Linking ≠ endorsement.
⇧ Has the Crash of the Global Financial Markets Begun? — Prime Economics
T. Sabri Öncü:
Let me now throw in some terminology. Marxian "over-accumulation," "overproduction," and "underconsumption" crises theories, Keynesian theory of "lack of aggregate demand," "financial instability hypothesis" of Minsky, "debt deflation theory of depressions" by Irving Fisher, Steve Keen's "excessive private debts," Michael Hudson's "debts that cannot be paid will not be," and the like. No matter which theory you use to look at the picture, your conclusion will be the same.
Whether it is the "longest" or the "greatest," the world has been in depression since the summer of 2007. And the global market crash is already underway.
On 29 January 2016, the Guardian asked a number of economists whether the gyrating financial markets are facing a global meltdown. One of the economists was the former Greek Finance Minister Yanis Varoufakis. He concluded his response as follows:
"Should we be afraid? Yes. Is it inevitable that a new 2008 is coming? In political economics, nothing is inevitable."
I respectfully disagree.
I have said that I don't see a US crash coming (yet).
A market crash is not an economic crash, per se. I'm concerned about main street more than about "Wall Street," though I realize they are inextricably linked.
As for Yanis's statement, I agree with him. The reason is that with the correct reactions to changes, a real global-economic crash is not inevitable. The odds are, however, that people who are not remotely as bright as Yanis will be in charge when the next wave of severely negative changes occur (some of which is happening as the article rightly points out).
Fortunately though, the left is poised to pounce with truly radical, brilliant, simple solutions as never before.
Never let a crisis go to waste. The left can own "creative destruction" too but without remaining subject to the whims of plutocrats.
None of that is to say I agree 100% with Yanis on everything.
⇧ Yanis Varoufakis: a manifesto for democratising Europe | Le Club de Mediapart
So, since Yanis was pinpointed in the article immediately above, here's his Manifesto:
A Manifesto for democratising Europe.
For all their concerns with global competitiveness, migration and terrorism, only one prospect truly terrifies the Powers of Europe: Democracy! They speak in democracy's name but only to deny, exorcise and suppress it in practice. They seek to co-opt, evade, corrupt, mystify, usurp and manipulate democracy in order to break its energy and arrest its possibilities.
For rule by Europe's peoples, government by the demos, is the shared nightmare of:
• The Brussels bureaucracy (and its more than 10,000 lobbyists)
• Its hit—squad inspectorates and the Troika they formed together with unelected 'technocrats' from other international and European institutions
• The powerful Eurogroup that has no standing in law or treaty
• Bailed-out bankers, fund managers and resurgent oligarchies perpetually contemptuous of the multitudes and their organised expression
• Political parties appealing to liberalism, democracy, freedom and solidarity to betray their most basic principles when in government
• Governments that fuel cruel inequality by implementing self-defeating austerity
• Media moguls who have turned f ear-mongering into an art form, and a magnificent source of power and profit
• Corporations in cahoots with secretive public agencies investing in the same fear to promote secrecy and a culture of surveillance that bend public opinion to their will .
The European Union was an exceptional achievement, bringing together in peace European peoples speaking different languages, submersed in different cultures, proving that we could create a shared framework of human righ ts acros s a continent that was, not long ago, home to murderous chauvinism, racism and barbarity. The European Union could have been the proverbial Beacon on the Hill, showing the world how peace an d solidarity may be snatched from the jaws of conflict and bigotry.
Alas, today, a common bureaucracy and a common currency divide Europe an peoples that were beginning to unite despite our many different languages and cultures. A confederacy of myopic politicians, economically naïve officials and financially incompetent 'experts' submits slavishly to the edicts of financial and industrial conglomerates, putting Europe into disrepute and stirring up a dangerous anti-European backlash. Proud nations are being turned against each other. Nationalism, extremism and racism are being re-awakened.
One after the other, the Eurozone economies are being marched off the cliff of competitive austerity, resulting in permanent recession in the weaker countries, low investment in the core countries, unprecedented inequality and declining hope everywhere. Meanwhile, EU member-states outside the Eurozone are alienated, seeking partners and inspiration elsewhere, where they are most likely to be greeted with opaque, coercive free trade deals that undermine their sovereignty.
This inefficient, authoritarian, illegitimate and anti-democratic 'Europe' is fragmenting. Europeans are torn between two false choices:
• Retreat into the cocoon of their nation-state
• Or surrender to the Brussels democracy-free zone
But the consequences of either going back to the nation-state or sticking to the existing EU will be dreadful for Europe, Europeans, and Europeanists.
