So [in conclusion], let me summarize: leftists are not anti-market. They recognize that what is called a market by economists is a rigorously simplified idealization. And that like all idealizations a lot is left out in order to render the idealization coherent. It’s what’s left out, not what’s left in, that leftists object to. And that is not trivial. Coase says so too.
Methodological individualism versus institutionalism. MMT is institutional and rejects the assumption of methodological individualism that is foundational in much conventional economics.
The Radford Free PressIn part two, Michael Hudson discusses his new book “The Collapse of Antiquity.” Hudson challenges the traditional beliefs about the fall of the Roman Empire, arguing that it was caused by a financial crisis brought on by excessive debt, wealth inequality, and the concentration of economic power. Hudson draws parallels to modern-day economies and highlights the dangers of financialization and wealth concentration....Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
The “Demise of the Dollar” is a long-running story in hard money circles, and has gotten a recent push by the growth of transactions in the Chinese yuan in international transactions. Although it seems likely that the yuan will grow in importance, this is largely a nothingburger from the perspective of the United States.
Emerging market investor Paul McNamara was recently interviewed by Tracy Alloway and Joe Weisenthal on this topic. His views are better thought out than mine, but I just want to chime in from the perspective of a developed market govvies analyst.…
Russia and China will complement each other in those technologies where one of the parties seeks advancement – Vladimir Putin
“We recently met with a colleague from China, we spoke very frankly in many areas and agreed that we should complement each other there – especially in high-tech industries – where one of us achieves some kind of movement forward,” Putin said, noting that we are talking about the exchange of information and assistance in the development of the market.
According to Vladimir Putin, it is necessary at the government level to develop tools to support exports, and there are government structures that are doing this.
“I am sure that colleagues in friendly countries will support this. Unmanned aerial vehicles do not suffer from African swine fever, so I am sure that it will be even easier than promoting pork to the Chinese market,” the Russian President noted with a smile.
Earlier this week (April 25, 2023), I saw a Twitter exchange that demonstrated to me two things: (a) some mainstream media commentators are now understanding some of the principles of Modern Monetary Theory (MMT) and relating that knowledge to practical matters that concern them (lens being applied to values); and (b) high profile financial market players still command a platform in the media but have little understanding of what MMT is and consistently issue false statements. A lot of misinformation continues to be circulated about our work. Cursory inferences, usually based on an extrapolation of what the flawed mainstream theories say about policy interventions, are then conflated with assertions about MMT. In other words, MMT is interpreted through the terminology and conceptual structure of a rival paradigm. We reject such inferences and comparisons....William Mitchell — Modern Monetary Theory
When I was a world traveler in my twenties back in the 60s, I was struck by the prevalence of Japanese cars and pickup trucks with US cars owned almost exclusively by the elite and no US pickups visible. The rest is history. China may be in a similar position now.
Zero HedgeThe [Kremlin] spokesman [Dmitry Peskov] added that the move “mirrors the attitude of Western states towards foreign assets belonging to Russian companies.”
“The main goal of the step is to create a compensation fund for potential use in tit-for-tat measures in response to the expropriation of Russian assets abroad,” Peskov said. He added that a number of states systematically carry out a rapid transition from temporary administration to actual confiscation..
The decree does not deal with property issues and does not deprive the owners of their assets, Peskov stressed, noting that the list of assets subjected to the measure could be expanded.
The move will “ensure the uninterrupted operation of companies significant for the national economy and eliminate the risks of the political position of a number of unfriendly countries influencing” the security of Russia.
The original owners are considered to have temporarily lost control of the property, but not forfeited it outright. The measure “helps preserve the investment climate in Russia and reduce the outflow of capital from the country,” the agency added.
German industrial giant to take hit on Russia exit READ MORE: German industrial giant to take hit on Russia exit
The decree also establishes a legal framework that enables the Kremlin to take over more foreign assets should other countries seize Russian private or government property in their jurisdictions, or threaten the national, energy, or economic security of Russia.
