Wednesday, February 29, 2012
China sold Treasuries in 2011 and guess what? Interest rates fell to record lows!
Here's another thing that the clueless Debt Doomsday crowd has been warning us about. I can hear them right now screaming hysterically about how one day China is going to start dumping its Treasuries.
Well guess what? They did. They sold a bunch last year and on balance, were net liquidating.
So what happened? Did rates spike like the misguided Doomsday guys forecast?
Hardly.
Actually, the opposite happened: rates collasped to new lows. The only ones who got this right were the MMT guys, like us, right here!
Galbraith on economic terminology
When policy makers and economists talk about the economy, the terms they use can play a role in conditioning how people think about matters.
In his Monday night lecture at Midwestern State University, noted economist James Galbraith talked about the current economic crisis and some of the factors that led to it — and which are exacerbating the situation.
The University of Texas economist also pointed out what he called misleading economic and business terms used to describe and understand (and misunderstand) the economy.
Read the rest at Times Record News
By Richard Carter
(h/t Kevin Fathi via email)
(h/t Kevin Fathi via email)
John Carney — Accounting Identity Errors and MMT
Read it at CNBC NetNet
Accounting Identity Errors and MMT
by John Carney | Senior Editor
Look like John is trying to prod some MMT economists to come forward and clarify their position wrt recent challenges emanating from JKH's analysis at Steve Roth's place, which John links to.
Dean Baker — Quick Thoughts on Modern Monetary Theory
Read it at CEPR
Since there were many thoughtful comments on my earlier post, it seemed worth saying a bit more by way of response. As I noted at the onset, I did not see a difference between MMT and the Keynes that I first studied more than 30 years ago. I guess I still don’t see the difference.
Quick Thoughts on Modern Monetary Theory
by Dean Baker
Joe Firestone on Dean Baker 2 on Dylan Matthews on MMT
Read it at Daily Kos | Money and Public Purpose
The WaPo MMT Post Explosion: Dean Baker's Second Try (1)
The WaPo MMT Post Explosion: Dean Baker's Second Try On MMT (2)
The WaPo MMT Post Explosion: Dean Baker's Second Try On MMT (3)
by Joe (Letsgetitdone) Firestone
Banks don't lend their reserves. Even if they could, it would be stupid.
The common story line we have been hearing for the past four years is that the Fed has "printed" all this money and reserves have grown exponentially so they will soon be "lent out" into the economy and that will create inflation.
Or what about this: Lawmakers wringing their hands over the fact that the gov't (Fed) gave the banks all this money and now they should be making loans.
It's wrong. All wrong.
First of all we need to understand that banks create loans by merely creating an accounting entry on their books. That's it. That's all there is to it. That's the power you have, granted to you by the government once you have a commercial bank charter. You create loans literally out of thin air. The only thing constraining your ability to do that is your capital. Nothing more than some capital and a blessing from the government and you're in business to "create money" (credit money) out of thin air. No reserves, no taking from Peter to lend to Paul. Nothing of the sort.
The point I am making is, if a bank needs nothing more than some capital and a book keeping system to make a loan, why would they lend out their reserves? From a business standpoint it would be really, really, dumb.
Don't forget, reserves earn interest for banks. Even if the interest rate is very low, the interest earned adds up. It's something. It flows to the banks' bottom line. More importantly, it's a no-risk stream of income and for a businesss that is fraught with risk (banking), that's a very precious thing. You don't want to play around with that.
So the obvious question is, why would a bank lend out its reserves and forego that risk free income when it's not even necessary? Again, the loan is just an entry on the banks' books. They can make that happen at will AND let the reserves sit there earning income at the same time.
Indeed, I'm not even sure if the banks are legally allowed to make loans with those reerves. I believe reserves can only be invested in things specified by the regulatory authorities and that mostly inlcudes government securities.
Therefore, no lending of reserves. Not necessary. Stupid, even.
Peter Cooper — Democratized Money and MMT
Read it at heteconomist.com
Democratized Money and MMT
by Peter Cooper
Peter sums up the debate wrt capitalism and democracy in terms of the opportunity that a correct understanding of a non-convertible floating rate monetary system provides.
John Carney — MMT, Deficits and Savings: The Babysitting Model
Read it at CNBC
MMT, Deficits and Savings: The Babysitting Model
John Carney | Senior Editor
Good post, good questions, moves the debate forward.
The answer to why government "should" accomodate non-government saving desire using the sectoral balance approach, stock-flow consistent modeling, and functional finance is to achieve full employment along with price stability (mopping up residual unemployment with the MMT JG).
The economic justification of this normative "should" is efficiency and effectiveness. Policy that idles productive resources unnecessarily is economically inefficient. MMT macro theory shows that this inefficiency in the name of controlling inflation is mistaken and that achieving full employment and price stability is a feasible objective using policy options derived from MMT macro theory.
Moreover, an economy is the material life-support system of a nation. Effectiveness wrt public purpose requires full employment in a situation in which income is a sine qua non of survival in modern society. Persistent unemployment results in economic adversity and political dissatisfaction, which all politicians know is poisonous to their careers.
DHS tracked Occupy Wall Street to ‘control protesters’
Leaked documents reveal that federal government tracked Occupy Wall Street protesters because it feared the movement could turn violent.
An internal Department of Homeland Security report (PDF) titled “SPECIAL COVERAGE: Occupy Wall Street” was part of 5 million leaked documents published by WikiLeaks andexamined by Rolling Stone contributing editor Michael Hastings.
The report indicates that the department monitored protesters’ social media activities to assess the movement’s impacts in individuals sectors, including financial services, commercial facilities, transportation, emergency services and government facilities.
In addition to monitoring Twitter, Facebook, Tumblr, Meetup and Occupy live video feeds, the feds also relied on the left-leaning activist website Daily Kos for tracking protest locations.
“The growing support for the OWS movement has expanded the protests’ impact and increased the potential for violence,” the report notes in its final paragraph. “While the peaceful nature of the protests has served so far to mitigate their impact, larger numbers and support from groups such as Anonymous substantially increase the risk for potential incidents and enhance the potential security risk to critical infrastructure (CI). The continued expansion of these protests also places an increasingly heavy burden on law enforcement and movement organizers to control protesters.”Read it at Raw Story
DHS tracked Occupy Wall Street to ‘control protesters’
by David Edwards
No surprises here. The government was doing the same thing in the Sixties and Seventies wrt the anti-war movement.The difficulty is drawing the line between legitimate security concerns and overreach. Authoritarian and libertarian mindsets disagree over where the line should be drawn, and security forces tend to draw on those who fall toward the right tail of the bell curve of population distribution.
Bill Black — Addressing the Dominant Critique of MMT
I'll begin by addressing today the dominant concern critics have expressed here -- the government might act badly with the funds. This is, of course, a real concern. But it is some ways a very odd concern and not a logical objection to MMT. The extreme variant of this critique argues that MMT is "fascist."
he good news from the standpoint of MMT is that this critique agrees that MMT is accurate and makes available policy choices that are effective in increasing income and employment -- and claims that MMT's effectiveness is the problem because the government leaders might use the increased income and wealth for evil purposes.
If that is a valid criticism of an economic theory (it works -- it increases income, wealth, and employment) then virtually any accurate economic theory that improves the economy is "fascist" because the government might be ruled by a fascist and the ruler might use the increased wealth and income to do evil. No one (economist or otherwise) can ever guarantee that a government ruler will not be evil and use the increased national wealth to do evil. Under this logic all effective economic theories are fascist and we should try to make the world as poor as possible so that fascistic governmental leaders have fewer resources with which to do evil.Read it at New Economic Perspective
Addressing the Dominant Critique of MMT
By William K. Black
(h/t Clonal in the comments)
"Under this logic all effective economic theories are fascist and we should try to make the world as poor as possible so that fascistic governmental leaders have fewer resources with which to do evil." This is position of the folks that want "small government" in order to block "the road to serfdom."
