Friday, March 31, 2023

Defense One — Milley: Don’t Invade Mexico

 This is not the Onion. Looks like the military is afraid that the civilians have lost their marbles (they have) in promoting the MICIMATT (Military-Industrial-Congressional-Intelligence-Media-Academia-Think-Tank complex).

Defense One[

See also at Defense One

‘Lower the Rhetoric’ on China, Says Milley

My podcast interview with MMT professor Randy Wray.

RT — Russian central bank reveals how it braced for Western dollar grab

The Bank of Russia had been preparing for an escalation of Western sanctions since 2014 and was beefing up additional funds as a hedge against future restrictions on its foreign exchange reserves, the regulator revealed on Wednesday.

Amid “increasing geopolitical risks” the central bank ramped up investments in assets “that cannot be blocked by unfriendly nations” and transferred part of its reserves to gold, Chinese yuan and foreign currency in cash, the regulator announced in its annual report.

The central bank managed to stash billions of imported dollars “in volumes limited by logistics capabilities,” the report said without specifying the amount of accumulated funds. Alternative reserves in dollars and gold bars have been stockpiled in the vaults of the Bank of Russia.

“This safety cushion was created in the form of alternative reserves – less liquid and convenient in everyday life, but more reliable in the face of a tough geopolitical scenario,” the regulator explained....
RT — Question More (Russian state-sponsored media)

V. Ramanan — Nicholas Kaldor On Monetary Policy And Stability Of Financial Instituitions

Via Eric Tymoigne’s blog post, I came across this quote from Nicholas Kaldor in 1982 (page 13) on stability/solvency of financial institutions, especially relevant in recent times:
The Case for Concerted Action
Nicholas Kaldor On Monetary Policy And Stability Of Financial Instituitions
V. Ramanan

Thursday, March 30, 2023

Radhika Desai and Michael Hudson — The Treasury Privatized?

RADHIKA DESAI: Hello everyone, and welcome to the sixth Geopolitical Economy Hour, the fortnightly show on the political and geopolitical economy of our time. I’m Radhika Desai.

MICHAEL HUDSON: And I’m Michael Hudson.

RADHIKA DESAI: As you know, the last time when we closed we were scheduled to do our fourth and final show on the subject of dedollarization. However, as you know, the best laid plans can be thrown awry by, as Harold MacMillan said, “Events, my dear boy, events.”

Since we published the fifth show we’ve had what looks like the biggest financial crisis since 2008 and 2020 on our hands, with the usual flurries of bailouts and emergency actions, which in other words amounts simply to a socialism for the rich.

So of course Michael and I had to devote our show today to that topic.
Video and transcript.

Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
The Treasury Privatized?
Radhika Desai, Professor at the Department of Political Studies, and Director, Geopolitical Economy Research Group, University of Manitoba, Winnipeg, Canada; and Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

Von der Leyen calls for de-risking EU-China relations in speech to MERICS — J.Heller

Delusional, still captured by the colonial mindset.

Von der Leyen calls for de-risking EU-China relations in speech to MERICS

See also

Project Syndicate
Destructive Decoupling
Michael Spence | Nobel laureate in economics, is Professor of Economics Emeritus and a former dean of the Graduate School of Business at Stanford University. He is Senior Fellow at the Hoover Institution, Senior Adviser to General Atlantic, and Chairman of the firm’s Global Growth Institute. He serves on the Academic Committee at Luohan Academy, and chairs the Advisory Board of the Asia Global Institute.

Review of Crotty's "Keynes Against Capitalism" (forthcoming in ROKE) — Matias Vernengo

It should not be a surprise that John Maynard Keynes is often seen as being relatively conservative by many progressively inclined or radical economists, that often tend to prefer the views of Michal Kalecki, or the more radical approach of Keynes’ favorite disciple, Joan Robinson. That is not the case in James Crotty’s book Keynes Against Capitalism, who takes a diametrically opposite view. He tells us that: “It is almost universally believed that Keynes wrote his magnum opus, The General Theory of Employment, Interest and Money [GT from now on], to save capitalism from the socialist, communist, and fascist forces that were rising up during the Great Depression era”, but in his view, that “was not the case with respect to socialism. The historical record shows that Keynes wanted to replace then-current capitalism in Britain with what he referred to as ‘Liberal Socialism’” (Crotty, 2019: 1-2). His Keynes was anti-capitalist and, in some sense, a socialist. The notion that Keynes was a socialist often encounters as much resistance as the notion that he was somewhat conservative, of course....

If Crotty is to be believed, it looks like Keynes held that the government needed to control the commanding heights of the economy and to shape it for public purpose through policy, which is one way to look at socialism as an economic system. This view is closer to ordoliberalism than to classical liberalism.

Not long and worth a read. While not directly related to MMT is related indirectly. Rightly or wrongly, MMT is associated with Keynes, and it is arguably a synthesis chiefly of Post Keynesianism and institutional economics, although at least some MMT economists would take issue with this characterization.

Naked Keynesianism — Hemlock for economics students
Review of Crotty's "Keynes Against Capitalism" (forthcoming in ROKE)
Matias Vernengo | Professor of Economics, Bucknell University and formerly Senior Research Manager at the Central Bank of Argentina (BCRA) and an external consultant to several United Nations organizations like the Economic Commission for Latin America and the Caribbean (ECLAC), the International Labor Organization (ILO), the United Nations Conference on Trade and Development (UNCTAD) and the United Nations Development Program (UNDP)

QE/QT And Deposits — Brian Romanchuk

Things seem to be calming down in financial markets, which could be interpreted in one of two ways. The benign interpretation is that a few weak banks failed, but the rest of the financial system is in decent shape. The paranoid interpretation is that crises occur in stages, with pauses between the key failures. So far, I lean towards the benign interpretation — there are some areas of weakness, but not a lot of visible credit failures in the real economy. Things will deteriorate as the cycle ages, but such is the fate of capitalist finance.
I just wanted to comment on bank deposits, which has been attracting some attention. My initial reaction is that we should expect some reversal in deposit growth as the Fed reverses its balance sheet growth. However, the figure above was not exactly what I expected....
Bond Economics
QE/QT And Deposits
Brian Romanchuk

The National Debt Ceiling and How Money is Created — jasciu

MMT for the "left." It's a reasonably good explanation of how a currency issuer is different from a currency user. Reading the comments section is depressing. The so-called left is about as clueless as the so-called 'right," e.g., as represented in the comments section at ZH. It seems doubtful that either of these heavily programmed groups will ever get it. However, here there are also commentors supporting MMT, holding out hope that the "left" isn't totally brainwashed.

Summer School on “Modern Monetary Policy and European Macroeconomics” (Maastricht, July/August 2023) — Dirk Ehnts

Modern Monetary Theory and European Macroeconomics
This course provides an introduction to Modern Monetary Theory (MMT). During the course, students will examine the balance sheets and transactions that are relevant for understanding modern money, with a focus on the Eurozone. Furthermore, alternative explanations are brought forward that include, among others, the idea that governments spend first and collect taxes later...
econoblog 101
Summer School on “Modern Monetary Policy and European Macroeconomics” (Maastricht, July/August 2023)
Dirk Ehnts | Lecturer at Bard College Berlin, research assistant at the Technical University of Chemnitz, and spokesperson of the board of Pufendorf-Gesellschaft in Berlink

William Mitchell — When mainstream economists arrive at ideas 50 or so years late and pretend to be contributing to knowledge

I regularly encounter mainstream economists who are confounded by the dissonance that the body of theory they have been working in introduces and then seem to think they have come up with new ideas that restores their credibility. The more extreme version of this tendency is called plagiarism in academic circles. But the less extreme version is to produce some work in which you conveniently ignore the main contributors in history but hold out implicitly that the ideas are somehow your own. As mainstream economics fumbles through this period where the fictional world they operate in and push onto students is increasingly being revealed as a fraud, several economists are trying to distance themselves from the train wreck by resorting to restating ideas that in a period past they would have criticised a ‘pop science’. This syndrome is an accompaniment to the well established ‘we knew it all along’ or ‘there is nothing new here’ defenses that are often used when new ideas make the mainstream uncomfortable. I saw this again in a recent article from the British-based Centre for Economic Policy Research (CEPR) which discusses the way modern banks work – How monetary policy affects bank lending and financial stability: A ‘credit creation theory of banking’ explanation (March 20, 2023). The problem is that heterodox economists knew this from years ago including with the seminal work in the early 1970s of Canadian economist – Basil Moore. The other problem is that the CEPR authors choose not to credit the seminal authors in the reference list, which I think is poor form....
I suspect that this behavior, serious as it is, may be owing to lack of knowledge of the field rather than intent. Most convention economists seems to be ignorant of anything that is not included in the domain of conventional economics, treating it a irrelevant. This is unprofessional, needless to say, and it goes beyond "poor form." It is amateurish.