Germany and Poland have so far seized an estimated $22 billion in assets belonging just to two Russian companies, Gazprom and Rosneft, according to media estimates.
Argentina peso in collapse wrt USD:
In #Argentina, the peso has tumbled to a 12-year low of 462 ARS/USD in the parallel market. The pathetic peso has lost 52% of its value against the USD since Jan 2022. Arg. needs to mothball the Central Bank of Argentina and the peso and place them in a museum. pic.twitter.com/uPXm9kIYAI
— Steve Hanke (@steve_hanke) April 25, 2023
Interest rates at 81% … better keep increasing rates and stick with it …. maybe it will work this time… come up with some new witty figures of speech maybe…
ARGENTINA CENTRAL BANK TO RAISE BENCHMARK INTEREST RATE 300 BPS TO 81% - OFFICIAL SOURCE
— *Walter Bloomberg (@DeItaone) April 20, 2023
All Art degree morons in control… ie hopeless situation…
Lots of long faces… ie back to the drawing board…
BREAKING: Japan's ispace says Moon landing may have failed, no contact with spacecraft pic.twitter.com/afscUiPSJ9
— BNO News Live (@BNODesk) April 25, 2023
If they had Art Degrees instead they would simply do the same thing without making any adjustments and see if it worked the next time or the time after that.. or the time after that… dogmatically advocating for this original configuration…. would be a lot easier …
That [refers to data in the article] represents a geopolitical point of no return of sorts, the moment when China’s economic dependence on the United States in particular and developed markets in general slipped behind its economic standing in the developing world.
Global economic growth is now coming from the Global South/East as these countries develop. China is in a position to capitalize (pun intended) on this trend, which appears to be long term owing to lower costs than prevail in the developed countries. China is the largest market globally and also the "world's factory," covering both supply and demand. (See Dean Baker, China is Bigger, Get Over It.)
China is now the leader in refining capacity, overtaking the United States last year, with 18.4 million bpd in total. This will grow further this year, cementing it at the number-one spot.
The Russian proposal to make use of its vast export earnings out of oil sales to India by investing the funds in manufacturing industry in India for export to Russia; the deal on adopting the Russian financial messaging system for cross-border payments; the acceptance of Indian Ru-Pay cards and UPI in Russia and Russia’s MIR cards and Fast Payments System in India; the operationalisation of the Maritime Corridor connecting Vladivostok and Chennai — these testify to the keenness of both countries to put in place the necessary underpinnings for a massive expansion of the Russian-Indian trade and economic ties in the very near future.…
Bilateral trade has crossed $45 billion — something unthinkable until Russia turned its back on the West and began pressing the pedal on alternative partnerships in Asia to replace the European partners....
Russia is also a chief arms supplier to India with no strings attached. Russia and India also have entered into joint ventures in weapons development and are discussing others.
India PunchlineI have now arrived at the part of the preparation for my panel that I have dreaded: the Great Canadian Fiscal Crisis of 1994-1995. This is an event that Canadian Establishment figures will talk your ear off about if you bring up Modern Monetary Theory (MMT). My problem with this crisis is that I spent my working life staring at charts of yields, economic data, and exchange rates, and never even noticed anything unusual during that period in Canada. It was only much later that I heard about this alleged crisis. (I was out of the country until August 1994, and too busy teaching my first course as a postdoc in engineering to notice what was happening in the markets or the news.)Bond Economics
Remember all the hype from central bankers last year and earlier this year about how they had to get ‘ahead of the curve’ with their interest rate hikes just in case wage demands escalated and inflationary expectatinos became ‘unanchored’. Over the last 18 months, I consistently noted in various blog posts that this was all a ruse to create a smokescreen to justify the unjustifiable rate rises – given that the inflationary pressures were almost all coming from the supply side and those forces were temporary and abating. Well now, the mainstream, having pushed for the rate rises and got their way are now backtracking to maintain their credibility by claiming there are no wage-price dynamics in sight. It is a dystopia....William Mitchell — Modern Monetary Theory
Once we get to the one year anniversary of the upward inflection point last year due to Brandon’s Russia sanctions then their “inflation!” is going to go away… looks like May or June …. 295 to 301 is 2%… then what are they going to do?
