Oh No, Panic In Silicon VAlley — Brian Romanchuk

The American Federal Deposit Insurance Corporation (FDIC) made the unusual step of shutting down the flailing Silicon Valley Bank (hereafter, SVB) during business hours yesterday (Friday). (FDIC Friday usually involves teams swooping in after the close on Friday.) Since I have to write this article quickly in the morning, I am not sure of what the latest developments are for SVB, rather I want to discuss the possibility of contagion....

Bond Economics
Oh No, Panic In Silicon VAlley
Brian Romanchuk

Yet More Rambling About My Upcoming MMT Presentation — Brian Romanchuk

Along with Eric Tymoigne, I will be on the “pro-” side of a “pro-/con-” Modern Monetary Theory (MMT) panel at the online part of the annual Canadian Economic Association (CEA) conference (on May 30, the live conference is in early June in my old hometown of Winnipeg). As a non-academic non-economist, if I were smart, I would keep my head down and offer fairly cautious remarks from the perspective of an educated outsider (with obvious biases). Whether that happens when I start opening my mouth remains to be seen (“No plan survives contact with the enemy”).

Bond Economics
Yet More Rambling About My Upcoming MMT Presentation
Brian Romanchuk

Do Interest Rates Really Drive the Economy? — JW Mason

Confirms that demand and not rate of interest affects firms' investment decisions. However, interest rates do affect the economy through mortgage rate and banks' loan policy, that is, through the housing channel (which is accounted for as investment). 

Raising the interest rate increases the interest rate on mortgages, which decreases the demand for housing over time, i.e., there is lag estimated at about two years. A lot of other demand is also connected to demand for housing, making housing demand a potent economic factor albeit a lagging one.

On the other hand, raising the interest rate also increases the payout on government securities and also interest payments on reserves, which adds to government spending. This happens immediately.

Brave New World
Do Interest Rates Really Drive the Economy?

JW Mason | Associate Professor of Economics at John Jay College, City University of New York and a Fellow at the Roosevelt Institute

Fed's Flow of Funds: Household Net Worth Increased $2.9 Trillion in Q4 — Bill McBride

Numbers.

Calculated Risk
Fed's Flow of Funds: Household Net Worth Increased $2.9 Trillion in Q4
Bill McBride

White House requests $842 billion to fund Pentagon in 2024 — Ashley Roque

The White House is requesting $886.4 billion in discretionary funding for national security in fiscal 2024, with $842 billion from that pot bound for Department of Defense coffers — a 3.2 percent increase over the FY23 enacted level.

The administration unveiled its budgetary roadmap today just hours before President Joe Biden was scheduled to touchdown in Philadelphia, Pa., to discuss plans to cut the deficit and fund the federal government next year.…

Breaking Defense

White House requests $842 billion to fund Pentagon in 2024

Ashley Roque

also at Breaking Defense

US Indo-Pacific Command seeks $15.3 billion in new, independent budget request

Justin Katz

William Mitchell — The current inflationary period is not remotely like the 1970s

In the light of recent debates about whether we are back in the 1970s, where the only ostensible similarity is that inflation has accelerated over the last year or so, I dug into my data archives to remind myself of a few things. One of the problems with dealing with official data is that it gets revised from time to time and time series become discontinuous. So the labour market data for Australia tends to start in February 1978 when the Australian Bureau of Statistics moved to a monthly labour force survey. Researchers who desire to study historical data have to have been around a while and have saved their earlier data collections (such as me). But it is often impossible to match them with the newer publicly available data. You will see in what follows how that plays out. But, I was also interested to return to the past today after the ABS released their latest – Industrial Disputes, Australia – data (released March 9, 2023), which shows that disputes remain at record lows. So in what follows I show you how far removed the current situation is from what happened in the 1970s and this renders the narratives from our central bankers a pack of lies….