William Mitchell — Modern Monetary Theory
When mainstream economists arrive at ideas 50 or so years late and pretend to be contributing to knowledge
Bill Mitchell |rofessor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Wednesday, March 29, 2023

William Mitchell — Inflation drops sharply in Australia but it is not the work of the RBA

 While this post is specific to Australia, the reasons for the recent spike in "inflation" are not unique to Australia. The inflation that is now turning out to be transitory was not the result of a wage-price spiral as central bank models assume. Rather, it was a consequence of supply shocks owing to the pandemic followed by sanctions in response to the conflict in Ukraine. Now that supply chains are beginning to function again or have been replaced or substituted, the inflation metrics are falling, as economists like Bill that were predicting transitory inflation had argued.

William Mitchell — Modern Monetary Theory
Inflation drops sharply in Australia but it is not the work of the RBA
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia P

Tuesday, March 28, 2023

What's wrong? — David Weakliem


WSJ survey results.

Just the social facts, ma'am
What's wrong?
David Weakliem | professor of sociology (retired) at the University of Connecticut

Modern Monetary Theory: The Right Compass for Decision-Making — Dirk Ehnts

In the November/December 2021 issue of Intereconomics, Françoise Drumetz and Christian Pfister examine Modern Monetary Theory (MMT) and approach it from the policy consequences that would follow. This paper is a reply to Drumetz and Pfister. It restates the core of MMT and offers some suggestions for central banks. Theories are explanations of what we see, and MMT describes money creation and destruction. Hence, MMT cannot be and is not a political manifesto. In contrast to most other theories of money, MMT is falsifiable in its core statements, which are based on a balance sheet approach to macroeconomics. Since many central banks already educate the public about the creation of modern money through bank lending, it would be most welcome if they would do the same for the creation of modern money through government spending. Here, MMT and central bankers can find common ground to move forward and leave the theory of loanable funds and that of the money multiplier behind….
Intereconomics — Review of European Economic Policy
Modern Monetary Theory: The Right Compass for Decision-Making
Dirk Ehnts, Hochschule Magedburg-Stendal, Germany

ECB can't go bankrupt even it suffers losses - Christine Lagarde

“As the sole issuer of euro-denominated central bank money, the Eurosystem will always be able to generate additional liquidity as needed,” [ECB President Christine] Lagarde said in response to a question by an Italian member of the European Parliament.

“So, by the definition, it will neither go bankrupt nor run out of money. In addition to that, any financial losses, should they occur, would not impair our ability to seek and maintain price stability.…"

ECB can't go bankrupt even it suffers losses

Michael Hudson — Introducing China’s Leading Economist

 Through my work at the Global University for Sustainability, I have come to know Professor Wen Tiejun. He provides a key analysis of the ten crises China has endured. I highly recommend his book to you (PDF), kindly donated to the reform community as an open access book. 

There are 10 lectures that accompany the book (below). Professor Tiejun and I also participated in a joint discussion you may enjoy. 

Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
Introducing China’s Leading Economist
Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

Monday, March 27, 2023

The best books to help you understand how money really works — L. Randall Wray

Some surprises.

The best books to help you understand how money really works
L. Randall Wray | Professor of Economics, Bard College

Here's the clip from my appearance on Fox Business today.

I was "debating" economist Joe Lavorgna regarding MMT. Lots of things we didn't have time to get into, but that's TV.

Click the link to watch the clip.

RT — Russian company unveils ChatGPT competitor

Moscow-based company Sistemma has created its own competitor to OpenAI’s ChatGPT, which runs entirely on domestic servers and in the Russian language. The project was unveiled on Sunday on the IT company’s official site. 
The AI is called SistemmaGPT (Generative Pre-trained Transformer) and is based on the company’s own developments, along with Stanford University research. The chatbot is intended for Russian businesses and government agencies.…

The chatbot is currently in a work-in-progress beta version, with open testing by the public slated for June. The company is also working on an AI that can edit images and videos, planned for 2023....

RT — Question More (Russian state-sponsored media)
Russian company unveils ChatGPT competitor

See also
Tests conducted by Reuters show that the regular version has a good command of the Chinese language but produces factual errors and avoids answering political questions.

Ernie bot, so far China's closest answer to U.S.-developed ChatGPT, was launched on March 16 by Baidu CEO Robin Li, who gave a livestreamed presentation that walked journalists through a series of pre-recorded demos displaying the Chinese chatbot's different capabilities....

Learning From The Crisis (MMT Perspective)? — Brian Romanchuk

The panel I am on is shifting its topic a bit to include some discussion of the latest crisis. Although this is more topical, it is not exactly moving in a direction that fits my knowledge of Modern Monetary Theory (MMT). I see two broad issues. The first is the discussion of bank failures (so far!) which I have a limited ability to comment on. The second is more useful for a MMT debate: interest rate policy is not exactly as costless as neoclassical arguments suggest....
Bond Economics
Learning From The Crisis (MMT Perspective)?
Brian Romanchuk

Banking Crisis & Crypto


Cathie and Laffer with a pretty good breakdown… but it’s still tainted by their monetarism… you have to filter that part out..

Sunday, March 26, 2023

William Mitchell — The inflationary episode is being driven by profit gouging and interest rate hikes won’t help much

I have read an interesting reports in the last months that demonstrate there is a shift in thinking about inflation – away from the tired narratives that attempt to implicate excessive government spending, poorly contrived monetary policies (particularly quantitative easing) or drag in the usual suspect – excessive wage demands from workers. All of the usual narratives are very convenient frames in which those with economic power can extract more real income at the expense of the rest of us, who have little economic power. At least, we have been indocrinated to think we have no power. But, of course, if we could overthrow the whole system of capital domination if we were organised enough but that is another story again. Back to the inflation framing. While it was possible to argue that distributional struggle between workers (organised into powerful unions) and corporations (with obvious price setting power in less than competitive industries) was instrumental in propagating the original OPEC oil shock in 1973 into a drawn out inflationary episode, such a narrative falls short in 2022-23. The workers are largely disorganised and compliant now. The new thinking is starting to focus on the role of corporations – one term that is now being used is ‘greedflation’ – to describe this new era of profit gouging and its impact on the inflation trajectory. That shift in focus is warranted and welcome because it highlights the imbalances in the capitalist system and just another way in which it is prone to crises....
William Mitchell — Modern Monetary Theory
The inflationary episode is being driven by profit gouging and interest rate hikes won’t help much
Bill Mitchell |rofessor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia P

Six Reactions To The Silicon Valley Bank Debacle — Christine Desan, Lev Menand, Raúl Carrillo, Rohan Grey, Dan Rohde, Hilary J. Allen

Earlier this month, little known Silicon Valley Bank – the bank for tech startups and Midwestern identitarians alike – collapsed in spectacular fashion after a good ol’ fashion run on deposits. Within 72 hours, the Fed, Treasury, and FDIC announced that they would make whole all SVB depositors, whether or not their accounts exceeded the $250,000 insurance limit. Beyond revealing that many tech wizards were less financially sophisticated than NBA star Giannis Antetokounmpo, the collapse and subsequent bailout raised fundamental questions about the stability and nature of our banking system. To begin to make sense of all this, we invited six banking experts and friends of the blog to share their initial reactions to the unfolding drama....
LPE Project
Christine Desan, Lev Menand, Raúl Carrillo, Rohan Grey, Dan Rohde, Hilary J. Allen

Christine Desan is Leo Gottlieb Professor of Law at Harvard Law School and the co-founder of Harvard’s Program on the Study of Capitalism.