Over 2X a Social Security…. 3X a DoD…
LFG!!!! 🤑🤑🤑🤑🤑
Following up on my comments on the paper: “Deficits Do Matter: A Review of Modern Monetary Theory” by Farah Omran and Mark Zelmer, I am going to do a high level discussion about their claims about the value of an independent central bank. (For new readers, I am discussing this paper as I will be on a panel about Modern Monetary Theory (MMT), and Mark Zelmer is one of the participants. I am using my articles here as a way of thinking about my prepared remarks.)Bond Economics
The headline of this article is somewhat dramatic, but that is the only snappy way I can think of summarising my interpretation of the article. If one believes those authors, creating an independent central bank is a major innovation in economic policy that generates positive outcomes by itself. The MMT prescription of downgrading monetary policy (and a general hostility towards the concept of central bank independence) would in this case be a damaging policy shift.
Over the last few decades, I have done a lot of reading and research on the way organisations and groups deteriorate into what socio-psychologists call Groupthink, which is a system of patterned behaviour that takes the group increasingly further away from reality and sees it denying basic facts while at the same time maintaining authority for its activities and work. Academic disciplines, in particular are susceptible to this sort of dynamic, because of the hierarchical structure of the workplace and the fact that the senior professors have a vested interest in suppressing any research findings that contest the work that got them to those senior posts when they were younger. The economics profession is riddled with this organisational disease. Second, I have also researched and written about the concept of depoliticisation – which involves the hollowing out of national sovereignty and curtailment of popular-democratic mechanisms. Both these phenomena are at the centre of my rejection of many of the key recommendations of the external review of the Reserve Bank of Australia – Final Report: An RBA for the Future – which was published today (April 20, 2023). While the Report purports to providing the central bank with a pathway to the future, what is really being proposed – in the form of a new monetary policy board stacked with ‘experts’ (economists) – is less political accountability (depoliticisation) and a decision-making structure that is hindered by Groupthink.
To flog a dead horse. Unfortunately, the horse is still alive and well in academia and central banks.
The unsellability of DSGE models — private-sector firms do not pay lots of money to use DSGE models — is one strong argument against DSGE.
But it is not the most damning critique of it.
It’s Wednesday and apart from music I am talking mostly about poverty – opposites indeed. The beauty of the beat against the ugliness of enforced poverty. Enforced by government policy, which if there is political will can always eliminate systemic poverty. Yesterday (April 18, 2023), a major report was released in Australia by the grand-titled Economic Inclusion Advisory Committee – 2023–24 Report to the Australian Government. It provided a series of recommendations to the new Labor government about how it should deal with poverty, disadvantage and the appalling state of income support in this country. Among its recommendations it found that “current rates of these payments are seriously inadequate, whether measured relative to the National Minimum Wage, in comparison with pensions, or against a range of income poverty measures. People on these payments face the highest levels of financial stress in Australia”. Accordingly, they recommended a “substantial increase in the base rates” for unemployment benefits and other payments. The new Labour government has already indicated it will not increase the rates in any significant way. The problem, though, is that the recommendation of the ‘Inclusion Committee’, is such that if introduced would still leave the unemployed being forced to live below the poverty line. Yet, its recommendation is now framing the ‘limit’ parameters of the debate. All sorts of so-called progressives are using the recommendation as the aspiration, which really becomes self-defeating. The ‘Inclusion Committee’ might better have been called the ‘Exclusion Committee’.William Mitchell — Modern Monetary Theory
This passage demonstrates that Murphy understands the accounting side of “MMT operations analysis” — not a big ask for a part time professor of accounting — but does not grasp economic theory nor its context. If literally everyone who has studied economic theory and is sympathetic to MMT states that the Job Guarantee is a core part of MMT and you do not understand them, the correct response is to reduce your ignorance, and not write a primer on MMT.
