Friday, January 31, 2014

Noah Smith — Why does America have potholed roads, low taxes, and high inequality?


"Racial redistribution"and the Southern strategy?

Noahpinion
Why does America have potholed roads, low taxes, and high inequality?
Noah Smith

Frances Coppola — Why the Fed should not taper alone


My latest post at Forbes endorses Raghuram Rajan's call for there to be permanent co-operation between the central banks of the G20. Business is global: financial markets operate across borders. Countries no longer have genuinely independent monetary policy. Monetary policy needs to be co-ordinated internationally, with the Fed as "first among equals". Whether intentionally or not, the Fed has become the de facto central bank of the world. It is time it behaved like it.
Coppola Comment
Why the Fed should not taper alone
Frances Coppola

It would say rather we need to address the issue of central banking and global organizations like the IMF and World Bank, not to mention the BIS as the central banks's bank, as instruments of global policy based on neoliberalism, which is antithetical to democracy.

The idea of central banks at the head of a global command economy under the rubric of "free markets, free trade, and free capital flows" is an oxymoron. It is the antithesis not only of democracy but also capitalism.

In fact, I regard this as one of the greatest dangers facing humanity as we enter the global age. It is recipe for greater centralization and crystallization of a power structure based on class structure, opening the door to a totalitarianism of capital aka fascism.

I am all for international cooperation but not on the basis of technocracy that supersedes democracy. The devil is in the details.

The first thing that needs to be done is to ditch the unrealistic assumptions that underlie the neoliberal view of the world and the socio-economic models that are used to justify it, such as free markets, free trade and free capital flow leading automatically to optimal social, political and economic outcome because it is assumed that they are based on laws of nature. That has no basis in reality.



JW Mason — What Do People Need to Know About International Trade?


Not what most introductory texts teach — more brainwashing for neoliberalism.

The Slack Wire
What Do People Need to Know About International Trade?
JW Mason | Assistant Professor of Economics at Roosevelt University

The Campaign to Neuter Our Fiat

   (Commentary by Roger Erickson)



Neuter our Fiat?
May the gods, universe and our own MiddleClass please take pity upon these sad people for their lack of insight, and lack of situational awareness.

This is a growing, ironically "well funded" and strangely distorted campaign. These folks do NOT grasp semantics OR fiat currency operations.

Over 2000 years ago the Sophists "proved" - using a linguistic loophole since named semantics - that if you owned a cat, and that cat was a mother, that it was therefore "your" mother. Ergo, we all have a responsibility to neuter our mothers.

It took over 2000 years before Walter Shewhart noticed the depth of the resulting problem, and publicly declared that


Seriously, I'm more than half afraid that the Neuter-The-Fiat campaigners might endorse the same faux "logic" - and start neutering their mothers.

After all, just because the process by which a nation creates it's own, sovereign fiat currency is referred to by accountants as a "nominal," fiat debt, and is an expression of Public Initiative or "fiat," .... semantic sophism dictates that the nominal fiat accounting "debt" is OUR real "debt," right? Weepin' Erbles in a Marriner Eccles trap! Is that the best we can do here in the USA, in the year 2014?

Hence, a foolish population and it's public fiat are soon neutered, and hoisted on their own semantics. Worst, the emasculating campaign is funded, ironically, by the very people most desperate to maintain the buying power of their hoarded fiat currency. They desperately want to stop the flow of what they want! What can you do with such simpletons? Send them back to highschool?

Maybe the people running the Neuter-The-Fiat campaign will fall for a dose of their own logic? Fine. I hereby suggest that they maintain their cranial blood pressure by tightening a tourniquet around their neck, one twist per day, until their middle section gives up the battle & dies. They'll succeed, by stopping the flow of what they want.

Maybe it'll werk fer thum!



Scott Kaufman — Florida Ku Klux Klan leader boasts of ‘invisible empire’ of sympathetic public officials (via Raw Story )

Florida Ku Klux Klan leader boasts of ‘invisible empire’ of sympathetic public officials (via Raw Story )
Residents in central Florida have become increasingly aware that the Ku Klux Klan is in their midst. WFTV 9 reports that recruitment flyers for the Florida chapter of the Loyal White Knights of the Ku Klux Klan (KKK) have appeared in neighborhoods throughout…

Chris Dillow — Endogenous Preferences


Who would have suspected that preferences are conditioned instead of given Something else Marx got right, and conventional economists have wrong — which wrecks models assuming stable exogenous preferences.

Stumbling and Mumbling
Endogenous Preferences
Chris Dillow | Investors Chronicle

Kevin Gallagher on capital controls in developing countries


Letter to the editor of The Financial Times recommending capital controls in EMs.

Naked Keynesianism
Kevin Gallagher on capital controls in developing countries
Matias Vernengo | Associate Professor of Economics, University of Utah

Amrit Bhaduri — What Remains Of The Theory Of Demand Management In A Globalizing World?

Preface by Dimitri B. Papadimitriou:

In our era of global finance, the theory of aggregate demand management is alive and unwell, says Amit Bhaduri. In this pol- icy brief, Bhaduri describes what he regards as a prevalent con- temporary approach to demand management. Detached from its Keynesian roots, this “vulgar” version of demand management theory is being used to justify policies that stand in stark contrast to those prescribed by the original Keynesian model. Rising asset prices and private-debt-fueled consumption play the starring roles, while fiscal policy retreats into the background.

Returning to foundations laid down by Keynes and Kalecki, Bhaduri sets out to clarify whether there is any place for traditional demand management policies—featuring an active role for deficit spending and public investment—in the context of financial globalization, and he concludes that such policies are ultimately unavoidable if we are to revitalize the real economy and achieve stability.

This policy brief emphasizes not only that globalization has elevated the relative importance of the external market, but also that we are living through a period in which trade in financial assets, enabled by multinational banks and other financial institutions, overwhelms, in terms of quantitative significance, trade in goods and services and foreign investment in physical assets. This era of financial globalization is marked by layers of private debt contracts that are generated at will by financial institutions—a system of private credit creation that is increasingly centered on a shadow banking system that exists largely beyond regulatory and supervisory control, and (at least formally) with- out the support of a lender of last resort.

While some might insist that the age of global finance leaves little room for the idea of demand management, Bhaduri con- tends that the theory survives, but that it does so in a form that is nearly unrecognizable from the original. This contemporary model of demand management receives its inspiration from the presuppositions of neoclassical economics, and its policy emphasis is often the very opposite of the old Keynesian model. In the context of the mobile and short-term nature of contemporary


financial investment, the perceived need to maintain a healthy climate for finance and protect against the risk of capital flight disciplines and constrains fiscal policy, while elevating the status of price-stability-focused monetary policy. Instead of public investment aimed at full employment, policymakers pursue restrictions on government spending and a shifting of the tax burden away from corporate profits and toward wages and salaries. Bhaduri argues that such policies exacerbate inequality and thereby suppress aggregate demand. To support demand, the “vulgar,” or “Great Moderation,” model hinges on the interplay between expectations of ever-rising asset prices and a consumption boom driven by private debt.