Lev Menand (@LevMenand) is Associate Professor of Law at Columbia Law School.

Raúl Carrillo (@RaulACarrillo) is the Deputy Director of the LPE Project.

Rohan Grey (@rohangrey) is Assistant Professor at Willamette University College of Law and the President of the Modern Money Network.

Dan Rohde (@DanEricRohde) is an S.J.D Candidate at Harvard Law School and co-editor of Just Money.

Hilary J. Allen (@ProfHilaryAllen) is Professor of Law and the Associate Dean for Scholarship at the American University Washington College of Law.

The Collapse of Antiquity: Greece and Rome as Civilization’s Oligarchic Turning Point — Michael Hudson's new book

Michael Hudson's latest book. Michael Hudson turned 84 this month and he still keeps churning them out.
Yves here. In a departure from our usual programming, below is the promotional material for Michael Hudson’s newest book, The Collapse of Antiquity
Naked Capitalism
The Collapse of Antiquity: Greece and Rome as Civilization’s Oligarchic Turning Point
Yves Smith

Is a full-blown global banking meltdown in the offing? — Satyajit Das

Capitalism is dependent on credit, so financial crises serious enough to threaten the capitalist system must be resolved by socializing losses. The alternative is financial collapse leading to economic collapse and social chaos. Central banking and credit regulation were instituted at the heart of economic liberalism to correct the risk inherent in this type of system.

The New Indian Express
Is a full-blown global banking meltdown in the offing?
Satyajit Das is a former banker and author of numerous works on derivatives and several general titles: Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives (2006 and 2010), Extreme Money: The Masters of the Universe and the Cult of Risk (2011), A Banquet of Consequences RELOADED (2021) and Fortune’s Fool: Australia’s Choices (2022).

(W. E. Talk•In-depth Interview) Zhang Xiaojing: Responding to Schumpeter's question, how to develop"China’s experience" to "China's theory"? — Han Yu

A short and insightful explanation of developing an economics with Chinese characteristics. Chinese economists recognize that there are universal elements underlying economics as a science, and they also recognize that there are temporal, historical, cultural, and civilizational factors affecting the study of economics. Conventional Western economics emphasizes the former and downplays the latter, so while there are things that Chinese economists can learn from Western economics, Western economics is incomplete as it stands and is currently practiced. Therefore, Western economics needs to be supplemented by adding factors it ignores or downplays to make it more complete universally and also to adapt it particularly to non-Western conditions.

Saturday, March 25, 2023

MMT—Krugman still does not get it! — Lars P. Syll

Stephanie Kelton's response to Paul Krugman's criticism of Abba Lerner's functional finance.

Lars P. Syll’s Blog
MMT — Krugman still does not get it!
Lars P. Syll | Professor, Malmo University

Friday, March 24, 2023

Patricia Pino & Christian Reilly Interview Warren Mosler: Anatomy Of A Bank Run (podcast, no transcript)

 I don't usually link to podcasts without transcripts, but this is worth mentioning.

The MMT Podcast with Patricia Pino & Christian Reilly
#162 Warren Mosler: Anatomy Of A Bank Run

“As long as people aren't all coming in at the same time and demanding that their deposits back, you're okay“


Even if they go to the Fed to borrow reserves at par of their USTs they don’t have the capital to support the increase in reserve assets they borrow from the Fed…iow if they are sitting there in compliance with SLR of 0.10 …. A-L=C…. Use the SVB reported numbers….  200-180=20… (A-L)/A = 0.10 ….. ok everything is fine.. somebody comes in and tries to withdraw 20… they don’t have any reserves as RRR is 0%…   they pledge UST assets at par to borrow 20 reserves from Fed… now 220-200=20 … (A-L)/A = 20/220 = 0.09 …. ie SLR drops below threshold due to the Fed transaction and they have to be shut down and everybody there gets wiped out with all the chaos… 🤔

Peter Navarro on Jerome Powell: "This man has no economic credentials."



MAGA take on the current crises….

Rassmussen: Americans trust in US banking system


Polling indicating extreme negative sentiment… embarrassing…

Thursday, March 23, 2023

Bill Black on SVB: A Bipartisan Clown Car Crash — Bill Black interviewed by Colin Bruce Anthes


the Analysis
Bill Black on SVB: A Bipartisan Clown Car Crash
William K. Black interviewed by Colin Bruce Anthes

The Simplest Fix for Banking — Jan Eeckhout

Following the latest banking crisis, monetary authorities should seriously consider how modern digital technologies could be used to avert such problems in the future. A central bank digital currency would both eliminate many barriers to financial transactions and end the risk of bank runs once and for all....
Project Syndicate
Jan Eeckhout | Professor of Economics at Universitat Pompeu Fabra

Why hypersonic weapons change everything — Alex Krainer

The war game just changed big time, actually for the first time since the dominance of sea power and then air power. This transition makes a great deal of very expensive military equipment obsolete. Moreover, the West is following in this domain, and not leading.

This article does not mention another emergent military domain, space. Spending on missiles, missile defense, and space capabilities will shape the bulk of military spending, inclduing research and production, going forward.

This will not obviate the need for boots on the ground and here a transition is underway to autonomous machines on the ground, in the air, and beneath of surface of the seas.

All of the this presages a shift in military spending and potentially increases inorder to catch up and dominate. While the primary players will be the US, Russia, China, and India, this trend will spill over into the entire international arms market.

Alex Krainer's TrendCompass
Why hypersonic weapons change everything

Alex Krainer

Energy Transition Advocates Get A Reality Check — Iriva Slav

Yves here. I’m preserving the original OilPrice headline since it invokes one of the themes of a new pro-fossil-fuels messaging campaign, that migrating to cleaner energy sources is contrary to energy security. It’s not hard to see that message hitting home with a lot of voters, particularly ones that live in suburbs or other area with poor public transportation, or in parts of the world where there’s not enough sun for rooftop solar to be anything more than a secondary power source.

One reason the oil, specifically Shell messaging will strike home at least in Europe is the respite from super high energy prices came largely from government subsidies. Those will be reduced or even gone next winter. Bearing the full higher energy cost will make many consumers want relief, climate change impact be damned. Of course, the obvious expedient of rolling back sanctions on Russia is off the table.

But another, more broadly applicable reason is the lack of adequate planning for changing the mix of energy sources. Too many things are done in an uncoordinated manner at a low level, too often the result of the lobbying of various green energy interest, as opposed to a look at the merits. In addition, any adequate program would have a point of view on what sort of living, schooling, and community arrangements we should be moving towards. But the US seems not to tolerate planning controls much more stringent than zoning. Too many Green New Deal types treat important issues like grid adequacy and meeting base load needs as problems that will solve themselves. The “too much vision, too little technical plans” orientation of a lot of energy transition advocates is enough to make ordinary citizens worry about where this is all going, which then enables Big Oil to play on security fears.
As with everything that is embedded in a system, emergent challenges need to be addressed in terms of the entire system. Energy is foundational to the economic system hence to the operation of the world system not only economically but also socially and politically. Addressing economics issues often founders owing to the bias of powerful interests at the level of the political aspect of the system. 