Brian saved me the trouble writing this. Actually, I was thinking of doing so yesterday but didn't have the time. Many seem to equate MMT with the institutional analysis, which is descriptive, and either forget about the macro theory, which is a causal explanation with factual implications, or else they misunderstand it, usually by reading it from a framing that MMT specifically rejects.
Bond Economics
STEM Musk getting PTSD from all the stress of large scale (read expensive) testing of his hypotheses….
You think art degree monetarist moron Larry Summers (or any other Art degree moron for that matter) is getting PTSD from spewing the dianoia of their untestable theses?
NFW…
The International Monetary Fund (IMF) has recently published its World Economic Outlook (WEO) which has a combination of a report and an annual database of macroeconomic data (including forecasts). The beauty of this database is that the IMF has boffins that work to harmonise the data across countries. I normally do not pay too much attention to the text of the report, but it has a chapter entitled “Coming Down to Earth: How to Tackle Soaring Public Debt” which attracted some attention. (There was also a chapter on the natural rate of interest that would probably cause me to lose a portion of what remains of my hair.)Bond Economics
I am not going to get into the discussion of whether we are supposed to worry about the debt/GDP ratio, but I would note that the discussion is global — with quite a bit of it aimed at debt restructuring in poorer countries. That is outside my area of experience, so I am staying clear of that. Instead, I just want to make some quick comments about the floating currency sovereign parts. Even though I do not care about the debt/GDP ratio, some people do — and they often impose austerity policies to deal with them.…
Last week (April 11, 2023), the IMF released their half-yearly update – World Economic Outlook: A Rocky Recovery, April 2023 – which excited the headlines in the media with predictions of gloom and calls for fiscal austerity and more interest rate hikes. The only good thing about these reports every six months is the accompanying datasets, which allows for fairly quick comparative analysis across nations. Other than that, the textual narratives are pure mainstream economics Groupthink and demonstrate how if one starts from a particular and flawed set of principles, everything else that follows undermines the stated goal. This is a recurring story – we have seen this with these multilateral agencies over and over again. The point to understand is not to try to interpret these IMF reports as being knowledge-based or compiled as if they are pursuing knowledge. They are parts of the ideological weaponry that seeks to sustain and advance neoliberalism and the power relations inherent in that ideology while purporting to be expert commentary.…
The assumptions frame the debate. If the assumptions are stipulated as epistemological absolutes, or in the terminology of conventional economics, "settled," then deduction determines the outcome accordingly.
Perhaps the problem is not elite ignorance but class-based cognitive bias, or maybe even just propaganda. Since this phenomenon is widespread, it is likely the result of a combination of these.
Then there is Upton Sinclair's famous quote: "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" — I, Candidate for Governor: And How I Got Licked (1935), ISBN 0-520-08198-6; repr. University of California Press, 1994, p. 109. It is not just the job description, however, although that is also fundamental. It is also class-status and access. Once a person is living in the bubble, leaving it seems like exile to the netherworld. So no one in the bubble is willing to rock the boat enough to get pitched out.
William Mitchell — Modern Monetary TheoryRADHIKA DESAI: Hi everyone, welcome to the seventh Geopolitical Economy Hour, a program about the political and geopolitical economy of the fast-changing world of today.
#duh
⚠️BREAKING:
— Investing.com (@Investingcom) April 14, 2023
*JPMORGAN CHASE SHARES EXTEND GAINS PREMARKET AFTER Q1 RESULTS, LAST UP 6.5%
*WELLS FARGO STOCK UP 2.5% AFTER Q1 EARNINGS BEAThttps://t.co/PVjilxCOOw$JPM $WFC pic.twitter.com/ZRkfTTkSNF
Ok let’s look at this from system perspective … total S&P 500 market cap is reported $34T and trailing earnings yield is reported 4.17%.
