Linking ≠ endorsement.
This is probably the most important commentary to date I’ve made via this blog.
The original title only says, “The Sanders controversy.” I added the prefix, “IMPORTANT: How Christina & David Romer debunk themselves.”
Jeremie Cohen-Setton has done a nice job of pulling together various views on the recent Sanders flap. I’d read about 90% of them, but it’s nice to see this sort of work that Jeremie does on a regular basis.
Christina & David Romer:
The only time in our history when growth averaged over 5% for a decade was during the recovery from the Great Depression and the years of World War II. But that involved moving from 25% unemployment to an economy pushed well above its normal capacity by the necessity of fighting a world war. Today we are not starting from remotely the same level of slack (the unemployment rate is one-fifth its level at the trough of the Depression), nor facing a national imperative that would allow us to push our economy far beyond its normal limits.
Ha, ha, ha, there it is. There’s exactly what I’ve been saying. We can ramp up the US economy just as if it’s war time but without the violent war. All it is, is a decision. The one and only reason it hasn’t been taken is because the super-rich, the plutocrats, stifle the public sector, plain and simple. They call this the political hurdle; but with enough votes by enough people who don’t mistakenly apply here the adage, “If it sounds too good to be true, it probably is,” the war on poverty and so much more can be won and done so quite easily. This is no “pie in the sky.” This is just fact. The plutocrats have been having it masked over for centuries.
The Chairman and CEO of US uber-bank Goldman Sachs, Lloyd Blankfein, calls this knowledge “dangerous.” Paul Krugman claims that if this knowledge exists, it’s a secret. Narayana Kocherlakota knows it’s not dangerous to the people but to the plutocrats and that it most certainly is not a secret but has been hushed up by those who do think it’s dangerous (to the wealth, power, and control of the plutocrats).
My view is that Romer & Romer, et al., especially Paul Krugman, the chief cheerleader (gloomleader might be more apt here) of the gang and its misguided herd, are at best suffering from cognitive dissonance. At worst, some of them are up to exactly what Paul Krugman protest that they are not: shilling for the powers that be behind the hypnotic ideology of extremely weak progressivism, if one can rightly call it progress at all.
Concerning slack or the “gap,” nobody has properly measured it because nobody can guess what the people would do if the floodgates of productivity, research, development, and all the rest were opened all the way, which really might be an insufficient analogy, as under proper management, the gates themselves widen while they’re being opened.
As for inflation, tell me how much of a problem inflation was during the war? We were fighting a war. We should be fighting one now on poverty. If we were to carry it on long enough, we most certainly would find the sweetspot and new techniques for avoiding inflation.
As for the Fed, it would be a simple matter for the Congress and President to tell them to stand down. If the supply of goods and services, the demand for them, the money supply, and the velocity of that money were all designed and managed correctly, they wouldn’t have to apply the brakes. The money system would be internally regulated rather than by the private sector. The Fed would be out of business. The people would be in charge and doing a much better job than the plutocrats and their Federal Reserve System, which would be scrapped.
“…nor facing a national imperative that would allow us….” That literally makes me laugh. What they are saying is that we most certainly could do it if we were to decide it’s imperative: like putting everyone to work and raising productivity through the roof to end poverty isn’t imperative.
I find such minds boggling. I’m sure Bernie Sanders does too.
What’s more, I can guarantee Hillary Clinton does not know this stuff and that when she finds out, she won’t touch it. She won’t admit she’s wrong. If she addresses it at all, she’ll dismiss it as not doable. A real leader would not do that. Real leaders, don’t just lead down some path. They lead down the right one, and they teach and rally and stimulate and challenge the people to do more than they think they can. They aren’t unrealistic.
“Let’s try” is the right expression (hat tip to Mark Thoma). “It’s hopeless” is useless. Are you listening, Paul Krugman? Will you hear the truth? I hope so, but I’m not holding my breath.
Am I fired up? This is extremely important stuff. If you can’t get fired up about it, well I just don’t know.