There must be another course. And there is!
It is the one official 'Europe' resists with every sinew of its cartel mentality and procedures. The antidote to the authoritarianism that corrupts the European Union and its institutions is a surge of democracy. Our movement, DiEM25, seeks to call forth just such a surge. The democratisation of the EU should start immediately, for without a swift start it may be impossible to chisel away at the institutionalised resistance in good time, before Europe goes past the point of no return.
Our goal to democratise Europe is realistic. It is no more utopian than the initial construction of the European Union was. Indeed, it is less utopian than the attempt to keep alive the current, anti-democratic, fragmenting European Union.
Our goal to democratise Europe is terribly urgent. We give it a decade, by 2025.
If we fail to democratise Europe by then, and Europe's autocratic powers succeed in stifling democratisation, the EU will crumble under its hubris, it will splinter, and its fall will cause untold hardship everywhere — not just in Europe.
Why is Europe losing its integrity and its soul?
In the post-war decades during which the EU was initially constructed, national cultures were revitalised in a spirit of internationalism, disappearing borders, shared prosperity and raised standards that brought Europeans together. But, the serpent's egg was at the heart of the integration process.
From an economic viewpoint, the EU began life as a cartel of heavy industry (later co-opting farm owners) determined to fix prices and to re-distribute oligopoly profits through its Brussels bureaucracy. The emergent cartel, and its Brussels-based administrators, feared the demos and despised the idea of government-by-the-people.
Patiently and methodically, a process of de-politicising decision-making was put in place, the result being a draining but relentless drive toward taking-the-demos-out-of-democracy and cloaking all policy-making in a pervasive, pseudo-technocratic fatalism. National politicians were rewarded handsomely for their acquiescence to turning the Commission, the Council, the Ecofin, the Eurogroup and the ECB, into politics-free zones. Anyone opposing this process of de-politicisation was labelled 'un-European' and treated as a jarring dissonance.
A deceit lies at the centre of the EU bureaucracy: It pretends that topdown, opaque decision-making is apolitical and demands that we all treat it as such. In fact its p rocedures are highly political as they attempt to kill off democracy by treating political decisions as technical problems. They mask the real purpose of their sanctity of 'rules': to keep the majority of Europeans away from exercising democratic power over money and finance and to defend the interests of financial and industrial conglomerates, their true masters.
The price of this deceit is not merely the end of democratic but also poor economic policies. It should surprise no one that Europe's political and economic institutions have led to abysmal economic data and avoidable hardship.
• Rules should exist to serve Europeans, not the other way round
• Currencies should be instruments, not ends-in-themselves
• A single market is consistent with democracy only if it features common defences of the weaker Europeans, and of the environment, that are democratically chosen and built
• Democracy is essential for limiting capitalism's worst, self-destructive drives and opening up a window onto new vistas of social harmony and sustainable development
In response to the inevitable failure of Europe's cartelised social economy to rebound from the post-2008 Great Recession, the EU's institutions that caused this failure have been resorting to escalating authoritarianism. The more they asphyxiate democracy, the less legitimate their political authority becomes, the stronger the forces of economic recession, and the greater their need for further authoritarianism. Thus the enemies of democracy gather renewed power while losing legitimacy and confining hope and prosperity to the very few (who may only enjoy it behind the gates and the fences needed to shield them from the rest of society).
This is the unseen process by which Europe's crisis is turning our nations inwards, against each other, amplifying pre-existing jingoism, xenophobia. The privatisation of anxiety, the fear of the 'other', the nationalisation of ambition, and the re-nationalisation of policy threaten a toxic dis integration of common interests from which Europe can only suffer. Europe's pitiful reaction to its banking and debt crises, to the refugee crisis, to the need for a coherent foreign and anti-terrorism policy are all examples of what happens when solidarity loses its meaning:
• The customary assumption that, whenever a state budget must be bolstered or a bank bailed out, labour and society's weakest must pay for the sins of the wealthiest rentiers
• The injury to Europe's integrity caused by the crushing of the Athens Spring, and by the subsequent imposition of an economic 'reform' program that was designed to fail
• The scandalous 'not in our backyard' attitude of most EU member-states to the refugees landing on Europe's shores, illustrating how a broken European governance model yields ethical decline and political paralysis, as well as evidence that xenophobia towards non-Europeans follows the demise of intra-European solidarity
• The comical phrase we end up with when we put together the three words 'European', 'foreign' and 'policy'
• The ease with which European governments decided after the awful Paris attacks that the solution lies in re-erecting borders, when most of the attackers were EU citizens — yet another sign of the moral panic engulfing a European Union unable to unite Europeans to forge common responses to common problems.