William Mitchell — Modern Monetary Theory

The current inflationary period is not remotely like the 1970s

Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

William Mitchell — RBA is engineering one of the largest cuts to real disposable income per capita in our history

Yesterday (March 7, 2023) two big things happened. The first is that I got a lovely bunch of sunflower blooms for my birthday present. Which was ace. The second, the RBA Board wheeled out the governor to announce the 10th consecutive interest rate rise even though inflation has been falling for several months. The RBA has now become preposterous and the Government should definitely terminate the tenure of the Governor in September when his term is up for renewal. In the meantime, it should clean the RBA Board out, or introduce legislation that says each member including the governor gets the real disposable loss that they are imposing on the worker deducted in percentage terms from their own salaries. A further deduction would be made (quantum to be determined) for each percentage point the unemployment rate rises. That might give them pause for thought. The music segment will definitely lift your spirits after reading through the following gloom..…

William Mitchell — Modern Monetary Theory
RBA is engineering one of the largest cuts to real disposable income per capita in our history
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

China’s grand plan for a world-beating digital future — Jeff Pao

 The Digital Age, knowledge revolution, and data harvesting are embraced by the Chinese leadership as national policy. This is an huge step in getting numbers on a whole system in real time.

New ‘Digital China’ vision a response to US tech curbs as authorities outline a ‘whole nation’ approach to going digital 

Asia Times
China’s grand plan for a world-beating digital future

Jeff Pao

Dems pursuing 10.2% unemployment into 2024 election

 

Mr Haney debriefs Powell yesterday to identify the GOP dream scenario for 2024:

“To get inflation down to 2.2%, based on history, unemployment would have to go to 10.6%."

Both Sen Kennedy & Jerome Powell could be right.

pic.twitter.com/yWIjQVTxHZ

— Patrick Bet-David (@patrickbetdavid) March 8, 2023

Dementia Brandon telling Fed to “stay the course!”, while Pocahontas not so sure:

WATCH🚨: Federal Reserve Chair Jerome Powell: “We are taking the only measures we have to bring inflation down.”

Sen. Elizabeth Warren (D-MA): “And putting 2 million people out of work is just part of the cost, and they just have to bear it?” pic.twitter.com/ctJ1Nyv9eM

— Officer Lew (@officer_Lew) March 7, 2023

Trump will eventually add a severe policy rate reduction to his economic platform to reduce the financing costs of his economic recovery plan and reduce any unemployment but not until it would be too late for dumb Dems to possibly tell the Fed to reverse in response… 

BAC pushing recession forecast back to 2Q 2024:

BANK OF AMERICA CEO: US INTEREST RATES TO BEGIN FALLING Q2 2024

BANK OF AMERICA CEO: DONT THINK WE WILL SEE DEEP US RECESSION

— *Walter Bloomberg (@DeItaone) March 6, 2023

So this money center bank planning for recession mere months before the 2024 election…

Debt/GDP Ratio: Beware "Real Analysis" — Brian Romanchuk

I saw a comment about the drop in the U.S. Federal debt-to-GDP ratio, which reminded me that I wanted to discuss it once the data started to settle down. As can be seen in the above chart, the public debt-to-GDP ratio went from 135% in 2020Q2 to 120% in 2022Q3 (latest figure on FRED). A drop of (roughly) 15% in the ratio without some kind of “austerity” policies might seem surprising — but it is only surprising if you look at debt dynamics the wrong way. That wrong way is relying on “real” variables — real GDP growth, real interest rates — as well as thinking too much about long-term “steady state” or “equilibrium” values.

The reliance on “real analysis” (ha ha) leads to silly things like charts of the U.S. debt/GDP ratio marching in a straight line towards 200%. (Yes, CBO, I am not laughing with you.) This framing also leads to neoclassical economists going on about the question: is r greater or less than g?...

Bond Economics
Debt/GDP Ratio: Beware "Real Analysis"
Brian Romanchuk

Russia Remains India’s Top Oil Supplier For Fifth Month In A Row — Cyril Widdershoven

Looking like a trend.

Oilprice
Russia Remains India’s Top Oil Supplier For Fifth Month In A Row

Cyril Widdershoven

Also at Oilprice

China is the largest buyer.

Germany Is Still The Second-Largest Buyer Of Russian Fossil Fuels

Zero Hedge

Also

Netting in rubles and yuan.

Most interesting point. Russia has technology and China has manufacturing capability. (This includes military. non-military, and dual use.)