This is the risk-management issue of risk-management issues. If we don’t get our economy properly designed and working, we will not fix the major problems facing humanity and the planet. We’ll not be able to handle the risks ahead.
⇧ Bernie Sanders and the Case for a New Economic-Stimulus Package – The New Yorker
Now, if one doesn’t necessarily agree with Gerald Friedman’s analysis, this article represents how such disagreement or doubt should be couched.
My hat is off to John Cassidy:
… In the history of national income accounts, the government bookkeeping system that dates to the late nineteen-forties, there has never been a ten-year period in which G.D.P. growth averaged 5.3 per cent. To find such a period, you have to go back to the decade after the Great Depression, 1934 to 1943, when the New Deal and the huge military build-up to the Second World War produced near double-digit rates of growth.
At the outset of that economic boom, about a quarter of all workers were unemployed, and many factories and offices were idle. Today, even if you don’t trust the official unemployment rate, which stands at 4.9 per cent, it is hard to argue that anywhere near as much spare capacity is available to be mobilized. And if the human and physical resources aren’t there to support supercharged rates of growth, the only other way it can be achieved over a lasting period is by unleashing an unprecedented decade of productivity increases. [exactly: “productivity increases”]
Right now, unfortunately, the economy is trapped in a self-reinforcing cycle of slow G.D.P. growth, inadequate investment (public and private), and stagnant wages. As Larry Summers and others have pointed out, public-sector investment is running at, or near, historic lows. Corporations, seeing little sign of rising demand for their products, are failing to invest in new capacity—preferring, in many cases, to return profits to their shareholders in the form of dividends or stock buybacks. Last year, according to the Economic Report to the President, real business fixed investment rose by just 1.6 per cent—less than G.D.P. When companies don’t invest in new capacity, their employees don’t ge t new technology to work with and productivity growth tends to lag. Low productivity growth, in turn, acts as a drag on wages and demand.
To break out of this low-growth trap, the economy needs policies designed to boost demand and push it onto a higher growth path: one in which rising investment, higher levels of productivity, rising rates of participation in the labor force, and higher wages all reinforce each other. … Realistically, we can’t expect 5.3-per-cent G.D.P. growth and 3.3-per-cent productivity growth to persist for a decade. … [“Realistically”?]
… in the late nineteen-nineties we saw rapid rates of G.D.P. growth and productivity growth appear in tandem. Some analysts would claim that the latter generated the former, rather than vice versa, but that argument isn’t convincing. In a Kaldorian virtuous cycle, G.D.P. growth spurs productivity growth, which, in turn, spurs G.D.P. growth. Causation goes both ways.
… Friedman points out that the candidate’s “Medicare for all” proposal, whose cost he estimates to be about $1.1 trillion a year, would also raise demand throughout the economy. Although the plan would largely be paid for by higher income taxes and a 6.2-per-cent payroll tax on employers, Friedman argues that the savings in private insurance premiums would outweigh these costs, and that most of the savings would be passed on to workers in the form of higher wages, which would then be spent. Indeed, it is this extra boost to the economy that drives much of the rise in G.D.P., productivity, and wages that Friedman projects.
… If history repeated itself, we could buy ourselves several years of rapid G.D.P. growth, which would give a most welcome boost to productivity and wages. And from there, higher levels of investment and innovation could well lead to permanently higher rates of economic growth.
He also even adds this: “As Martin Wolf pointed out in the Financial Times on Wednesday, we could even end up with the Fed and other central banks i ssuing so-called helicopter drops of cash into people’s bank accounts—an option I discussed a few months ago in a magazine piece about Adair Turner’s book, “Between Debt and the Devil.”
Wolf and Turner seem to always get all the credit for this, but even Keynes made clear that the economy could benefit by paying people to dig holes and then turn around and fill them. The point is that money would get into the economy.
Yes, Bernie’s plan is not MMT enough, if at all; but he could be taught. Jeremy Corbyn’s People’s QE is about the government spending debt-free money into the main-street economy rather than borrowing, which goes beyond MMT. The planned method is unnecessarily circuitous (keeping the central bankers in place), but it’s better than nothing. Spending debt-free money into the main-street economy is what Dennis Kucinich was advocating, but that was before the current youths were old enough to light a political fire and keep it burning.