What must be done? Our horizon
Democracy across Europe is a prerequisite for a functioning, prosperous European Union. We believe that the EU is running out of time, quickly. Change is needed. An immediate change of direction with the aim of creating a democratic union by 2025, at the latest. The EU bureaucracy, which today harbours a deep contempt for democracy, must be democratised. Or it will disintegrate.
One simple, radical idea is the motivating force behind DiEM25:
Democratise Europe! Democracy cannot be a luxury afforded to creditors while refused to debtors.
Realism demands that we work toward reaching mi lestones within a realistic timeframe. This is why DiEM25 will aim for four breakthroughs at regular intervals in order to bring about a fully democratic, functional Europe by 2025.
Now, today, Europeans are feeling let down by EU institutions everywhere. From Helsinki to Lisbon, from Dublin to Crete, from Leipzig to Aberdeen. Europeans sense that a stark choice is approaching fast. The choice between authentic democracy and insidious disintegration. We must resolve to unite to ensure that Europe makes the obvious choice: Authentic democracy!
When asked what we want, and when we want it, we reply:
IMMEDIATELY: Full transparency in decision-making.
- EU Council, Ecofin, FTT and Eurogroup Meetings to be live-streamed
- Minutes of European Central Bank governing council meetings to be published a few weeks after the meetings have taken place
- All documents pertinent to crucial negotiations (e.g. trade-TTIP, 'bailout' loans, Britain's status) affecting every facet of European citizens' future to be uploaded on the web
- A compulsory register for lobbyists that includes their clients' names, their remuneration, and a record of meetings with officials (both elected and unelected)
WITHIN TWELVE MONTHS: Address the on-going economic crisis utilising existing institutions and within existing EU Treaties Europe's immediate crisis is unfolding simultaneously in four realms.
• Public debt
• Inadequate Investment, and
• Rising Poverty
All four realms are currently left in the hands of national governments powerless to act upon them. DiEM25 will present detailed policy proposals to Europeanise all four while limiting Brussels' discretionary powers and returning power to national Parliaments, to regional councils, to city halls and to communities. The proposed policies will be aimed at re-deploying existing institutions (through a creative re-interpretation of existing treaties and charters) in order to stabilise the crises of public debt, banking, inadequate investment, and rising poverty.
WITHIN TWO YEARS: Constitutional Assembly
The people of Europe have a right to consider the union's future and a duty to transform Europe (by 2025) into a full-fledged democracy with a sovereign Parliament respecting national self-determination and sharing power with national Parliaments, regional assemblies and municipal councils. To do this, an Assembly of their representatives must be convened. DiEM25 will promote a Constitutional Assembly consisting of representatives elected on trans-national tickets. Today, when universities apply to Brussels for research funding, they must form alliances across nations. Similarly, election to the Constitutional Assembly should require tickets featuring candidates from a majority of European countries. The resulting Constitutional Assembly will be empowered to decide on a future democratic constitution that will replace all existing European Treaties within a decade.
BY 2025: Enactment of the decisions of the Constitutional Assembly.
Who will bring change? We, the peoples of Europe, have decided to regain control over our Europe from unaccountable 'technocrats' and shadowy institutions.
We are forming DiEM25 intent on moving from a Europe of 'We the Governments', and 'We the Technocrats', to a Europe of 'We, the peoples of Europe'.
Our four principles:
• No European people can be free as long as another's democracy is violated
• No European people can live in dignity as long as another is denied it
• No European people can hope for prosperity if another is pushed into permanent insolvency and depression
• No European people can grow without basic goods for its weakest citizens, human development, ecological balance and a determination to become fossil-fuel free in a world that changes its ways — not the planet's climate
We join in a magnificent tradition of fellow Europeans who have stru ggled for centuries against the 'wisdom' that democracy is a luxury and that the weak must suffer what they must. With our hearts, minds and wills dedicated to these commitments, and determined to make a difference, we declare that:
We call on our fellow Europeans to join us forthwith to create the European movement which we call DiEM25
• To democratise the European Union
• To end the reduction of all political relations into relations of power masquerading as merely technical decisions
• To subject the EU's bureaucracy to the will of sovereign European peoples
• To dismantle the habitual domination of corporate power over the will of citizens
• To re-politicise the rules that govern our single market and common currency
We consider the model of national parties which form flimsy alliances at the level of the European Parliament to be obsolete. While the fight for democracy-from-below (at the local, regional or national levels) is necessary, it is nevertheless insufficient if it is conducted without an internationalist strategy toward a pan-European coalition for democratising Europe. European democrats must come together first, forge a common agenda, and then find ways of connecting it with local communities and at the regional and national level.
