This is a VERY rough draft of a dialogue/narrated animation aimed at regular folks highlighting important misconceptions about the economy. I have to travel for a bit and rather than going back and researching every term and point made, I am throwing it on the web for help.Clint Ballinger
Bill Gross, manager of the world's largest bond fund, urged fellow members of the "privileged 1 percent," earning the highest incomes, to support higher U.S. taxes on carried interest and capital gains to help the economy.
Gross, who acknowledged he was among the 1 percent, noted he is writing investment letters that "'dis' the success that provided me the soapbox in the first place." He said that increasing taxes could improve the U.S. competitive position compared with Germany and Canada.
Can Science Explain Tea Partiers’ Rage? (via Moyers & Company)
Ted Cruz’s father wants to send Obama ‘back to Kenya’ and install son as ‘political savior’ (via Raw Story )
Illustrated very clearly in the chart below. The Chinese yuan appreciated 30% against the dollar since 2004 (when the Bush Administration started this China bashing policy). Since then, manufacturing jobs have fallen by 300,000.
Not only does this not work, it acts as a tax on the middle class and poor, who have to pay more for Chinese goods, when they were once a lot more affordable.
It's a really, really, stupid policy.
The crisis has given rise to a range of new ideas and theories to replace the discredited view of the economy. The newest and most imaginative of these is known as Modern Monetary Theory (MMT) and is one of the first theories to owe its growth to the internet. Without a doubt MMT is radical and completely turns established economic thinking on its head. If it is correct then it would change the way we think about the economy forever.
As surprising as it may seem to an ordinary person, economists rarely discuss money or banking, the two topics that most come to mind when one thinks of economics. This is because most of mainstream economics has its roots in the 19th century when the financial sector was tiny and money was not seen as important (to the extent that economists would imagine barter economies for simplicity). MMT is the first theory to recognise the importance of the massive growth in the financial sector and the fundamental role money plays in the economy (especially since it is no longer backed by gold). It addresses head on the idea that perplexes most ordinary people, how is that paper money with no intrinsic value of its own is so valuable and how are banks able to create money “out of thin air”?
Nor are higher interest rates a worry. This is because printing money increases the level of reserves in a bank which then has to offer a lower interest rate in order to lend out all this extra money. So contrary to a higher interest rate, MMT claims it would receive a lower interest rate and cites Japan as an example of a country with enormous levels of debt and low interest rates.That a real howler.
Trying to understand Modern Monetary Theory is a bit like the first people trying to understand flying. No matter how many logical arguments are made, something in your gut tells you it can’t be true. How could an aeroplane possibly stay in the air despite weighing so much? How could it not crash despite going at such speed? Can we really trust the pilot not to make a mistake? How can the government print all the money it needs? Are taxes really that irrelevant in funding the government? Can we really trust the government not to mess up? In many ways MMT seems too good to be true. However, if it does work then it would be the miracle theory we have all been searching for. It’s so crazy, it might just work.
... the concept of leadership [and group agility, AND policy agility, as real capital] is certainly more complicated than taking and receiving orders. As retired U.S. Navy Captain David Marquet explains in the following video, it’s about creating an environment that empowers the members of an organization to think creatively and take psychological ownership of the mission at hand, whatever it may be. [And, providing them with adequate venues to practice exactly that.]
It’s about “giving control and creating leaders, not taking control and attracting followers,”
Jack Lew at Treasury has apparently been given orders from the White House to do something to create "manufacturing jobs," so now he's telling China that their currency is not rising fast enough.
This policy is not only incredibly ignorant, as it reduces America's real terms of trade, but it is spiteful, vindictive and shows the Obama Administration's utter contempt for working class and poor Americans.
The reason being, it is functionally a tax that hits middle and low income people the worst as it makes the cost of Chinese made goods--which were once highly affordable--more expensive.
And the cruel lie behind this policy is that it will not create any jobs.
Obama Administration = DUMB!!!
Today I’m going to do something that I usually refrain from doing; that is, I’m going to engage with some of the crank arguments that come from the so-called ‘Austrian economists’.Phil swings his pen — well, keyboard — like a sword.
