Bill Mitchell – Central banks accounting losses are rising but are of no importance to anything important

There are regular interventions from commentators over time who repeat the same thing over and over – usually some prophesy that a currency (for example, the Yen or the USD) will collapse soon, and life goes on until they come out with the same predictions, which never turn out. The mainstream media loves to give these characters a platform because the headlines are sensational and I guess that sells ‘units’ for the companies. The latest I saw was from Mr. Roubini in the Financial Times, who has been predicting the collapse of the USD regularly. Time to give him a miss I think. A related topic of hysteria that ordinary folks seem to get agitated about but clearly don’t understand even the first principles involved is the old canard – central bank losses. This gets a little more abstract for most relative to the Roubini-type currency collapse headlines but the mainstream press still manage to whip up a doom scenario that somehow the central bank is about to go broke and governments will have to bail them out and taxes and debt will rise, and, somehow, ultimately, our grandchildren will find themselves in penury trying to pay back the debts our current governments ran up. A recent Bank of International Settlements Bulletin article (No. 68)- Why are central banks reporting losses? Does it matter? (released February 7, 2023) – bears on this issue. Conclusion: nothing to see here....

Bill Mitchell – billy blog
Central banks accounting losses are rising but are of no importance to anything important
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Can America Lead Again? — Yuen Yuen Ang

The US president-elect has advanced a vision of America that is back in charge of the liberal international order. But while that would go a long way toward enabling constructive competition with China, there is good reason to believe that [many] Americans do not want their country to lead again.…

Global leadership has enabled rising inequality, a consequence of which is social unrest.  Yuen Yuen Ang suggests that to regain global leadership the US must successfully address inequality and polarization.

This is a recipe for "uncertainty" internationally going forward since the "global leader" can't make up its mind, being caught between opposing internal forces in a conflict that has not yet been resolved — and with no resolution in sight. Internationally, this means an internal conflict between between Wilsonian and Jacksonian foreign policy 

So, can a President Biden reconcile the country and restore unity? 

Project Syndicate
Can America Lead Again?

Yuen Yuen Ang, Professor of Political Science at the University of Michigan, Ann Arbor

See also

Project Syndicate
America Is the New Center of Global Instability
Nouriel Roubini

Also at Project Syndicate

Don't be fooled by corporate statements defending the rule of law after the insurrection by Donald Trump's supporters at the US Capitol. Having long exploited the US constitutional order for its own gain, corporate America is not suddenly part of the solution; it is part of the problem.

Saving US Democracy from Corporate America
Katharina Pistor | Professor of Comparative Law at Columbia Law School

Also

Stories by Paul Mason on Medium
The Trump Insurrection: a Marxist analysis

Paul Mason

"Dr. Doom" At IT Again: Predicts 10-Year Depression — J. Barkley Rosser

Barkeley Rosser says to take Roubini with a grain of salt, but only a grain, since he makes some important points. I am in agreement with that. Both optimism and pessimism need to be tempered with realism, and reality is fraught with uncertainty owing to human decisions that affect conditions. And just as the weather is relatively uncertain other than short term, reality has a way of delivering "exogenous shocks." So the watchword should be "caution." That is not a meme or mantra of this administration. Forking paths ahead?

Econospeak
"Dr. Doom" At IT Again: Predicts 10-Year Depression
J. Barkley Rosser | Professor of Economics and Business Administration James Madison University

Car rental giant Hertz files for bankruptcy as its vehicles remain idled by pandemic — John Solomon

Car giant was already saddled with debt before COVID-19 struck.

Anomaly, or indication of systemic risk owing to debt?

Just the News
Car rental giant Hertz files for bankruptcy as its vehicles remain idled by pandemic

John Solomon

See also

It's not just a matter of reopening. Will the customers be there?

BBC
Coronavirus: Leading economist warns of 10 years of depression and debt

Karishma Vaswani interview with Nouriel Roubini

Modern Monetary Theory: A Primer — TD Bank Financial Group

The perception of MMT is getting better, but it still has quite a way to go to get it right. The bright side is that some presentations are not just dismissive, but rather attempt to understand MMT and its usefulness in policy. This is one of the latter.

