Mike Norman Economics

Sunday, October 23, 2016

Daily Mail — No comment: Clinton has 'nothing to say' about Wikileaks email revealing $12M quid pro quo with Morocco's king that an aide said was a 'mess' of her own making

'I have nothing to say about Wikileaks, other than I think we should all be concerned about what the Russians are trying to do to our election'

Democratic nominee was responding to a question posed by DailyMail.com during a question and answer session on her plane

Trump went on offense over the 'pay for play' agreement at a rally Friday

Emial from Huma Abedin revealed how Clinton got King of Morocco to underwrite $12m Clinton Foundation summit

Abedin revealed: 'The condition upon which the Moroccans agreed to host the meeting was her participation.'

She backed out of Marrakesh event amid a human rights storm after Abedin wrote: 'She created this mess and she knows it'

Emphasis in lede.

Daily Mail (UK)
No comment: Clinton has 'nothing to say' about Wikileaks email revealing $12M quid pro quo with Morocco's king that an aide said was a 'mess' of her own making

Francesca Chambers, White House Correspondent and David Martosko, U.S. Political Editor for Dailymail.Com

Mark Weisbrot — Venezuela's Economic Crisis: Does It Mean That the Left Has Failed?

The international media have provided a constant fusillade of stories and editorials (not always easily distinguished from each other) about the collapse of the Venezuelan economy for some time now. Shortages of food and medicine, hours-long lines for basic goods, incomes eroded by triple-digit inflation and even food riots have dominated press reports.

The conventional wisdom has a set of predictable narratives to explain the current economic mess. "Socialism" has failed -- never mind that the vast majority of jobs created during the Hugo Chávez years were in the private sector, and that the size of the state has been much smaller than in France. The whole experiment, it is said, was a failure from the beginning.

According to this narrative, nationalizations, anti-business policies, populist overspending during the years of high oil prices and the collapse of oil prices since 2014 sealed Venezuela's fate. Adherents to this explanation say the downward spiral will continue until the chavistas are removed from power, either through elections or through a coup (most pundits don't seem to care which).

The reality is somewhat more complicated.…

Given this situation, it is clear that serious reforms are necessary in order to restart the economy. The Union of South American Nations (UNASUR) has assembled a team of economists, headed by former president of the Dominican Republic, Leonel Fernández, which has presented a set of proposals. (Full disclosure: I am one of the members of this team.)

The most obvious change that is needed is to unify the multiple exchange rate system. This should be done quickly, and in one step. The government can auction a fixed amount of dollars each day, with the price determined by supply and demand. Although allowing the currency to float seems scary to many people, the price of the dollar would undoubtedly stabilize at something considerably less than the current parallel market rate of about 1,000. A floating rate is also the only way to avoid wasting scarce foreign exchange reserves in a futile attempt to maintain an overvalued fixed rate.…

This means that the hard part of the adjustment -- the one that often requires people to reduce their living standards in order to sharply reduce imports -- has already been done. It is relative prices now that have to be adjusted in order to recover. The result is that Venezuela can return to growth rather quickly, without the prolonged recession that neoliberal adjustment normally creates.…

So what are they waiting for?

Much of the left -- including people inside the government and among the base of its party, the PSUV -- rejects these economic reforms. They think it is a "paquetazo" (package) similar to International Monetary Fund (IMF) or neoliberal reforms that increased poverty in the past. They see the fixed exchange rate as socialistic and a floating exchange rate as a "free market" reform. But in reality, the informal economy for dollars constitutes one of the most destructive "free markets" that exists; it is the "capitalismo salvaje" ("savage capitalism") that Hugo Chávez used to denounce. (Chávez himself successfully floated Venezuela's currency in February 2002, and dollar reserves actually increased despite serious political instability.) And we can recall that the IMF supported fixed, overvalued exchange rates with disastrous results in Argentina, Brazil, Russia and a number of Asian countries in the last years of the 20th century.

There is nothing neoliberal about a program in which the government creates employment, protects wages from inflation (which has not happened since inflation began to skyrocket nearly four years ago), subsidizes food and essential items on a large scale, and protects people generally from the burden of the adjustment of relative prices.

Yet there are those on the left who seem to think that Venezuela can recover without fixing its most fundamental and destructive imbalances.….