⇧ Economic Forecasting Models and Sanders Program Controversy | Institute for New Economic Thinking
Here’s why I said the pot is calling the kettle black concerning the “gang of four” ganging up on Gerald Friedman and why I’d hire Jamie Galbraith if I were in the White House.
The baseline is baseless, equilibrium is vacuous, and the past growth path is not the single best forecast.
In the case of the models favored by the Romers, we have the experience of forecasting from the outset of the Great Financial Crisis, which was marked by a famous exercise in early 2009 known as the Romer-Bernstein forecast. According to this forecast (a) the economy would have recovered on its own, in full and with no assistance from government, by 2014, (b) the only effect of the entire stimulus package would be to accelerate the date of full recovery by about six months, and (c) by 2016, the economy would actually be performing worse than if there had been no stimulus at all, since the greater “burden” of the government debt would push up interest rates and depress business investment relative to the full employment level.
It’s fair to say that this forecast was not borne out: the economy did not fully recover even with the ARRA, and there is no sign of “crowding out,” even now. The idea that the economy is now worse off than it would have been without any Obama program is, to most people, I imagine, quite strange. These facts should prompt a careful look at the modeling strategy that the Romers espouse.
It’s plainly unsatisfactory, to forecast in this way. But what’s the alternative? To develop a different point of view, one needs a model capable of generating a picture of the future that does not necessarily yield a mirror of the past. To do that, one needs a structured grip on the underlying mechanics. One needs a vision of how the economy works, and one needs to have the courage to assert that vision — ironically — in sp ite of the fact that it cannot be derived from the past statistical record. This is the hard part. But only in this way can one see that the baseline is baseless, that equilibrium is vacuous, that the past growth path is not the single best forecast. There is no way to build such a model for use by functionaries, and hence no easy escape from the mental traps of statistical prediction.
In an emergency, therefore, forecasts are not only useless; they are counterproductive. Franklin Roosevelt was blessed by history, in that he came to power in an age bereft of national income accounts and economic forecasting models. He was working in the dark, with nothing to guide him but a sense of urgency, the advice of trusted observers, and the observed results of action. So he tried everything, the plausible and the implausible alike, and both received and accepted full credit for the results. If Roosevelt had had the benefit of today’s economic experts, Keynesians and anti-Keynesians alike, he would have never gotten the New Deal off the drawing boards.
What saved the United States from a new Great Depression in 2009 was not the underlying resilience of the private economy, nor the recovery of the banking sector. And it was not the stimulus program, though that clearly did help. It was, mainly, the legacy of big government that had been created to deal with the Great Depression, and to complete the work of the New Deal. Big government programs — Social Security, Medicare, Medicaid, unemployment insurance, disability insurance, food stamps, and the progressive structure of the income tax — worked to transfer the loss of private income from households, which could not handle it, to the government, which could.
⇧ One thing Bernie Sanders gets absolutely right about the economy.
I like this article with the exception of its buying into the gap-ceiling. There is no gap-ceiling.
I’m not saying that I fully endorse Gerald Friedman’s analysis. He based it on Sanders’ current plan, which plan is weak in my view (way too small, albeit for politically salable reasons no doubt).
What I also don’t buy, in addition to the output-gap limitation, is that the multiplier simply vanishes when the stimulus is withdrawn. Why? Because the “stimulus” shouldn’t be viewed as such but as a steady stream of governmental spending. That, again, is something Sanders’ plan doesn’t state but that I take as his unstated vision. Yes, I realize the “gang of four” critique is specifically addressing stimulus that is withdrawn.
In my view, this “the Sanders’ campaign shouldn’t have heralded Friedman’s analysis” dustup as a deliberate political attack to lessen Bernie Sanders’ chances of being nominated. It’s been blown way out of proportion and drawn out, when the kettle has often been calling the pot black.