Action Forex

Modern Monetary Theory: A Primer

TD Bank Financial Group

See also

With the global economy experiencing a synchronized slowdown, any number of tail risks could bring on an outright recession. When that happens, policymakers will almost certainly pursue some form of central-bank-financed stimulus, regardless of whether the situation calls for it.

Project Syndicate
The Allure and Limits of Monetized Fiscal Deficits

Nouriel Roubini | Professor of Economics at New York University's Stern School of Business, CEO of Roubini Macro Associates, and formerly Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration

Nouriel Roubini - The Big Blockchain Lie

Have the wheels have come off the wagon?

Now that cryptocurrencies such as Bitcoin have plummeted from last year's absurdly high valuations, the techno-utopian mystique of so-called distributed-ledger technologies should be next. The promise to cure the world's ills through "decentralization" was just a ruse to separate retail investors from their hard-earned real money.

 Yet far from ushering in a utopia, blockchain has given rise to a familiar form of economic hell. A few self-serving white men (there are hardly any women or minorities in the blockchain universe) pretending to be messiahs for the world’s impoverished, marginalized, and unbanked masses claim to have created billions of dollars of wealth out of nothing. But one need only consider the massive centralization of power among cryptocurrency “miners,” exchanges, developers, and wealth holders to see that blockchain is not about decentralization and democracy; it is about greed.

Project Syndicate

Nouriel Roubini - The Big Blockchain Lie

Max Keiser - Ignore Roubini’s bitcoin crash prediction as he lacks knowledge & background

This week economist Nouriel Roubini said bitcoin is going to crash to zero. RT talked to Max Keiser, host of RT’s Keiser Report, about the validity of the prediction.

“There are several arguments that can be made critical of bitcoin on technical grounds, and Roubini never mentions these, therefore offers no room for intelligent debate,” Keiser said. “Roubini’s comments are straw man arguments meant to deflect rather than elucidate."

According to Keiser, “Roubini feels compelled to comment on bitcoin because it has captured the world’s imagination and he’s being asked about it, but he does not have the background, or knowledge to offer anything substantive.” 

The American economist who earlier called bitcoin the “biggest bubble in human history” said traders will use wash trading to prop up the prices. Wash trading involves someone buying and selling their own order to manipulate markets.

The economist’s “comments regarding wash trading can be seen as a blanket statement that covers all financial trading in all markets, in particular the gold market that has languished for years due to wash trading and spoof trading cited by regulators repeatedly.”

Keiser added that Roubini has said nothing about the “egregious gold market manipulation” which is the second biggest market in the world by volume.

“We’re left asking, who is Roubini shilling for? The obvious answer is: the establishment banks and academics who rule his particular patch in economics,” Keiser said.

“Until Roubini indicates he’s spent more than 5 minutes thinking about this subject, citing the White Paper for example, we can safely ignore his comments along with his Luddite friend Paul Krugman at the New York Times.”

Ambrose Evans-Pritchard — Nouriel Roubini dismisses China scare as false alarm, stuns with optimism

Nouriel Roubini has cast aside his mantle as the lugubrious "Dr Doom" of the global economy, scathingly dismissing market panic over China as "manic depressive" behaviour by ill-informed investors.
"China is not in free-fall," he told the Ambrosetti forum of world leaders on Lake Como.

Mr Roubini, a professor at New York University, described the alarmist reaction to the Shanghai stock market rout as "excessive, unreasonable and irrational".…

The Telegraph
Nouriel Roubini dismisses China scare as false alarm, stuns with optimism
Ambrose Evans-Pritchard

EconoMonitor — Special Announcement

EconoMonitor — Special Announcement

NEW YORK, Jul 21, 2015 — Roubini Global Economics, a leading provider of independent, global macroeconomic research, today announced the formation of EconoMonitor LLC, a new joint venture between Roubini Global Economics and Ashmore Media Group.