Naked Capitalism
Energy Transition Advocates Get A Reality Check
Iriva Slav, OIlprice

William Mitchell — Latest Productivity Commission report – relies on and exploits our ignorance – to undermine our well-being

I had a sense of déjà vu this week when I read the latest release from Australia’s Productivity Commission – Advancing Prosperity – which was released on March 17, 2023 and is a five-yearly exercise conducted by the Commission on behalf of the Australian government. Frankly, if the government was looking to cut spending while advancing material well-being in the community, they could simply tell the Commission to cease doing this work and instruct the staff involved to get real jobs and do something that matters. We just get a regurgitation of GIGO, that well-practiced art of pretending to have something authoritative to say while one is grabbing money out of the till at a rate of knots to advance self-interest! The problem is that the ordinary citizen is ill-equipped to understand any of the technical hoopla that attempts to shroud these types of Report in ‘credibility’, and so is at a disadvantage when trying to determine whether they should support it through the ballot box. Neoliberalism relies on and exploits our ignorance....
William Mitchell — Modern Monetary Theory
Latest Productivity Commission report – relies on and exploits our ignorance – to undermine our well-being
Bill Mitchell |rofessor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Wednesday, March 22, 2023

Scott Ritter — G7 vs BRICS — Off to the Races

After rooting through the IMF’s World Economic Outlook Data Base, [Richard] Dias [of Acorn Macro Consulting] conducted a comparative analysis of the percentage of global GDP adjusted for PPP between the G7 and BRICS, and made a surprising discovery: BRICS had surpassed the G7.

This was not a projection, but rather a statement of accomplished fact: BRICS was responsible for 31.5 percent of the PPP-adjusted global GDP, while the G7 provided 30.7 percent. Making matters worse for the G7, the trends projected showed that the gap between the two economic blocs would only widen going forward….

PPP versus GDP analysis. Same with China, which is ahead of the US based on PPP although not GDP. 

Consortium News
Scott Ritter: G7 vs BRICS — Off to the Races
Scott Ritter, former US Marine Corps intelligence officer, serving in the Soviet Union as an inspector implementing the INF Treaty, on General Schwarzkopf’s staff during the Gulf War, and from 1991-1998 as a UN weapons inspector

In Moscow, Xi and Putin bury Pax Americana — Pepe Escobar

In Moscow this week, the Chinese and Russian leaders revealed their joint commitment to redesign the global order, an undertaking that has 'not been seen in 100 years.'
Can this traspire without WWIII, already being waged through hybrid warfare, without going kinetic. If t goes hot, can nulear winter be avoided? These are the questions on the table now that the gauntlet has been thrown down.

The Cradle
In Moscow, Xi and Putin bury Pax Americana
Pepe Escobar

Regulation is Not a Mantra — Dean Baker

Anyhow, this exchange led me to believe that regulators applied some common sense to their stress test exercises and examined how bank assets would fare in all bad but plausible circumstances. In the years 2020-21, when 10-year Treasury rates were at times flirting with 1.0 percent, a sharp rise in interest rates had to be seen as a plausible, even if unlikely, possibility.

Incredibly, the Fed stress tests did not consider this scenario. This means that the Fed’s stress tests would not have detected the vulnerability of SVB to the sort of jump in interest rates that we have seen over the last year. That means that it is possible that, even if Dodd-Frank had not been weakened in 2018, to reduce the regulation to which SVB was subject, the Fed still would not have detected its problems.

I said “possible,” rather than asserting that the Fed would not have caught the bank’s vulnerabilities, because even without a stress test some items should have been apparent to anyone giving the bank careful scrutiny, as would have been required before the 2018 law weakening Dodd-Frank....
Beat the Press
Regulation is Not a Mantra
Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, DC

How the Current Refusal to Deal Harshly with Failing Banks and Their Executives Will Create an Even Bigger Crisis — Yves Smith

Your humble blogger has been saying that the new bank rescue scheme, which is a covert backstop of nearly all uninsured deposits, is a disastrous extension of government support to institutions that are welfare queens save for executive and manager pay levels. And the Fed may make banks’ “Heads I win, tails you lose” bet even bigger by announcing that all deposits will be guaranteed.

We’ve argued since the crisis that banking is the most heavily government subsidized industry, far outstripping the military-surveillance complex in the support it gets from the great unwashed public. Yet every time banks predictably drive themselves off the cliff, they get even more goodies, with virtually nada in the way of new restrictions or punishment of miscreants. The US is keen to perp walk Donald Trump, but not bank executives.

Aside from the long-overdue need to prosecute more bankers and also swiftly remove bank top managers who demonstrate that they are bad at banking, the US needs to regulate banks like utilities. They need to be kept stupid and allowed to make safe and boring profits. So no one talented will want to work for them? Outside of IT, where big banks’ systems are held together with duct tape and baling wire, banking does not require “talent” (which today usually amounts to rule-breaking or at least soft corruption), but people who perform reliably and competently. Our financial system is dangerously outsized. One way to put that in reverse is to set out to reduce pay levels across the industry.…
Not narrow banking but "plain vanilla" banking.

Banks need to be regulated like public utilities because they are public utilities of a sort, and state provision of the currency is the basis of it. In addition, banks operate on the basis of a charter granting them privileges, such as access to the central bank as lender of last resort. Moreover, it is already widely recognized that in exchange for receiving these privileges, banks acquiesce in regulation. No brainer. 

This is political problem in the US. As Sen. Dick Durbin famously said about Congress at time of the GFC, "the banks, hard to believe in a time when we're facing a banking crisis that many of the banks created, are still the most powerful lobby on Capitol Hill. And they frankly own the place." So strengthening bank regulation is easier said than done.

See also by Yves Smith

Lack of Grownups in the Room Exacerbates Bank Freakout

Narrow Banking: A Bad Solution To A Non-Existent Problem — Brian Romanchuk

Narrow banking is a concept for a bank that holds 100% reserves against deposits. It attracts people who are deeply concerned about the symbolic content of “money” on both the left (e.g. Positive Money) and the free market right (the Chicago Plan). Devotees of narrow banking are happy to talk your ear off about how their plans work, so I leave finding out more as an exercise as a reader. I just want to focus on the core principle: they want banks to not take risks lending deposits, so that “money” remains “money”: a numeric entry that corresponds in a 1:1 fashion to a claim on a “monetary asset,” like a gold coin or claims on specific gold coins, and not a messy credit relation....
Bond Economics
Narrow Banking: A Bad Solution To A Non-Existent Problem
Brian Romanchuk

William Mitchell — Former Bank of Japan governor challenges the current monetary policy consensus

In the latest IMF Finance and Development journal (March 2023), there is an interesting article by the former governor of the Bank of Japan, Masaaki Shirakawa – It’s time to rethink the foundation and framework of monetary policy. It goes to the heart of the complete confusion that is now being demonstrated by central bank policy makers. With their ‘one trick pony’ interest rate attacks on inflation, not only have they been inconsequential in dealing with that target (the so-called price stability responsibility), but, in failing there, they have undermined the achievement of the other central bank target (financial stability) and probably worsened the chances of sustaining the third target (full employment). Sounds like a mess – and it is. We are witnessing what happens when Groupthink finally takes over an academic discipline and the policy making space. Blind, unidirectional policies, based on a failed framework, steadily undermining all the major goals – that is where we are right now. And not unsurprisingly, those who have previously preached the doctrine are now crossing the line and joining with those who predicted this mess. And, as usual, the renegade position is somehow recast as we knew it all along’ when, of course, they didn’t. When you get to that stage, we need music – and given it is Wednesday, I oblige at the end of this post....
Bill nails it. Central banks have lost the plot. What Bill doesn't draw attention to in the highlighted sentence is that the primary purpose of a central bank and the underlying rationale for having one at all in a free market system based on economic liberalism is to ensure the financial stability of the credit system that underlies modern production economies.