$34T x 0.0417= $1.4T S&P500 total earnings…
Let’s just look now at what the Fed is paying banks in IOR: 5% IOR on 3T reserves = $150B annual of USD reserve transfer to banks with no corresponding liability… accrues directly to capital/retained earnings…
$150B / 1.4T total earnings = 10.7% …
so .. Fed is giving certain S&P500 components almost 11% of the total 500 TTM earnings as free munnie…
AND hold up… this does NOT include what other S&P500 industrial firms are getting directly from Treasury in interest on their retained earnings being saved in USTs and from Bill discounts…
Total S&P500 cash is nearly $3T so now 5% UST interest on that $3T USD savings is almost another $150B…
Government currently providing S&P firms with almost 20% of previous ZIRP era earnings as free munnie…
🤔
Revised up this week…. Art degree monetarist morons no gonna likee…. Will want to accelerate rate increases…
US @AtlantaFed GDPNow Q1: 2.5% (prev 2.2%)https://t.co/GIJHH2ZMsR pic.twitter.com/FRwbrEmK82
— LiveSquawk (@LiveSquawk) April 14, 2023
Prices are not going to be reduced any time soon…. Biden Fed people will keep increasing the rates too which will make monthly payments even higher…. Keep maintaining and repairing your current car bro…
Used car inventories are still falling.
— CarDealershipGuy (@GuyDealership) April 14, 2023
We’re now at only ~2M available units on dealer lots across the *nation*.
The LOWEST on record.
This is a brief and targeted commentary by EPI’s Josh Bivens to which I have added input. The Fed has been flailing away at the economy in the belief Labor is the issue. Josh contends, product or profit markups have been a major issue. He does provide a foundation for his posit.Angry Bear
I look to the supply chain issue(s) as the basis for the higher profits. I experienced similar in getting componentry in 2008-2010. With less supply and a lengthen (and silly lead times) lead time, companies increased prices not due to cost but because they could on items like semiconductors. I was the guy on th other end of the phone listening to the excuse for a higher price. They raised prices because they could and this component was specified by automotive. The manufacturer knew it and we knew it.
It took a while for the market to normalize. I believe we will see similar shortages before a return to normalcy in today’s environment.
I do not make a major case for supply chain here. Instead I concentrate on Josh’s points....
This article is a grab bag of comments on the paper: “Deficits Do Matter: A Review of Modern Monetary Theory” by Farah Omran and Mark Zelmer. I have mentioned this article before, for the good reason that Mark Zelmer will be on the other side of a panel on Modern Monetary Theory (MMT) that I will be on in late May....Bond Economics
This week is a big data week. Today the Australian Bureau of Statistics (ABS) released of the latest labour force data (April 13, 2023) – Labour Force, Australia – for March 2023. The March result is weaker than February’s strong outcome but still relatively robust. Employment rose with a bias towards full-time work and kept pace with population growth such that unemployment fell marginally. The employment to population rose modestly. Overall a good result. Some caution needs to be observed though – the underlying (‘What-if’) unemployment rate is closer to 4.9 per cent rather than the official rate of 3.5 per cent, which indicates the labour market still has slack. The downside is that the broad underutilisation rate rose 0.3 points to 9.7 per cent and that means there are still 1,402.7 thousand Australian workers without work in one way or another (officially unemployed or underemployed). That extent of idle labour means Australia is not really close to full employment despite the claims by the mainstream commentators. The falling inflation rate coupled with the steady labour market which is maintaining relatively low unemployment runs counter to the RBA model, that is being used to justify the interest rate hikes. Guess which one is wrong?…William Mitchell — Modern Monetary Theory
So now he’s going to tell the Biden people to keep increasing the rates… Summers wants to demonstrate that Monetarism works and re-establish Monetarisms dominance after 15 years of ZIRP which resulted in no Art Degree “inflation!” ….