In August 2015, EconoMonitor LLC will be relaunching the EconoMonitor blog, a community for informed commentary on economic, financial, and geopolitical developments around the world. The new business will be managed by CEO Norman Wetmore and Editor-in-Chief Ash Bennington, in partnership with Roubini Global Economics.

“I am very excited about relaunching EconoMonitor,” said Chairman Nouriel Roubini. “We believe that the new EconoMonitor website will become an important destination for economic news, analysis, and opinion. I am especially happy to be working with the team from Ashmore Media to take this opportunity to the next level.”

“I’m delighted to be leading EconoMonitor and partnering with Roubini Global Economics,” said Norman Wetmore, EconoMonitor’s new CEO, “and I’m very pleased to be working with the entire Roubini team, along with an impressive list of external contributors”

“We are looking forward to building EconoMonitor into a world class macroeconomic, community-based portal,” Ash Bennington, EconoMonitor Editor-in-Chief said. “The team at Roubini Global Economics brings a vast body of economic insight and thought leadership to the table: It’s a great place to build a global digital community for informed commentary on economic, financial, and geopolitical developments around the world.

DSWright — Taken For Granted At Davos That US Government Run On ‘Legalized Corruption’

In an interview at Davos with Bloomberg News related to growing concerns about rising wealth inequality and its corruption influence on American politics economist and NYU business professor Nouriel Roubinistated as a matter of fact that it would be hard for the US to overcome wealth inequality because the US political system was based on “legalized corruption” which meant rich people – having more resources to bribe politicians with – would generally prevail.

It's called "stability," you know, versus "rabble rule."

Firedog lake
Taken For Granted At Davos That US Government Run On ‘Legalized Corruption’
DSWright

Nouriel Roubini — Global Ground Zero in Asia

From Dr. Gloom and Doom:

Historically, whenever a new great power has emerged and faced an existing power, military conflict has ensued. The inability to accommodate Germany’s rise led to two world wars in the twentieth century; Japan’s confrontation with another Pacific power – the US – brought World War II to Asia.

Of course, there are no iron laws of history: China and its interlocutors are not fated to repeat the past. Trade, investment, and diplomacy may defuse rising tensions. But will they?

Project Syndicate
Global Ground Zero in Asia
Nouriel Roubini | Professor at NYU’s Stern School of Business and Chairman of Roubini Global Economics, was Senior Economist for International Affairs in the White House's Council of Economic Advisers during the Clinton Administration

Nouriel Roubini predicting WWI all over again. So now I'm really buying this dip!

Dr. Doom, Nouriel Roubini, who's been pretty much wrong on everything for the past five years, is now drawing parallels between 2014 and 1914.

#wef14 Echoes of 1914: backlash against globalization, gilded age of inequality, rising geopolitical tensions, ignoring tail risks
— Nouriel Roubini (@Nouriel) January 23, 2014

I've been waiting for a pullback to get back into stocks and I like all this worry and fear that is building. A bit lower, say, S&P 1750 or so, and I will start buying.

Let's hope Dr. Doom keeps scaring people until then.

Gennaro Zezza — The Next Bubble?

Is the U.S. economy heading towards another bubble? Since last week, the number of commentators on this subject has been growing, from Robert Shiller to Nouriel Roubini (on housing markets)...

Summing up, our findings suggest that U.S. non-financial corporations are in a healthy state – as measured by their net profits – but that this will not necessarily imply stronger U.S. growth and job creation. On the contrary, the data are coherent with a further increase in the concentration of income leading to financial speculation, in the U.S. as well as in foreign financial markets.

Restoring jobs and prosperity in the U.S. does not seem to be what U.S. corporations are working towards, and yes, the soaring stock market may change course very quickly, if “financial markets” make this decision.

Restoring sustainable growth in the U.S. (and elsewhere) requires a reversal of the trend in income distribution, since, as Stockhammer reminds us, “rising inequality has increased the propensity to speculate as richer households tend to hold riskier financial assets than other groups,” and “higher inequality has led to higher household debt as working class families have tried to keep up with social consumption norms despite stagnating or falling real wages” – a fact we already investigated a few years ago.