The problem is that the traditional left is clueless.

Truthout

Venezuela's Economic Crisis: Does It Mean That the Left Has Failed?

Mark Weisbrot | Co-director with Dean Baker of the Center for Economic and Policy Research in Washington, D.C

No relief in sight for UK Savers

UK savers continue to get screwed by the BOE's near-zero rate policy and are fearing worse.

Low interest rates may have helped the country survive the terrible financial crisis of 2008. They could also steer us through the fallout from the Brexit vote in June – a view certainly held by Bank of England boss Mark Carney who quickly sanctioned a cut in the base rate to 0.25 per cent.

But seven and a half years of low rates have caused nothing but pain for savers who depend on the interest from their cash accounts to maintain a decent standard of living.

DTN UK: Low rates and rising inflation mean more misery for savers: Here’s what the Chancellor must do to end... https://t.co/m9Wnpds0CG
— DTN UK (@DTNUK) October 23, 2016

Saturday, October 22, 2016

RT — Linguistic prodigy: 4yo Russian girl speaks 7 languages, incl Chinese & Arabic

Bella speaks languages belonging to three different groups: Indo-European (Russian, French, English, Spanish, German), Semitic (Arabic) and Sino-Tibetan (Chinese) – which in short means that they are very, very different to each other and lack structural similarities.

That doesn’t stop Bella from thinking clearly in each language, however, and she correctly answered age-appropriate questions on the show….

The specialist added that it’s too early to tell whether Bella is truly a polyglot or not, because it’s natural for children to pick languages up – it’s how they evolve with age that matters.

What is amazing is that we think this is amazing.

“In pre-revolutionary Russia, if a child from a noble family couldn’t speak three-four languages by the age of five or six, it was a shame to take him out. Then in school Latin and ancient Greek were added to those. So five-six languages were a standard package for an educated youth back in 19th-century Russia,” Semenovich said.

My grandfather, who lived in the 19th century Austrian-Hungarian Empire, spoke five languages. His first language was German but he knew Slavic languages, as well as English.

RT
Linguistic prodigy: 4yo Russian girl speaks 7 languages, incl Chinese & Arabic

Jonathan Vanian — China Overtakes U.S. In Apple App Store Spending

China has overtaken the U.S. as the biggest spender in Apple’s iOS app store.

Mobile analytics and research firm App Annie said this week that Chinese consumers spent $1.7 billion on Apple-sanctioned mobile apps in the third quarter, or about 15% higher than the nearly $1.45 billion spent by Americans during the same period.…

Fortune

China Overtakes U.S. In Apple App Store Spending
Jonathan Vanian

John J. Mearsheimer — Two Worlds, Two Playbooks: Why Moscow and Washington Don’t Understand Each Other

John J. Mearsheimer is a US foreign policy realist, who is opposed to idealism such as neoconservatism and liberal internationalism.

This week, Mearsheimer, a living classic of political realism, attended a discussion at the Valdai Club Conference Hall in Moscow, which brought together scholars, diplomats and journalists.

During the debate, Mearsheimer outlined the ongoing tensions as a conflict between the two perspectives of international relations, the realist and the liberal internationalist, with the latter still dominating in the western world. Liberal interventionism has the upper hand in academic debates in the United States because of the unprecedented might and influence that Washington gained after the end of the Cold war, and with it, the commitment of the US political establishment to global dominance, according to Mearsheimer.

“We wanted to dominate the entire globe,” Mearsheimer said. “The United States was the indispensable nation, which stands taller and sees further.”

According to the Mearsheimer, this position is based on three premises: the country is incredibly rich, incredibly secure and its military force allows it to intervene around the world without alienating society.

This almost unlimited use of military force, leading to local wars every two-three years is foolish, Mearsheimer said. Political realists like him and Stephen Walt from Harvard call for restraint, but so far to no avail.…

While liberal internationalism remains the dominant school of thought in the United States, Western Europe and countries like Japan and South Korea, political realism has long ago taken hold in Russia and China, according to Mearsheimer.

“As a realist in a liberal internationalist world, you’re a fish out of water. Intellectually, I’m much more at home in China than I am in the United States […] and, by the way, I’m much more at home here in Russia. Culturally, I don’t speak a word in Russian, it’s a foreign culture to me, just like the Chinese culture, but intellectually, most Russians, like most Chinese, speak realpolitik,” Mearsheimer said.…

“Russia operates according to a realist playbook. The United States operates according to a liberal interventionist playbook.”