We come from every part of the continent and are united by different cultures, languages, accents, political party affiliations, ideologies, skin colours, gender identities, faiths and conceptions of the good society.
Our overarching aim to democratise the European Union is intertwined with an ambition to promote self-government (economic, political and social) at the local, municipal, regional and national levels; to throw open the corridors of power to the public; to embrace social and civic movements; and to emancipate all levels of government from bureaucratic and corporate power.
We are inspired by a Europe of Reason, Liberty, Tolerance and Imagin ation made possible by comprehensive Transparency, real Solidarity and authentic Democracy. We aspire to:
• A Democratic Europe in which all political authority stems from Europe's sovereign peoples
• A Transparent Europe where all decision-making takes place under the citizens' scrutiny
• A United Europe whose citizens have as much in common across nations as within them
• A Realistic Europe that sets itself the task of radical, yet achievable, democratic reforms
• A Decentralised Europe that uses central power to maximise democracy in workplaces, towns, cities, regions and states
• A Pluralist Europe of regions, ethnicities, faiths, nations, languages and cultures
• An Egalitarian Europe that celebrates difference and ends discrimination based on gender, skin colour, social class or sexual orientation
• A Cultured Europe that harnesses its people's cultural diversity and promotes not only its invaluable heritage but also the work of Europe's dissident artists, musicians, writers and poets
• A Social Europe that recognises that liberty necessitates not only freedom from interference but also the basic goods that render one free from need and exploitation
• A Productive Europe that directs investment into a shared, green prosperity
• A Sustainable Europe that lives within the planet's means, minimising its environmental impact, and leaving as much fossil fuel in the earth • An Ecological Europe engaged in genuine world-wide green transition
• A Creative Europe that releases the innovative powers of its citizens' imagination
• A Technological Europe pressing new technologies in the service of solidarity
• A Historically-minded Europe that seeks a bright future without hiding from its past
• An Internationalist Europe that treats non-Europeans as ends-inthemselves
• A Peaceful Europe de-escalating tensions in its East and in the Mediterranean, acting as a bulwark against the sirens of militarism and expansionism
• An Open Europe that is alive to ideas, people and inspiration from all over the world, recognising fences and borders as signs of weakness spreading insecurity in the name of security
• A Liberated Europe where privilege, prejudice, deprivation and the threat of violence wither, allowing Europeans to be born into fewer stereotypical roles, to enjoy even chances to develop their potential, and to be free to choose more of their partners in life, work and society.
Again, republishing that here is not to say that I agree with every last bit of it. I am content to let a fully informed people decide.
⇧ The Fed's interest payments to banks | Brookings Institution
Ben Bernanke and Don Kohn:
… as a consequence of the large-scale asset purchases that the Fed undertook between 2008 and 2014 to help support the US recovery—purchases that were financed by the creation of bank reserves—the quantity of reserves in the system is now very large. Because banks are essentially satiated with reserves, modest changes in the supply of reserves will no longer have much influence on the federal funds rate. Rather than varying the supply of reserves, the Fed now manages the federal funds rate by changing the rate of interest it pays on reserves (as well as the interest rate it offers in so-called reverse repo transactions with money market funds and other private-sector institutions). These changes influence the federal funds rate and other short-term funding rates, and thus financial conditions more generally.
⇧ Capital flight signals investors still bracing for China to devalue yuan – MarketWatch
Given that China is the world's second-largest economy and largest trading nation, it seems reasonable to expect a fall in the yuan would send a deflationary shock around the world. Many assets that have already been under pressure can expect to face further downside.
All of this is why there are a few of us out there who advocate a single, global currency and a fully democratic one-world government. It's a long-term vision, of course.
The global plutocrats oppose it. They want a global technocracy that takes its marching orders from majority, corporate shareholders: those same plutocrats.
This is why you hardly ever hear them talking anymore about promoting democracy in China. They opened China based upon changing China's economy so that China's political system would also change; however, once China was opened up to foreign investment, all the talk of democracy pretty much ended.
It's also why the EU is so technocratic rather than democratic, as Yanis points out in his Manifesto (reprinted in full above).