Bernanke lies again. Makes up nonsense. Kills any chance at full output and employment
More and more lawmakers on Capitol Hill seem to be getting it. What they're getting is the fact that monetary policy can't stimulate anything, only fiscal policy can.
Great. So why aren't we seeing any movement in Congress to get another stimulus going? Something WAY bigger than the last one?
It's probably because every time it's mentioned, Bernanke throws cold water on it by saying something like, "We must be careful. It has to be done in a way where fiscal policy can be sustainable."
WTF???????????
What is he talking about?
Fiscal policy of any country under a fiat monetary system is ALWAYS SUSTAINABLE BY DEFINITION.
I thought Greenspan and Volker were bad, but Bernanke is the worst. The absolute worst.
He's almost gotten me to the point where I'll support Ron Paul's "End the Fed" campaign.
Hey gold bugs...what happened???
For the past week you had all these gold bugs and other "very smart people" telling us how the world is being "flooded with money" by the central banks and that the ECB's coming LTRO (II) would be another example that. Then the ECB does a larger than expected, 529 bln euro ($700 bln) and what happens? Gold tanks. Great call, gold bugs. Great call.
MMT had it right, once again! Central bank monetary operations are NOT inflationary.
The Fed cannot print money, even if it wanted to. Only the Federal Government can and it's currently "un-printing" money, as are nearly ALL governments of the industrialized nations of the world.
Good call, gold bugs...good call!
Simon Wren-Lewis — Why introductory macroeconomics should ditch the LM curve
I have become more and more embarrassed at having to teach the IS-LM model. The IS curve is fine, but the LM curve is not. The reason is obvious enough: central banks do not operate a fixed money supply policy. It would be nice to tell students that the fiction that the monetary authorities fix money is a harmless fairy story, but I do not believe this. Here are just three mistakes or confusions caused by using the LM curve.
Read it at mainly macro
Why introductory macroeconomics should ditch the LM curveFor teachers and students of economics
by Simon Wren-Lewis | Professor of Economics, Oxford University
IS curve is fine? Then why are corporations saving trillions and not investing at ZIRP?
Favorite quote:
I sometimes say to master’s students just starting the core macro course that they will spend some time learning about the same stuff as they did when they were undergraduates: inflation, unemployment, business cycles. The key difference is that what they learn will only be 5 or 10 years out of date, compared to material that is 30 years out of date for undergraduates. Strange, but unfortunately true.
Steve Keen — From Zombie Banking to Zombie Democracy
Video at Steve Keens' DebtWatch (fast forward to 3:56)
From Zombie Banking to Zombie Democracy on Capital Account
By Steve Keen
Keen makes the point that New Classical economics is incompatible with liberal democracy and shows how the structure of the EZ under the Eurocrats reflects this.
Tuesday, February 28, 2012
Growing Number Of Americans Can't Afford Food
Here in the United States, growing numbers of people can't afford that most basic of necessities: food.
More Americans said they struggled to buy food in 2011 than in any year since the financial crisis, according to a recent report from the Food Research and Action Center, a nonprofit research group. About 18.6 percent of people -- almost one out of every five -- told Gallup pollsters that they couldn't always afford to feed everyone in their family in 2011.
One might assume that number got smaller wrapped up with the national unemployment rate falling for several consecutive months. In actuality, the reverse proved true: the number of people who said they couldn't afford food just kept rising and rising.
The findings from FRAC highlight what many people already know: The economic recovery, in theory now more than two years old, has done little to keep millions of Americans out of poverty and deprivation. Incomes for many haven't kept pace with the cost of living, and for a large swath of the country, things today are as bad as ever, or worse.
Forty-six million people lived below the poverty line as of 2010, a record number, according to the Census Bureau, and one that's not even as high as some other estimates would have it. Take a further step back and the situation appears even more dire. About 45 percent of people in the U.S. have reported not being able to cover their basic living expenses, including food, shelter and transportation, according to the group Wider Opportunities for Women.
The official poverty rate is about 15 percent, but over two-fifths of Americans have so little saved that one financial emergency is all it would take to put them in poverty, according to the Corporation for Enterprise Development.
These high rates of financial insecurity -- a consequence of the weak job market, and the prevalence of jobs that don't pay very well -- are making themselves felt at the level of everyday spending.
Read it at The Huffington Post
Growing Number Of Americans Can't Afford Food
by Alexander Eichler
Pretty shocking numbers.
AFP — Leading French candidate vows 75 percent tax on super rich
The Socialist tipped to become France’s next president took aim at the wealthy Tuesday with plans to slap a 75 percent tax rate on top earners.
Francois Hollande said it was simply a case of “patriotism to accept to pay extra tax to get the country back on its feet again” and reverse the policies of President Nicolas Sarkozy that he said favoured the rich.
“It is sending out a signal, a message of social cohesion,” he said during a tour of France’s annual agricultural fair in Paris.
Taxing the rich has become a hot issue in an election campaign marked by worry over the economic crisis and rising unemployment, which now stands at nearly three million.
Hollande, who opinion polls consistently put ahead of Sarkozy in the race to win the presidential elections in April and May, unveiled the 75 percent tax rate plan late Monday on a television show.
“I have seen the considerable progression of the pay of the CAC 40 (benchmark French stock market index) bosses. Two million euros (a year) on average. How can we accept that?” he asked.Hollande said he would slap the tax rate on all French people who earned more than a million euros ($1.3 million) a year. He had earlier said he wanted to impose a rate of 45 percent on incomes above 150,000 euros a year.
Read it at Raw Story
Leading French candidate vows 75 percent tax on super richBy Agence France-Presse
A Dynamic Function for Energy Return on Investment
Abstract: Most estimates of energy-return-on-investment (EROI) are “static”. They determine the amount of energy produced by a particular energy technology at a particular location at a particular time. Some “dynamic” estimates are also made that track the changes in EROI of a particular resource over time. Such approaches are “bottom-up”. This paper presents a conceptual framework for a “top-down” dynamic function for the EROI of an energy resource. This function is constructed from fundamental theoretical considerations of energy technology development and resource depletion. Some empirical evidence is given as corroboration of the shape of the function components.Keywords: EROI; net energy; energy-return-on-investment
Read it at Sustainability
A Dynamic Function for Energy Return on Investmentby Michael Dale , Susan Krumdieck, and Pat Bodger
(h/t Oil Drum)
WSJ — Occupy Groups Get Funding
Read it at the Wall Street Journal
A group of business leaders—including Ben Cohen and Jerry Greenfield of Ben & Jerry's ice cream and former Nirvana manager Danny Goldberg—are planning to pour substantial funds into the Occupy Wall Street movement in hopes of sustaining the protests and fostering political change.
Occupy Groups Get Funding
by Jessica Firger
John Carney mentions MMT
Read it at CNBC NetNet
Stuff We Missed: Tuesday February 28th
by John Carney | Senior Editor
MMT as an ECB Alternative (Michael Hudson). The big MMT conference in Italy was a smashing success with thousands in attendance.
Shades of MMT in the Blogosphere (Heteconomist). Obviously, the mainstream Het is trying to exclude and marginalize me (Neo-MMR) and Joe Weisenthal (who is Post-MMT) by leaving our factions off this list.Peter Cooper take note. :)
BTW, Warren responded to a post by John, and John engages at Warren's here in the comments, clarifying his stance, if you are keeping up with this. Many other good comments, too.
Millions of Indian workers strike
Read it at Al Jazeera
One-day walkout hits transport, banks and post offices, as unions seek better rights and protest over rising prices.
Millions of Indian workers strike for rights
Al Jazeera and agencies
Falling real wage.
Adbusters — A Shift in Consciousness
Read it at Adbusters and watch video (5 min.)
A Shift in Consciousness
by Adbusters
Adbusters initiated Occupy Wall Street at a year of more of planning, in which David Graeber was involved.
Here's the promo on the video.
