civil aviation. Is estimated at over $ 100.000 million annual profit accruing to U.S. corporations in China, but the biggest problem facing America is the lack of jobs caused precisely by the absence of these and other businesses on U.S. soil. 

Large financial capitals are managed primarily in New York, London and Frankfurt-Munich axis Berlin. This enormous treated China-Japan-Thailand, it create a new world economic order? Will it leave the dollar to exercise its hegemonic role in international trade? Major changes can be made in the medium run. What is a disturbing reality is that the U.S. must urgently take steps to safeguard our system. And these measures can be unrewarding for many.

BENJAMIN F DeYURRE
Miami

PROS AND CONS OF MEGA CASINOS IN MIAMI

Published in El Nuevo Herald on December 11, 2011

Many comments are around the project for a mega casino in the city of Miami. So,  in order you can be more objective, below outlines what we believe are the truths and falsehoods to the issues raised.

-It is true that the casino has recruited a distinguished former congressman to represent them in government negotiations. Undoubtedly, this adds an additional advantage in any negotiation.

-It is true that the revenues generated by these casinos are not reinvested in the city, county or state. Could be achieved to secure legislation in 20% of the net profit the amount to be reinvested in the community. This would be in business investment that will generate direct employment, other than the game.

-It is true that the dealer authorization for a mega casino will make legally inevitable appearance of the like.

-It is true that a flood of casinos will dethrone the former desert of Vegas as the Mecca of the international game.

-It is true that Miami was not conceived as Vegas and therefore its infrastructure would not support an enormous motor traffic.

-It is true that thousands of jobs will be created that  logically doesn't  exist right now.

-It is true that state revenues will be increased significantly.

-It is not true that Miami would become a major tourist destination. It already is.

-It is not true that the game generates more economic activity. On the contrary, small businesses will disappear and with them the small entrepreneur.
-It is not true that this mega casino can be approved without a final submission to an electoral vote.

BENJAMIN F. DeYURRE