⇧ It's Time To Go After Big Money | Larry Summers
Larry Summers about getting rid of €500 notes and more:
I confess to not being surprised that resistance within the ECB is coming out of Luxembourg (see also), with its long and unsavory tradition of giving comfort to tax evaders, money launderers, and other proponents of bank secrecy and where 20x as much cash is printed relative to GDP compared to other European countries.
No surprise here either.
Of course, bill size also has to do with stashing cash rather than paying deposit fees or negative interest.
The real solution includes getting rid of interest altogether, which would be much easier from a money-mechanics standpoint than the bankers would have you believe.
⇧ Fresh economic thinking: Reteaching economics in practice
Cameron K. Murray:
Reforming economics teaching has been a heated topic of debate since the financial crisis. My personal views on this align closely with The University of Manchester's Post Crash Economics Society (PCES), who have been calling for a pluralist approach that would rid economics teaching of its neoclassical core, and replace it with a critical study of economic questions and the diverse methods and approaches being taken to understand and answer those questions. The group Reteaching Economics has similar aims.
⇧ Left-Leaning Economists Question Cost of Bernie Sanders's Plans – The New York Times
"If, at the end of the day, people don't believe that we can achieve the same savings as Canada, Britain, France, Japan, South Korea, Australia are achieving on health care, then we have a fundamental disagreement," Mr. Gunnels said, naming countries with single-payer systems.
A huge part of what the critics of Bernie Sanders don't mention is that insuring and delivering healthcare to the un- and underinsured adds to GDP and more importantly, quality of life. It does not necessarily add to price or service inflation. In fact, done correctly, as Bernie Sanders suggests, it can represent an overall savings.
Most importantly though is that the critics simply do not realize the extent of the political shift that has already taken place. Politicians who stand in the way and stand with corporate profits over the needs of the general population will simply be displaced by those who side with the general population.
⇧ Not to be negative, but…a critical comment on negative interest rates. | Jared Bernstein | On the Economy
OK, if I'm so smart, what would I do? Well, not raise our own Fed funds rate. Not be wound up about nascent inflationary pressures about to materialize out of the deflationary fog. Nudge Congress to consider fiscal policy, like a deep infrastructure dive, to help generate more demand.
If I wanted to get outside the box, I'd tell the staff to put aside the negative rate mishegoss and think about what a mainstreamer like Lord Adair Turner is doing talking about "helicopter money," or money creation that finances fiscal deficits. And he's not alone.
I'm not saying this is a good idea, especially since I fear any spending priorities would have to go through Congress ("Hey, let's print free money and give it to Congress! What could go wrong?").
Turner came quite late to the discussion by the way, but those in high places get the credit when what they've done is (sort of) co-opt an idea, including when they even water it down when doing so, which Adair has done.
As for Congress misdirecting spending, well, they aren't spending now. Why would they be bad at where to put the money if they were to spend it? They know the national infrastructure is in massive disrepair. They also know that private contractors bid on the work when the government coughs up the money. The only thing the deficit hawks don't like is that the infrastructure isn't private too.
Of course, there's always voting the hawks out of office so we could get the economy humming without increasing governmental debts and without causing problems with inflation or deflation.
⇧ Staying Positive About Going Negative
The messaging from Committee leaders should be relentlessly positive. It is reasonable to highlight that Federal Reserve staff are studying whether negative rates would in fact stimulate aggregate demand in the US, given the ability of banks and others to substitute into cash. (After all, most of us thought until about two years ago that going negative would have essentially no effect on aggregate demand given those substitution possibilities.) But FOMC leaders should be clear that, as long as negative rates do have a stimulative effect, the Federal Reserve is more than willing to use them as a monetary policy tool.
If one is confining one's thinking to inside the Fed box, Narayana is exactly right on this issue. He's quite the psychologist/behaviorist.
All the very recent criticism about negative rates has been way overblown and knee-jerk, not thoughtful. Just because people who don't understand how negative rates work reacted by pulling away doesn't mean that negative rates won't work.
Of course they'll work, but they won't do away with the currency wars. That's the real issue.
⇧ My Unicorn Problem – The New York Times
Sanders, on the other hand, probably believes what he's saying; the rude awakening still lies ahead.
Bernie is older than you are, Paul. He's just not as jaded. He's been serving in the US Congress, both the House and Senate, for decades. He was right there when Barack Obama didn't do what his voters thought he would. You're telling Bernie what's doable in Washington? You didn't think he'd get anywhere near as far as he already has.
Electing Bernie President isn't just about Bernie's first 100 days, Paul. It's about electing someone in the vein of FDR, the best President in US history (yes, better than Lincoln), who will fight, and I mean fight, for a new New Deal, but this one on steroids, even if it takes two terms and even if the President who follows him will have to be the one to wrap it up, though I think that's being too pessimistic.