A taste of the upcoming feature documentary, Occupy Love. This is a community funded film. http://www.occupylove.org "Love is the felt experience of connection to another being. An economist says 'more for you is less for me.' But the lover knows that more of you is more for me too. If you love somebody their happiness is your happiness. Their pain is your pain. Your sense of self expands to include other beings. This shift of consciousness is universal in everybody, 99% and 1%." ~ Charles EisensteinReminiscent of Love is all you need, four decades ago.
Ayn Rand — A Corporate Coup D'Etat on Campus
Gary Weiss, the Wall Street writer who was ahead of his time with his comprehensive chronicle of Wall Street corruption in 2006 (Wall Street Versus America) charts a bold new course this week with the release of Ayn Rand Nation: The Hidden Struggle for America’s Soul.
Thanks to Weiss, the nation might just escape the next wave of Ayn Rand’s radical capitalism and student brainwashing by corporate money vultures fanning out across U.S. campuses.Thanks to the trail paved in Weiss’ book, we did some further digging into the money cartel financing this “spontaneous” outpouring of campus and Tea Party interest in Rand, whose work is regularly considered by top academics to be mediocre and simpleminded.
This cartel has a striking similarity to the network of university economists set up by Big Tobacco in a money for hire scheme from 1983 to the mid 90s to blanket Congress and the media with bogus OpEds and research papers.
While it has been well known that the oil billionaire, Charles Koch, has been funneling tens of millions of dollars through his foundation into economic programs at public universities and mandating approval of faculty and curriculum in some instances, it has not heretofore been reported that a sweeping partnership in these programs has sprung up between Koch and the southern banking giant, BB&T, the latter corporation mandating that Ayn Rand’s book Atlas Shrugged is taught and distributed to students.
Read the rest at CounterPunch
Resurrecting Ayn Rand: Hedge Fund Money Teams Up With Koch & BB&T
by Pam Martens and Russ Martens
(h/t Kevin Fathi via email)
Time for the economics profession to speak out against corporate propaganda in the name of economics.
BBC News — Greeks the hardest workers in Europe
Figures from the Organisation for Economic Co-operation and Development (OECD) show that the average Greek worker toils away for 2,017 hours per year which is more than any other European country.
Out of the 34 members of the OECD, that is just two places behind the board leaders, South Korea.
On the other hand, the average German worker - normally thought of as the very epitome of industriousness - only manages 1,408 hours a year. Germany is 33rd out of 34 on the OECD list (or 24th out of 25 looking at the European countries alone).
Read it at BBC News
Are Greeks the hardest workers in Europe?By Charlotte McDonald
The article shows the assertion that Greek workers are unproductive is simplistic. Depends on how productivity is measured.
"Productive" Potential of Greece vs. Germany
I'm getting kind of tired of all of the mainstream comments disparaging the "productivity" of the nation of Greece as measured by the usual orthodox methods. Pictures are sometimes worth one thousand words.
Here is a topo map of Greece:
And here is a topo map of Germany:
Large, contiguous areas of green = good for "productivity"; small, discontinuous areas of green, separated by large impassable mountainous formations and wide non-bridgeable seas, archipelagos and long ismuths = bad for "productivity".
Okay let's review: Large green: good..... small green: bad. Which area has more modern day "productive" potential?
Here below is a low orbit photo of Greece, seems like a tough place to get around in.
Cullen Roche — Understanding The Modern Monetary System
Read it at Pragmatic Capitalism
Understanding The Modern Monetary System
by Cullen Roche
Cullen updates his paper and provides links
Peter Cooper — Shades of MMT in the Blogosphere
Read it and enjoy at heteconomist.com
Shades of MMT in the Blogosphere
by Peter Cooper
Take the "test" and see where you fit.
Monday, February 27, 2012
Kimball Corson — "Man at Work + What Is Modern Monetary Theory All About"
Read it at Sailblogs.com
Man at Work + What Is Modern Monetary Theory All About
Kimball Corson
02/23/2012, Pago Pago, American Samoa
(h/t Clonal in the comments)
I can't figure out how to link directly to this post so I am crossposting it here. It can be read at Sailblogs.com by scrolling down to the date.
What Is Modern Monetary Theory All About
It is a variety of Keynesianism -- nominally centered at the University of Missouri, K.C., with its most notable exponent, James Galbraith, a Cambridge trained economist and son of John Kenneth Galbraith -- that focuses more on the money supply, the importance of large deficits and their impact, the extent of use of productive resources and less on interest rates, the dangers of high public debt and the threat of inflation during recessionary times. It challenges the view that during recessionary times -- when resources are not fully employed -- deficit spending should be restrained out of fear of inflation or rising public debt. The argument is that deficit spending should be even more aggressive during depressed times because as long as there is unemployment and plants are not at capacity, inflation is not a realistic prospect. Neither is concern about a high debt to GDP ratio as long as we commit to not default and retain flexible exchange rates.
Conventional Keynesians, like Krugman and others, worry that if deficits are too large, even during recessionary or high unemployment times, inflation lurks in the wings and imposes a curb. Nonsense, say the MMT theorists.
Demand driven inflation, the only type to worry about, can only come about when as we approach full employment and plants are running near full capacity. Until then, we can run deficits as large as we want and need with the interest expense being the only issue and a marginal one at that. In short, we constrain badly needed deficit spending because of our fear of inflation which is a false boogy man, except at full employment, and high public debt, which is also not a problem, if we have flexible exchange rates and commit not to default.
The heart of the matter is this: according to Modern Monetary Theory, the Fed buying up Treasuries is just, in Galbraith's words, a "bookkeeping operation" that does not add income to American households and therefore is not really inflationary (a continuous rise in prices generally).
"It seemed clear to me that ... flooding the economy with money by buying up government bonds ... is not going to change anybody's behavior," Galbraith says. "They would just end up with cash reserves which would sit idle in the banking system [with few borrowing], and that is exactly what in fact happened [with quantitative easing in 2009 and 2010]." Sitting on cash instead of bonds, as near cash.
Deficit spending adds directly to national income. Buying bonds to increase the money supply doesn't. The idea that the government can never run out of money -- central to MMT -- has different implications for different economists. The MMT thinkers contend hyperinflation and prospect of default which bother others isn't possible absent full resource employment, and, unless of course, a nation chooses to default, which is a problem.
Orthodox Keynesians are also baffled by another claim of MMT: namely, that budget surpluses in and of themselves are usually bad for the economy. According to MMT, when the government runs a surplus, it is a net saver, which means that the private sector is a net debtor. The government is, in effect, "taking money from private pockets and forcing them to make that up by going deeper into debt," Galbraith claims. I think he is correct although this claim leaves conventional Keynesians shaking their heads. But that is because they don't distinguish between the private sector being forced to become a net debtor, on one hand, and being induced to reduce consumption expenditures in an overheated economy, on the other.
An implication, that constant deficits are usually preferable where there remain idle resources bothers orthodox Keynesians even more. Conservatives orbit. The implications of ever growing public debt seem not well addressed by either group, beyond the growing interest burden, and a great sense of unease by the orthodox Keynesians. Perhaps the failure to understand MMT, is what creates that unease. After all, what magic attends any particular Debt/GDP ratio, as long as a nation commits not to default, in whole or part, and maintains flexible exchange rates to permit it to make that commitment.
MMR: "A family balances it's checkbook, a nation balances financial sectors."
The Three MMR Musketeers have come up with a pretty good tagline here (consider it stolen guys!) .
Michael Hudson — MMT Theory as an ECB Alternative
Michael Hudson reports on the weekend MMT conference in Italy.