TASS (Russian state media)
Russia, China can complement each other in trade — expert

How Could Western Intelligence Have Got It Wrong, Again? They Didn’t. They Had Other Purposes — Alastair Crooke

How is this different from conventional economics and monetarism, with a similar result. Fail (for the little guy). Great for the fat cats.

Strategic Culture Foundation (sanctioned by the US Treasury Department)
How Could Western Intelligence Have Got It Wrong, Again? They Didn’t. They Had Other Purposes
Alastair Crooke | founder and director of the Conflicts Forum, and former British diplomat and senior figure in British intelligence and in European Union diplomacy

Yuan squeezing out dollar on Russian market – Kommersant

The Chinese currency has outperformed the greenback by volume of trading on the Moscow Exchange for the first time on record.

RT — Question More (Russian state-sponsored media)
Yuan squeezing out dollar on Russian market – Kommersant
The Chinese currency has outperformed the greenback by volume of trading on the Moscow Exchange for the first time on record

America’s Chips War With China: Another Sanctions Backfire Coming? — Yves Smith

Have US leaders thought this through? Have they a history of thinking things through?

Naked Capitalism
America’s Chips War With China: Another Sanctions Backfire Coming?
Yves Smith

Simpler Math Predicts How Close Ecosystems Are to Collapse — Anna Gibbs

By replacing thousands of equations with just one, ecology modelers can more accurately assess how close fragile environments are to a disastrous “tipping point.”…

A recent breakthrough in the mathematical modeling of ecosystems could make it possible for the first time to estimate precisely how close ecosystems are to disastrous tipping points. The applicability of the discovery is still sharply limited, but Jianxi Gao, a network scientist at Rensselaer Polytechnic Institute who led the research, is hopeful that in time it will be possible for scientists and policymakers to identify the ecosystems most at risk and tailor interventions for them.

Last August in Nature Ecology & Evolution, Gao and an international team of colleagues showed how to squish thousands of calculations into just one by collapsing all the interactions into a single weighted average. That simplification reduces the formidable complexity to just a handful of key drivers.

“With one equation, we know everything,” Gao said. “Before, you have a feeling. Now you have a number.”

 Putting a number on it is one thing; getting a clock on it is another.

Quanta
Simpler Math Predicts How Close Ecosystems Are to Collapse

Anna Gibbs

William Mitchell — German Bundestag body’s MMT overview exposes the hidden agenda – the population simply can’t be allowed to understand MMT

The Scientific Advisory Department of the Deutscher Bundestag recently (January 27, 2023) released a discussion paper – Modern Monetary Theory – An overview – which really exposes what all the opposition to our work is about. Initially, I was interested to learn from the discussion paper that I was a US economist after thinking all these years that I was Australian by birth and citizenship. Perhaps that error tells you something about the quality and depth of the research effort that the authors undertook. The paper recognises that Modern Monetary Theory (MMT) is “an economic school of thought that has existed for around 25 years” but is hazy on the provenance, ignoring that at the beginning there was Warren Mosler, Randy Wray and myself. Rather interestingly, the discussion paper claims that there is no disagreement among the mainstream as to the theoretical and conceptual elements of MMT. So the mainstream all agree with us now! That is quite an admission. But, as one gets further into the discussion, it becomes obvious that the authors miss the point when they start talking about MMT policies. What their critique of MMT illustrates is that the real antagonism to our ideas is that they might open up wider policy options to the public than the political process cares to admit. Or, in other words, the real problem is that an understanding of MMT exposes the TINA mantra – that allows governments to maintain policies that advance the interests of the few at the expense of the many – as wanton neglect of the responsibilities of government. That exposure, if sustained, would alter the whole policy terrain and challenge the hegemony of the elites. That is what the opposition to MMT is about.

While Bill's criticisms are well-taken, the presentation of MMT is actually more positive than I would have expected judging from most of the things I encounter about what MMT purportedly is (NOT). 

In other words, it is a presentation that is the basis for further discussion, which Bill undertakes, rather than being worthy of dismissal out of hand as hopelessly delusional. Bill acknowledges what the analysis gets right and where it goes off-track, showing how it can be improved to correctly reflect the MMT position.