The key question for the realist paradigm is what the United States’ strategic interests are, Mearsheimer posited.…

Valdai Club
Two Worlds, Two Playbooks: Why Moscow and Washington Don’t Understand Each Other
John J. Mearsheimer | R. Wendell Harrison Distinguished Service Professor of Political Science at the University of Chicago.

Xinhua — 'Little brown brother image' of Filipinos stunts Philippines: foreign secretary

Filipinos fed up with US racism.

The Philippine foreign secretary said on Saturday that the "little brown brother image" has thwarted the Philippines' growth and development, adding that separation from the United States is demanded in pursuing an independent foreign policy.

"It implies breaking away from the debilitating mindset of dependency and subservience - economically and militarily - that have perpetuated our 'little brown brother' image to America, which has stunted our growth and advancement," Perfecto Yasay wrote on his Facebook page.

Ecns.cn
'Little brown brother image' of Filipinos stunts Philippines: foreign secretary
Xinhua, Editor: Mo Hong'e

Jason Smith — One year ago ...

One year ago ... I put up my preprint. No journal has accepted it yet ...

Abstract

A general information equilibrium model in the case of ideal information transfer is defined and then used to derive the relationship between supply (in- formation destination) and demand (information source) with the price as the detector of information exchange between demand and supply. We recover the properties of the traditional economic supply-demand diagram. Infor- mation equilibrium is then applied to macroeconomic problems, recovering some common macroeconomic models in particular limits like the AD-AS model, IS-LM model (in a low inflation limit), the quantity theory of money (in a high inflation limit) and the Solow-Swan growth model. Information equilibrium results in empirically accurate models of inflation and interest rates, and can be used to motivate a “statistical economics”, analogous to statistical mechanics for thermodynamics.

Hard breaking in.

Information Transfer Economics
One year ago ...
Jason Smith

RT — No one allowed to leave: Militants shell East Aleppo exit route as humanitarian pause ends

So much for that. It was a forgone conclusion, but Russia and Syria were wise to call the Western bluff, although Russia and Syria are being blamed anyway.

RT
No one allowed to leave: Militants shell East Aleppo exit route as humanitarian pause ends

Backgrounder on Mosul. Another mess.

Defend Democracy Press
Mosul’s Frightening and Uncertain Future
Patrick Cockburn

JW Mason — How I Think about Monetary Policy

From my point of view, the conceptual issues here are simpler than you’d guess from the shouting. It comes down to two questions. First, how much control does the central bank have over the terms on which various economic units can adjust their balance sheets by selling assets or issuing new liabilities? And second, how many units would increase their spending on goods and services if they could more easily make the required balance sheet adjustments? Obviously, these questions are not straightforward. And they have to be answered jointly — to be effective, monetary policy has to reach not just the elasticity of the financial system in general, but its elasticity at the points where it meets financially-constrained units. But in principle, it’s simple enough.…

JW goes on to show how conventional approaches to dealing with these "simple" questions are simplistic. Economies are granular rather than homogenous, dynamic rather than static, complex rather than simple.

The whole question, it seems to me, is made more confusing than it needs to be by two bad habits of economists. First is the tendency to think of the economy as a tightly articulated system, with just a few degrees of freedom.…

The second vice is economists’ incorrigible tendency to mistake the map for the territory.…

Both of the oversimplifications seem to result from assuming ergodicity.

The first is the informal fallacy of hasty generalization. The second is the informal fallacy of mistaking a view of reality for reality. They are related fallacies, the second being an instance of the first. They seem to arise at least in part from a cognitive bias for imposing precision without due regard for rigor. Strange for math people that regard rigor so highly in model formulation.

This is not economics but logic and critical thinking, which are taught in Philosophy 101. JW gets an A for recognizing this. Economists that commit these errors get an F.

J. W. Mason
How I Think about Monetary Policy [For some reason this link is not working now]
JW Mason

Perpetuity

Review of a financial Perpetuity from wikipedia here:

A perpetuity is an annuity that has no end, or a stream of cash payments that continues forever.