Read it at MichaelHudson.com
MMT Theory as an ECB Alternative
By Michael Hudson
(h/t Clonal in the comments)
Crossposted at CounterPunch as
Our Very Own Oscar Night in Rimini
Crossposted at CounterPunch as
Our Very Own Oscar Night in Rimini
(h/t Kevin Fathi via email)
Neil Wilson — Reconciling S = I + (S - I) to the national accounts
Read it at 3spoken
Reconciling S = I + (S - I) to the national accounts
by Neil Wilson
(h/t Kevin Fathi via email)
John Carney responds to Warren Mosler
Read it a CNBC | NetNet
Warren Mosler Thinks I'm Wrong About US' 'Greece' Danger
by John Carney | Senior Editor
TBTF's and US Global Hegemony
Sometimes finance executives let slip the way they really feel: that they hold the world in the palm of their hands.It’s not often that the people in charge admit what is really going on: a global game for political dominance. I just saw an interview with Wall Street superlawyer Rodge Cohen, the secret force behind (among other things) the expanded emergency lending power of the Federal Reserve through section 13(3). You know, that’s the law allowing the Fed to lend unlimited sums based on whatever it wants to lend, a section amended in 1991 at Cohen’s behest. He was involved in “more than 17 deals” during the crisis in 2008, including the bankruptcy of Lehman Brothers, the $85 billion AIG bailout deal, and the takeover of Fannie Mae by the federal government. He is, as Bill Black said, the fixer of Wall Street. Here’s his quote, at minute 3:39 ofthis Bloomberg interview:
Hopefully we will not see the major financial institutions in this country disappear because if we do we will also see a loss of ability to influence events not only financially but also politically throughout the world.
Read it at New Deal 2.0
Wall Street Fixer Rodge Cohen: Big Banks Key to American Global Dominance
by Matt Stoller
(Crossposted at Naked Capitalism)
(Crossposted at Naked Capitalism)
Explains TBTF in a new light.
Chris Cook — The end game in oil
The end game is about to begin. On the one hand you have the noise and rhetoric. Greedy speculators gouging gasoline prices; mad mullahs preparing to wipe Israel off the map; bunker buster bombs and fleets being positioned; huge demand for oil from the BRIC countries; China’s insatiable thirst for oil; the oil price will head for $200 a barrel and will never again fall below $130 …
On the other hand you have the reality.
Read it at Asia Times Online
The end gameBy Chris Cook
(Crossposted at Naked Capitalism)
Chris Cook is former compliance and market supervision director of the International Petroleum Exchange
The U.S. Oligarchy
The wealth defense industry protects the richest of the rich.
In 2005, Citigroup offered its high net-worth clients in the United States a concise statement of the threats they and their money faced.
The report told them they were the leaders of a “plutonomy,” an economy driven by the spending of its ultra-rich citizens. “At the heart of plutonomy is income inequality,” which is made possible by “capitalist-friendly governments and tax regimes.”The danger, according to Citigroup’s analysts, is that “personal taxation rates could rise – dividends, capital gains, and inheritance taxes would hurt the plutonomy.”Read the rest at In These Times | With Liberty and Justice for All
Oligarchy in the U.S.A.
by Jeffrey A. Winters | Associate Professor of political science, Northwestern University. For a more extensive explanation of his theory of oligarchy, read Oligarchy (Cambridge University Press, 2011)
Good article on oligarchic plutonomy in the US, explaning the extraordinary privilege of the 0.01% in a liberal democracy. Winter's explanation accords well with Ravi Batra's historical explanation, and demonstrates how the US is now in an acquisitor era.
Dr Housing Bubble — The Down Payment Boogeyman
There was a time in our more stable housing history where people wouldn’t even consider buying a home unless they had an adequate down payment. Part of the buying process required families to tighten their belts and save for a few years for that trek into home ownership. When so much time, effort, and capital is put into buying a property less people are going to walk away from a mortgage. This also created a positive buffer zone.
Starting in the late 1990s and going into the 2000s the idea of a down payment played into the narrative that all debt was somehow golden. Why does anyone need to save when you can simplytake on a mortgage and forego the years of saving?
Banks loved it because the mortgage volume churn was like having a money making machine. Of course much of this philosophy and mentality is what led into the bubble peaking with no-doc, no-job, no-money down mortgages. Today we examine the down payment debate closely and analyze why it is important to have a bigger down payment especially with government backed loans.
Dr Housing Bubble
The down payment boogeyman – report finds requiring a 20 percent down payment would push out 60 percent of borrowers from qualified residential mortgages (QRMs). Those 29 to 34 acquired a mortgage for the first time in 1999 to 2001 at a 17 percent rate but that rate is now down to 9 percet.
by Dr Housing Bubble
Marshall Auerback — A Giant Game of Chicken in the Eurozone
Read it at AlterNet
As financial operatives and politicians play games to protect their interests, the future of ordinary Europeans is held hostage.
A Giant Game of Chicken in the Eurozone
by Marshall Auerback
John T. Harvey on the national debt
Read it at Forbes | Leadership
Why Our Current National Debt is not the Largest in History
by John T. Harvey
(h/t Anonymous in the comments)
Warren Mosler on the Eurozone
Read it at Global Economic Intersection
Eurozone: How to Drive an Economy in Reverse
by Warren Mosler
Warren Mosler in John Carney on US becoming Greece
Read it at The Center of the Universe
Someone is still worried about the US becoming the next Greece
by Warren Mosler
Joe Firestone on Matt Yglesias on Dylan Matthews on MMT
Read it at Daily Kos | Money and Public Purpose
The WaPo MMT Post Explosion: Matthew Yglesias's MMT
by Joe (Letsgetitdone) Firestone
Charles Hugh Smith on crony capitalism
One of the reasons I am posting this is that Smith uses CAFOs (concentrated animal feeding operations), with which I am very familiar as an Iowa resident. CAFOs are the bane of not only of the family farm and small farmers, but aso the environment. The public has found that it is difficult to impossible to regulate them owing to their political clout. Anyone owning rural land is threatened with a CAFO moving in nearby, making their land worthless for anyone but a CAFO owner.
Read it at Of Two MInds
The Perfection of Crony Capitalism: Use Regulation to Destroy Competitors
by Charles Hugh Smith
(H/t Zero Hedge)
Sunday, February 26, 2012
2012 TED talks to focus on shaping the future — AFP
Technology, art and magic will mix in perspective-bending ways this week as the prestigious TED conference continues transforming from an elite retreat to a global movement for a better world.
The gathering kicks off Monday in the Southern California city of Long Beach with a roster of 1,350 attendees including Internet heavyweights, Hollywood celebrities, scientists, and other notables.
Tickets to the sold-out event cost $7,500 each, but captivating 18-minute “talks” for which the conference is renowned are made available free online at ted.com and have a growing worldwide audience.
This year’s “Full Spectrum” theme refers to a range of presentations “from dazzling technology and leading-edge science to the richest veins of human creativity and interconnection.”While topics at TED and the way it connects with the world have changed with the times it remains devoted to “ideas worth spreading.”
“I have a fundamental belief in the power of ideas,” TED curator Chris Anderson told AFP.
“Powerful ideas, shared the right way, lead to action. Period.”
TED presenters are known for combining dizzying brain power with mind-tickling spins on concepts as weighty as climate change and the devastation of sea life or as playful as dance and music.Read it at Raw Story
2012 TED talks to focus on shaping the future
by Agence Presse-France
“Powerful ideas, shared the right way, lead to action. Period.” Sounds like a venue for MMT.
The bankers' worst nightmare
Stephanie Kelton
@deficitowl
tweets:
Here's a partial view of the bankers' worst nightmare that is here in Rimini, Italy learning about #MMT this weekend.pic.twitter.com/K9CKa6I6
(h/t Scott Fullwiler via Twitter)
Margins, profits and wages
Read it at Think Progress
Corporate Margins And Profits Are Increasing, But Workers’ Wages Aren’t
By Pat Garofalo
Is there a fallacy of composition operative in firms' decision making that is kneecapping effective demand due to lagging worker incomes and falling real wages in contrast to increases corporate earnings, or can owners' consumption offset this? If it can, is this desirable for society, or even politically sustainable?