So I would regard this as a step forward, especially since it gives exposure to MMT, on the principle that there is no such thing as bad publicity. Better to be talked about negatively than ignored. I would count it as "progress" — sort of. The ball is advancing down the field — "first they ignore you, then they ridicule you, then attack you, and then you win,"paraphrasing a quote often misattributed to Gandhi.

William Mitchell — Modern Monetary Theory
German Bundestag body’s MMT overview exposes the hidden agenda – the population simply can’t be allowed to understand MMT
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Here Comes China! – Global South

Extracts from and comments on Godfree Roberts's "Here Comes China" newsletter.

Global South
Here Comes China! – Global South
amarynth

The Valdai meeting: Where West Asia meets multipolarity — Pepe Escobar

The 12th “Middle East Conference” at the Valdai Club in Moscow offered a more than welcome cornucopia of views on interconnected troubles and tribulations affecting the region.

But first, an important word on terminology – as only one of Valdai’s guests took the trouble to stress. This is not the “Middle East” – a reductionist, Orientalist notion devised by old colonials: at The Cradle we emphasize the region must be correctly described as West Asia.

Some of the region’s trials and tribulations have been mapped by the official Valdai report, The Middle East and The Future of Polycentric World. But the intellectual and political clout of those in attendance can provide valuable anecdotal insights too. Here are a few of the major strands participants highlighted on regional developments, current and future:

The Cradle
The Valdai meeting: Where West Asia meets multipolarity

Pepe Escobar

Congress MIT graduate demonstrates reification error

 

STEM graduate from MIT exhibits the most sophomoric of cognitive reification errors and thinks Accounting abstractions are real:

Maybe should have taken some Accounting and Finance STEM electives… 

Analogy doesn’t work…  No forms of figurative language work…  

This thing going viral on Truth Social with numerous likes….

ECNS — Number of Chinese netizens rises to 1.06 billion

Short slide presentation, mostly numbers.

ECNS (Chinese official English news service)
Number of Chinese netizens rises to 1.06 billion

Staff

Long-form article with details also at ECNS

The report shows the internet environment has continued to improve, and the increase of Internet of Things (IoT) terminals has promoted the connection of everything.

5G is already widespread and increasing quickly.

Number of Chinese netizens rises to 1.06 billion; internet availability rate reaches 75.6%

Also at ECNS

China likely to achieve 6 percent or even higher GDP growth in 2023: expert

Financial Markets And Inflation — Brian Romanchuk

Note: this is an unedited draft chapter section from my inflation manuscript. I am not too happy with this, but perhaps getting savaged on the internet might give me some additional things to add. This section follows more detailed discussions of equities and residential real estate.

We will now conclude this chapter with some general comments on the relationship between inflation and the overall financial markets. What we see is that there are some areas of direct linkage between inflation (as measured by a consumer price index) and some financial assets, other assets have a more complex relationship. As a result, making generalisations is difficult – equity prices are not going to move the same way as the prices of cheesy snacks at your local convenience store.…

Bond Economics

Financial Markets And Inflation
Brian Romanchuk

The Cradle — Iran discovers world’s second largest lithium reserve

 Iran's lithium deposits are estimated at 8.5 million metric tons, which would make it the world's second largest lithium reserve after Chile

Irony.

The Cradle
Iran discovers world’s second largest lithium reserve

US CPI

 

This is US CPI… I don’t know if this is what the Art degree monetarist morons mean by their figure of speech “inflation!” but maybe… I don’t understand a lot about how these peoples non technical brains work… Anyway if you look at this price index it hasn’t peaked as of the January report…

This is in contrast to Bills report on Australia below… you can’t say the US CPI has peaked…

It seemed to have peaked looking at the December report at 297 but now since January 1 we’ve had a significant impulsive increase in fiscal flow and January reported a 2 point increase in this index to a new high…. so this appears to have the Art degree monetarist psycho morons panties all in a twist with all the drama…

By June 2022 with the Biden peoples global economic sanctions constraining supply chains CPI was up to 296 now in January 2023 299… YoY number up from January 2022 at 281.   281 to 299 = 6.4% 

6.4% is a lot higher than the monetarists 2% ideal…

If we can hold prices here at this 299 level (or perhaps get a reduction) then come June 2023 the YoY is going to be from 296 to 299.   296 to 299 = 1% annual …. Then what?  Monetarists will again be below their 2% ideal…

These psycho morons going to reverse?