⇧ Is Oil Becoming Stranded? by Paul Spedding – Project Syndicate
… though oil prices may be cyclical, structural changes in energy markets are likely to undermine price increases. Alternative transport technologies, including electric cars, static batteries, and hybrid solutions, are already threatening to make oil less necessary.
⇧ Seven dead as gas blast in Russia collapses building | GlobalPost
At least seven people, including two children, were killed in Russia on Tuesday when a gas explosion caused part of a block of flats to collapse, officials said.
⇧ The "New Democrats" [Clintons et al.] Confront a New Reality
Third Way and its allies are gravely misreading the economic and political moment. If their influence continues to wane, perhaps one day Americans can stop paying the price for their ill-conceived, corporation- and billionaire-friendly agenda.
Look, this isn't a "political blog," per se. The reason I include what most would call "politics" is because this blog is about risk management. Economic and other matters political definitely are risk-management issues.
It's no secret that I completely disagreed with Bill Clinton's support for Wall Street deregulations. I opposed his welfare "reforms," not that no reforms were needed. I also opposed NAFTA because it was worse than weak on the environment, worker rights, worker safety, and on protecting American jobs. I wanted Mexico and other nations to be lifted up economically but not at the expense of the things I just mentioned. There were, and remain, ways to lift all boats with the proper tide. The DLC just wasn't that tide and neither is the "Third Way" now.
What should have happened rather than the DLC taking over was that the left in general needed to formulate an educational program to reach the masses with the facts about the problems caused by running away from the New Deal. Rather than shun FDR's rather modest pull to the left, the Democratic Party should have worked to convince the general public that we needed to improve and enhance the New Deal and Great Society type programs rather than dump them in favor of clearly disastrous laissez-faire.
Make no mistake about it, running from the New Deal, dismantling the regulations, allowed the Great Recession, which really isn't over yet, far from it.
It's true that the government's push for everyone to own a home through lax lending-standards was a big part of the problem, but claiming that it was the cause is to put the cart before the horse. The deregulators were behind the government push for looser standards. Plus, the private sector defrauded the NGOs that were securitizing home mortgages.
I'm for everyone having a good home but not that way.
So, what's the best risk-management way forward? It's to continue bringing more and more real data and facts and excellent analysis to the fore. If Bernie Sanders' campaign allows a platform for that, and it has and does, then it's a very good political development.
It's interesting that the linked article cites Paul Krugman when Paul is so anti-Sanders with Paul's false claim that Bernie is unelectable.
To further clarify, characterizing me solely as a "lessor of evils" advocate would be failing to understand what I'm really doing and about. Bernie Sanders is plainly the lessor of the lessor of evils. I'm not campaigning for him. I'm campaigning for the best system I can envision. Bernie simply falls closer to it than any other candidate allowed any coverage in the mainstream media.
Anyway, we tried Bill Clinton's way. It didn't work. His Reaganomics ruined the nation for decades, and it's not over yet. Yes, there were some tweaks, in that Clinton targeted tax revenues (spending) better than a more hawkish President would have; but that's not nearly enough to mitigate the severe damage Bill and Hillary have done.
It's time for the democratic wing of the Democratic Party to take back control and then some.
⇧ Japan Economy Minister: need more data to measure impact of negative rates | Reuters
Ishihara also said the government's plan to raise the sales tax next year to 10 percent from 8 percent is important for fiscal discipline, but implementation becomes a political decision if there is a big shock to the economy.
If they go through with it, they'll need their heads examined.
⇧ Lead poisoning crisis sends Flint real-estate market tumbling – MarketWatch
Median home sales prices in Flint had risen from a 10-year low in April 2014 to $46,700 in August of last year . But the water poisoning crisis at the end of December dropped selling prices to $30,700, according to Zillow.com.
"This is a momentum killer, I'm not going to hide it," said Chris Theodoroff, the Flint Area Association of Realtors president. "Everybody's is now going to have to get a water test to sell," he said. The Environmental Protection Agency says that lead levels of 15 ppb (parts per billion) is considered unsafe, and some homes in Flint still have lead levels ten times higher than what the EPA considers dangerous.
Property insurance policies won't cover the damage either, according to Jeff Brewer, a spokesman for the Property and Casualty Insurance Association of America, a Chicago-based trade group. "It's an unfortunate situation, but they would not be covered," he said.