Bernie Sanders’ economic plan is better than Hillary Clinton’s. His foreign policy is also better. If Gerald Friedman has overestimated (I don’t know that) and Sanders’ campaign shouldn’t have simply run with it to the extent they did, it’s really not a huge enough thing to vote for Clinton over Sanders, far from it. That’s what matters.
Bernie Sanders wants to pull the nation in the right direction much more so than does Hillary. If everyone who agrees with him simply votes for him rather than spending countless hours saying he’s not electable, he’ll win.
⇧ The Cases for Public Investment – The New York Times
Compared to what, anarcho-capitalists?
How about Richard D. Wolff ( https://www.rdwolff.com/ ), are you progressive relative to him? Hardly.
You’re not progressive. You’re a centrist, Paul; and I’m being rather liberal about it.
Hardcore progressives think you’re the next generations’ reactionary. After all, you oppose Bernie Sanders not on principle but because “he can’t win” even though Hillary would likely get trounced were she the nominee.
Do the math, Paul. Look at what Donald Trump has been doing. Listen carefully to him. Listen beyond the negative sound bites coming from the Democratic establishment. He’s able to appeal across the Party divide more than is Hillary Clinton. Plus, Hillary isn’t inspiring the youth, who know she’s much more the Potemkin candidate (say anything to get elected).
Most importantly for my readers, please note that Paul Krugman only discussed governmental borrowing rather than “money financing” governmental stimulus-spending.
⇧ Chinese accounting is ‘highly questionable’: Strategist
Watling now claims lenders are using tricks like labelling loan collateral as revenue in their balance sheets, rather than as a creditor.
And it may be helping inflate banks’ balance sheets, which in aggregate have increased tenfold in 10 years to over three times gross domestic product at $30 trillion, he said.
If true, it would constitute fraud by Western accounting standards.
Are the Chinese simply assuming the borrowers will default? If so, do they state that openly in their financials? How then do they treat the outstanding loan?
It sounds very fishy.
⇧ Insurance advice for tornado victims
Plenty of good advice here that applies to tornados but also to other losses
⇧ Don’t Panic Over Falling Inflation Expectations – Real Time Economics – WSJ
Both overall and underlying inflation have persistently run below the Fed’s 2% target in recent years and odds are that will continue—though not by as much as the bond market thinks. That wages have only begun to stir with unemployment now below 5% illustrates how little pressure there is on the economy’s capacity, and how little urgency there is for the Fed to pre-empt a dangerous wage-price spiral.
That said, neither the Fed nor anyone else need panic over the recent drop in inflation expectations. The Fed may well decide to pause in its rate-normalization campaign. But the decision on whether to abort that campaign altogether can wait until a clearer picture of inflation and economic growth emerges in coming months.
⇧ AIA Names the Winners of 2016 Young Architects Award | Architect Magazine | Awards, 2016 AIA Honor Awards, American Institute of Architects (AIA)
They’ve done some really nice work.
⇧ How Drones Are Transforming The Way You Shop For Real Estate | Fast Company | Business + Innovation
Drone photography is far cheaper than the next cheapest alternative—helicopters—and much easier to implement in terms of logistics and planning. Stephanie Spear, an attorney at the National Association of Realtors who works on the issue, told Fast Company that the demand for drone photography is simple: Many properties, especially commercial facilities or rural tracts of land, don’t necessarily photograph well on the ground. In late 2015, the NAR issued a FAQ and a sort of best practices guide for realtors who want to use drones.
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⇧ Why Millennials Are Getting Into Real Estate | D Real Estate Daily
Dallas appraisal executive Chuck Dannis has taught the same real estate class at Southern Methodist University’s Cox School of Business since 1988. Over the years, enrollment has risen and fallen, in line with the cyclical nature of real estate. “I think my 2009 class had seven students,” Dannis says. “This year, I had 37—the biggest class ever.”
⇧ Where the money is in real estate | SierraSun com
Some homes are just plain repugnant when you walk in them. Most Buyers walk away in disgust from such properties, but often they are the proverbial diamond in the rough. We see many “before and after” real property situations where someone steps up to buy and cure the visual blight of a neglected property.