This over any other real economic or Democrat political objective... Democrat left AWOL on this except maybe Pocahontas…
iow if they think their "inflation" comes down but there is no commensurate recession after all of these extreme unprecendented rate increases then Summers will consider it a failure of policy …. not a failure of Monetarism…
This analysis from Ricardo Trezzi, who does careful work in the inflation front, is concerning. It suggests that wage inflation, which I regard as the best “super core” inflation measure, may have not been decelerating. This would make the @federalreserve's already difficult…
— Lawrence H. Summers (@LHSummers) April 11, 2023
NOTE: THIS IS THE ENGLISH ORIGINAL OF A COLUMN SPECIALLY COMMISSIONED BY LEADING RUSSIAN BUSINESS DAILY VEDOMOSTIVK
Most assessments of the effectiveness of sanctions on Russia, with some exceptions, hold them to have been highly effective. My new INET Working Paper analyzes a few prominent Western assessments, both official and private, of the effect of sanctions on the Russian economy and war effort. It seeks to understand the goals of sanctions and bases of fact and causal inference that underpin the consensus view. Such understanding may then help to clarify the relationship between claims made by Western economist-observers and those emerging from Russian sources – notably from economists associated with the Russian Academy of Sciences (RAS). As we shall see, Russian views parallel those in the West on many matters of fact yet reach sharply different conclusions....
Last Friday (April 7, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – March 2023 – which revealed continuing employment growth and rising participation with unemployment falling modestly. A good confluence of events. We have been looking for a turning point in the US labour market after several months of interest rate increases. But it hasn’t come yet. Indeed, it is going in the opposite direction to that envisaged by the Federal Reserve ‘model’, upon which they justify their interest rate decisions. Guess which is wrong? Most of the aggregates are steady and in terms of the pre-pandemic period, March’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 in the face of the Federal Reserve interest rate hikes....William Mitchell — Modern Monetary Theory
I have been tied up courtesy of a major power failure, Easter, and other family obligations. Over the weekend, there was a blow up on Twitter between Richard J. Murphy and what appeared to be dozens of Modern Monetary Theory (MMT) proponents. (I ignore any Twitter thread involving lots of people and lasts more than a day, so I cannot fill in more details.) The dispute was about the role of taxes (although it devolved into whining about attitudes). Since many of my readers will have found me via Twitter, I just want to explain why this is largely a non-issue....Bond Economics
The turning point came on 26 February, 2022, when Washington’s neocons – in a glaring display of their shallow intellects – decided to freeze and/or steal the reserves of the only nation on the planet equipped with all the commodities that really matter, and with the necessary nous to unleash a momentous shift to a monetary system not anchored in fiat money.
That was the fateful day when the cabal, identified by journalist Seymour Hersh as responsible for blowing up the Nord Stream pipelines, actually blew the whistle for the high-speed de-dollarization train to leave the station, led by Russia, China, and now – welcome on board – Iran and Saudi Arabia.…
An earlier post offered what is for me a fairly large change of orientation on fundamental questions of social ontology: a conviction that the concept of ontological individualism is no longer supportable. My concern there was that this phrase gives too much ontological priority to individual actors; whereas the truth about the social world is more complex. Individuals are indeed the substrate of social structures and entities, but social entities are in turn constitutive of individual social actors.
The implication is that our social ontology needs to give equal priority to both actors and structures. But how can we make sense of these three ideas in a non-paradoxical way:
Why is this significant? MMT is a type of institutional economics, for example. Institutional arrangements are some of the structures that Daniel Little mentions as being causal factors in social science, including economics.
Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva on Thursday said the world economy is expected to grow less than 3 percent this year, with India and China projected to account for half of global growth in 2023....
The rapid rise in interest rates across the yield curve has increased the broader public’s interest in the exposure embedded in bank balance sheets and in depositor behavior more generally. In this post, we consider a simple illustration of the potential impact of higher interest rates on measures of bank franchise value....