Review: A Cooperative Species: Human Reciprocity and Its Evolution— Samuel Bowles And Herbert Gintis
A prescription for how human cooperation evolved will provoke much-needed debate about the origins of society
Read it at Nature
Not so selfishby Peter Richerson
Steve Waldman — Competitiveness is about capital much more than labor
Read it at Interfluidity
Competitiveness is about capital much more than labor
by Steve Randy Waldman
A banker looks at Graeber's Debt: The First 5000 Years from the vantage of commercial debt
Read it at Crooked Timber
http://crookedtimber.org/2012/02/25/too-big-to-fail-the-first-5000-years/
Too Big To Fail: The First 5000 Years
by Daniel Davies
(h/t Mark Thoma)
Peter Cooper — Preliminary Observations on Implementing a JIG
Read it at heteconomist.com
I have suggested in recent posts that both freedom and equality would be promoted by ensuring that all individuals: (i) are guaranteed a job if they want one; and (ii) can opt out of paid employment if they wish. The first ideal would be met by a job guarantee and the second by an unconditional basic income scheme. Accordingly, I am in favor of a combined job or income guarantee in which all adult citizens are guaranteed a job and/or basic income as a matter of right. This raises questions about the implementation of such a policy.
Preliminary Observations on Implementing a JIG
by Peter Cooper
Ezra Klein: Government Gets Money from the Non-Government
This from a recent Klein post here:
Klein apparently doesn't even read the Post's own articles. If he did, he would be able to more effectively refute Mitt Romney's fiscal proposals in his short post here.
Let’s try to make this as simple as possible. Money comes into the federal government through taxes and bonds. The vast majority of it is then spent on old-people programs, poor-people programs, and defense.Let me try to make this as simple as possible: Klein is a MORON.
Klein apparently doesn't even read the Post's own articles. If he did, he would be able to more effectively refute Mitt Romney's fiscal proposals in his short post here.
Saturday, February 25, 2012
Konczal — Administration switching positions toward balance sheet recession?
The White House also looks to be on team balance sheet....
When Noam Scheiber wrote about how the administration viewed the economy in late 2010, he explicitly contrasted its wonks’ opinions with that of the balance sheet recession theorist Richard Koo. So is this a revolution within the administration? Is this why it is now pushing for writedowns and refinancing, after having left housing on the side for the past three years? Let’s hope so, since I consider being three years late to the party better than never showing up.Read it at Rortybomb
Is the Administration Joining Team Balance-Sheet Recession?
by Mike Konczal
Still no sectoral balances mentioned. I guess they haven't discovered MMT yet, or Wynne Godley, either.
The New News — Livestreaming
Livestreamers are armed with a smart phone, an app and an audience of people at home watching every frame.
Read it at AlterNet
Rise of the Livestreamer: Telling the Truth About Occupy in Real Time
by Tina Dupuy
Adrea Terzi — Civilized Money View (MMT) vs. Monetarist Keynesianism
Read it at Mepoc
Civilized Money View vs. Monetarist Keynesianism
by Andrea Terzi
[Andrea is a male name]
Joe Firestone on Kevin Drum on Dylan Matthews on MMT
Read it at Daily Kos | Money and Public Purpose
The WaPo MMT Post Explosion: Kevin Drum's Take on MMT
by Joe (Letsgetitdone) Firestone
John Carney aligns with MMR
It's a shame that a guy as brilliant as Wray doesn't quite understand that the "public sphere" is nearly always code for private interests expressed through political power.
This gap in understanding is one of the things that has given rise to the post-Modern Monetary Theory movement of Modern Monetary Realism.Read it at CNBC | NetNet
David Brooks Does Modern Monetary Realism
by John Carney | Senior Editor
Well, I guess the battle lines are drawn, and it's neoliberals and Libertarian Austrian schoolers against Post Keynesians. What else is new, other than now both left and right understand monetary operations and monetary economics, thanks to the contributions of Post Keynesians, Circuitists, Warren Mosler's Soft Currency Economics, and MMT's operational analysis.
On the other hand, the debate can now be reality-based, where the major disagreement over arises from political persuasion concerning policy determined by right wing supply-side macro analysis and policy proposals, and left wing demand-side macro and policy proposals. That is, if both sides agree on operational analysis. I suspect it will turn out that they don't. As physicist J. A. Wheeler said in effect, values are determined by the questions we ask of reality. Different viewpoints are constructed from different norms and criteria, and result in different perceptions of the putative facts.
This is to be expected from financial professionals. The financial world was never going to buy in to MMT. They will simply adopt what is useful to their purposes.
BTW, following John's line of thinking that "the 'public sphere' is nearly always code for private interests expressed through political power," the recourse is to get the money out of politics with a constitutional amendment, lock the revolving door, and tax away economic rent.
Friday, February 24, 2012
Congressional Democrats And Republicans Unanimous: Bring The Robot Drones To American Skies
On Valentine’s Day, while many Americans were obsessed with the decision between dark chocolate and milk chocolate, Barack Obama sat with his pen poised over H.R. 658, a bill with a stark impact lying beneath its bland title: “FAA Modernization and Reform Act of 2012.”
Are you familiar with the thousands of robot drones being deployed in foreign war zones to spy on locals and drop bombs on them? You need to be, because thanks to H.R. 658The stage was set for this transformation of American surveillance in American airspace nearly a year ago when the House of Representatives passed House Amendment 220(read the text here on page H2187) on March 31 2011. The amendment, a piece of legislative language written by Rep. Candice Miller of Michigan, “directs the FAA to work with various federal agencies to integrate Unmanned Aerial Vehicles (UAV’s) into the National Airspace System more expeditiously,” engaging in studies and regulatory action in order to allow self-piloting robots to fly over American airspace using “sense and avoid” technology while they engage in surveillance of the American people.
Recall that federal courts have already declared that Americans have no reasonable “expectation of privacy” to grant them 4th Amendment protections from warrantless surveillance when they can be seen from “publicly navigable airspace”. We’ll be visible to the robotic watchers, but the robotic watchers won’t be visible to us, flying so high in the airthat we won’t be able to perceive them.Who were the brave souls standing up for the privacy rights of Americans against the robotic drones flying over our heads? Who were the members of Congress objecting to Candice Miller’s amendment?
There weren’t any.
Read it at Irregular Times
by Jim Cook
Dirk Bezemer - Growth and Crisis: The Two Faces of Credit
Perry Mehrling interviews Dirk Bezemer for INET (10 min)
Dirk Bezemer is MMT-friendly.
INET abstract:
At least since Joseph Schumpeter we know that credit is good for economic growth. At least since 2007 we know that too much credit foreshadows financial turmoil. Inspired by Keynes and Minsky, Dirk Bezemer pieces together a cross-country data set of credit and debt, investigating whether the two faces of credit are different for different forms of credit. And using agent-based modeling, he strives to capture the interaction between the financial and the real -- this is new economic thinking.
Dr. Housing Bubble — Japanification of US RE market?
Read it at Dr. Housing Bubble
The case of having a Japan like correction in our real estate market grows stronger as each year goes by. The entire notion of zombie banks derives from the crisis in Japan. Shadow inventoryand the suspension of mark-to-market accounting are part of the life support that is keeping many US banks operating. Two decades later, with low interest rates and no signs of real estate values going up, the Japanese housing market is virtually stuck in a holding pattern. One thing is now different however as Japan is now starting to run trade deficits. Japan recently posted a record trade deficit because of a strong yen and rising imports on fuel. Yet the real estate market has yet to recover and is back to 1980s values. Can you imagine housing values in the US going lower or sideways well into the 2020s? Hard to believe but let us examine a few areas where the pattern is playing out on a similar note with new data.
A mirror in the real estate sun – Japan posts record trade deficit while real estate values go deep into the 1980s. US has decade long collapse in real estate values in spite of record low mortgage rates. The path of two lost decades in US real estate values is looking very similar to Japan.
by Dr. Housing Bubble
Paul Mason — How Financial Crisis, Economic Inequality, Social Media, and More Brought Revolutions in 2011--and Changed Us Forever
Journalist Paul Mason covered the uprisings of 2011 as they occurred. His new book "Why It's Kicking Off Everywhere," explains why they all happened at once.