I’ve been meaning to write a blog on a book by my friend, Mariana Mazzucato, titled The E State. It is essential reading for anyone who wants to understand the role played by government in encouraging innovation. For so many years we’ve been sold the notion that our nation’s Undertakers (also called Entrepreneurs or Capitalists) are the lions who drive growth through innovation. Actually, according to her well-documented book, Mariana shows they are nothing but domesticated pussycats, who have to be dragged along by the entrepreneurial State. The State innovates, doing the hard stuff and even guaranteeing markets; the pussycats merely make profits off the State’s initiatives.Economonitor — Great Leap Forward
A few weeks ago, I had a lengthy e-mail exchange with Frank N. Newman, former Deputy Secretary of the U.S. Treasury. Frank’s books (here and here) are so closely aligned with MMT thinking about deficits, debt, monetary operations, etc. that I wanted to get his thoughts on one of the most common criticisms of MMT. MMT recognizes that the currency itself is a simple public monopoly and that the issuer of the currency must spend (or lend) it into existence, before it can be used to pay taxes or buy bonds. The implication? Governments that issue sovereign money are not revenue constrained. Critics have argued that MMT has this all wrong because the system requires the government to have numbers on its balance sheet before it can spend — i.e. the government is not allowed to run an overdraft and is, therefore, constrained by cash on hand. Here’s what Frank Newman thinks of that critique:New Economic Perspectives
What happens when people are asked about the national debt in an objectively structured poll, rather than one designed to ride Pete Peterson's personal hobby horse?
Interestingly, the national debt doesn't rank high as a concern at all. Americans' consistent No. 1 concern is job growth, which means policies that, for the near term at least, require higher federal debt.
When Gallup asked people to rank their concerns in May, 86% listed "creating more jobs" as a top or high priority, tied with "helping the economy grow." Reducing the federal deficit, the closest Gallup came to asking about the debt, ranked seventh of the 12 choices, picked as a top or high priority by 69%.
The "job situation" has been the top economic concern of the American public at least since 2010, according to the Pew Research Center. The budget deficit hasn't ranked higher than second in all that time. The national debt doesn't make the list.
6. Conclusions
Fear of a Greek-style fiscal and financial crisis has loomed over much of our policy discourse over the past four years, and has played a significant role in shaping actual policy, constituting the principal argument for austerity in countries that don't face any current difficulties in borrowing. However, despite repeated warnings that crises of confidence are imminent in floating-rate debtors – mainly the United States, the UK, and Japan – these crises keep not happening.CURRENCY REGIMES, CAPITAL FLOWS, AND CRISES
Part of the explanation for the failure of disaster to strike on schedule lies in the DeGrauwe point: countries that borrow in their own currencies are simply not vulnerable to the kind of self-fulfilling liquidity crises that have afflicted euro debtors. What I have pointed out in this lecture is that the difficulties with crisis warnings don't stop there. Rather remarkably, nobody seems to have laid out an explicit story about how the predicted crisis would play out. The claim is that interest rates would rise, causing a severe economic slump, but how is this to be reconciled with the ability of the central bank to set short-term rates?
My answer is that claims about the vulnerability of floating-rate debtors to crisis haven't been given any specificity because they do not, in fact, make sense. Simple macroeconomic models suggest that a loss of confidence in a country like the United States, taking place at a time when interest rates are at the zero lower bound, should, if anything, have an expansionary effect. Nor can one appeal to the lessons of history: cases resembling the hypothesized crisis scenario are rare, and those that exist don't support the notion that Greek-style crises can take place under a very different currency regime. You may find it implausible that conventional wisdom, backed by so many influential people, could be wrong on so basic a point. But it's not the first time that has happened, and it surely won't be the last.
Stephanie Kelton, Associate Professor of Economics at the University of Missouri/Kansas City, believes that the root of all these problems can be found in a fundamental misunderstanding – shared by Democrats, Republicans and mainstream voters alike – about the government's balance sheet. She argues, plausibly, that the whole idea that we should control the deficit at all is costing our nation trillions of dollars in lost output. The result is lost income, savings, wealth and prosperity.
"As a society, we don't understand government finance," says Kelton. "Most people – including most economists, think that it operates by the familiar rules of household finance. Therefore, we find it plausible when we hear politicians and government watchdogs urging us to balance the budget, control the urge to spend and pay down the debt."
The mantra on the right: the federal government has to stop spending money it doesn't have. The mantra on the left: we need higher taxes on "the rich" in order to balance the budget and pay down the federal deficit. Moderates call for a little bit of each.
"We act like there is some limited amount of money available," says Kelton, "and that government competes for savings with the rest of the economy, and that too much competition for savings drives up interest rates, and higher interest rates crowd out all productive private investment. We act like the federal government is walking a fine line between solvency and insolvency – that if the debt gets too big, our creditors may begin to get nervous, downgrade our debt, our interest rates go up, and suddenly we end up like Greece."