Bhaduri cautions, however, that a model centered on pri- vate credit creation is prone to instability. More and more financial investment is needed to produce greater returns and boost asset prices, continually shifting the composition of investment from the real to the financial and creating the conditions for a delinking of finance from output and employment. When the paths of the financial and real sectors of the economy diverge, when incomes stagnate while debt and asset prices continue to rise, this creates the conditions for a financial crisis. At that point, the government is called upon to inject liquidity into the finan- cial system. But this is not enough, says Bhaduri: it saves the financial sector, but not the real economy. Ultimately, he suggests that a revival of traditional Keynesian demand management, including large-scale, deficit-financed public investment, is needed to return the real economy to a state of health and stabilize the system as a whole.
Amrit Bhaduri
Levy Economics Institute of Bard College Public Policy Brief No. 130, 2014

Yves Smith — Former IMF Chief Economist, Now India’s Central Bank Governor Rajan Takes Shot at Bernanke’s Destabilizing Policies


The consequences of free capital flow as a pillar of neoliberalism.
Narrowly, Rajan is correct, but the underlying problem is much bigger and most orthodox economists are unwilling to confront it because it conflicts with their free markets religion. Carmen Reinhart and Ken Rogoff, in an analysis that got much less attention that their work on debt levels and growth, looked at 800 years of history of crises and found a strong correlation between the level of international capital flows and the frequency and severity of financial crises. That’s implicit in his discussion of the impact of hot money flowing in and out. The Reinhart/Rogoff finding was confirmed by a 2010 paper by Claudio Borio and Piti Disyatat of the BIS that argued that what drives financial crises is not net capital flows (“global imbalances”) but gross capital flows (too much financial “elasticity” as they called it, or what most of us would describe as too much speculation). But Rajan may in fact be referring to remedies like capital controls when he says, basically, that the industrial economies may not like the remedies that emerging economies implement.
Naked Capitalism

Yves Smith 

Ignacio Portes — How the Left Underestimates Chile’s Right-Wing Keynesians

Chile’s caste of technocrats is smarter than what the left generally gives it credit for. The country’s post-dictatorship neoliberals, most of them inside the Socialist-Christian Democrat coalition, not only inherited the disciplined workforce of the Pinochet years, they also have read Keynes, and use his recipes all the time to escape the typical problems that the more fanatic and less pragmatic market fundamentalists create on their own economies, although they do it in quite a conservative way....
The social divide is similar to what it was in the Pinochet years (crumbs notwithstanding), but demands for reform have been successfully contained for more than 2 decades since the end of the dictatorship, and have only recently started surfacing.

And when they surface, what both the Pinochet/libertarian right and the more neoliberal within the Christian Democrat/Socialist Party coalition tell the wannabe reformers is: if we do what you want and start redistributing wealth, helping the unions and so on, all the growth that Chile has benefited from by being so friendly to international capital—all it’s given us, like boosting construction, mining and other dynamic sectors—will go away. And they are right in a sense, because the world is rigged for international capital, which can boycott any government they don’t like by simply moving elsewhere.
In this context, where national workforces are being played against each other to see which of them can serve the market more effectively, it’s hard to see how a movement of students, a couple of trade unionists and well-meaning citizens and some half-assed center-left politicians inside one country could defeat such an octopus of a system. A homeostatic octopus at that, which has the power to regulate its movements in such a way as to control and eliminate any localized effort to reduce its power. Raise your taxes, raise your salaries? How bad, we are going elsewhere then, good luck paying for all that new infrastructure and investment you needed. Behave like a good boy, do what capital says? Good boy, here, have some of my dollars, have a bit of jobs and welfare, at least for as long as the resource-extracting economy lasts or someone starts behaving better than you....
Still, all these extractive, export-based models in Latin America tend to run in the long term into the same problem: whenever the international prices for the commodities they export fall, their highly dependent economies weaken or collapse. When that happens, the masses who more or less kept quiet despite their subordinate position, placated by continued growth, find out they suddenly don’t even have an expanding pie anymore, and even worse, that their rulers are coming for a bigger share of it even if it’s now shrinking, in order to “make the economy more competitive” and re-boot it into profitability and growth, a process which makes class struggle inevitably resurface, exposing the farcical nature of the neoliberals’ harmonious depiction of society, at no small social cost.

So there might be no choice but this: to start thinking of ways of transcending national barriers to stop the race to the bottom, and instead join efforts to confront it. Neoliberalism, neo-imperialism, and neocolonialism still rule through the power of "free markets, free trade, and free flow of capital," along with the power that capital bestows on its owners.
Naked Capitalism
Yves Smith 

How To Usefully Interact With Conservatives .... And Progressives Too

(Commentary posted by Roger Erickson)



Systems do not work in isolation, and the well-being of a person - or a culture of citizens - depends upon the well-being of all the interacting body & cultural systems.

Ya think? So why do we constantly hear liberals/progressives saying that "Conservatives" are at odds with evolution because nothing ever stays the same, while "Progressives" understand we live in a constantly evolving world?

And, why do we constantly hear conservatives saying that "Progressives" are dangerous fools because they don't understand how things work, and want to change everything?

The reality is that there are no unitary Conservatives and Progressives. That is a myth, which too many of us accept as fact, about ourselves. We should know better.

Rather than this myth, the reality is that there is, in every organized system, a continuous spectrum, between those components acting as foundation material, and those components taking the risk of testing what has to start changing as context changes - call them physiological StemCell characteristics, or cultural StemHuman characteristics. Arbitrarily DIVIDING a continuous, undivisible spectrum of complex_component characteristics is senseless and impossible to start with. As Lincoln so aptly noted, a house divided cannot stand.

So why do so many cultures - who are composed of continuous spectra of personality characteristics - so often find themselves pushed and pulled into two, mindlessly opposing and artificial groupings, and then prodded to make civil war, not culture?

Perhaps cultural Civil War is most commonly the result of a 3rd grouping, of cultural parasites, which recruit host components into a cycle of being confused, distracted, divided, and conquered? There are endless tomes written on the topic of social parasites, aka, the "British Strategy" (or simply "politics"), that I'll leave readers to research it on their own.

For now, in the USA, take our conservative/progressive Civil War ... PLEASE!

Have you ever considered simply declining to participate? Instead of being drafted, or volunteering, in yet another senseless war - that benefits no one except various forms of "conflict-industrial-Congressional-complex" social parasites - JUST SAY NO?

The CICC social parasites are the only ones who benefit when you do participate in conflict. Yet we needn't hate them either. Social parasites are simply the consultants that social species hire to search out "bugs" in their social strategies. Cultural evolution is dramatically accelerated by simply regulating resilient defenses against the operational hijacking opportunities that parasites expose. Our job is to simply apply routine patches to our democracy & culture, through timely re-regulation of our own CICC parasites. They don't own us. We own them. We just have to act like owners.

How do we NOT take sides and be drafted into a grouping that breaks up & parasitizes the very affinity that builds Democracy and culture? 

Change your perspective. Once you look at our own situation as though a different context, you can then re-interpret ALL of the same data, differently. Don't accept the paradigm of the CICC parasites.

Here's one alternative to retain affinity and culture, and be able to say ... "I never met a [citizen] I didn't like."

Simply look at the range of the ~320million US citizens, diverse disciplines and many public/private institutions the same way you look at the ~30Trillion cells, ~300cell-types and ~70organs in your own body. None of these grouping need EVER be at civil war! In fact, both aggregates will quite obviously sink or swim together, with the "co-citizens" of their aggregate. The highest return, by far, is the return-on-coordination (teamwork), so all other returns simply don't matter in the long run.