William Mitchell — Modern Monetary Theory
Former Bank of Japan governor challenges the current monetary policy consensus
Bill Mitchell |rofessor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

See also

Naked Capitalism
How Monetary Policy Affects Bank Lending and Financial Stability: A ‘Credit Creation Theory of Banking’ Explanation
Peter Bofinger, Professor for Monetary Policy and International Economics University of Wuerzburg; Lisa Geißendörfer, Research Associate, Chair for Monetary Policy and International Economics University of Wuerzburg; Thomas Haas, Research Associate, Chair for Monetary Policy and International Economics University of Wuerzburg; and Fabian Mayer, Research Assistant and PhD candidate, Chair for Monetary Policy and International Economics University of Wuerzburg. Originally published at VoxEU

Tuesday, March 21, 2023

Michael Hudson With Dennis Kucinich on the Financialized Economy, Collapse — David Kelley interviews Dennis Kucinich and Michael Hudson

Overview: This was an impromptu conversation precipitated by former Congressman Dennis Kucinich to have a deep dive discussion with a former economic advisor, Michael Hudson, on the shockingly large recent bank collapses. As the former chair of the powerful Government Oversight Subcommittee, Kucinich had a ringside seat in unraveling the bank collapses after the housing bubble burst. He confronted the players in the field with withering questions in Congressional hearings. Now Kucinich wanted important feedback from a banking insider on how this crisis was different than the one in 2008.

Kucinich knew that Hudson was a former Wall Street banker/investment professional who worked for Chase Bank and then the Hudson Institute as well as managing the second most successful bond mutual fund one year. Hudson has often candidly admitted that everything he really learned about economics came on Wall Street and not in his Ph.D. classes.
Hudson’s first assignment at Chase was to figure how much money South American debtor countries could pay without collapsing. His intense and ground-breaking research into the predatory balance of payments system led to his first (of many) books, Super Imperialism, now in its third printing. The meeting was moderated by a close friend to both: David Kelley.

The meeting was arranged the day before and, at the last minute, it was decided to record it. After the meeting the participants agreed that while the production quality was minimalist, the topics covered had been largely missed by the mainstream media and was worthy of being released. The transcript has been lightly edited to make it more readable and to keep all salient comments and vocabulary.…

Somewhat longish and sprinkled with a lot of shooting from the hip, but interesting nonetheless because of the participants. 

Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
With Dennis Kucinich on the Financialized Economy, Collapse
David Kelley interviews Dennis Kucinich and Michael Hudson

Digital Spyware

A dual U.S.-Greek national working for Meta Platforms Inc. was hacked by the Predator spyware for around one year in Greece, the New York Times (NYT) revealed on Monday.

At the time, Artemis Seaford was in Greece working as a trust and safety manager on Meta’s security policy team.

Why she was hacked is unclear, but it’s now certain that her phone was hacked by Predator. According to NYT, this could make her the first known case of an American spied on in Europe using such technology.

Predator spyware is made by a company called Cytrox, a firm headquartered in Skopje, North Macedonia. In 2021, it was one of several surveillance-for-hire companies that Meta banned on its platforms after it was discovered they were surveilling as many as 50,000 of Meta’s users....
Defend Democracy Press
Meta Executive Working in Greece Hacked by ‘Predator’ Spyware

Russia’s Kremlin ordered officials to stop using iPhones, apparently over concerns the devices could be vulnerable to Western intelligence agencies, Reuters reports. When surveillance-as-a-service firms sit exposed for brazenly undermining device security, it's hard to think there isn't an argument there. But the bigger story isn’t the harm to Apple’s small business in Russia, it's the threat to digital supply chains it shows.

Having spent years attempting to build robust physical supply chains, it would be easy to imagine things should get better. But a new threat to business is emerging as digital supply chains struggle in the face of political fragmentation....
Russia’s iPhone ban and the digital supply chain

For digital spying technology, it's a doozy of a case. Security researchers have revealed evidence of attempted or successful installations of Pegasus, software made by Israel-based cybersecurity company NSO Group, on phones belonging to activists, rights workers, journalists and businesspeople. They appear to have been targets of secret surveillance by software that's intended to help governments pursue criminals and terrorists, and as the months go by, more and more Pegasus infections are emerging.…

Hawley Announces First Bill in Worker's Agenda to Rebuild America: Ending Normal Trade Relations with China Act — U.S. Senator Josh Hawley (R-Mo.)

Today U.S. Senator Josh Hawley (R-Mo.) announced the first piece of legislation in his new Worker’s Agenda to Rebuild America. The Ending Normal Trade Relations with China Act would revoke China's normal trade relations status to reduce our dependency and protect America’s working class.

China is America’s greatest adversary. To win the fierce economic competition for jobs, industry, and the future, America must return to the long-standing formula for American success: strong and independent workers. Years of short-sighted decisions by policymakers in Washington have only perpetuated the problem.

“As we face a new age of competition with China, we need an agenda in Washington that will make our working class strong and independent. We can start by revoking the sweetheart deal D.C. elites handed to China 23 years ago—end normal trade relations, put in place strong tariffs, and protect American workers,” said Senator Hawley.

Smoot-Hawley redux? The reasoning behind then and now is protectionism, which is anathema to the liberal doctrine of free markets, free trade, and free capital flows. Isn't this antithetical to the US claim to be competing?

Protectionist trade policies and the lack of an economic agenda for East and Southeast Asia have become central themes in critiques of US policy towards the region and its approach to managing US–China ‘strategic competition’.

According to these accounts, US protectionism undermines its economic draw in East Asia — and the political leverage stemming from it — at a time when it has already been eroded by rising reliance on Chinese trade, investment and regional institutions such as the Regional Comprehensive Economic Partnership (RCEP). Instead, the United States should employ open economic diplomacy, return to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and allow for greater market access for exporters from the region.

From the US perspective, limiting economic openness towards China is necessary to protect its industrial base, lessen its import reliance in critical sectors and mitigate the potential for China to weaponise interdependence. But export restrictions, punitive tariffs and industrial policies aimed at eroding the market share of Asian firms are perceived in East Asia as detrimental to the ‘rules-based international order’ and East Asian prosperity.
East Asia Forum
A ‘protectionist’ United States still key to East Asia’s economy
Tamas Meszaros, Keio University

The U.S. and some other Western countries must take responsibility and be held accountable for the systemic violation of human rights resulting from their unilateral sanctions, Chinese Foreign Ministry Spokesperson Wang Wenbin said at a press conference on Monday....
ECNS (Chinese official English news service)
U.S. must be held accountable for systemic violation of human rights resulting from unilateral sanctions: Chinese FM

The Fed’s New Supply Chain Pressure Gauge just went Negative — run75441

Some indication that supply-chain issues are normalizing. If the trend persists, this would portend lower supply-side inflationary pressure.

Angry Bear
The Fed’s New Supply Chain Pressure Gauge just went Negative

Also by run75441

Monday, March 20, 2023

The collapse of SVB shows why monetary policy is the wrong tool to fight inflation — Yeva Nersisyan and L. Randall Wray

What is missing from the debates over monetary policy today is the understanding that the Fed was not established to control inflation. It was created to prevent financial crises by acting as a lender of last resort in times of distress. Indeed, that’s exactly what the Fed is doing now — opening up its lending facilities to banks in need. But rather than focus on maintaining financial stability, the Fed has become obsessed with controlling inflation, something it cannot really do without causing either a recession or a financial crisis (or both).

What the Fed needs to do is abandon misguided economic theories that have subverted its primary goal of financial stability to inflation targeting. Rather than change interest rates to control inflation it should pivot to a policy of stable interest rates with the goal of maintaining financial stability. The current experience is yet another stark example that unstable interest rates are inconsistent with financial stability. This approach is counterproductive and unnecessary since we have more effective tools for macroeconomic stabilization, such as fiscal policy..…
Simple and understandable explanation of what went wrong. The authors admit it not the whole story but it is the essence of it. Rate hikes, which are useless in controlling inflation anyway unless they create a crisis.