We start to see the absurdity of the current reliance on monetary policy as a counter-stabilisation tool, when you read the calls from the Bank of England Monetary Policy Committee member talking about the risk of a ‘significant inflation undershoot’. In a detailed analysis of the current situation, the external MPC member noted that inflation was falling faster than expected because the supply constraints were reversing quickly. She also noted that the interest rate hikes had now reached a point where unemployment was certain to rise and lead to, in the face of the supply reversals, to deflation. And that would require faster and larger interest rate cuts. Here is an insider admitting that the Bank of England is more or less gone rogue and out-of-step with reality. Overshoot at the top of the hiking cycle, swinging to a massive undershoot at the bottom. Absurd....William Mitchell — Modern Monetary Theory
Conclusion
More research is clearly needed to understand the best measures of inflation to inform macro models, especially as the U.S. economy continues to respond to structural changes. There is a need for both an accurate understanding of capacity constraints in the economy, and a consistent measure of changes in inflationary expectations—and these may not be well captured by any one measure, let alone the measures traditionally used. For U.S. policymakers, the challenge is twofold. They need to calm inflationary expectations on the one hand, even if expectations are not based on a full understanding of what may persistently drive future inflation, while also preserving the health of the economy itself on the other. Balancing these needs will also require reexamining old assumptions.
Measuring inflation is hard. Official statistics are very good at measuring inflation, but how to use those measures is more tricky because it is conceptually difficult and context dependent. The COVID pandemic makes the application of go-to inflation measures even more challenging as it created unprecedented shifts in spending across sectors, leading to shifts appearing as increases or decreases in major components of primary inflation measures.
It’s Wednesday and so I have a few items to discuss followed by some music. Many readers have E-mailed me asking about last week’s decision by the OPEC+ cartel to cut production of crude oil by 1.66 million barrels per day. Taken together with the previous cuts (2 millions barrels per day) in October, this pushed the price of oil up within a day or so back over $US80 per day. Many commentators immediately announced this would drive inflation back up and force central banks to go harder on interest rates. I disagree with those assessments. When analysing cartel behaviour (and OPEC+ is such an organisation), one has to distinguish between price stability and price gouging exercises. As I explain below, I believe OPEC+ to be engaged in a price stabilising activity in the face of anticipated reductions in global demand for crude oil. The risk is that demand will fall further than the producers expect and they will have to make further cuts. But even if the new price level holds, that won’t really trigger a new bout of accelerating inflation.Cartel pricing as an economic indicator based on supplier expectations. Is a slowdown in the growth of the global economy in the offing?
As a further comment on “funded” public pensions (link to previous note), I just want to comment on the side effects of such “funding.” (To recap, a central government could create fictitious bonds to match “pension contributions,” which has the same cash flows as a pure “pay-as-you-go” scheme. The alternative Canada has switched towards is to buy financial assets with the “pension contributions” — although some of those assets would be reinvested in bonds guaranteed by the Government of Canada.) As I discussed, this is economically equivalent to the Government of Canada levering up its balance — issuing bonds to the private sector to buy private sector assets.Usually the logic behind what a neoliberal government does is some special interests' profits.
In this article, I will make some random comments about the implications of that policy. Although I believe that the procedure is somewhat silly from an economic standpoint, there is a logic behind it.
The Chinese people are such fanatics about educating their offspring that the Chinese government felt it needed to step in and give the kids a break by liming their exposure to both formal education (amount of homework) and informal education (after-school tutoring).
Tutoring was a growth industry in China until the reforms curtailed it. It had already expanded outside mainland China and now the push is on to expand it further to make up for the market lost in China. It serves not only Chinese living abroad but other Asian, Asians in general tending to be obsessed with education in comparison with Western interest in it.
Education and health are key components of a nation's infrastructure. Infrastructure provides both a tangible foundation for national progress and also an intangible one in terms of the quality of human resources assessed on the basis of the ability to apply knowledge and skills and to grow. This constitutes labor as a factor of production versus capital and land.
If you are interested in education or China, this is an interesting article that takes only a couple of minutes to read.
Sixth Tone