Once you throw off the CICC parasite propaganda, and recover your natural perspective on your own aggregate, a simpler context emerges.

Individual humans are all mosaics displaying both conservative and progressive tendencies as given characteristics in given contexts. If you tally the "yea" or "nay" of an aggregate, on 10,001 topics, you'll find that no two people are equally conservative or progressive on every single topic, nor even consistent on the same topics across different contexts! We are NOT consistent. Instead, we are incredibly diverse. Further, we use that diversity to build the very resiliency that makes both our individual behavior complex and our culture resilient, wealthy and capable. It's an inescapable fact that coordinated diversity drives the success of all social species - whether the social-cells making up  your body, or the social-humans making up your culture.

In may help many people to re-visualize citizens as displaying either Foundation-human or Stem-human characteristics, ON EVERY TOPIC INDEPENDENTLY, not as citizens consistently for or against change on every topic equally.

Once our instantaneous behaviors on every topic are re-described in terms of variable, context-dependent, Foundation-human or Stem-human characteristics, we can picture everyone standing on everyone else's shoulders, ala Isaac Newton - just in interleaved fashion, on all topics simultaneously. That, in a nutshell, is what social species do. ESPECIALLY humans! Human citizens have multifaceted behaviors, personalities and skills, and we all interleave our complex behavioral characteristics together in complex patterns, in real time.

It would surprise no one overmuch to find, say, a religious conservative who plays evenings in a progressive jazz band. Or a social progressive who strictly adheres to conservative diet and lifestyle habits. No single example of mixed conservative/progressive traits would surprise us, for given topics in a given context. We are all mosaics, and change our characteristics to fit context, once altered context is recognized.

Try declining to participate in social frictions urged by CICC social parasites?

So do we EVER need to argue over details? Instead, simply interleave your instantaneous duties, and always help drive Adaptive Social Selection. That's easier if a little patience is applied. Just remember that conservative-tendencies and progressive-tendencies on every instantaneous topic boil down to a simple selection task. For us to thrive as a culture, all our interleaved conservative tendencies on a given subject must simply help select what to keep, from all the progressive inventions offered up by our progressive tendencies.

The Progressive characteristics in all of us take on the risk of standing on the shoulders of Conservatives. Meanwhile, the Conservative characteristics in all of us need only sit back and help select from Progressive inventions. To interleave many selections simultaneously, we invariably practice multi-variate evolution, socially as well as physiologically.*

What could be simpler? Conservatives & Progressives arguing on given topics is pretty much a case of grandparents & grandchildren arguing. It's pointless, and always completely out of context.

###

* There's a simple message - for us as citizens - from all thinking about systems. Namely, that multi-variate adaptation in human aggregates tracks development of diverse perspectives in the electorate. When it comes to developing good citizens, hopefully even our own conservative characteristics can always appreciate the value of a traditional Liberal education.

An electorate can't optimally review data without juggling contexts as well. That's a simple rule of, say, combinatorial chemistry, and multi-variate analysis as well.

If an electorate can't visualize it's own complexity and diversity, it can't leverage it, to explore expanding group options.



US Treasury Spending vs. SP500 Sales


Chart below that depicts leading US Treasury spending vs. SP500 Sales vs SP500 earnings over the recent long term in time domain.

Of interest is the linearity in the growth of both Treasury spending and SP500 sales over the time period leading up to the "GFC" in 2008, about from the years 2001 thru 2007.



While if we look at the below chart depicting the growth in the Fed's H.8 Loans and Leases in Bank Credit over this same time period that we showed here last week, we can see the NON-linearity of the growth in the establishment of these balances over this same time period.




So even though bank credit was growing exponentially, we can see no exponential growth in sales by firms over this same time period.

This observation might make one want to wonder: "Where did the money go?".

"Loans create deposits" is a true statement; and we can see that loans and hence the derivative deposits were being established in exponential growth over this time period, while concurrent sales by the large SP500 firms were not growing exponentially, seemingly responding to the linear growth in leading US Treasury spending rather than non-linear growth in "Bank Credit".

Intuitively we might think that an exponential increase in Bank Credit would lead to an exponential increase in at least sales by firms (if not earnings), but that does not appear to be the way the system is functioning.

Mark Weisbrot — Problems of Eurozone, European Integration Stem From Deeply Unpopular Elite Economic, Social Policy

It was not because of the power of financial markets or because the Germans didn’t want to “help” the Greeks that Europe suffered through about three years of recurring crises, in which the continued existence of the euro was thrown into question, until August of 2012.
It was because the European authorities were using these acute crises, and did not want to resolve them, until they had extracted certain “reforms” from the weaker European economies (and possibly even some of the stronger ones, if we consider the European Fiscal Compact and what the French government has been doing recently). We know this because as soon as the European Central Bank (ECB) wanted to do so, it put an end to these crises in a matter of weeks, in July-August of 2012, by effectively establishing a ceiling on the interest rates of Italian and Spanish bonds – something it could have done at any time in the prior three years.
We also know this because the political agenda of the troika (the ECB, European Commission, and IMF) is spelled out pretty clearly in the IMF’s comprehensive reports on regular consultations with European governments. A review of 67 IMF reports on the 27 European Union countries during the four years from 2008 through 2011 shows a remarkably consistent pattern: reduce the size of government, reduce the bargaining power of labor, cut spending on pensions and health care, and increase labor supply.
Any discussion of the European or eurozone project should have this struggle over economic and social policy at its center....
Truthout | OpEd
Problems of Eurozone, European Integration Stem From Deeply Unpopular Elite Economic, Social Policy
Mark Weisbrot

Thursday, January 30, 2014

Daron Acemoglu and James Robinson — Democracy vs. Inequality

Overall, our results suggest that democracy does represent a real shift in political power away from elites and has first-order consequences for redistribution and government policy. But the impact of democracy on inequality may be more limited than one might have expected.
Though our work does not shed light on why this is so, there are several plausible hypotheses. The limited impact of democracy on inequality might be because recent increases in inequality are “market induced” in the sense of being caused by technological change. But equally, this may be because, as in the Director’s Law, the middle classes use democracy to redistribute to themselves.
But the Director’s s Law is unlikely to explain the inability of the US political system to confront inequality, since the middle classes have largely been losers in the widening inequality trends.

Could it be that US democracy is captured? This seems unlikely when looked at from the viewpoint of our typical models of captured democracies. But perhaps there are other ways of thinking about this problem that might relate the increasingly paralyzing gridlock in US politics to capture-related ideas.
Ya think? Maybe look outside the silo?