Yeva Nersisyan, Associate Professor of Economics at Franklin and Marshall College, and L. Randall Wray, Professor of Economics and senior scholar at the Levy Economics Institute of Bard College — Opinion Contributors 

William I. Robinson, Can Global Capitalism Endure? — Book review by Elna Tulus

It should be obvious to just about anyone by now that transnational capitalism cannot survive in its present form if humanity is to survive. The amount of negative externality that is not priced in is too great. Markets are not a mechanism that delivers accurate economic calculation, contrary to what Hayek argued in his Nobel Prize Lecture (1974), and is now widely accepted as received wisdom. Valuation is biased by failing to consider true cost and reliance on this is leading to more erroneous assumptions about addressing emergent challenges. 

Ignoring true cost including externalities will vitiate any market-based solutions that are propounded based on current theory and accounting practices. Probably most know this deep down but also know that addressing this issue effectively would be extremely painful and highly unpopular absent a presently pressing existential threat that gets wide attention and motivates large numbers of people to act. While this has not happened yet, at least sufficiently to motivate the changes that need to be made to the system, the pressure is rising.

Progress in Political Economy (PPE)
William I. Robinson, Can Global Capitalism Endure?
Elna Tulus

The State of Democracy in the United States: 202 — Chinese Ministry of Foreign Affairs

I. Preamble

In 2022, the vicious cycle of democratic pretensions, dysfunctional politics and a divided society continued in the United States. Problems such as money politics, identity politics, social rifts, and the gulf between the rich and poor worsened. The maladies afflicting American democracy deeply infected the cells of US politics and society, and further revealed US governance failure and institutional defects.

Despite mounting problems at home, the US continued to behave with a sense of superiority, point fingers at others, usurp the role of a “lecturer of democracy”, and concoct and play up the false narrative of “democracy versus authoritarianism”. To serve the interests of none other than itself, the US acted to split the world into two camps of what it defined as “democracies and non-democracies”, and organized another edition of the so-called “Summit for Democracy” to check how various countries had performed on meeting US standards for democracy and to issue new orders. Be it high-sounding rhetoric or maneuvers driven by hidden agenda, none can hide the real designs of the US — to maintain its hegemony by playing bloc politics and using democracy as a tool for political ends.  

This report collects a multitude of facts, media comments and expert opinions to present a complete and real picture of American democracy over the year. What they reveal is an American democracy in chaos at home and a trail of havoc and disasters left behind as the US peddled and imposed its democracy around the globe. It helps remove the facade of American democracy for more people worldwide....
Ministry of Foreign Affairs of the People's Republic of China
The State of Democracy in the United States: 2022

Currency Swap Facility Comment — Brian Romanchuk

People read much into the implications of currency swaps that is not there. Much ado about nothing. Brian explains why in terms that are simple to understand.

Why swaps?
You either have capital controls, or you have central banks acting as swap dealers of the last resort, or you have periodic meltdowns of the currency system. Pick your poison.
Bond Economics
Currency Swap Facility Comment
Brian Romanchuk

GDP Data Confusion — Observer R

Some numbers (nominal and adjusted). Short.

A Son of the New American Revolution
GDP Data Confusion
Guest Post by Observer R

Sunday, March 19, 2023

Bank Capital Contagion Comment — Brian Romanchuk

The details of a shotgun marriage between UBS and Credit Suisse arranged by Swiss regulators have been leaking out. Credit Suisse has been plagued by problems, and one might hope that this act would finally clear them up. The concern I am seeing at the time of writing is the risk of contagion.
As an aside, we can tell this is a bit of a crisis by my posting frequency.…
Bond Economics

China and Russia capitals connected on New Silk Road for first time — Chengfan Zhao

A total of 55 40-foot containers were loaded on the new China-Europe train. The route chosen is to exit China at the Manzhouli border crossing to enter Russia, and then go west all the way to Moscow. The goods transported are auto parts, building materials, home appliances, fabrics, clothing, home furnishing, etc. The entire route of this operation is about 9,000 kilometers, and the estimated transit time is about 18 days.
Linking Moscow and Beijing is of symbolic value, but the symbolism says a lot. The big news is that Sino-Russia trade is increasing and it is not just energy that formerly went to Europe heading East. China as "the factory of the world" is now supplying Russia directly with its output, further eroding the effect of sanctions. And the trade is being settled in RIB and CYN. Time to keep an eye on the CYN/RUB rate?

Rail Freight
China and Russia capitals connected on New Silk Road for first time
Chengfan Zhao
h/t Naked Capitalism

See also

India Punchline
US paranoid about Russia-China summit
M. K. Bhadrakumar | retired diplomat with the Indian Foreign Service and former ambassador

Saturday, March 18, 2023

Magical Monetary Thinking at the Fed Killed SVB — L. Randall Wray and Stephanie Kelton

Today’s post is a joint effort, written with my friend and former teacher/colleague, Randy Wray. Randy was a student of Hyman Minsky (and author of many books, including Why Minsky Matters.) We were trading e-mails about the collapse of Silicon Valley Bank (SVB) over the weekend, and I suggested that we team up and write something for readers of The Lens. So here it is....
The Lens
Magical Monetary Thinking at the Fed Killed SVB
L. Randall Wray and Stephanie Kelton

See also

Notes on the Crisis
Nathan Tankus

My interview with Lewis Borsellino. Greatest S&P futures trader of all time.

 My interview with Lewis Borsellino, greatest and most dynamic S&P futures trader I have ever known. He DOMINATED the S&P pit at the CME in Chicago during the wild times of "open outcry" trading. Incredible dude. Enjoy.

On fighting inflation — Lars P. Syll (John Stewart v. Larry Summers)

 Boom! John Stewart lowers it on Larry Summers, that is. BTW, John Stewart has been coached in MMT.

Video, no transcript, of John interviewing Larry. Short.

Lars P. Syll’s Blog
On fighting inflation
Lars P. Syll | Professor, Malmo University

Friday, March 17, 2023

McCarthy weighs in


GOP Speaker finally makes statement during banking system crisis and it’s a post of a old Milton Friedman video…

Biden people I’m afraid are on their own in trying to fix their own monetarist mess… better not be thinking Congress is  going to help them…

Thursday, March 16, 2023

Dollar Diplomacy Down — Radhika Desai and Michael Hudson

 Video and transcript.

RADHIKA DESAI: Hi everyone. Welcome to the fifth Geopolitical Economy Hour, the fortnightly show about the political and geopolitical economy of our times. I’m Radhika Desai.

MICHAEL HUDSON: And I’m Michael Hudson.

RADHIKA DESAI: So this is our third and final show on the theme of de-dollarization, based on our work, particularly on Geopolitical Economy that I wrote in 2013 and Super Imperialism that Michael wrote some decades ago and has recently reissued.

Based on my Geopolitical Economy and Michael’s Super Imperialism and also of course our article which we co-wrote called “Beyond the Dollar Creditocracy”.

As many of you know we have structured our discussion around some ten questions
Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
Dollar Diplomacy Down
Radhika Desai, Professor at the Department of Political Studies, and Director, Geopolitical Economy Research Group, University of Manitoba, Winnipeg, Canada; and Michael Hudson, President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

Primer: American Bank Insolvency Losses — Brian Romanchuk

 In this article, I am going to give a basic introduction to insolvency (bankruptcy), as well as a discussion of the principles of how losses are apportioned to the various classes of creditors of American banks. I will only attempt to look at American banks since bankruptcy procedures are specific to each legal jurisdiction. Although I was not a credit analyst, I worked with them and had some training on the topic. The article “U.S. Corporate and Bank Insolvency Regimes: An Economic Comparison and Evaluation” by Robert R. Bliss and George G. Kaufman (URL: covers this topic, and I will use it to justify some assertions about the procedures. I will then discuss some of the issues of the resolution of Silicon Valley Bank, which is underway at the time of writing....

Bond Economics
Primer: American Bank Insolvency Losses
Brian Romanchuk

JPM: $2T could be “injected!”


Nice figure of speech “injected!”… wow…

They are referring to the $2T of reserve balances currently in the RRP… why are they in that Fed account and not in Depository accounts where they could be utilized to settle unanticipated withdrawals without requiring sales of other HQLA at current reduced prices due to the dumb monetarists rate increases?