Yes. So? "That picture has no economic meaning whatsoever," says Kelton. "None."
Introduction
Anyone who who has been following debates on fiscal policy over the past few years will have noticed that, among those who think fiscal policy can be effective, there are two distinct camps. There is a minority who think that fiscal policy is not subject to a budget constraint; that is, that as long as a government borrows in its own currency, its existing liabilities never limit its ability to adjust taxes and spending to bring the economy to full employment. And there are the majority who think that governments are subject to a binding budget constraint; that is, that while adjusting spending and taxes can in principle be used to bring about full employment, it may be impossible or undesirable to do so when the level of government debt is already high. In this view, maintaining full employment should be left to monetary policy. Following Abba Lerner, I call the first position "functional finance" and the second position "sound finance."
I believe there are important differences between these two positions. But I also believe that these differences have not been clearly articulated, and as a result these debates between them been unproductive. It is my view that there are no important differences in terms of economic theory between the two positions. A perfect application of a functional finance policy rule and of a sound finance policy rule are indistinguishable. The difference between the camps is with respect to policy errors -- which errors are most likely, and which are most costly.
Five years after the U.S. financial crisis forced the massive government TARP bailout, the U.S. corporate culture remains toxic and breeding crime, the watchdog for the bailout program said Tuesday.
More than 300 people in the banking, housing and securities industries are in the hands of the criminal system, whether it is a charge, a conviction or a sentencing, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) said in a quarterly report to Congress.
“The financial system has stabilized, but the toxic corporate culture that led up to the crisis and TARP has not sufficiently changed,” said Christy Romero, the special inspector general.
“At the core of the crisis was a pervasive culture at institutions of rampant risk-taking and greed combined with significant unchecked power,” she said.The Raw Story
Yahoo!Finance had a chance to be something different, to stand out in the useless, banal, brain dead Wall Street apologist world of CNBC and Fox Business. Instead they went in the same direction. No, worse, they doubled down by hiring Jeff Macke, the dude who was even too bizarre for CNBC and Lauren Lyster, the Ludwig Von Mises, goldbug, Peter-Schiff-loving former RT Capital Account host who thinks our money comes from mother nature.
If you watch you know that the Yahoo!Finance shows all come off as the same, big bad government, poor abused banks, market is the all-knowing omniscient self-regulating entity bullshit straight out of some bad Ayn Rand novel with a plotline so tired that the only people who watch are probably the clueless guests themselves who keep getting the same smoke blown up their asses by these clown hosts. The rest of the world could give a shit.
I only mention it because they appeared to hit a new low on a segment today where the apparently medicated Macke decides to go after soon to be Fed Chairman Janet Yellen, intimating that we ought to be wary of a woman having "power rivaling Obama." (Clueless statement. One of many.)
Now if I were a woman and I heard this I would unleash a shit storm of protest all the way up to Yahoo's WOMAN CEO, Marissa Mayer and try to get her to realize that a) the show sucks and b) there's no fucking way a loser like Macke and the show's producers should be framing a segment with such a disprespectful and obviously sexist/chauvanist lead in.
But wait...it gets better.
Cue the moron music.
Up on the screen pops some dude named Keith McCullough who, when asked about the Yellen appointment (Yellen being a woman) says, "I don't know whether to smile or puke." (I kid you not. Listen ot the clip.)
Puke! The guy says he wants to puke!
Then this simpleton moron, who runs an outfit called "Hedgeye" goes into some unitelligable rant about how "We Lost touch with the Constitutional principals of the country" (how so?) and how the Fed is "unelected and unaccountable." I guess he feels its okay to ignore the fact that Fed governors are all noninated by POTUS and confirmed by Congress and the Fed itself was established by an Act of Congress and that they Fed has to give all its earnings over to the U.S. Treasury every year and so on and so on.
Finally the dude finishes it all off with this lovely cherry on top...ready...here it comes..."The Fed is keeping rates artificially low and devaluing the dollar." Ba dum bum.
Right off the Peter Schiff talking points memo!
A little bit more whining ensues about some other stuff--all wrong and out of paradigm, of course--then a moment where he scolds the Fed for "not agreeing with the market," and there you have all the evidence you need to see that this bumpkin got the monetary intelligence of a jellyfish .
Anyway, here's the clip. Watch it for yourself.