A lot will be riding on the February CPI report due March 14th with these people…

William Mitchell — Inflation has probably peaked in Australia – yes, it was a transient episode

Given yesterday’s extensive National Accounts analysis replaced my usual Wednesday blog post, I am using today to discuss a range of issues and provide a musical interlude into your lives for peace. Yesterday’s bad National Accounts data release took the headlines away from another data release from the ABS yesterday – the monthly CPI data results. Inflation is falling in Australia and has probably peaked. The RBA still thinks it is going to hike rates a few more times. As more data comes out, their cover (justifications) are evaporating by the day and it is becoming obvious that they are pushing rates up because they want to reclaim the territory as the ‘boss’ of macroeconomic policy irrespective of the costs and hardships they impose on lower-income Australian families. Shocking really. I also look at the new RadioMMT show which launched last week. And the debate about Covid continues but the evidence is being distorted badly by those who continue to claim it was all a conspiracy to bring us to heel. And then some music.

William Mitchell — Modern Monetary Theory
Inflation has probably peaked in Australia – yes, it was a transient episode
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia P

Treasury Department will lead a new working group to explore a possible launch of a digital dollar

 

This will eventually happen but that’s not the point… here’s the thing:  the whole USD system will go CBDC…. The WHOLE THING….  and then… these Art degree monetarist morons will STILL insist the abstractions are REAL! …. They will!  …. Lock it…

The Treasury Department will lead a new working group that to explore a possible launch of a digital dollar https://t.co/fhTPuOKmnP

— Bloomberg Economics (@economics) March 2, 2023

William Mitchell — Australian National Accounts—GDP growth in decline, expect unemployment to rise—courtesy RBA sabotage

The Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, December 2022 – today (March 1, 2023), which shows that the Australian economy grew by 0.5 per cent in the December-quarter 2022 and by 2.7 per cent over the 12 months. This is a significant decline in growth, which is now insufficient to prevent unemployment from rising over the coming period. Growth is being driven largely by continued (but moderating) growth in household spending. This was augmented by the strong rebound in the Terms of Trade (commodity prices), which helped net exports make a positive growth contribution. There was growth in employee compensation (the wage measure from the national accounts) of 3.2 per cent but that was largely due to administrative decisions (for example, minimum wage increases) that impacted in this quarter rather than being the result of market pressures. Households are now saving less relative to their disposable income in an effort to maintain consumption growth in the face of rising interest rates and temporary inflationary pressures. I expect growth to decline further and we will be left with rising unemployment and declining household wealth as a result of the RBA’s poor judgement....

William Mitchell — Modern Monetary Theory
Australian National Accounts – GDP growth in decline, expect unemployment to rise – courtesy RBA sabotage
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

China identifies roots of US crackdown on TikTok — RT

The US has been over-stretching the concept of national security and abusing state power to suppress foreign companies,” she continued. “We firmly oppose those wrong actions. The US government should respect the principles of market economy and fair competition.”...

RT — Question More (Russian state-sponsored media)
China identifies roots of US crackdown on TikTok

Logistics of the 21st Century & New Economic Order: Prospects for a New North-South Transport Corridor — Muhammad Athar Javed

The emergence of “New Economic Order” would transform the way logistics and transport in global market is being carried out. The North-South Transport Corridor (INSTC) member countries must contribute effectively for the overall development of corridor i.e., the improvement of inland waterways, security of container and general cargo terminals in Caspian ports, the modernization of border crossing points and the construction of logistics hubs and roadside service facilities, writes Muhammad Athar Javed, founder, CEO of Pakistan House, especially for the 12th Valdai Club Middle East conference.