Why Nations Fail
Democracy vs. Inequality
Daron Acemoglu, Killian, Professor of Economics at MIT, and James Robinson, David Florence Professor of Government at Harvard University



Yves Smith — George Mangus Warns of Broad Impact of Emerging Markets Turbulence

In the runup to the global financial crisis, George Magnus, who was then chief economist at UBS, was one of the most insightful commentators and was early to call how bad things might get. He’s best known for coining the term “Minsky moment” in early 2007, which he described as when “lenders become increasingly cautious or restrictive, and when it isn’t only over-leveraged structures that encounter financing difficulties . . The risks of systemic economic contraction and asset depreciation become all too vivid.”
Magnus returns and does not find much reason to be optimistic. In a comment today at the Financial Times, he discusses Turkey’s economic and political situation in some detail, and then discusses the potential for continued, widespread upheaval:
Naked Capitalism
George Mangus Warns of Broad Impact of Emerging Markets Turbulence
Yves Smith

David Andolfatto — A bit more on the economics of Bitcoin

One could argue that the USD is at least partially backed by its ability to discharge real tax obligations. But bitcoins truly are purely fiat in nature (they have no intrinsic use in either consumption or production). Does this mean that the value of bitcoins must eventually crash to zero (their fundamental value)? No.

Bitcoins are information -- record-keeping devices. You can't eat my credit history either, but some companies would value (and pay for) this information nevertheless. So as long as Bitcoin conveys accurate information, its value can persist indefinitely.
That is to say, modern money is not only chartal, after Knapp, but also social credit, as Innes observed. Since money is chiefly information, digital money can serve the purpose of money if certain conditions are met. Andolfatto is mildly positive about Bitcoin in this regard.

MacroMania
A bit more on the economics of Bitcoin
David Andolfatto | Vice President, FRBSL

Chicago Fed Letter
Bitcoin: A primer
François R. Velde, senior economist

Ellen Brown — Enough Is Enough: Fraud-ridden Banks Are Not L.A.’s Only Option

“L.A. relies on these banks,” says The Times, “for long-term financing to build bridges and restore lakes, and for short-term financing to pay the bills.” The editorial noted that a similar proposal brought in the fall of 2011 by then-Councilman Richard Alarcon, backed by Occupy L.A., was abandoned because it would have resulted in termination fees and higher interest payments by the city.
It seems we must bow to our oppressors because we have no viable alternative – or do we? What if there is an alternative that would not only save the city money but would be a safer place to deposit its funds than in Wall Street banks?
TINA? No way, says Ellen.

Web of Debt
Enough Is Enough: Fraud-ridden Banks Are Not L.A.’s Only Option
Ellen Brown

Ramanan — Joan Robinson On Economists


Summary: Economics is ideology-ridden and therefore always contains an element of propaganda for a particular normative and prescriptive POV. Honest economists state their bias as part of their assumptions.

the case for concerted action
Ramanan

Bombshell New Book Argues That Capitalism and Democracy Don’t Mix (via Moyers & Company)

Bombshell New Book Argues That Capitalism and Democracy Don’t Mix (via Moyers & Company)
Few books have been met with as much anticipation at Thomas Picketty’s Capital in the 21st Century. A reviewer in the Journal of Economic Thinking declares it “one of the watershed books in economic thinking.” Picketty, an economist at the Paris…

Wednesday, January 29, 2014

Noah Smith — What if preferences are unstable?




















Noah asks, "What if preferences are unstable?" Then they cannot be modeled owing to uncertainty. Experimental research is suggesting just this, and not only "la donna e mobile." There goes key assumptions like REH and EMH, calling into questions econometric and financial modeling as currently practiced. (Sound of heads exploding)

Noahpinion
What if preferences are unstable?
Noah Smith

Mark Karlin — When J. Edgar Hoover Lost and Freedom Won
















Hoover's FBI the precursor of NSA and DHS? J. Edgar Hoover was no Lavrentiy Beria but presidents were still afraid of him. He is largely forgotten now, but he was a major political force in his day as a "grey eminence." "Those who cannot remember the past are condemned to repeat it" — George Santayana. This is definitely such a warning that is appropriate to remember today.

Houses and Holes — Do we need one global currency?














Reviving the bancor as a global reserve currency for international trading purposes, proposed by Keynes but rejected by the US at Bretton Woods.

MacroBusiness — Global Macro: Houses and Holes
Do we need one global currency?
Houses and Holes

Yves Smith — Mirabile Dictu! Post Office Bank Concept Gets Big Boost

Naked Capitalism readers have frequently called for the Post Office to offer basic banking services, as post offices long have in many countries, notably Japan. That idea has gotten an important official endorsement in the form of a detailed, extensively researched concept paper prepared by the Postal Service’s Inspector General. I’ve embedded it and strongly urge you to read and circulate it.
Naked Capitalism
Mirabile Dictu! Post Office Bank Concept Gets Big Boost
Yves Smith

Taper is not the removal of stimulus, it's the opposite













Fed announced it will buy another $10 billion per month in securities. That means monthly purchases down to $65 billion from $85 billion. That means $240 billion of securities remain in the economy, earning interest each year.

At an average of 3% coupon, that means the economy GAINS about $7.5 billion in income. Gaining income is NOT tightening or removal of stimulus.

If the Fed does a $10 billion reduction every month now, that will start to add up quick. For every $10 billion of reduced purchases that equates to about $3.6 billion of new income to the economy. Do the math.

It's stimulus, not removal of stimulus.

The market's got it all wrong.

James Steele: "Absurd, insane deficit obsession" making U.S. income inequality worse"



Steele says, "You don't just need a short-term stimulus now. We need a program planned out over a period of time, not just roads and highways but money pumped into technology, science ... that will be a positive for years to come. Nobody is even thinking about that now unfortunately."

A voice in the wilderness....although I have no idea if Jim Steele is "in paradigm" or not. Frankly I was just surprised to see Yahoo Finance posting any sort of counter narrative. 

Lars P. Syll — Keynes & MMT



Keynes quote on chartalism versus metalism for the file.

Lars P. Syll | Professor, Malmo University

Chris Dillow — Deficit Fetishism


Chris Dillow does some sectoral balances to counter deficit fetishism but says he is not a full-on MMT'er in that it's not possible to know before hand what effect expanding deficits would have on markets, effectively nodding to the bond vigilantes. But he does give a shout-out to MMT and provides a link to the Wikipedia article on Modern Monetary Theory.

Stumbling and Mumbling
Deficit Fetishism
Chris Dillow | Investors Chronicle
(h/t Ralph Musgrave)

FOMC statement out — taper is on

In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee's sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.
Board of Governors of the Federal Reserve System

For immediate release

Cardiff Garcia — A new call for rev-repo to become the new policy rate

To those who have been watching the developments in the Fed’s fixed-rate full-allotment repo facility*, it won’t come as a bracing shock that the facility’s interest rate might eventually be synced with the interest rate paid on reserves and supplant the federal funds rate as the Fed’s new policy rate.

A short paper by Joseph Gagnon and Brian Sack arguing in favour of such a framework has been eagerly awaited and is now live (hat tip Real Time Economics). Sack’s authorship is especially notable given that he was head of the New York Fed’s markets desk until June 2012, when he was replaced by Simon Potter.
The Financial Times — FT Alphaville
A new call for rev-repo to become the new policy rate
Cardiff Garcia

Encouraged By Their "Success" In Europe, European Investors Position East Africa For Looting Too

   (Commentary posted by Roger Erickson)



Whoa!

This is quite a story. Not only is the whole financial system WAYYYYYY more trouble than it's worth, the euro system is the worst of the worst, including deadly trouble.

Looting Rwanda is what Davos touts as Euro investing options?

The confluence of statements in this Rwanda story also implies a bevy of Rwandan elites eager to sell the rest of their citizens to the highest bidders. (Those bidders will also throw in assassinations, gratis, as a show of good will? Wow!)