Under our current numismatic form of system operations (post 1971), think of the US Treasury's annual stream of USD deposits of taxes/fees/etc received from the non-govt sector which were enabled via the assessment of previous non-govt sector credits originally created via the US Treasury's previous withdrawals of USDs as such a perpetual stream of annual payments, or a Perpetuity, then we can apply the financial formula for the Present Value of a Perpetuity:

PV = A/r

Where A = the period payment, which the US Treasury in FY 2015 received net deposits of $3.9T.

and r is the period interest rate which is what the Fed sets it to; or about 0.25% for the last 8 years.

So dividing the $ 3.9T by the 0.0025 annual rate

= $1.56 x 10^15 or close to $1.6 quadrillion....

A value which the PV of any liability of the US Treasury pales in comparison to, whether Social Security, Medicare or any/all of the above.

This might explain why, from a purely financial perspective, ie leaving out the usual philosophical issue of authority vs. the idiot libertarians, no US Treasury auction ever fails even with all the Peterson morons going all around the place with their dire financial warnings wrt US Treasury liabilities.

The street is obviously not paying any mind to those people our Treasury operations go on everyday like clockwork for 100s of $billions at near zero rates right where the Fed sets them. Rinse and repeat. The Peterson people don't understand any of these systemic operations so hence nobody of import even listens to their bibble babble other than other unqualified idiots like them.

From a purely financial perspective, the issuer (US Treasury) possesses a Perpetuity with a current PV of $1.6 quadrillion which overwhelms any liability of the issuer.

Luigi Zingales — The Non-Performing Assets of Wells Fargo

Short and incisive.

ProMarket
The Non-Performing Assets of Wells Fargo
Luigi Zingales

Zero Hedge — Obama Warned Of Rigged Elections Back In 2008: "It Helps We Got Democrats In Charge Of Machines"

From the not-so-way-back time machine. Run the tape, please.

Zero Hedge
Obama Warned Of Rigged Elections Back In 2008: "It Helps We Got Democrats In Charge Of Machines"

Tyler Durden

The Duran — Russia reinforces positions in Syria, Al-Qaeda stops civilians fleeing eastern Aleppo

The inability of the UN to provide aid during the current ceasefire in Aleppo, and of the people of eastern Aleppo to leave via the ‘humanitarian corridors’ provided for them, demonstrates the truth of what The Duran – notably our contributor Afra’a Dagher, who is Syrian and who writes from Syria – has been repeatedly saying: there are no “moderate rebels” in Syria.
The story of the Aleppo ceasefire and of the ‘humanitarian corridors’ can be told quickly enough.

The UN supported the ceasefire and sought to use the ‘humanitarian corridors’ to send aid convoys into eastern Aleppo. The Jihadis in eastern Aleppo fired at the convoys, and the movement of the convoys has stopped. The result is that no aid has got through.

As reported previously, the Russians and the Syrians reached an agreement for 900 Jihadi fighters to leave eastern Aleppo by way of the ‘humanitarian corridors’. However when these fighters attempted to do so, they were fired on by the more militant Jihadis belonging to Jabhat Al-Nusra, Al-Qaeda’s Syrian branch, which is in control of eastern Aleppo. The result is that this withdrawal of Jihadi fighters has also failed to take place.

A group of civilians also tried to leave eastern Aleppo through the ‘humanitarian corridors’. They too were prevented from doing so by the Jihadis in eastern Aleppo.…

What the ceasefire has however done is demonstrate not just the utter intransigence of the Jihadis in eastern Aleppo, but that Jabhat Al-Nusra – ie. Al-Qaeda – does indeed run the show there. Staffan de Mistura, the UN official who was recently claiming otherwise, has been proved wrong.

None of this of course is going to change the way the situation in Aleppo is being described in the Western media. There it will continue to be a story of defenceless civilians in a gallant besieged rebel city being brutally bombed by murderous Russians.…

But it is all Putler's fault.

The Duran
Russia reinforces positions in Syria, Al-Qaeda stops civilians fleeing eastern Aleppo
Alexander Mercouris

Greta Mautner — How Come the Biden Family is Above US Laws?

Corruption watch.

NEO
How Come the Biden Family is Above US Laws?

Greta Mautner

Paul Robinson — A normal week in the British press

Propaganda watch.