Title or regulatory issues can be particularly satisfying to cure and profit from. All is not what it appears to be. When presented with a title, zoning, HOA, or other problem, look at it closely. Very closely. We’ve seen some magnificent resolutions to such problems by researching, reading and talking that were unthinkable when the problem was first encountered.
⇧ Jones Lang LaSalle stock battered amid fears of real estate slowdown – In Other News – Crain’s Chicago Business
Real estate is notoriously cyclical, and some investors fear that the industry is near its peak following good times in recent years. Obstacles to continued growth include rising interest rates, stock market gyrations, falling oil prices and a slowing Chinese economy.
⇧ Well-funded real estate newcomer turning heads | Indianapolis Business Journal | IBJ com
Out-of-state developer Hendricks Commercial Properties hopes to make a bold statement in Indianapolis with its $260 million pitch for a mixed-use project on a highly coveted piece of downtown land.
With downtown office vacancy hovering around 20 percent, Esselman is a bit concerned about the amount of office space Hendricks is pitching.
“They’ve got a lot packed into that site, not that it all can’t come together,” she said. “There’s just a lot of space to fill.”
⇧ Millennial Money: A demon landlord guide | FT Life – YouTube
It’s England, but many of the same issues apply in the US. We hear about the tenant from Hell quite a bit, but we all know there are landlords from there too.
Good landlords will want to “get it right,” as the narrator terms it.
⇧ China Internet watchdog bans former tycoon’s microblog | Reuters
It’s interesting we “opened China” only to find out we can’t find out what someone wrote to be banned; but it was never really about taking capitalism to China to cause China to become democratic, was it. It was always only about money.
⇧ Chinese Tycoon Loses 37 Million Web Followers After Faulting Xi – Bloomberg Business
The Western press found out what he said whether Xi likes it or not.
Shortly after Xi’s Feb. 19 media tour, Ren published a post on his Weibo account criticizing the president’s assertion that the state media serve the party, instead of the taxpayers who fund its budget. “When does the people’s government turn into the party’s government?” he said. The posts were deleted.
Ren has been reading democratic thought. That’s his crime. Where will be the voices of the Western billionaires in his defense? More importantly, where will they put their money?
What will Xi do if a Democracy Movement springs up once China hits the economic wall?
⇧ China internet: Ren Zhiqiang’s account blocked after Xi criticism – BBC News
… “anti-Communist Party” thoughts.
⇧ Foreign investment in Denver commercial real estate totaled more than $980.5 million in 2015 – The Denver Post
This is a fairly in-depth article.
“Foreign investment in San Francisco and New York and Boston and markets like that, coastal prime markets, is nothing new,” said Geoff Baukol, executive vice president with CBRE Capital Markets in Denver. “What’s new is the proliferation of interest from foreign capital into noncoastal, nonprimary markets. Denver is one of the first ones on that list after the coastal markets.”
Denver as a whole ranked No. 21 out of the top 30 global markets in total 2015 commercial real estate sales volume, according to Real Capital Analytics.
⇧ Hilton to spin off real estate and time share business, create three companies – Washington Business Journal
Hilton Worldwide Holdings Inc. (NYSE: HLT) will separate its real estate holdings and its timeshare business into new companies, creating three separate entities and leaving Hilton as primarily a hotel management company.
The move was suggested in December, and the statement Friday from Hilton confirms the scuttlebutt at the time: Hilton has received permission from the Internal Revenue Service to spin off its real estate into a REIT through a tax-free transaction.
The Hilton REIT spinoff will be perhaps one of the last of its kind, given that Congress recently passed legislation that would require corporations to pay capital gains taxes on those transactions, although it agreed to create an exception for companies that had contacted the IRS before Dec. 7, 2015.
… Australian households are now the most indebted on the planet ….
But is this a problem? After all, isn’t money cheap now — with borrowing rates the lowest they’ve been in history? Why not lever when debt is cheap? Aren’t Australian households just being clever with leverage? And what’s mortgage debt got to do with house prices anyway — aren’t they determined by supply and demand?