This is so worth reading that a few comments are posted in-line [bold text].

Rwanda emerges as East Africa’s investment gateway

Rwanda’s finance minister Claver Gatete waxes lyrical over the country’s bid to become an international-investment hub for the budding East African Community and defends the administration’s security policy.

Claver Gatete, Rwanda’s minister of finance, has but only a few minutes to spare on the phone with Euromoney as he darts from one meeting to another at this year’s World Economic Forum in Davos, Switzerland. The minister is upbeat as investors praise the administration’s deft stewardship of the economy, which is rapidly entrenching its status as an innovative hub for central and east Africa. Gatete’s gallivanting zeal as the country’s chief sherpa on the global economic stage is designed to send a clear message to the international investment community: Rwanda is open to global business.

The Davos exposure comes as Rwanda braces for a landmark economic event in May – the annual African Development Bank forum. Gatete says the event will prove a watershed in the country’s economic rehabilitation in its post-conflict age. “Having the forum in Rwanda this year is a vote of confidence for us,” he says. “It shows the region and the rest of the international community that we are capable of successfully hosting such a central event in African development.”

Rwanda has proven itself to be an extraordinary African success story relative to expectations in 1995. Although there was a slight slowdown in economic growth in 2013, between 2001 and 2012, real GDP growth averaged 8.1% per year and, between 2006 and 2011, an estimated one million people were pulled out of poverty. Underscoring the country’s economic ascent, the Kigali Convention Centre, an impressive glass dome that will become a focal point of the city upon completion, was financed by a successful Eurobond issue in April 2013.

The debut issue was priced at the tighter end to yield 6.875% and attracted a $3.5 billion order book – more than eight-and-a-half times the issue size and more than half the country’s GDP. The conference centre will house a five-star hotel with 292 rooms, a large conference room with a capacity to hold 2,600 people, as well as 24,000 square metres of office space.

The administration hopes the China-backed project won’t in the coming years be seen as an under-used vainglorious construction effort. 
[rge: Good luck with that.] 
Instead, it’s hoped it will be seen as a proactive capacity-building project as Rwanda attracts greater FDI flows, buoyed by its reputation as a regional business and transport hub for the East African Community.

Early signs are encouraging. Last year, the World Bank ranked Rwanda – a commodity-poor landlocked nation – the second-easiest country to conduct business in sub-Saharan Africa, after Mauritius.
[rge: That defines success? Or could that WB ranking be calling looters to Rwanda? After all, "pro-active" capacity building has a 'sterling' track record. Even in China. :) ]
Globally, Rwanda is ranked at 32. The Rwanda Development Board has drastically cut the time it takes to register a business in the country: it’s possible to be in and out of their offices with all necessary licences in less than six hours. 
[rge: For foreigners only, or local citizens as well? They don't say.]
However, questions over president Paul Kagame’s human-rights record, and tolerance of dissent continues to dog the administration, testing international support. In the latter part of 2012, Kagame was accused of supporting the Democratic Republic of Congo’s M23 rebels in the Great Lakes conflict. Gatete is anxious to reject any accusations of collusion. “It was proven that the government of Rwanda had not provided any assistance to [the M23],” he says. “The country got all of its aid back, all bilateral and multilateral agreements were restored, and donors are continuing to offer their support with no exceptions. As I have said, confidence in Rwanda – politically and economically – remains firm.” He adds: “We work closely with the international community to reach a peaceful solution in the Congo, nothing more.”

However, Rwanda’s international standing came under the spotlight again recently, after the US criticized scathing comments made by Kagame, who claimed that political opponents ought to be treated harshly. The remark came after one of his exiled critics, Patrick Karegeya – a former director of external intelligence and a former opposition leader – was found dead in a hotel room in Johannesburg, raising questions about the administration’s involvement. “We didn’t do it, but my question is: shouldn’t we have done it?” said Kagame at prayer breakfast on January 12, as was reported by Reuters.

Says Gatete: “Karegeya was part of the opposition and was responsible for setting off bombs in Kigali, but the death had nothing to do with us and we will leave the South African government to look into the case. All Kagame is trying to do is protect the country.” Anxious to shift back into Rwanda’s international-investment bid, Gatete cites two landmark projects that highlight the country’s dynamism. “One of the most interesting [projects] is Visa International’s project here to roll out mobile payments and transfers,” he says. “If it’s successful, it will be rolled out in the rest of the region. “The East African Commodities Exchange is another example. Rwanda was chosen for the site of this despite its size and because of its insight into business. Rwanda is a good place to do trials such as this one.

We are a government that international companies can trust and it’s a place where business runs smoothly.”
[rge: A place even Al Capone couldn't resist? With the way paved by missionaries of finance, hosting prayer meetings?]
The exchange aims to increase liquidity and offer a commodities market for 130 million people in the region. One of its goals is to create a platform for smaller, regional producers and give them access to futures and options – an ambitious project given nascent financial infrastructure, limited listed equity products and issuers, as well as illiquidity. Nevertheless, the commodities exchange is another step towards East African integration, aimed squarely at the economies of scale.

“We already have freedom of movement and freedom to seek employment within the region, which helps business in Rwanda and elsewhere,” says Gatete. “We already have certain things in place, including a customs union and a common market. “The next phase will be a monetary union and a single currency.”

[rge: You just HAD to expect that that was coming at some point, given input from the looters in Brussels.]
Few consider the integration project will be plain sailing, but Gatete’s enterprising zeal highlights how Rwanda – the small country with big ambitions – represents a competitive challenge and opportunity for its reform-shy regional neighbours.

[rge: Right! "Painful structural adjustments will be necessary." Just like in Greece. Maybe Rwanda's "reform-shy" neighbors are right to hunker down & hope to survive another round of colonialism. Evolutionary resiliency is, after all, built through maintenance of diversity, not the brittle "efficiency" of over-adapting everything to transient contexts. Every time "we're all (anything-uniform) now," we're mostly all dead just one context later, when the Luddites offer their standard excuse that "no Luddite could have predicted this!"]




Report: Climate Impacts Could Lead To Drastic Increases In Food Prices Over Coming Decades (via Clean Technica)

Report: Climate Impacts Could Lead To Drastic Increases In Food Prices Over Coming Decades (via Clean Technica)
Climate impacts are likely to lead to drastic increases in the prices of common food-stuffs over the next few decades, according to a series of new studies from the Potsdam Institute for Climate Impact Research. The studies strongly suggest that the…

Arturo Garcia — Seattle socialist Kshama Sawant’s SOTU response: ‘We need a break from capitalism’ (via Raw Story )

Seattle socialist Kshama Sawant’s SOTU response: ‘We need a break from capitalism’ (via Raw Story )
Socialist Seattle City Council member Kshama Sawant ripped not only President Barack Obama’s State of the Union speech Tuesday night, but the Democrats and Republicans alongside him as he delivered it. “We will make progress only on the basis of…

David Edwards — Louie Gohmert: Raise taxes on poor people because they can pay with welfare (via Raw Story )

Louie Gohmert: Raise taxes on poor people because they can pay with welfare (via Raw Story )
Texas Rep. Louie Gohmert (R) has proposed raising taxes on the poorest Americans even if the only money they have to pay is money that they get from government programs like welfare. At a Tea Party Patriots event in South Carolina earlier this month…

David Ruccio — Anything but. . . [class]


Better it seems to me to focus our attention on the real sources of inequality in the United States. And that means we have to face the class questions straight on. Anything else is merely a distraction.
Real-World Economics Review Blog
Anything but. . .
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame

Jonathan Larson — The latest scummy bankster behavior

The World Economic Forum is being held right now in Davos Switzerland. This gathering of the über Predators is always good for a few "let them eat cake" quotes and this time is no exception. A guy named Ermotti thinks life is hard enough without folks picking on the moneychangers. Poor bastard doesn't quite understand why folks don't just LOVE the thieving classes.