Why did the dumb Art degree people at the Fed reduce the RRR from 10% to 0% in the first place?

What is bad about requiring Depositories to maintain a ready USD balance of direct CB liabilities of  a small 10% of their deposit liabilities in case of unanticipated withdrawals?

If the deposits flow to another depository (ie withdrawals) from available reserve balances that transaction actually INCREASES the Depository’s SLR with ZERO effect on Capital…

Hard to understand how the Art degree brain works… 🤔

Wednesday, March 15, 2023

Why 3 US banks collapsed in 1 week — Economist Michael Hudson explains Ben Norton interviews

Video and transcript.

Geopolitical Economy Reportby 
Why 3 US banks collapsed in 1 week: Economist Michael Hudson explains
Ben Norton interviews Michael Hudson (on his 84th birthday)

William Mitchell — US inflation falling fast as Europe prepares to go back into a deliberate austerity-led crises

The transitory view of the current inflation episode is getting more support from the evidence. Yesterday’s US inflation data from the Bureau of Labor Statistics (March 14, 2023) – Consumer Price Index Summary – February 2023 – shows a further significant drop in the inflation rate as some of the key supply-side drivers abate. All the data is pointing to the fact that the US Federal Reserve’s logic is deeply flawed and not fit for purpose. Today, I also discuss the stupidity that is about to begin in Europe again, as the European Commission starts to flex its muscles after it announced to the Member States that it is back to austerity by the end of this year. And finally, some beauty from Europe in the music segment....
William Mitchell — Modern Monetary Theory
US inflation falling fast as Europe prepares to go back into a deliberate austerity-led crises
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

The Mechanics of a Bond Market and its Impact on the Banking Crisis — Michael Hudson

A market valuation problem is not a fraud problem this time around. 

Michale Hudson explains the big difference between this crisis and 2008. 

Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
The Mechanics of a Bond Market and its Impact on the Banking Crisis
Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

See also

Geopolitical Economics
Michael Hudson: Why the US banking system is breaking up

Tuesday, March 14, 2023

Escape from Muddle Land — Peter Dorman

Let’s get the up-or-down part of this review over with quickly: Escape from Model Land: How Mathematical Models Can Lead Us Astray and What We Can Do About It by Erica Thompson is a poorly written, mostly vacuous rumination on mathematical modeling, and you would do well to ignore it.

Now that that’s done, we can get on with the interesting aspect of this book, its adaptation of trendy radical subjectivism for the world of modeling and empirical analysis....
While I have not read the work that Peter Dorman is criticizing, it appears to me that he ignores a major factor affecting economics, science and human knowledge as a whole. That is the ontological, epistemological, and ethical dimension, as well as work in philosophy (foundations) of science, logic, anthropology, sociology, and psychology. 

Tony Lawson and critical realists have attempted to address this in economic modeling from an angle that might be called "Aristotelean." This approach is one among others worthy of consideration. Lars Syll has written a great deal on this at his blog. However, it is called into question by the Kantian approach, which suggests the entanglement of the subject and object in knowledge. Cognitive science seems to favor a Kantian approach based on discoveries about the functioning of the brain and nervous system. Evolutionary biology also makes contributions. Understanding of these based on substantive evidence is still inchoate.

Without getting it the weeds, suffice it say that that the naïve commonsense view that observation is "objective" and not influenced by the subject is, well, naïve. It is possible that the work that Dorman is referring to is itself naïve but the need for reflection on ontological, epistemological, and ethical foundations is not, as well as the influence of scientific findings that affect these key areas. Keynes suggested this in his calling economics a "moral science" in criticizing Tinbergen's approach to econometrics.

There are different views concerning these foundation factors. They are not recondite either. A great deal of work has been done on such issues in many fields. But in general economists breeze right past them. Yet they involve some of the "enduring questions" that make up the quest for understanding ourselves and our universe. And they impact all aspects of life, including economics.

Escape from Muddle Land
Peter Dorman | Professor of Political Economy, The Evergreen State College

Some Takes On The Banking Crisis

Bond Economics
What We Learned: Something Is Seriously Wrong With Silicon Valley
Brian Romanchuk

Notes on the Crisis
Every Complex Banking Issue All At Once: The Failure of Silicon Valley Bank in One Brief Summary and Five Quick Implications
Nathan Tankus

The Big Picture
All the Things We Do Not Know About SVB
Barry L. Ritholtz is co-founder, chairman, and chief investment officer of Ritholtz Wealth Management LLC.

ECNS (Chinese official English news service)
China Daily (Chinese state-sponsored media)

Sergey Glazyev: ‘The road to financial multipolarity will be long and rocky’ — Pepe Escobar

In an exclusive interview with The Cradle, Russia's top macroeconomics strategist criticizes Moscow's slow pace of financial reform and warns there will be no new global currency without Beijing.

Politics coming into it


MAGA/GOP does not want to participate in any leftist bailout:

Not really needed so far as Treasury has some ESF slush fund to use without needing an appropriation… but these funds are limited…

McCarthy not saying anything so far…

Officer down


Bubbe Janet might be on the mat:

This is same as Hank Paulson hiding in the lavatory with the dry heaves in 2008…. All this stress about the munnie system takes a physical toll when you don’t know what is going on…

Monday, March 13, 2023

Bailout! — Brian Romanchuk

The U.S. Treasury, Federal Reserve, and Federal Deposit Insurance Corp banded together to create the Bank Term Funding Program (BTFP — the bureaucrats are going for the laughs with the acronyms at this point), which gives 1-year financing to eligible banks against Treasury/mortgage-backed security collateral at par. They also announced that uninsured depositors at two failed banks (the known failure Silicon Valley Bank, as well as the newly-shuttered Signature bank) will be made whole.

At the time of writing, I have not seen any announced results for the auction of Silicon Valley Bank’s assets (or entire balance). This lending facility seems to be the replacement.

Unlike the 2008 bailouts, bank equity and bond holders have been zeroed out (unless future asset sales do a lot better than expected). To the extent that this is a bailout, it is a bailout of the depositors of those banks.…

So not exactly a bailout. Equity and corporate debt will be wiped out as of the currently announced policy, not bailed out. Only the depositors will be made whole. This is consistent with "capitalism," since it is equity and bond holders that are supposed to shoulder the risk. 

While customers' making deposits are actually customer loans to banks, most people do not realize that they are actually making loans to the bank by making deposits. Rather many think that deposits are "money" held for safe keeping that is set aside in vaults, which is not the case. Others think that their deposits are lent out by banks in making loans. Neither of these perceptions of banking are true.

Many if not most people confuse this regarding banking, since they think of "money" in terms of thing that is stored in the bank for safekeeping or else lent out. But "money" is based double-entry bookkeeping, where it shows up as one party's asset and another party's liability on accounting records. 

Banking is based on the bank making loans (customer liabilities, bank assets) and creating deposits (customer assets, bank liabilities), and taking deposits (customer assets and bank liabilities). Extension of credit creates an asset for the bank in the form of loan, and those loans are subject to non-performance and default risk, which affects the solvency of the bank. Customer deposits do not enter into it, since the bank creates a deposit corresponding to loan when the loan is approved. "Money" is created by banks simply by recording entries in the appropriate accounting records (the bank's books). Apparently a lot of people can't get their heads around this. 

Central banks create their respective currencies similarly in accordance with the government mandate — in the US, the Federal Reserve Act. In a digital environment, "money" is created by stroking keyboards and exists on spreadsheets (the respective parties books in terms of double-entry).

Central banks were a logical extension of the development of banking. If customers lose trust in a bank, a bank run can occur and if large enough, now bank can withstand it based on its own liquidity. This was the reason for the the creation of the Federal Reserve by the US Congress in 1913. The Fed would act as lender of last resort to prevent a banking crisis that could lead to a financial collapse and ensuing depression. Thus, the government became the provider of liquidity based on its constitutionally granted power of money-creation — the US, the US Constitution, article 1, section 8.