… home buyers and sellers in Flint have also been smacked by a decision by the government's biggest backers of mortgages, Fannie Mae and Freddie Mac, that lenders must certify that the water is safe before they purchase loans. Private lenders also followed suit as a result. "What's happening is that financial institutions are just not lending," said Keller Williams's Bigelow.
So, you'd have to buy all-cash and install a full-system filtration system capable of removing lead and keep it well maintained. Wow!
⇧ Lessons from the Crisis: Ending Too Big to Fail | Federal Reserve Bank of Minneapolis
- Breaking up large banks into smaller, less connected, less important entities.
- Turning large banks into public utilities by forcing them to hold so much capital that they virtually can't fail (with regulation akin to that of a nuclear power plant).
- Taxing leverage throughout the financial system to reduce systemic risks wherever they lie.
⇧ Lender of More Than Last Resort | Federal Reserve Bank of Minneapolis
- The Nixon administration asked for discount window assistance in 1970 in response to the financial problems of Penn Central Railroad. This request stalled in Congress, but the Fed worried that the company's default would spark a financial crisis, and it made clear that it would assist banks that needed help with businesses caught up in Penn Central paper. Schwartz wrote:
The Penn Central episode fostered the view that bankruptcy proceedings by a large firm created a financial crisis, and that, if possible, bankruptcy should be prevented by loans and loan guarantees: the "too big to fail" doctrine in embryo.
- The Nixon administration asked for discount window assistance in 1970 in response to the financial problems of Penn Central Railroad. This request stalled in Congress, but the Fed worried that the company's default would spark a financial crisis, and it made clear that it would assist banks that needed help with businesses caught up in Penn Central paper. Schwartz wrote:
⇧ Inequality: The Structural Aspects
Despite the unprecedented attention that income and wealth inequality has received in this year's presidential campaign in the United States and in several recent elections in Europe, one cannot but have the impression that, for many centrist politicians, inequality is just a passing fad. Their belief is, I think, that once the economies return to sturdy growth of at least 2 to 3 percent per year, and unemployment falls to 5 percent (or in Europe to single digits), people will just forget all about inequality and everything will go back to where it was some 20 years ago. Nobody would care about inequality again.
This, I think, is an illusion because it disregards the structural changes in societies wrought by the long and sustained process of increases in wealth and income inequality during the past 40 years. …
… When it comes to the interaction between equity and efficiency, Kuznets sees it going both ways: in some cases, pushing for equity too hard, as in full egalitarianism, may have detrimental effect on the growth rate. But in other cases, the very achievement of higher growth rates requires greater equity, be it because a significant part of the population is otherwise socially excluded, not allowed to contribute, or because it leads to the fragmentation of society and political instability. I believe that Simon Kuznets would have seen today's position of the developed Western economies as being at that second point and argued that pro-equity policies are not a waste of resources but rather an investment in, even the prerequisite, for future growth.
⇧ Does capitalism have to be bad for the environment? | World Economic Forum
… the market mechanisms under capitalism do not provide incentives for preserving the environment. Firms are constantly threatened by market competition to cut costs and optimize profit. The environment thus falls pray to the compulsive market behaviour of the capitalist mode of production. Without the intervention of non-market entities such as the state, international organizations and social forces, capitalism as an economic system simply will not safeguard our planet.
⇧ I'm in Awe at Just How Fast Global Trade is Unraveling | Wolf Street
Everyone wants to export their way out of trouble. Central banks in these countries want to crush their currencies to get the process going. But it's not working anymore. Because there's one problem: crummy global demand.
Why is there crummy global demand? Wages stink, unemployment is still too high, and households and firms are still too indebted.
Raise wages, create public jobs, and forgive debts.
⇧ Of Two Minds – If Zero Interest Rates Fixed What's Broken, We'd Be in Paradise
Charles Hugh Smith:
Rather than fix what's broken with the real economy, ZIRP/NIRP has added problems that only collapse can solve.
Actually, properly targeted massive increases in fiscal spending, preferably of the non-debt kind, could easily correct the entire problem.
I could solve the global economic problem in less than a year that way.
⇧ China Ramps Up Rhetoric, Plans New Steps to Juice Up Economy – Bloomberg Business
"Short-term prospects look brighter, but runaway loan growth will do nothing to ease concerns about China's over-extended banks and over-indebted corporates," Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a note.
Okay, so the Chinese people and leadership knew next to nothing about capitalism when they decided to create capitalism "with Chinese characteristics."
Who told them that they could only create money via issuing bonds at interest?