Watching these scum start to squirm is satisfying only because we are deprived of seeing them marched off to prisons. Until we see the return to honest banking, all the other big problems—including climate change—cannot and will not be solved.
Real Economics
The latest scummy bankster behavior
Jonathan Larson

Izabella Kaminska — Currencies everywhere

Two points I want to jot down before I forget them.

1) someone made a really good point today that society seems to be transferring trust away from banks and over to tech firms. This by definition suggests tech firms are as vulnerable to “trust” runs as banks.

2) a trust run should be particularly worrisome to a tech firm which draws power from its stock valuation more than its provable earnings.
Which made me think about acquisition currencies.
Dizzynomics
Currencies everywhere
Izabella Kaminska

North Carolina — Proof that cutting unemployment benefits increases employment? No way.

North Carolina has been without long-term unemployment benefits since last Summer, and so they might offer a glimpse of what happens when the unemployment insurance is not extended. 
The answer? A gigantic drop in the unemployment rate....
Of course, this only answers one question, which is what happens to the rate of unemployment.

It doesn't tell us whether people are finding jobs or just totally dropping out of the workforce. But even if this is mostly a function of people dropping out of the labor force, the actual unemployment rate does still matter for Fed policy. So if you think this has any predictive value for the national number (which could be debated) ths number still matters.
Business Insider
Look How The Unemployment Rate Is Plunging In The One State That Already Canceled Long-Term Unemployment Benefits
Joe Weisenthal

From the Charlotte Observer:
North Carolina’s unemployment rate took a sharp turn downward in December, suggesting a dramatic economic turnaround is well underway, but economists warned that the statistics are distorting a more sober reality....

Economists are not so sanguine about North Carolina’s employment statistics for December and for all of 2013....
In reality, however, North Carolina created fewer jobs in 2013 than it did in 2012. Last year’s jobs gain was 64,500, roughly two-thirds of the 89,900 jobs created in 2012.
Just as disconcerting, the state’s labor force shrunk last year, eliminating nearly 111,000 people from the pool of those who are working or looking for work. Such a shrinkage artificially reduces the jobless rate because legions of jobless people don’t show up in the data....

N.C. State University economist Mike Walden said the shrinkage of the labor force is a national problem that suggests discouraged job applicants are giving up finding work.
Wells Fargo economist Mark Vitner expects the 2013 jobs gain to be revised to at least 80,000, but he estimated that December’s unemployment rate is probably closer to 8 percent than the official 6.9 percent....
East Carolina University economist James Kleckley said the December jobless rate is the statistical equivalent of an optical illusion.
He said the state has recovered about 75 percent of the jobs it lost in the recession and estimated that North Carolina’s real jobless rate is probably at least 9 percent.
Charlotte Observer
John Murawski

Cardiff Garcia — Paul Tucker on the carry trade


"Hot money" flows resulting from free flow of capital.

The Financial Times — FT Alphaville
Paul Tucker on the carry trade
Cardiff Garcia

Tuesday, January 28, 2014

How May We Permit Ourselves To Scale Up The Product of GROUP_LEARNING X GROUP_CREATING?

   (Commentary posted by Roger Erickson)



We've all learned a lot, since bumping into Warren Mosler, branching out of other fields, and having to learn what we didn't want to have to know about ... namely the difference between sane and insane aggregate economic policy.

Yet it's not at all clear what that knowledge gets us, if we don't know how to leverage what we all now know.

There's a famous, very old quote (dubiously attributed to Caesar), that triggered a still evolving thought process.
"It's better to create than to learn. Creating is the essence of life." JC, ~50BC
Yet where would individuals or electorates be, if they hadn't LEARNED that insight? :( [They'd be roughly where WE are?]

2000 yrs later, we've only slightly restated that train of thought.
“If only HP knew what HP knows, we’d be three times more productive." then-CEO Lew Platt, of HP
Platt's quote is touted as key to the explosively growing field of knowledge management or "KM", proving that all humanity can, will and does miss it's own, prior points.

What IS the obvious point? If we marry together the lessons attributed to Caesar, Darwin & Shewhart//Deming, we get: 
"If we all continuously learned & shared just how little we all need to share, in real time, in order for our nation to CREATE faster/leaner/better culture ... then we'd never have to worry about our Democracy." RGE :)
It seems obvious that we can't separate learning & creating ... except by dying. 

Our REAL, not just nominal, question is how to scale up the product of GROUP_LEARNING x GROUP_CREATING.

Any ideas about new methods that would allow us to create more of that "product?" 

We are NOT constrained by a net lack of knowledge.

Rather, we're lacking methods for letting ourselves sample enough KNOWN options. Worse, we have known option-exploring methods, but lack methods for allowing ourselves to apply distributed use of those subclasses of known methods, whether little or widely known. 

The outcome is that our population is in the same situation as HP's staff was 20 years ago. The US electorate is overflowing with knowledge and practiced methods ... and lacks only a few extra submethods for triggering exploration of national options. Those options can be better explored WITH an ongoing cascade of parsing methods, from best known methods (if they still apply to a non-recognizable pattern, or new context), to desparately_random trial & error.

The more I ponder this, the more our current Democracy reminds me of a patient with Parkinson's disease. Those patients can initially DO most things if prompted by triggering cues, but progressively suffer from declining ability to self-trigger their own voluntary actions. Their symptoms start with difficulty triggering physical movements, and progress to inability to trigger voluntary thoughts, and eventually even autonomic impulses such as breathing.

The evolved operations of vertebrate behavior-motor physiology reveal sub-parts of the basal ganglia as critical brain structures which "gate" all the inter-dependency circuits allowing conditional behavior of individuals.

The factors gating the more distributed functions of a human culture are not specific cultural ganglia. Rather, they are the distributed checks & balances we attempt to maintain, and the sub-methods we employ for creating, KEEPING and extending necessary cultural checks and balances.

We always need NEW METHODS, for tuning and adding to our repertoire of checks and balances, the operations we depend upon in order to explore our emerging options.

The only thing we know for sure about choosing the policy-formation methods we need is that they must help us steer - faster/leaner/better - through the unpredictable obstacle course that we loosely call "succeeding contexts."

Does that help? What core methods can we employ MORE of, in order to create, KEEP and extend the distributed checks and balances which we continuously need MORE of?




Jeffrey D. Sachs — Our Dangerous Budget and What to Do About It


Another case of Jeffrey Sachs meaning well and going off the deep-end of deficit hysteria. Someone needs to fisk this piece to set him straight before he causes any more disasters.