Irrussianality
A normal week in the British press
Paul Robinson | Professor, Graduate School of Public and International Affairs at the University of Ottawa

Jafe Arnoldski — The new State Duma rears its head: A new era in Russian democracy

Political change is taking place in Russia as the country gets used to liberal democracy in governing.

Simultaneously, an anti-corruption campaign is underway in Russia as in China that is taking on both "tigers and flies," as the Chinese day.

The Western meme that Russia is sliding back into autocracy and authoritarianism looks to be propaganda.

Fort Russ
The new State Duma rears its head: A new era in Russian democracy
Jafe Arnoldski

Jafe Arnoldski — What languages do the Normandy Four speak together?

You were probably just dying to know this.

Fort Russ
What languages do the Normandy Four speak together?
Jafe Arnoldski

James Kwak — Ideas, Interests, and the Challenge for Progressives

This is a follow-up on a debate begun by Mike Konczal and joined by Dani Rodrik.

It's an important debate to be having about political economy but I don't think it can be resolved as a political matter in the way it is framed without bringing in Post Keynesian economics, MMT, and Institutionalism, from the side of economics, and sociology and political science as well. Moreover, it is basically a philosophical debate that hangs on differences in world views and ideologies.

The fundamental question is what living a good life in a good society entails, individually and socially, as well as in terms of social, political and economic liberalism.

The Right has Friedrich Hayek's The Road to Serfdom and Milton Friedman's Capitalism and Freedom. The Left has John Kenneth Galbraith's The Good Society and Economics and the Public Purpose. All are dated and need to be revised for current conditions.

The coalition on right that was dominated by the GOP establishment has collapsed with the party breading between populist and establishment wings, and faces an uncertain future after this election. The dominance of the New Democrat establishment was seriously challenged by the Sanders "insurgency" and the dynamics of US demographics suggest that to Democrats that unless they change they face the same establishment- populist schism in which the Republicans are now enmeshed.

James Kwak certainly has it right that the challenge is to come up with a long term approach rather than a short term fix to regain the white working class that began to abandon the Democratic Party. Nixon's Southern Strategy broke the lock on the solid South that the Democrats had had after Reconstruction and flipped it to the GOP, while civil rights sealed the deal. Working class Democrats then defected wholesale to the GOP as "Reagan Democrats." Now the male white working class seems to be owned by right-wing populism.

Going forward, it appears that the US is divided between white males on the right and white females and non-whites on the left. This divide has economic roots but it is not fundamentally economic. Therefore, an economic approach can only be a part of the overall approach that progressives take politically.

The Baseline Scenario

Ideas, Interests, and the Challenge for Progressives

James Kwak

ht Mark Thoma at Economist's View

Noah Smith — Liberals Compete for the Soul of Economics

But there are not one, but two big trends in liberal economic thinking. One wants to modify the economic thinking of the past few decades, and the other wants to rip it up. I expect to see a lot of the economic debate in the coming years play out not between the left and right, but between these two strains of thought.

More controversy on the way. Will MMT finally get a hearing?

Not if Noah Smith has it right. Noah completely ignores Post Keynesian economics and Institutinoalism as an overlapping cluster of schools and talks instead of evolutionary economics and complexity economics, which are still in their infancy compared with PKE.

Is Noah blindsided, or is this Bloomberg policy?

Bloomberg View
Liberals Compete for the Soul of Economics

Noah Smith, contributor
ht Mark Thoma at Economist's View

Jason Furman — Extracting the Signal from the Noise

Seven tips for interpreting macroeconomic data.

Milken Institute
Extracting the Signal from the Noise

Jason Furman | Chairman of President Obama’s Council of Economic Advisers

ht Mark Thoma at Economist's View

21st Century Wire — SYRIA: ‘Rebels’ Constructing Child Victims to Sell Western Intervention & Regime Change

Dissecting the propaganda coming out of Syria geared to Western media to promote "Assad must go."

Assad and Putin are "bombing children" while the US and its allies are "liberating Mosul."

21st Century Wire
SYRIA: ‘Rebels’ Constructing Child Victims to Sell Western Intervention & Regime Change

Paola Subacchi — Free Trade in Chains

This is significant. The research director of Chatham House is agreeing with Joseph Stiglitz, Stephen Roach, and Dani Rodrik that political liberalism supersedes economic liberalism. This is a several of neoliberal doctrine.