Read it at AlterNet
How Financial Crisis, Economic Inequality, Social Media, and More Brought Revolutions in 2011--and Changed Us Forever
Interview of Paul Mason by Sarah Jaffe
This trend is gaining steam globally and is becoming a transforming force as it gathers momentum among international youth now linked through social media and networking.
This can be understood in terms of Naomi Klein's disaster capitalism, which is the ploy of using crisis or manufacturing it in order to force political and economic change that would be impossible through elections under more normal circumstances. The reason is Margaret Thatcher's TINA (there is no alternative).
The push pack is coming from angry youth, who see their future being stolen from them by a greedy elite using a false pretext.
See also the "I Don't Pay" call to action on You Tube
UK institutes slavery (forced unpaid work)
Concern over unpaid workers taking overtime from staff as some placements last more than a month
Read it at The Guardian (UK)
by Shiv Malik, James Ball and Lizzy Davies
UPDATE:
Read it at Raw Story
UK government under fire over ‘slave labor’ job scheme
By Agence France-Presse
UPDATE:
Read it at Raw Story
UK government under fire over ‘slave labor’ job scheme
By Agence France-Presse
The ten-month-old voluntary programme, part of Prime Minister David Cameron’s welfare reforms, is intended to help the record number of jobless youths improve their CVs and find work in a difficult economic climate.
But opponents say people who quit halfway through their placements are docked two weeks unemployment benefits as punishment — and that the scheme allows major corporations to exploit a large pool of free labour.
The resulting furor has seen a number of big-name backers distance themselves from the scheme, including Tesco, which was targeted by protests last weekend.
Campaigners say the 34,200 youths who have taken part in the scheme so far have provided unpaid labour worth £67.5 million to companies that also include fast food giant McDonalds.“If there are people who feel they’re coerced to work for nothing, ‘slave labour’ isn’t a bad description of it,” Michael Bradley of the Right to Work campaign told AFP.
“If they aren’t benefiting from doing these placements, and aren’t getting jobs at the end of it, that’s coercion.”
Marshall Auerback — German Economic Striving at the Expense of Workers and Neighbors Will Backfire
Read it at AlterNet
The export-obsessed Germans have created an economic race-to-the-bottom in which no one can win. But there's a better way.
German Economic Striving at the Expense of Workers and Neighbors Will Backfire
by Marshall Auerback
(h/t Kevin Fathi via email)
Chris Cook on the Post-Modern Fiscal Theory
The following is a guest post from Chris Cook, a senior research fellow at theInstitute for Security and Resilience Studies at University College London. His work is focused on a new generation of networked markets – which will, in Chris’s view, necessarily be dis-intermediated, open, decentralised and, therefore, resilient.
Following the recent upsurge in interest in Modern Monetary Theory (MMT) I was rash enough to make the comment that the central insight of MMT – that modern ‘fiat’ money is a credit instrument ultimately based upon the government’s power to tax – is muddied by disputes as to what the proper basis for taxation actually is, or indeed, whether there should be any taxation at all.FT Alphaville invited me to contribute a post on the ‘Modern Fiscal Theory’ I suggested. But I decided to go further and document my view that in a world of direct connections a Treasury is no more necessary as a credit intermediary than is a Bank.
Post-Modern Fiscal Theory looks to the networked, de-centralised and dis-intermediated economy emerging rapidly from the post October 2008 wreckage.Read it at The Financial Times | FT Alphaville
by Chris Cook
(h/t Kevin Fathi via mail)
Important. Chris Cook is a big thinker.
Joe Firestone on Dean Baker on Dylan Matthews on MMT
Read it at Daily Kos | Money and Public Purpose
The WaPo MMT Post Explosion: Dean Baker Weighs In on MMT
by Joe (Letsgetitdone) Firestone
EconomicMaverick — MMT in the House!
After a long hiatus I had to come back and post about this much deserved attention recently given by a mainstream US media organ, The Washington Post, to heterodox economics - specifically the Post Keynesian and MMT (Modern Monetary Theory) schools!
Read it at EconomicMaverick.com
MMT in the House! "Rogue" school of economics gets mainstream press in the Wash Post!
by the Economic Maverick
MMT busting out into the mainstream!
In this video I offer my congrats to the MMT crowd for driving the movement into the mainstream.
I'll be on Fox News tomorrow at 10:00am ET
I'll be on "Bulls & Bears" on Fox News Channel tomorrow (Sat, Feb 25) at 10:00am ET.
Here we go again...are speculators driving up the price of oil?
I thought we cleared this up back in 2009, when independent reports concluded that speculation was largely to blame for high oil prices and again last year when a Congressional investigation concluded the same thing. Even Fox News reported that speculation was to blame. I remember, because I was there on Neil Cavuto's show when he did the story on it.
The controversy (and I don't know why it should still be controversial) was reignited yesterday by Nancy Pelosi, when she blamed speculators for the rise in oil and gas prices.
First, the facts: oil production is up and demand for crude and gasoline is down, but prices keep rising. This goes against the most basic law of economics.
Second: According to the CFTC, large specs (funds and swap dealers) are long NYMEX WTI and ICE to the tune of nearly half a billion barrels! And that's only in one type of crude. That's about 50 days worth of global consumption. In other words, take 50 days worth of oil off the market and see if the price doesn't go up. Are you kidding???
Let's be honest; the debate about speculation cuts right through party lines--Republican and Democrat. Repubs claim it has nothing to do with speculators (even though the GOP admitted that speculation was part of the reason) while Dems claim it's mostly about specs.
I'll be arguing on the case for speculation (causing it) on Fox News, tomorrow at 10:00am ET. Bulls & Bears.
Second LTRO reveals market bias toward dollar bearishness
Back in December when the ECB first announced the 489 bln euro LTRO the euro currency rallied.
Now the ECB is out a second LTRO in the amount of 470 bln euro and the euro is once again rallying.
I have to admit, it's odd to see the euro's strength in the face of all this "money printing." The ECB lends $600 bln in ONE DAY and the euro goes up. When the Fed even hints at doing QE or any other form of monetary policy that adds to its balance sheet, investors are all over the dollar, selling it wildly. The last round of quantitative easing played out over six or eight months and the dollar got crushed. The ECB does it in one day and it's bullish for the euro. Go figure?
To me, this behavior exposes what I believe to be an inherent and irrational, negative bias toward the dollar. People want to sell it for any reason. Their arguments against the dollar (e.g. QE is "money printing") are not only wrong, but applied solely to the dollar and no other currency. If some other central bank or fiscal authority does the exact same thing, these very same investors are are either ambivalent or rationalize it in a way that allows them to take the opposite view.
"The ECB is printing 500 bln euro? Oh, that's bullish."
Sorry, but you can't have it both ways. Something's gotta give. Investors are clearly acting irrationally when they sell one currency for one reason and buy another for exactly the same reason. This type of behavior MUST NECESSARILY lead to a massive loss of money for those operating in this regard, at least eventually.
The problem (for me) is that, as Keynes said, investors can stay irrational longer than I can remain solvent. :(
Thursday, February 23, 2012
Warren Mosler — More on Greece and the euro
Read it at The Center of the Universe
More on Greece and the euro
by Warren Mosler
I assume that readers of this blog also read the major MMT blogs so I don't post link to them here, with the exception of posts especially significant wrt MMT. In the post, Warren provides a clear MMT analysis of the state of the EZ at present and prospects going forward.
JW Mason — The Dynamics of Household Debt
Read it at The Rorty Bomb
Changes in debt-income ratios can be attributed to primary borrowing, interest rates, growth, and inflation. In a new working paper, we apply such a decomposition to the evolution of U.S. household debt. This shows that changes in borrowing behavior has played a smaller role in the growth of household leverage than is widely believed. Rather, most of the increase can be explained in terms of “Fisher dynamics” — the mechanical result of higher interest rates and lower inflation after 1980. Bringing leverage back down will similarly require contributions from factors other than reduced borrowing.