Yes they are and as I’ll explain in next week’s column, that’s the problem.
⇧ Lack of laws means little can be done about vacant properties | News | wyomingnews com
The journalist who wrote this article, Matt Murphy, is good at researching.
While past debate has brought up the issue of private property rights, research has shown that vacant structures harm adjacent property values and the marketability of a neighborhood, according to reports from numerous entities, including the Government Accountability Office.
While I don’t agree with Henry George, I don’t agree at all with the neoliberal school of economics. George at least had his heart in the right place.
I also don’t agree with the blanket statement that banks are not intermediaries. They are. They aren’t very much though relative to the credit-money they create without reserves backing them much at all in the UK and with a nominal 10% reserves in the US. (Though it is said that the Fed will always supply the reserves; is that to solvent banks only? I can’t say. Not surprisingly, the Fed refused to answer the question.)
Let me add that the loudest voices about the coming crash I read were Paul Craig Roberts (an economist of the supply-side school) and Mike Whitney. I too was very loud but not nearly as heard.
To give you another taste of Gaffney (take a big breath): ‘To most modern readers, probably George seems too minor a figure to have warranted such an extreme reaction. This impression is a measure of the neo-classicals’ success; it is what they sought to make of him. It took a generation, but by 1930 they had succeeded in reducing him in the public mind. In the process of succeeding, however, they emasculated the discipline, impoverished economic thought, muddled the minds of countless students, rationalised free-riding by landowners, took dignity from labour, rationalised chronic unemployment, hobbled us with today’s counterproductive tax tangle, marginalised the obvious alternative system of public finance, shattered our sense of community, subverted a rising economic democracy for the benefit of rent-takers and led us into becoming an increasingly nasty and dangerously divided plutocracy.’
The corruption of economics in universities is no trivial matter. Economic crises are serious matter involving loss of homes, savings and jobs and economists need the right tools to predict them so they can deal with them. Tragically only a handful of economists predicted the Global Financial Crisis of 2007-8 and the Queen of England was known to ask, ‘Why didn’t anyone see this coming?’ Professor Steve Keen in his book Debunking Economics spends a chapter summarising the work of a Dutch economist, Dr Dirk Bezemer. After laying down certain criteria for selection, he concludes there were only 12 (two published together). He named Dean Baker, Wynne Godley, Fred Harrison (UK), Michael Hudson, Eric Janszen, Steve Keen (Australia), Jakob Madsen & Jens Kjaer Sørensen (Denmark), Kurt Richebächer, Nouriel Roubini, Peter Schiff and Robert Shiller. Subsequently Bezemer had the list at three dozen, but out of a total profession of at least 20,000 it is a very dismal record. If any other profession (e.g medicine) was so wrong in something that affected millions they would be sued. The universities who train economists should hang their heads in shame.
There is a long way to go to reverse public thinking. Neoclassical (or neoliberal) economics has a death like grip on us. In over a century the doctrine has succeeded in further privatising the commons, dismantling the state, deregulating everything that moves and fooling the public over land and money. The economic theory that ignores the role of money and debt can’t possibly make sense of the economy in which we live. It should be jettisoned.
⇧ SEC Shares Data on Private Securities Offerings Post JOBS Act (Deck) – Crowdfund Insider
Regarding 506(c) or Title II of the JOBS Act, Bauguess states that uptake has been slow. He also recognizes that fraud, a consistent concern within the SEC, has not been prevalent. Committee member Patrick Reardon noted, anecdotally, the process of investor verification has dampened the usage of 506(c). Bauguess, along with Sebastian Gomez from CorpFin concurred.
The SEC states that under 506(c), or accredited crowdfunding, that non-fund capital raises have tallied $26.7 billion. The average amount of securities was measured at $8.1 million but the median was just $500,000.
Under Regulation A+, or Title IV of the JOBS Act, 68 companies have filed with the SEC and 19 have completed the process. Only three issuers have completed the sale of the securities.
Give it time. I’d rather have slowness than fraud and little people losing everything.