Trust based on this liquidity provision is a principal reason for deposit insurance, along with rules that allow for bank nationalization, which is usually temporary, occurring Friday after close with the institution opening under new management on Monday morning. Without this trust, reluctance to commit deposits would be a result. So it is not merely government generosity or paternalism. Nor does it affect taxpayers adversely in a sovereign system in which the government has a monopoly on its currency-issuance.

In the case of insolvency leading to bank closure (banks don't go bankrupt like other firms but are taken over by the feds), bank liabilities are at risk, including uninsured deposits. Guaranteeing all deposits at the federal level, with the government having a monopoly over currency issuance, would obviate that risk in the case of bank deposits. In return, banks would be subject to strict oversight regarding credit operations. 

As Warren Mosler has said many times, bank regulation should focus on the asset side (credit creation) rather than the deposit side. Bank regulation should focus on credit operations. Making the federal deposit guarantee unlimited would serve to protect all depositors as a matter of optimizing the banking system by increasing trust while reducing system risk.

A lot of the noise now is about the bailout of depositors being at the expense of taxpayers, with frequent reference to "taxpayer money." MMT shows that that so-called taxpayer money doesn't exist in the current monetary system. "Money" is not a thing but rather the creation of accounting. A currency is the unit of account adopted by a sovereign. 

Many people apparently reify the concept of "money" based on the origin of banking in taking deposits of precious metals, chiefly gold and silver, and lending these deposits out based on "fractional reserve bank." Under this system, banks did not have the resources to cover deposits in the case of a run without calling in loans of gold and silver they had made from the deposit base. This was impractical. That system no longer exists as the dominant form of banking in the contemporary world. As a result, this perception — misperception really — is not congruent with reality.

The fact that it is necessary to explain this is an indication of how widespread this misperception is. Quite revealing actually. MMT still has a lot of work to do in educating the public including economists and financial professionals. Readers of this blog likely know all this already but everyone can help in spreading the word to others. This "crisis" presents an opportunity to do so.

This is not to assert that a "crisis" cannot lead to an actual crisis. If misperception of reality leads to deterioration of trust in the system then a real crisis could develop, since most large financial systems are subject to systemic risk ("knock-on effects"). For this reason, the US government is acting to get out in front of it by acting promptly, and rightly so.

Bond Economics
Brian Romanchuk


Tax Research UK
Money is just double-entry bookkeeping, but you get it wrong at your peril
Richard Murphy | Professor of Practice in International Political Economy at City University, London; Director of Tax Research UK; non-executive director of Cambridge Econometrics, and a member of the Progressive Economy Forum

Powell just last week

 Monetarists….  😂😂😂😂😂😂😂

MAGA breakdown of current bank crisis


Pretty good breakdown:

If youre a big firm you’re going to have to get all your USD to a 100% govt money market fund and establish your own credit union staffed by your own people for the firm to use for payroll and current accounts payable/receivable... US banking system completely unusable with these Art degree monetarist morons trying to operate it…

Sunday, March 12, 2023

US labour market slows a bit but no sign of a major contraction yet — Bill Mitchell

Last Friday (March 10, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – February 2023 – which revealed a slight dip in the number of net payroll jobs created and a slight increase in the unemployment rate. It is too early to say whether this marks a turning point in the US labour market after several months of interest rate increases. We will know more about that next month. January’s result was very strong, so a slight dip on that is no cause for concern. Most of the aggregates are steady and in terms of the pre-pandemic period, February’s net employment change was still relatively strong.
Real wages continued to decline in the face of a decelerating inflation rate. Overall, the US labour market is steady and doesn’t appear to be contracting fast in the face of the Federal Reserve interest rate hikes.…
William Mitchell — Modern Monetary Theory
US labour market slows a bit but no sign of a major contraction yet
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

With the FDIC auction underway… — Brian Romanchuk

With the FDIC auction underway, the Silicon Valley Bank Crisis may either be over or raging uncontrollably when you read this. I lean towards the scenario of excitement winding down, but at the same time, I know literally nothing about the quality of SVB’s asset book. Rather than speculate, I just want to point out what I see as key: credit market conditions (including wholesale funding) are the only thing the Fed really cares about. Even if one worries about other large regional banks, credit investors — and existing lending facilities for banks, like the discount window and FHLB advances — can pump money into the back door of a solvent bank faster than a bunch of people who read stuff on Twitter can withdraw it out the front....
Bond Economics
With the FDIC auction underway, the Silicon Valley Bank Crisis may either be over or raging uncontrollably when you read this
Brian Romanchuk

MAGA: No bank bailouts


MAGA coming out swinging…  Silicon Valley leftists getting their clocks cleaned due to their own Democrat Biden people increasing risk free rate in unprecedented fashion as a desperate monetarist attempt to help him with his inflation problem last election year and continuing … 

Will need to at least get something out of it from Dems… like maybe approval of the political delay in TMTG/DWAC merger finally …  if they need a suggestion…

Saturday, March 11, 2023

Moveable Multipolarity in Moscow: Ridin’ the ‘Newcoin’ Train — Pepe Escobar

Not MMT but MMT-related in that it considers "money" institutionally. The article views the need for a new set of institutional arrangements as compelling for the Global South and suggests parameters for a solution as well as an outline of a possible solution 

While the article does not mention it, this appears to be akin to the bancor system devised by J. M. Keynes and E. F. Schumacher and proposed by the UK at Bretton Woods. It was rejected in favor of the US proposal of a dollar-based system with the USD anchored to gold at a fixed rate for international settlement. This became the untethered dollar system in 1971 when President Richard Nixon ended convertibility on the advice of US Treasury Secretary John Connolly as a unilateral response to a run on gold as a result of rising US deficits. This post-WWII experience provides a historical reference for the issues involved in institutional arrangements regarding "money." This article is informed by that experience.

The article is also based on the work of Zoltan Pozsar's analysis and draws on Michael Hudson's critique.

Strategic Culture Foundation (sanctioned by the US Treasury Department)
Moveable Multipolarity in Moscow: Ridin’ the ‘Newcoin’ Train
Pepe Escobar
Crossposted at Zero Hedge


A lot has been written analyzing the reasons for the Saudi-Iranian détente brokered by China. However, I have yet to see an obvious economic factor mentioned. Both countries are candidates for the new institutional arrangements around BRI, the New Silk Road trade routes, SCO and other economically beneficial arrangement. However, both entering the new game would have to abide by the basic requirements, which are apparently met by the agreement they arrived at.

Most people in the West are probably unaware of another significance of this détente. It is similar to ending the Catholic-Protestant conflicts that characterized Europe historically that ended with the adoption of the concepts of the nation state and national sovereignty. Sunni-Shi'a rivalry has been as endemic to Islam as Catholic-Protestant rivalry was to the West. But economic interests provide an incentive and motivator for cooperation over competition. This is also a characteristic approach of Chinese policy in contrast to the individualism and zero-sum thinking of many in the West. Thus, the Western elites, especially in the US and Israel, are likely to consider this a "loss" to be overcome rather than an opportunity presented.
The European wars of religion were a series of wars waged in Europe during the 16th, 17th and early 18th centuries. Fought after the Protestant Reformation began in 1517, the wars disrupted the religious and political order in the Catholic countries of Europe, or Christendom. Other motives during the wars involved revolt, territorial ambitions and great power conflicts. By the end of the Thirty Years' War (1618–1648), Catholic France had allied with the Protestant forces against the Catholic Habsburg monarchy. The wars were largely ended by the Peace of Westphalia (1648), which established a new political order that is now known as Westphalian sovereignty. (Wikipedia, European wars of religion)
India Punchline
China steps up, a new era has dawned in world politics
M. K. Bhadrakumar | retired diplomat with the Indian Foreign Service and former ambassador


Zero Hedge
China Blasts America's "Illegal" Occupation Of Syria In Wake Of Failed House Vote
Tyler Durden