The New York Review of Books
Our Dangerous Budget and What to Do About It
Jeffrey D. Sachs |
Director of The Earth Institute at Columbia University, Quetelet Professor of Sustainable Development at Columbia's School of International and Public Affairs and Professor of Health Policy and Management at Columbia's School of Public Health. He is Special Adviser to United Nations Secretary-General Ban Ki-Moon on the Millennium Development Goals, having held the same position under former UN Secretary-General Kofi Annan. He is co-founder and Chief Strategist of Millennium Promise Alliance, a nonprofit organization dedicated to ending extreme poverty and hunger.

Lord Keynes — Paul Krugman cites Yours Truly


Not only a feather in the cap of Lord Keynes (congrats) and a boost for Post Keynesianism, but also an indication that Paul Krugman reads more widely than one might expect.

Social Democracy For The 21St Century: A Post Keynesian Perspective

Lord Keynes

Monday, January 27, 2014

Warren Mosler — Beyond The Euro: The Left. The Crisis. The Alternative [Transcript of video]


Alexandria Angus graciously provides a transcript of Warren Mosler's recent talk in Chianciano, Italy, entitled, Beyond The Euro: The Left. The Crisis. The Alternative [Google translation].

Short and clear summary of Mosler Economics.

New Economic Perspectives
Beyond The Euro: The Left. The Crisis. The Alternative
Alexandria J E Angus

The cultural and psychological basis of the Southern strategy


It was in 1941, a full half-century ago, that Alfred A. Knopf published a volume by a North Carolina newspaperman, entitled The Mind of the South. Time has accorded the book by Wilbur Joseph Cash, known as "Jack" to his associates, a kind of classic status. No one compiling a list of the really significant Southern books of the 20th-century would omit it....
What Cash develops throughout his book is what he identifies as the enormously hedonistic quality of the Southern people. He sees them as self-satisfied, complacent. They will not be diverted from their smugness, their unwillingness to look critically at what they are, with the result that throughout their history anyone who has attempted to point out to them the extent to which they are being used and manipulated for the benefit of those in power has been unable to get anywhere. Conversely, those who have flattered their self-esteem and confirmed them in their prejudices have been able to manipulate them to vote and act contrary to their own economic and political interests.
VQR — The Virginia Quarterly Review
W.J. Cash After Fifty Years
Louis D. Rubin

John Light — An Icy New Hampshire Walk Sparks a new Movement to get Money out of Politics (via Moyers & Company)

An Icy New Hampshire Walk Sparks a new Movement to get Money out of Politics (via Moyers & Company)
The temperatures started to drop Tuesday morning, and continued to plummet through the night, so by Wednesday at 8 a.m. it was 0° Fahrenheit in Concord, NH. In the lobby of the Marriott Fairfield Inn next to Interstate 93, noted activist Lawrence Lessig…

What Could Go Wrong? Only Danger Is The High Probability Of (Trying To) Return To A Feudal Serf System. :(

(Commentary posted by Roger Erickson)




Warren Mosler: ECB proposals to buy loans to households and companies
"This is highly problematic.
If the ECB takes the risk, there is extreme moral hazard. 
If they don’t, [it's likely that net lending to consumers] won’t increase:"

Surely there are OTHER ways to raise aggregate demand among consumers? More income? Less taxes? Less fees? Less incentives to save excessively? Yada, yada? More Public Initiative?

Who runs these countries? The public? Or the public's nominal accountants?


Winterspeak — Corporate profits helped by weak employment


... an economy with enough demand to hold up revenue, but still weak enough to keep labor markets in check, might be great for corporate profit. Without end-customer demand to justify hiring ramps or capex outlays though, that profit would just pile up as cash.
Winterspeak
Corporate profits helped by weak employment

David Glasner — Two Cheers (Well, Maybe Only One and a Half) for Falsificationism


Philosophy of science. Mostly on Popper v. Logical Positivism. Good comments, too.

Uneasy Money
Two Cheers (Well, Maybe Only One and a Half) for Falsificationism
David Glasner


Does It Help, To Simply Say That We Need A More Distributed Steering Wheel?

   (Commentary posted by Roger Erickson)




Steering the Expanding Responses of Growing Aggregates ... To Accelerating Data Flows (we need a more distributed steering wheel)



Lord Keynes — Keynesians, Austrians, Demand, and Production


Austrians emphasize price signaling, while Keynesians emphasize quantity signaling.

Social Democracy For The 21St Century: A Post Keynesian Perspective
Keynesians, Austrians, Demand, and Production
Lord Keynes

Philip Pilkington — New Blog Dealing With Devolution/Scottish Independence


FYI

Fixing the Economists
New Blog Dealing With Devolution/Scottish Independence
Philip Pilkington

Steve Keen — Why economists are almost always wrong

That verbose title is almost the reverse of a quintessentially arrogant statement of economic supremacy published in the UK’s Daily Telegraph - on the editorial page of the business section - by Andrew Lilico. Entitled “Economists are nearly always right about things, despite what you may think” in the print edition, its content and tone encapsulated everything about economic theory, and economists’ blind belief in it, that led me to write Debunking Economics over a decade ago....
The two main factors that made that book necessary were the capacity of economists to intimidate opponents with their apparent depth of knowledge of a difficult subject, and the reality that economists knowledge of their own subject was, to coin a phrase, not even shallow: it was frequently outright wrong. 
Business Spectator
Why economists are almost always wrong
Steve Keen

Lilico’s defence of economics despite its many empirical failings is the mark of a zealot. That is the real weakness of mainstream economic theory: that it engenders in its followers a manic belief that is impervious to empirical reality.
This was the thought — WTF? — that came to me as I read Lilico's article when it came out.


Lars P. Syll — The dilemma of probability theory (wonkish)


This importantly also means that if you cannot show that data satisfies all the conditions of the probabilistic nomological machine, then the statistical inferences used – and a fortiori neoclassical economics – lack sound foundations!
The dilemma of probability theory (wonkish)
Lars P. Syll | Professor, Malmo University

Peter Cooper — Introduction to the Sectoral Financial Balances Model


A recent post introduced the income-expenditure model, a staple of introductory courses in macroeconomics. In this post, a closely related model of the sectoral financial balances is considered at a similarly introductory level. The 'sectoral financial balances model', or 'SFB model' for short, has been discussed in the blogosphere by a number of Modern Monetary Theorists, including Bill Mitchell, Robert Parenteau, Eric Tymoigne, Daniel Conceicao and Scott Fullwiler, prompted by a post of Paul Krugman's which contained a useful diagram. Analysis of the sectoral financial balances proved insightful in understanding both the lead up to the global financial crisis and its aftermath. This claim will be substantiated once the basic model has been outlined.
heteconomist.com
Introduction to the Sectoral Financial Balances Model
Peter Cooper

Sunday, January 26, 2014

Ben Stein Throws Cold Water on Fox Panel Fearmongering Over National Debt (via http://crooksandliars.com)

Ben Stein Throws Cold Water on National Debt Fearmongering (via http://crooksandliars.com)
By Heather January 26, 2014 8:07 pm Fox's Ben Stein went off script this Saturday and dared to criticize the amount of money we spend on our military. I'm no fan of Fox regular and former Nixon speechwriter Ben Stein, but every once in a while, he goes…

George Chidi — Working poor now majority of food stamp recipients — with college educated among fastest growing group of users