By the way, you women out there, Marissa Mayer is on Twitter. Maybe she'd like to hear from you. (That goes for you, too, guys.)
In periods of political crisis or threatening social change, the lower middle class[ii]often has been the demographic segment most susceptible to militant authoritarian movements - such as the Klan or the Coughlinites in earlier times in American history. In other countries as well, the lower middle class has been the basis of fascist movements. As Richard J. Evans documents in The Coming of the Third Reich, the original electoral backbone of the National Socialists was the lower middle class, exemplified by petty shopkeepers, the lower rungs of the white-collar professions and land-poor farmers. As the great economic calamity of 1929 intensified, these groups feared, above all, sinking into the despised proletariat. It was this emotion that caused them to identify the source of their problems less in the banks, corporations and cartels that were the proximate cause of the crash than in the contaminating presence of foreigners and the underclass. France has had periodic bouts of thisphenomenon, with movements like Action Francaise, the post-World War II Poujadists (the definitive small shopkeepers movement) and, more recently, the anti-immigrant party of Jean-Marie Le Pen, whose psychologically penetrating political catchphrase was "I say what you are thinking." Capitalists are of course more than willing to fund such parties if they are on the brink of success and can be useful to capital, just as the German cartels began to fund the Nazis after their breakthrough election in September 1930. Nothing succeeds like success: University professors and intellectuals flocked to the Nazi Party once it gained power. But the motivating energy of the movement sprang, above all, from the fear and resentment of those tenuously situated a couple of rungs above the actual poor....Lofgren then looks at what is happening in the US. He sees a disturbing ascendence of authoritarianism in this iteration of the Tea Party, obscuring its Libertarian roots:
[In What's the Matter with Kansas Thomas] Frank identified the culture wars as trumping economics, but the fascinating question he never sufficiently answered is how this mechanism works at the granular level.
In 1933, psychologist Wilhelm Reich attempted to answer that question in The Mass Psychology of Fascism. His answer: The virus is all around us, because it is latent within ourselves. But it flourishes in rigid, punitive and authoritarian upbringings, whereby a person's early domestic circumstances foreshadow his future relationship with state and society. In a home life filled with punishments, taboos and guilt, Reich saw the kernel of the future fascist: repressed, conformist and outwardly submitting but filled with a rage over his humiliation whose source could never be admitted. This dilemma accounts for the curiously contradictory psychology of the adherents of authoritarian movements. They are highly suggestible followers of some strong leader whom they can masochistically adore, yet at intervals they become anarchic and rebellious. And as they cannot admit the roots of their rage, they displace it onto others: Hence the xenophobia, the militancy, the endless search for scapegoats. It is no coincidence that this kind of personality finds an outlet on the Tea Party - which overlaps so heavily with followers of the Religious Right, whose lives are often a catalogue of commandments, taboos and shibboleths.
All this unhealthy energy usually does not find a unified political objective unless coaxed along by money and organizational skill from outside....
...there are always not a few businessmen willing to finance an ostensibly populist movement so as better to manipulate it, and who then get an unpleasant surprise....Definitely an analysis worth reading all of. This is a defining movement of our time and not only in the US.
The culture of fraud and criminality on Wall Street has become so ingrained that execs like Sallie Krawcheck don't even think twice about it. Instead, they whine about the fines they have to pay. In an interview here she calls it "a real cost of doing business.
What about the millions of people that these banks are illegally ripping off to the tune of billions and what about the very criminal rackets that they run, which perpetrate things like fraud, money laundering, market manipulation, etc?
These activities are a REAL COST TO US, CITIZENS, SALLIE. Did you ever think of that?
Wall Street has been legally allowed to brazenly operate in this fashion for so long that they literally show contempt for us even questioning what they are doing.
It's really time to stop all this. We NEED some kind of revolution.
Here’s a piece I wrote with Yolanda Fernandez for the Asian Development Bank.
Monetary and Fiscal Operations in the People’s Republic of China: An Alternative View of the Options Available
You’ve no doubt read various analyses predicting the impending collapse of the Chinese financial sector, and arguments that China cannot continue to grow at a rapid pace. While we do think that China faces some challenges, we part company with the gloom and doom crowd. What most of them do not understand is that China is a sovereign country that issues its own currency. Affordability is not an issue. China has the fiscal capacity to resolve any financial crisis, and it can “afford” to grow fast if it chooses to do so....Economonitor — Great Leap Forward