Britain's Chatham House is one of the premier Western policy think tanks, comparable to Brookings Institution in the US, for example. As such it is the center for generation of Western policy formulation and the propaganda to promote it.

Project Syndicate is a major organ through which Western propaganda is disseminated publicly to forge group think.

This may sound like conspiracy theory. Elites will forcefully deny that this is either the intention or even happening. I agree that for most part it is not intentional, although there is some of that, too. (You know who your are.).

Michael Polanyi, Karl's equally brilliant brother, pointed out the role of tacit knowledge as a shaper of thought. Tacit knowledge is not random thoughts stored in the memory bank, but rather it is highly structured and manifests as world views and ideologies. The Western elite are trapped in liberalism as both a world view and a ruling ideology, although they may disagree about some of the details. They are, however, not very cognizant of the paradoxes of liberalism that arise within it.

Economic liberalism — "free markets, free trade, and free capital flows" — creates issues not only economically but also politically and socially. When group think draws on tacit knowledge and applies ideology reflexively, then the paradoxes of liberalism that emerge in societies generate dysfunction and created "surprise."

Addressing increasing dysfunction rising as "populism" as a reaction to liberal establishment group think is what this article is about. But the elite has not figured out the dynamics of the process just described and are trapped in a quagmire of their own creation because they cannot see the forest for the trees.

So I am happy to see Chatham House waking up somewhat, but the world would be better off they just disband.

Project Syndicate
Free Trade in Chains

Paola Subacchi | Research Director of International Economics at Chatham House and Professor of Economics at the University of Bologna

Dani Rodrik — How to tell apart trade agreements that undermine democratic principles from those that don't

I discussed in an earlier post on Brexit how to think about international agreements and the constraints on state action they entail in terms of democratic legitimacy. Since that discussion has relevance beyond Brexit, I've pasted the relevant part here below. The basic point is this: the fact that an international rule is negotiated and accepted by a democratically elected government does not inherently make that rule democratically legitimate.…

Another paradox of liberalism: Just because a policy decision has been arrived at "democratically" does not imply that the policy is democratic (of the people, for the people, and by the people).

Dani Rodrik's Weblog
How to tell apart trade agreements that undermine democratic principles from those that don't

Dani Rodrik | Ford Foundation Professor of International Political Economy at the John F. Kennedy School of Government at Harvard University

Robert Parry — Washington’s New Lock-Step March of Folly

Good analysis. What I would question though is his assessment of Tulsi Gabbard.

One potential leader of a peace movement would be Rep. Tulsi Gabbard, D-Hawaii, a 35-year-old military veteran who is one of the few members of Congress to offer an insightful and courageous critique of the dangers from an interventionist foreign policy. But Gabbard would be putting her promising political career at risk if she challenged a sitting Democratic president, especially early in Clinton’s White House term.

Rep. Tulsi Gabbard, D-Hawaii.

Yet, without a modern-day Eugene McCarthy (the anti-Vietnam War Democrat who took on President Lyndon Johnson in 1968) to rally an anti-war movement from inside the Democratic Party, it is hard to imagine how significant political pressure could be put on a President Hillary Clinton. Virtually the entire mainstream U.S. media (and much of the progressive media) are onboard for a U.S. “regime change” operation in Syria and for getting tough with Russian President Vladimir Putin.

I expect Gabbard to oppose liberal interventionism very strongly. She has already burnt her bridges to the Democratic establishment, and her political future lies with the future rather than the past.

The Democratic establishment is on the way out since it runs counter to the geographic dynamics.

If Clinton wins, she will be the last of the New Democrats. and her administration will crater the Democratic establishment.

Who do the Democrats think the rising generations prefer, Tulsi Gabbard or Madeliene Albright and Samantha Power?

Consortium News
Washington’s New Lock-Step March of Folly

Robert Parry

China aluminum makers to target auto, aerospace in global push

China USD zombies prepping to turn surplus aluminum into more USD balances... So much for the econo-moron theory of "supply and demand!"...

China aluminum makers to target auto, aerospace in global push https://t.co/XCDgpiM54W @Reuters pic.twitter.com/fkn3TEs378
— Modern Metals (@ModernMetalsMag) October 22, 2016