In the wake of recent cuts to the Supplementary Nutrition Assistance Program — or food stamps — the Associated Press reported Sunday that working-age people have now passed children and the elderly as the majority of recipients for households relying on food stamps.
The program now covers one in seven Americans, with the fastest growth in use among workers with some college training, the AP reported.
The Raw Story
Working poor now majority of food stamp recipients — with college educated among fastest growing group of users
George Chidi

Randy Wray — Let’s Compare the Job Guarantee to the Alternatives, NOT Against Some Distant Utopian Vision

I guess we could at least recognize the logical consistency of the right. Fiat currency leads inevitably to hyperinflation because it does not have gold behind it. Fine. True regardless of what government spends on: Wall Street. Obamacare. Military. Welfare. JG. Basic Income Guarantee. Hasn’t happened in the past (even in the 1940s when budget deficits reached 25% of GDP) and no sign of it in the near future.
What is more troubling is the criticism from the Left. The Left has no problem with QE (helping homeowners) or Wall Street Bailouts (had to save the banks) or Military (security in the age of terrorism) or Welfare (gotta help the poor) or even the Basic Income Guarantee (time to end the “work fetish”).
But, provide Jobs to those who Want To Work? Hell NO, We Won’t Go!
Why not?
Economonitor — Great Leap Forward
Let’s Compare the Job Guarantee to the Alternatives, NOT Against Some Distant Utopian Vision
L. Randall Wray | Professor of Economics, University of Missouri at Kansas City

Mercedes White — Why the U.S. lost the war on poverty [Stephanie Kelton quoted]


Stephanie Kelton quoted. Good to see Stephanie becoming a go-to person for reporters.

Deseret News National Edition
Why the U.S. lost the war on poverty
Mercedes White

Mark Pascal on MMT

I will return to Modern Monetary Theory (MMT) for the masochists on TMV. There are important points I wish to repeat with respect to MMT. It may describe the underlying operations of monetarily sovereign nations but when a political/economic system is so corrupt, fraudulent, manipulated and criminal, it doesn’t matter what the underlying policies and principles are when those entrusted with running the system cannot do so honestly or competently. In a country where the “rule of law” only applies to the non-elite, non-wealthy and powerless, then anything goes and nothing matters.
The Moderate Voice
On My Writing...
Mark Pascal
(h/t Charles Hayden)

Linette Lopez — Bank Of America Is Reportedly Being Investigated For One Of The Oldest Trading Tricks In The Book


Frontrunning Fannie and Freddie.

Business Insider
Bank Of America Is Reportedly Being Investigated For One Of The Oldest Trading Tricks In The Book
Linette Lopez

C.J. Polychroniou — Costas Lapavitsas Discusses the Financialization of Capitalism

The neoliberal capture of the state has laid the ground for the financialization of capitalism, a stage of capitalism that cannot be reversed without developing new methods of public provision in housing, education, health, pensions and the other sources financialization has used to create profit.
Truthout
Costas Lapavitsas Discusses the Financialization of Capitalism
C.J. Polychroniou interviews Costas Lapavitsas, Professor of Economics at the School of Oriental and African Studies, University of London.
I find Mirowski's argument that neoliberalism is not the enemy of the state and nor does it genuinely ascribe to the simple opposition "state versus market," very persuasive. Neoliberalism is, rather, about capturing and using the state to achieve pro-market changes across society. The neoliberal capture of the state has laid the ground for the financialization of capitalism....
Finance can extract profits from any money income and stock of money - its profits are not limited to the fresh flows of value produced annually. During the past four decades, it has become expert at making zero-sum profits that involve transfers from one economic agent to another. Financial profits have become an incredible proportion of total profits - particularly in the USA for which we have relevant data. The exploitative outlook of finance in relation to households and individual workers is also evident. This is a characteristic feature of financialization and marks it out as a historical period in the development of capitalism....
The characteristic feature of the new regulation is that it has been shaped by the financial institutions themselves, and its purpose has been to ensure the ability of the financial system to grow and extract profits. It has not contributed in the slightest to avoiding financial bubbles nor to imposing the costs of financial crises onto those responsible for them. On the contrary, contemporary regulation has led to society bearing the brunt of financial disasters, while private individuals associated with finance have reaped the benefits of expansion. Society has little to expect from more regulation of the type we have known for four decades now.
In confronting financialization, it is vital to start with the recognition that it does not represent "progress" in human affairs.
 Financialization does not amount to a socially productive expansion of the forces of production that could potentially benefit society, if it was brought under control through a series of bold measures and interventions. Financialization ought to be reversed. To this purpose, regulation alone is not enough, particularly when one bears in mind that financialization is a historical period of capitalism. Confronting it inevitably raises issues of ownership, but also of broader policy and social relations.


Pavlina at Truthout


Pavlina's post contra Matt Yglesias on the MMT JG is reposted at Truthout.

Sixteen Reasons Matt Yglesias Is Wrong About the Job Guarantee vs. Basic Income by Pavlina R. Tcherneva, Ph.D., New Economic Perspectives | Op-Ed

Lord Keynes — Mises’s Explanation of the Great Depression: A Critique


Relevant today because the debate between market fundamentalists and Keynesians is still very much alive.

Social Democracy for the 21st Century: A Post Keynesian Perspective
Mises’s Explanation of the Great Depression: A Critique
Lord Keynes

Robert Oak — GDP By Industry for 2012


Data and graphs.

The Economic Populist
GDP By Industry for 2012
Robert Oak

Scott Kaufman — Bayer Pharmaceutical CEO: Cancer drug only ‘for western patients who can afford it’ (via Raw Story )

Bayer Pharmaceutical CEO: Cancer drug only ‘for western patients who can afford it’ (via Raw Story )
In an interview with Bloomberg Businessweek, Bayer CEO Marijn Dekkers said that his company’s new cancer drug, Nexavar, isn’t “for Indians,” but “for western patients who can afford it.” The drug, which is particularly effective on late-…

Paul Jay interviews Gar Alperovitz — Capitalism in Long Term Stagnation and Decay


Video and transcript.
...if you concentrate wealth at the top, there's not enough purchasing power to make the rest of the system work.
Real News Network
Capitalism in Long Term Stagnation and Decay - Gar Alperovitz on Reality Asserts Itself (3/5)
Paul Jay interviews Gar Alperovitz

Don Quijones — Continue to Ignore Writing on Wall

As the London banker deftly explains in his blog, those charged with protecting the integrity of markets from the abuses of financial institutions have instead been going out of the way to facilitate those same abuses:
“It used to be that the role of the state in financial market regulation was to ensure efficient market operations, promote transparency of prices and liquidity, protect consumers from abusive practices, and to resolve failed companies according to principles of equitable distribution of assets among like classes of creditors. If the role of the state now is to shield HFT, dark pool and OTC markets from transparency, provide liquidity where the market fails, oversee the orderly fleecing of consumers, and to ensure that some creditors of failing firms always win while others always lose, then we no longer have a market economy. And as virtually all these regulatory policies have evolved in the absence of public debate and legislative scrutiny, we also no longer have democratic governance of markets.”
Raging Bull-shit
Continue to Ignore Writing on Wall
Don Quijones

Matthew O'Brien — Why Is the American Dream Dead in the South?



Atlantic Business
Why Is the American Dream Dead in the South?
Matthew O'Brien