⇧ China Debt Binge Spurs S&P Warning as Magnus Sees `Big Problems' – Bloomberg Business
China's main government organs have vowed to tackle overcapacity, safeguard the asset quality of banks and limit loans to "zombie" companies, according to a joint statement issued Tuesday by agencies including the People's Bank of China, the National Development and Reform Commission and the Ministry of Finance.
Marketfield Asset's Michael Shaoul said the PBOC's ability to prevent excessive credit growth may be waning as the country loosens regulatory control over the financial system.
"How much of this is a result of deliberate policy rather than extreme moves made by the private sector is open to argument," Shaoul said in an e-mailed note. "We increasingly suspect that the PBOC has lost substantial control of the events we are witnessing, with both the partial deregulation of financial markets and multiple conflicting policy aims making regulatory control increasingly difficult without massive unintended consequences."
In other words, they still don't know what they're doing.
⇧ Convinced of the Secular Stagnation Hypothesis | Larry Summers
… while there is certainly scope for QE, for forward guidance and possibly for negative rates it is very unlikely that the Fed can take steps that are nearly the functional equivalent of 400 basis point cut in Fed funds that is normally necessary to respond to an incipient recession. If I am right in these judgements, monetary policy should now be focused on avoiding an economic slowdown and preparations should be starting with respect to the rapid application of fiscal policy.
That's what I've been saying all along: fiscal, fiscal, fiscal.
⇧ Worried Wonks – The New York Times
Paul Krugman's appeal to weak "authority":
… Four former Democratic chairs of the Council of Economic Advisers ….
I'm supposed to be impressed? I'm supposed to defer?
I like Steve Waldman's approach much better (that's regardless of whether Bernie nails the numbers, which he might, despite the "Four former Democratic chairs of the Council of Economic Advisers," who never really wowed me): http://www.interfluidity.com/v2/6400.htm l
Look, we've had them (the Four former Democratic chairs of the Council of Economic Advisers). We're here now because of people like them, their views, their approaches, your approach, Paul.
We don't want more Clintonomics! That's what we'd get with Hillary. She has always talked a game. The "New Democrats," the old DLC people, the now "Third Wave" pushers, believe firmly she'd remain true to form and swing back to the right to reward the corporatists and plutocrats and people with horrendously bad geopolitical views that will lead to WWIII if left unchecked.
⇧ Why Hamilton—Not Jefferson—Is the Father of America's Economy – Fortune
Stephen S. Cohen and J. Bradford DeLong:
The creation of a federal government debt also constituted the basis of a new and vigorous financial market. No wonder then that in Hamilton's strong and settled opinion: 'a national debt, if it is not excessive, will be to us a national blessing.'
Similarly Japan's MITI was great for Japan's post-WWII catch up but became a cropper once Japan was no longer following a well-blazed industrial development trail.
Hamilton was right about somethings. About the national debt, he was dead wrong.
Abraham Lincoln had a great deal to do with the development of the American School of Economics, and he didn't borrow to fight the Civil War.
As for Japan, it is my understanding that Japan's economy was doing just fine, too fine to suit the Western bankers who weren't reaping the lion's share via usury.
"Monetary-and-Banking-Reform Platform for The United States": http://propertypak.com/introduction-home /articles/monetary-and-banking-reform-p latform-for-the-united-states/
⇧ Construction Material Prices Continue to Plunge in January
Decreased demand for inputs to construction ranging from copper to iron ore has served to flood global markets with excess supply, leading to falling prices. Significant oil production among OPEC and non-OPEC nations alike has collided with flat demand, helping to push energy prices lower.
"With Russia and Brazil remaining in recession and with the Chinese economy continuing to slow, input prices are likely to remain low for quite some time," said Basu.
⇧ Sierra Club Sues 3 Energy Companies Over Rising Quake Risks – Bloomberg Business
The Sierra Club weighed into the controversy over fracking and increased earthquake risk with a lawsuit accusing a Chesapeake Energy Corp. unit, Devon Energy Production Co. and New Dominion LLC of triggering tremors in Oklahoma and Kansas.
Devon declined to comment on the complaint and officials at New Dominion couldn't immediately be reached for comment. David J. Chernicky, chairman and founder of New Dominion, said in an interview last year with Bloomberg Businessweek that evidence tying underground wells to earthquakes is unreliable and expressed confidence New Dominion would prevail against an earlier lawsuit.
Evidence linking oil and gas companies to seismic activity in the region is growing, according to a Bloomberg Intelligence report. In 2015, Oklahoma Governor Mary Fallin acknowledged the relationship between the two, while state regulators have imposed new rules for fracking in an effort to reduce the quake risk.
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