JW Mason: The Dynamics of Household Debt
by J. W. Mason
(h/t Mark Thoma)
(h/t Mark Thoma)
We draw two main conclusions. First, as a historical matter, you cannot understand the changes in private sector leverage over the 20th century without explicitly accounting for debt dynamics. The tendency to treat changes in debt ratios as necessarily the result in changes in borrowing behavior obscures the most important factors in the evolution of leverage. Second, going forward, it seems unlikely that households can sustain large enough primary deficits to reduce or even stabilize leverage. Even the very large surpluses of 2006-2011 would not have brought down leverage at all in the absence of the upsurge in defaults; and in the absence of large federal deficits and an improving trade balance the outcome would have been even worse since reductions in household expenditure would have reduced aggregate income. As a practical matter, it seems clear that, just as the rise in leverage was not the result of more borrowing, any reduction in leverage will not come about through less borrowing. To substantially reduce household debt will require some combination of financial repression to hold interest rates below growth rates for an extended period, and larger-scale and more systematic debt write-downs.
Panera tests pay what you want
Panera Bread is opening at least two more pay-what-you-want cafes as part of its effort to help feed the hungry in a dignified way.
Panera spokeswoman Kate Antonacci said Thursday that locations will be announced this spring. One cafe could open by summer, another in the fall and possibly a third later this year.The concept is simple: Panera lists a suggested price for food, but customers pay what they want.
Read it at The Huffington Post
Panera Bread To Open At Least Two More Pay-What-You-Want Cafesby Jim Salter
Burning Man a victim of its own success as word spreads
Since its inception in 1986, Burning Man has grown from a small gathering of friends on San Francisco's Baker Beach to a year-round international subculture that culminates in the summertime festival. The main event draws some 50,000 "Burners" to Nevada's remote Black Rock Desert for a week of, to borrow a favorite phrase from founder Larry Harvey, "radical self-expression."
For seven days, an otherwise hostile stretch of desert transforms into Black Rock City, a bustling community surrounding a massive central area dubbed the playa. The playa economy relies solely on "gifting," or the friendly exchange of goods and services, to sustain itself. Buying and selling is strictly condemned (except for, say, ice from the general store).
Participants spend mind-boggling amounts of time, money and energy building the art installations, planning the infrastructure and organizing the "theme camps" that make the festival thrive -- and then they burn it all. The camps, many of which return year after year, take on a variety of shapes and sizes, from 200-person villages that serve elaborate breakfasts to smaller entities that offer one-off performances or group meditation ceremonies.Read it The Huffington Post | San Francisco
When Burning Man Went Viral: How A Festival-Turned-Subculture Struggles With Scarcity
by Carly Schwartz
Joe Firestone on Jared Bernstein on Dylan Matthews on MMT
After stating his general approval for Dylan Matthews's, MMT post on Ezra Klein's blog, and his agreement with MMT on the issue of solvency, a big point that MMT's been trying to get across to the mainstream for years, Jared brought forth a number of points of disagreement, which I'll reply to based on my interpretation of the MMT perspective.
Read it at Daily Kos | Money and Public Purpose
The WaPo MMT Post Explosion: Jared Bernstein's Cool Up To a Point
by Joe (Letsgetitdone) Firestone
Wray — Will the Central Bank Bail-Outs Ever End?
To be sure, I do not share the worry of the BIS and many other commentators that the central bank expansions will cause inflation. My worry is this: the “too big to fail” (or as my colleague Bill Black calls them “systemically dangerous”) institutions have learned that no matter what they do, they will be saved and their top management will never be punished.
With the “deal-making” and “bail-out” approaches of the Fed and Treasury, it is unlikely that financial institutions have learned anything from the crisis—except that risky behavior will lead to a bail-out. In the Saving and Loan crisis of the 1980s, many institutions were shut down and resolved, and more than a thousand officers in top management served jail time. In the current crisis, no top officer has been prosecuted, much less jailed. Banks have been slapped on the wrists with some fines—usually without being forced to admit wrong-doing.
Critics like Walker Todd have long argued that continued expansion of government’s “safety net” to protect “too big to fail” institutions not only runs afoul of established legal tradition, but also produces perverse incentives and competitive advantages. The largest institutions enjoy “subsidized” interest rates—their uninsured liabilities have de facto protection because of the way the government (Fed, FDIC, OCC, and Treasury) props them up, eliminating risk of default on their liabilities (usually only stockholders lose). The “deal-making” approach described last week extended the principle of lender of last resort activities to entirely novel areas—protecting creditors of even shadow banks and, as discussed, favoring bond holders while forcing stockholders and securities holders (and defrauded homeowners) to take losses. As William Black argues, these SDIs are mostly run as “control frauds” to enrich top management. As long as they remain in business they destroy economic value—not just the capital value of the firm, but the financial and real wealth of the economy as a whole. Total financial losses that can be attributed to the GFC already exceed $10 trillion and will eventually sum to much more. And of course that does not include the “real” economic losses—nearly 10 million jobs in the US alone.Read it at Economonitor | Great Leap Forward
Will the Central Bank Bail-Outs Ever End?
by L. Randall Wray
Some Greeks Might Have to Pay for Their Jobs
This may actually be a new first for humanity, an actual all time low, because it actually results in a lower net position for the worker than slavery. Link at AtlanticWire here.
Question: Has there ever been a lower economic point reached in the annals of recorded human history of work or employment? I say not, I could be wrong perhaps and would be willing to stand corrected.
Modern slavery?
Read it at Tao Jonesing
People need to understand that laws like Arizona's SB 1070 are designed to perpetuate modern slavery of the type described by The Automatic Earth in the above-linked post. When a society outsources its prison systems, prisons must be profitable, and profitability must grow perpetually. Neofeudalism is the necessary result.
TAE: Understanding Modern Slavery
Novel way of using part of the buffer stock of unemployed to increase national productivity.
(Ashamed to be in Arizona at the moment.)
Jared Bernstein on Larry Summers
Jared Bernstein sets the record straight on Larry Summers as chief economic advisor.
Read it at On The Economy
The Wrong Narrative on Larry Summers
by Jared Bernstein
Probably not anything new to see here, but it a report is by one of the participants that confirms a particular version.
Alexander Field: A Great Leap Forward - Productivity Growth During the Great Depression
Alexander Field offers a new take on postwar prosperity in the United States. While public spending during the Second World War is often credited with laying the foundation for postwar growth, Field suggests this foundation had long been laid. In this INET interview with Rob Johnson he says productive capacity increased tremendously in the years preceding the war, and that fact – not the war spending – provided the basis for prosperity and productivity improvements in the 1950s and 1960s. Alexander J. Field is Professor of Economics at Santa Clara University and Executive Director of the Economic History Association. He is author of the book A Great Leap Forward: 1930s Depression and U.S. Economic Growth.
Video at INET
by The Institute for New Economic Thinking
John Carney — Can America become the next Greece?
The most important difference between the U.S. and Greece, however, is not where we are in our economic cycle or our monetary system.
It’s the gap between the productivity of the American economy and the Greek economy.
Read it at CNBC NetNet
Can America Become the Next Greece?
by John Carney | Senior Editor
John joins MMR, or MMR joins John? In either case, neoliberals and the political right, for whom the cause of social, political and economic problems is the lazy, profligate (fill in the blank), will be pleased.
No austerity here: Fed'l government spending surging this month!
Real net spending (total outlays adjusted for public debt redemptions) is rising at the fastest month-over-month pace in over a year. It looks like this is due to the Social Security pay increase that went into effect as well as interest payments on the debt, which although interest rates are lower, the total amount of debt outstanding is higher.
The sharp increase in real spending is what's behind the economy's strong numbers recently. That and a big rise in new loans.