Multiplier Effect

The Next Bubble?
Gennaro Zezza | Associate Professor in Economics at the Department of Economics of the University of Cassino, Italy, and a Research Scholar at the Levy Institute of Economics

Stealing back the commons: Citizen economics beyond capitalism

Michael Jacobs, an ex-SpAd to Gordon Brown, has recently written in the New Satesman that ‘green social democracy can save capitalism’. Well, not everyone agrees. For some, the ‘green social democracy’ experiment has, thus far, not worked, and indeed, might be running out of time. 

And as for capitalism – or at least capitalism1.0, it’s no longer heresy to question its infallibility. Since we last blogged about capitalism, a host of mainstreamers like the BBC’s Stephanie Flanders, the FT’s Martin Wolf, UBS’s George Magnus, Joseph Stiglitz and Nouriel Roubini, have started questioning our growth-obsessed, capitalist economics and calling up Karl Marx from his grave.

And, as a search of Amazon will show you, there’s no shortage of recent books both questioning capitalism and laying out ideas for its updating or replacement.
But why might we have to consider alternatives to capitalism and what might an alternative look like?

Resilience
Stealing back the commons: Citizen economics beyond capitalism
Jules Peck | Citizen Renaissance

Mario Pianta And Alessandro Bramucci — Why Do Economic Forecasters Get It Wrong?

What can we learn from these numbers? The crisis has shown how wrong the assumptions and relationships at the core of mainstream economics were. They were at the root of economic policies that have proven to be disastrous. But the same assumptions and relationships are incorporated in the models used by the international organizations to make their estimates on the future.

The lesson from this evidence is that ideology blinds forecasters as well as politicians. The most dramatic case is the failure of mainstream approaches to underestand the negative effects austerity measures have had since 2011 on demand and income in the Eurozone. At the ECB and the European Commission, at the Bundesbank and OECD it was expected that spending cuts in 2011 and 2012 in the “periphery” of Europe would only have modest effects. This is not what actually happened and the recession in 2012 hit the whole of the Eurozone. The evidence has been provided by IMF studies – such as What Determines Government Spending Multipliers? by Giancarlo Corsetti, Andre Meier and Gernot Müller – and the analysis of the World Economic Outlook issued in October 2012 that showed how cuts in public budgets have a much bigger negative effect on income than expected by mainstream models. At the start of 2013 a reassessment of the issue has been published by Olivier Blanchard and Daniel Leigh in the study Growth Forecast Errors and Fiscal Multipliers (IMF WP/13/1).

Outside the ECB, the OECD and governments practicing budget cuts, however, there are thousands of economists who have never believed in the virtues of austerity and have long argued for a change of perspective. Criticisms of austerity policies from Paul Krugman (End this depression now! Norton, 2012) or Nouriel Roubini are well known. We have now additional arguments for alternative policies from the Independent Annual Growth Survey (see alsoAndrew Watt) and from the Euromemorandum 2013 (www.euromemo.eu), launched last week with the support of 350 European economists.

Social Europe Journal
Why Do Economic Forecasters Get It Wrong?
Mario Pianta And Alessandro Bramucci
(h/t John Zelnicker via email)

Nouriel Roubini — American Pie in the Sky

Roubini projects the US economy hitting stall speed in the near term. But..

A significant equity-price correction could, in fact, be the force that in 2013 tips the US economy into outright contraction. And if the US (still the world’s largest economy) starts to sneeze again, the rest of the world – its immunity already weakened by Europe’s malaise and emerging countries’ slowdown – will catch pneumonia.

Read it at Project Syndicate
American Pie in the Sky
Nouriel Roubini | Professor, NYU Stern School of Business and Chairman of Roubini Global Economics

Expansionary fiscal austerity all the rage at Davos

DAVOS, Switzerland -- As much of the globe grapples with lean economic prospects, and as Europe in particular sinks toward a recession that could spread to multiple shores, world leaders gathered here this week appear to be operating with a rough consensus over how to proceed: Attack budget deficits by cutting spending in a bid to sow confidence in bond markets.