The big news now is that the Global South/East are coming online economically as decolonization proceeds and is now picking up speed. Until recently, "the world economy" largely meant that of the Global North/East, with the Global South being relegated to colonial status. That is ending as the pcae of development increases in Asia, Latin America, and Africa and they become more assertive, demanding a proportionate piece of the pie, since growth in this century promises to come largely from this area.

Javed observes that owing to the current conflict and imposition of sanctions on Russia, Russia has become more active in developing its relations with other countries of the Global South/East, thereby opening economic corridors that previously had only been contemplated. 

Longer term, either Europe joins this endeavor or isolates itself from the major sources of growth on the world island, as British geographer Halford Mackinder called Eurasia/Africa in his influential 1904 lecture/article, "The Geographical Pivot of History" that launched the study of geopolitics and geostrategy. His thesis was that whoever controls Eurasia controls the world. As a result, Russia has been viewed as a geopolitical football.

Javed concludes with the warning that other interested parties will try to sabotage this economic trend toward the Global South/East.

This is an important article as a backgrounder.

Valdai Club (Russia)
Logistics of the 21st Century & New Economic Order: Prospects for a New North-South Transport Corridor
Muhammad Athar Javed, founder and CEO of Pakistan House, an independent policy institute based in Bronshoj, Denmark, and Islamabad

We were promised ‘economic shock and awe’ against Russia — Andrew Cockburn

Maybe economic warfare is not all that it was cracked up to be. Or maybe not. Blowback from it is rocking the NATO alliance as NATO countries buckle economically. The only NATO country profiting from the crisis is the US and other NATO countries view this as at their expense, although, being vassal states, they can only whine about it.

What went wrong? The world economy is a system and the US failed to grasp Russia's place in the system and also the state of the system itself. As a result, assumptions turned out to be wildly wrong since they were not reality-based but rather figments of fantasy. 

Thus far, this has turned out to be a monumental strategic blunder.

The overall result is biasing the world system against the Global North/West in the Global South/East much to Western consternation as its former dominance fades markedly. The information war on the part of the West has failed in the Global South/East as China and India support Russia economically and Russia supports them with resources.

However, the game is far from over. The combined West is still powerful economically and is reacting. But this West now facing a strategic alliance of Russia, China and Iran that is open about its aims, which it views as existential. Putin declared recently that this conflict is existential for Russia, fulfilling the requirement for the first use of nuclear weapons. Moreover, Russian nuclear doctrine is under revision to bring it in line with US doctrine, which allows for a preemptive first strike. (And while North Korea is not usually mentioned as part of this alliance, it is for all practical purposes.) 

This is US foreign policy realists' worst nightmare scenario, since China reputedly having great national capacity than the US, UK and continental Europe combined, and Russia is a nuclear peer.

And it could get worse if Russia shares military technology with China, Iran and North Korea. Moreover, no one in the West seems to know if this has already occurred and if so, to what degree.

Not to mention that the pace is increasing one might say, "exponentially," chiefly owing to US and UK brinksmanship.

So, failure of the economic war that was supposed to crash the Russian economy in weeks has resulted in a strategic upheaval following the US refusal to acknowledge Russia's security needs.

Responsible Statecraft
We were promised ‘economic shock and awe’ against Russia

Andrew Cockburn

See also

Strategic Culture Foundation (sanctioned by the US Treasury Department)
Manichaeism and ‘An Ideology of Liberal Empire’ – Biden’s Forever Cosmic War Against Russian ‘Evil’
Alastair Crooke | founder and director of the Conflicts Forum, former British diplomat and senior figure in British intelligence and in European Union diplomacy

Euro stoxx banks reached highest since 2018 on inflation data

 

ECB finally went non-negative IOR….

Euro stoxx banks reached highest since 2018 on inflation data. pic.twitter.com/sxCz7ratzu

— 🅰🅻🅴🆂🆂🅸🅾 (@AlessioUrban) February 28, 2023

Europe bourses following their banks back up… same thing should happen here on the rate increases…  Brandon starting WW3 not withstanding…

BofA now joining JPM with a call for 6%:

Fed Might Raise Policy Rates To 6%, BofA Says - RTRS https://t.co/Nt9xA46vZE

— LiveSquawk (@LiveSquawk) February 28, 2023

🤑🤑🤑🤑🤑