Ralph Musgrave's letter in The Financial Times
Read it at The Financial Times | Letters
Bigger deficits do not always mean more debt (part 2)
From Mr Ralph Musgrave
(h/t Ralph via email)
Winterspeak on Eurocrats' disaster capitalism to force fiscal union
Read it at Winterspeak.com — Thoughts on Human Interaction over the Next 25 Years
The EU: Towards and ever closer Union
by Winterspeak
Wednesday, February 22, 2012
Keith Chen — Whorfian Economics [wonkish]
In a nutshell: I find a strong correlation between how a language treats future-time reference (FTR), and the choices that speakers of those languages make when thinking about the future. Specifically, in large data sets that survey families across hundreds of countries, I find a strong and robust negative correlation between the obligatory marking of FTR in the language a family speaks, and a whole host of forward-looking behaviors, like saving, exercising, and refraining from smoking. These correlations hold both across countries and within countries, even when comparing effectively identical families born and living in the same country. While the data I analyze don’t allow me to completely understand what role language plays in these relationships, they suggest that there is something really remarkable to be explained about the interaction of language and economic decision making. These correlations are so strong and survive such an aggressive set of controls, that the chances they arise by random lies somewhere between one in 10,000 and one in 10^32....In short, I believe the data suggest a strong and robust relationship between linguistic and economic data, a relationship that bears explaining. Where this leaves us is what I think is an exciting place: one where Economists have a lot to learn from Linguists.
Read it at Language Log
Whorfian Economics
by Keith Chen
Joe Firestone responds to Dylan Matthews on MMT
Read it at Daily Kos | Money and Public Purpose\
WaPo Covers MMT, But Does Its Usual Bad Job: Part One, Some Basics and Solvency
WaPo Covers MMT, But does Its Usual Bad Job: Part Two, Inflation/Hyperinflation
WaPo Covers MMT, But Does Its Usual Bad Job: Part Three, Banking, and Default vs. Hyperinflation
WaPo Covers MMT, But Does Its Usual Bad Job: Part Four, The Victory
Cullen Roche — Capitalism Makes Socialism Acceptable
The MMR conversation on savings and investment has now raged to over 600 comments. It would be an understatement to say that the conversation has been illuminating. To me, one of the more interesting facets of this discussion is the fact that we have MMTers, horizontalists (like Ramanan), MMRists and previously undecideds (like the mysterious JKH) all agreeing! I think this speaks volumes about the merits of what MMR is building. Our flexible, fact based and apolitical approach is proving agreeable to many and I hope we’ll continue to embrace even those who might disagree with much of what we say.
But the most illuminating point that came from the discussions was the point on S = I + (S-I), where S = Savings, I = Investment. Now, for the layman, I will try to break this down as best I can so bear with me. What we learn from the sectoral balances approach is that the government’s deficit is the non-government’s surplus. If the government taxed all your assets at a rate of 100% then you’d have no dollar denominated assets. That’s simple enough. The sectoral balances is a powerful concept as it highlights the power of the government and helps explain why a sovereign currency issuer might run persistent budget deficits without running into a Greek problem (the USA for instance has pretty much always run deficits so the idea that deficits are inherently bad, is inherently wrong!). But when we break this equation down we have to be very precise about what it means because improper explanation will lead one to put the cart before the horse.
Read it at Pragmatic Capitalism
Capitalism Makes Socialism Acceptable
by Cullen Roche
(h/t Kevin Fathi via email)
Last summer I said a U.S. credit downgrade would NOT result in higher rates!
I did this interview prior to the S&P downgrade of the U.S. last summer and I said that a downgrade WOULD NOT RESULT IN HIGHER U.S. INTEREST RATES!
Middle Class Uprising
Read it at AlterNet
John Nichols talks about his new book, "Uprising: How Wisconsin Renewed the Politics of Protest, from Madison to Occupy Wall Street," and what happens next.
How the Wisconsin Uprising Changed America and Why Its Renegade Politics Are Here to Stay
Interview of John Nichols by Sara Jaffe
EconomistMom.com Completely Ignores MMT Buzz
We have been chronicling all of the media outlets that have been showcasing MMT this week in response to the Washington Post article at Ezra Klein's about MMT over the weekend, both pro and con.
Well here is one economics blog where the silence of their response has been deafening (cue the chirping cricket soundtrack), EconomistMom.com, the EconBlog of Diane Lim Rogers, Chief Economist at the Concord Coalition, a normally high profile Washington economic policy group which maintains a focus on the mainstream view of so-called "fiscal sustainability" issues and overall, advocates for long-term deficit reduction as a policy priority.
I'm sure Ms. Rogers is one of the best people in the world and looks like she could easily win the award for the best mom in the world, but if the fiscal policy advocates there at Concord truly have the best interests of the country in mind, and are truly concerned about the real economic legacy that we are going to leave to our children, they should be willing to engage at this point in an honest policy debate with MMT about the true nature of Federal "debt" and fiscal deficits.
UPDATE: Here's this week's runner-up for the "Chirping Cricket Award".
Lynn Parramore on MMT at Alternet
Over the last week, an important approach to economics that has spent years on the sidelines went mainstream: Modern Monetary Theory. This is good news for anyone who wants to see the neoliberal paradigm challenged, and a positive sign to heterodox economists who have difficulty getting a hearing in a field still gripped by outmoded models.
The theory, which provides unusual perspectives on issues including currency, debt, and government spending, kicked off in the mid-90s and has since grown into a movement. Its roster of proponents includes James K. Galbraith; Australian economist Bill Mitchel; Randall Wray and Stephanie Kelton of the University of Missouri-Kansas City; Rob Parenteau; Scott Fullwilier; Warren Mosler; and blogger Marshall Auerback. Their insights have been particularly valuable in countering the deficit hysteria which reached a fever pitch in the U.S. during the summer of 2011, and still darkens policy debates worldwide.
Read it at AlterNet
The Challenge to Status Quo Economics Everybody is Talking About
by Lynn Parramore
(h/t Clonal in the comments)
Izabella Kaminska on MMT at FT
Read it at The Financial Times
Yes Virginia, there really is Modern Monetary Theory
Posted by Izabella Kaminska
On the MMT flurry resulting from Dylan Matthews WaPo article on MMT.
Read it at The Financial Times
Crossposted at New Economic Perspectives)
Posted by Izabella Kaminska
On a different way of looking from the MMT perspective.
MMT goes global. Many consider The Financial Times to be the summit of the mountain of economic media. This has been a big week for MMT so far and it isn't over yet. Looks like break out into the mainstream is occurring. It's now respectable to admit knowledge of MMT, if not yet to embrace it.
I give John Carney a lot of credit for being the ice breaker. Props to Dylan Matthews and Ezra Klein, too. Dylan was working on this article for some time, and Ezra provided the WaPo venue.
BTW, the MMT economists are headed to Italy today for the MMT conference there. Report to follow.
Jerry Khachoyan on Warren Mosler
Warren Mosler, economist and one of the primary founders of Modern Monetary Theory (MMT), had a very interesting interview recently on “Straight Talk About Money” that is a must listen (click the link to listen). He was giving his thoughts on how we’re not headed in the right direction and what we can do to fix that. As usual, he gives very clear and concise descriptions about the monetary system, the economy and what the solutions should be for our woes.
One thing that particularly caught my attention was when he said (at about 37:37): ”Because We Think We Can Be The Next Greece, We’re Turning Ourselves Into The Next Japan”. This is exactly what is happening. We think the deficits are hurting us while it is truly the only thing keeping us from going into a deflationary spiral. We think we can default like Greece because of our inability to “pay back our debt”.
To add some illustrations to this quote (and some of Mosler’s other points), just take a look at the following charts and graphs.Read it at The Armo Trader
Warren Mosler: Because We Think We Can Be The Next Greece, We’re Turning Ourselves Into The Next Japan
Jerry Khachoyan
(h/t Clonal in the comments)
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