The logic of austerity as curative assumes that the basic problem limiting economic growth is investor fears about the size of government budget deficits, and visions that the bond market may suddenly demand sharply higher rates of interest to enable lending. Governments could be forced to impose growth-killing tax increases to square their books. With such worries in mind, those in control of money are supposedly hewing to the sidelines, depriving economies of credit and investment.

Among finance ministers participating here at the annual World Economic Forum, the word “uncertainty” has been getting a vigorous workout. When times are troubled, goes the thinking, lack of clarity provokes investors to imagine the worst, and to act accordingly. They hold tight to their money, producing self-fulfilling prophesies of pullback.

“If you want to have more internal demand, you have to have confidence,” the German finance minister Wolfgang Schaeuble declared here Friday morning, during a discussion about the future of the eurozone. “If you make your deficit sustainable, people will gain confidence.”

But among some economists, deficit reduction as a growth strategy amounts to a wrong-headed leap of faith.

“Austerity won’t even prevent the next crisis, let alone solve the current one,” the Nobel laureate economist Joseph Stiglitz told The Huffington Post.

Cutting government spending in times of economic weakness further reduces demand for goods and services, he said, which reduces incentives for businesses to invest and hire -- a self-reinforcing dynamic of diminishing fortunes.

This is followed by George Soros's warning about debt-deflation as the risk of austerity, along with his accusing Germany of economic imperialism. Ouch.

Dr. Doom (Nouriel Roubini), too, predicting, well, doom.

Oh, and Geithner is on board with austerity “for parts of Europe, for a long period of time...."

Read it at The Huffington Post
World Economic Forum: At Davos, Austerity Reigns

by Peter S. Goodman

This is way beyond clueless and even exceeds moronic. It is malfeasance. "Ignorance is no excuse before the law." 

Belief in the confidence fairy is magical thinking. These people really do act like wizards waving their magic wands around.

Roubini's 2012 US Forecast — Anemic

Read it at Project Syndicate
The Straits of America

by Nouriel Roubini

Paradox of thrift:

Given all of these large and small risks, businesses, consumers, and investors have a strong incentive to wait and do little. The problem, of course, is that when enough people wait and don’t act, they heighten the very risks that they are trying to avoid.

Larry Summers — Current woes call for smart reinvention not destruction

Nouriel Roubini tweets: "Larry Summers on how to deal with capitalism & inequality: Current woes call for smart reinvention not destruction."

Read it at The Financial Times
Current woes call for smart reinvention not destruction

by Lawrence Summers

Krugman on 2012 — Will China Break?

Now the bubble is visibly bursting. How much damage will it do to the Chinese economy — and the world?

Some commentators say not to worry, that China has strong, smart leaders who will do whatever is necessary to cope with a downturn. Implied though not often stated is the thought that China can do what it takes because it doesn’t have to worry about democratic niceties.

To me, however, these sound like famous last words. After all, I remember very well getting similar assurances about Japan in the 1980s, where the brilliant bureaucrats at the Ministry of Finance supposedly had everything under control. And later, there were assurances that America would never, ever, repeat the mistakes that led to Japan’s lost decade — when we are, in reality, doing even worse than Japan did.

Read it at The New York Times

Will China Break?

by Paul Krugman

Could Krugman be right that we've seen this before?

I hope that I’m being needlessly alarmist here. But it’s impossible not to be worried: China’s story just sounds too much like the crack-ups we’ve already seen elsewhere. And a world economy already suffering from the mess in Europe really, really doesn’t need a new epicenter of crisis.

See also Michael Pettis on capital misallocation in China (Dec. 3) if you missed it.

Read it at China Financial Markets
How do we know that China is overinvesting?
by Michael Pettis

UPDATE: Don't overlook Dr. Doom on this either.

Read it at Project Syndicate
China’s Bad Growth Bet
by Nouriel Roubini

However, Roubini doesn't see a hard landing hitting until 2013.

Roubini tweets: "Paul Krugman asking 'Will China Break?' Consistent with what RGE/I have been writing for a year on hard landing risks."