Resident Krista Joiner is one seller who believes that her property has lost value. Her five-bedroom home fell out of escrow in December. It is now back on the market at a slightly reduced price.
“There is a real nervousness from people,” Joiner said. “I understand. I’m scared and I live there. It’s an unsettling feeling to not know whether it’s safe or not safe.”
⇧ What are the top global risks to doing business? | World Economic Forum
With unemployment and underemployment identified as the number one risk of highest concern for doing business in 41 economies – more than a fourth of the economies surveyed – the toll of this risk on the well-functioning of business is highlighted once again. Moreover, combined with energy price shocks, these two economic risks top the ranking in half of the economies. These are followed by the failure of national governance, asset bubbles, fiscal crises and cyberattacks. While some patterns emerge on a global scale, the analysis of the EOS data shows that the global risks of highest concern for doing business differ considerably from country to country.
Cyberattacks is … the top concern in the United States ….
I put anthropogenic global warming very high on my list. How about you?
⇧ Europe’s Too-Big-to-Fail Banks Remain Risky | Chatham House
In the aftermath of the collapse of Lehman Brothers, which sent shock waves through the banking sectors of many countries, Europe did not go through a thorough cleanup to separate the good banks from the bad, unlike the United States. Europe, with its single currency, didn’t have a banking union at the time (it was established in 2014), so lack of coordination and domestic fears of triggering an even worse crisis pushed Europe’s banks to sweep their structural problems under the carpet.
Now enter the European Union bail-in mechanism for a failing bank, which came into force at the beginning of this year as part of the EU’s Bank Recovery and Resolution Directive. The idea is that the costs of a failing bank should be absorbed by its bondholders (i.e. the bank’s creditors), shareholders and depositors with more than €100,000 before asking the taxpayers to chip in, as they did in 2008-09.In practice, however, this new directive has created panic among bank investors ….
Not only do they not know what they’re doing in China, they don’t know in Europe either.
… a number of researches have suggested that with a relatively stable core inflation in the United States, oil prices would need to collapse to levels that are neither consistent with today’s forward curve nor sustainable. Therefore, these studies argue, the current market-based inflation expectations are simply irrational.
Some suggest that raising rates in the current environment is nothing short of insanity. Given the monetary easing by the ECB, the BOJ, etc. (as rates move deeper into negative territory) or the dovish stance by the BOC, the BOE, and others, the US dollar is bound to resume its rally, causing further damage to the US economy. In fact the latest PMI measures, (from Markit as well as ISM) suggest that the US economic activity has already slowed sharply in the first quarter.
⇧ Noahpinion: Occult Mysteries of the Heterodox
What in the world is he talking about?
I’ve studied MMT in some detail, all for free, all online, all open sources. The differences between MMT and New Keynesianism and Neoclassical economics is abundantly clear.
My reaction to this post is that Noah’s biases are blocking him from digging in.
By the way, I learned about the Austrian School the same way I learned about MMT and New Keynesianism. Of the three, I found the New Keynesian the least accessible. The Austrian was the most accessible, though the worst.
⇧ Currency wars coming in leaderless world: Citi’s Buiter
“If we have a further slowdown, it will have to be combined more with the fiscal policy, and the world just isn’t ready for that, institutionally, politically and any other way,” he said.
Well, they’ll be shocked into it. If it happens soon, the societal memory of the Great Recession will be fresh enough that the bankers and others simply won’t be able to pull the wool over people’s eyes. The politicians will be run out on rails if they side with the bankers against the people again.
⇧ ‘Love the party, protect the party’: How Xi Jinping is bringing China’s media to heel | World news | The Guardian
“This is all part of a trend towards a much harder or harsher authoritarianism in China,” Bishop added. “Because, ultimately, his goal is for China to have a much more highly-functioning authoritarian, single-party state. But to get there it is not going to be a soft authoritarianism it is going to be a hard authoritarianism. That is pretty clearly what we are seeing here.”
He hated it when it went viral and reached some Chinese that he doesn’t know what he’s doing. Now he’s running scared and using intimidation to prevent a Democracy Movement.
What’s US foreign policy on this?
We “opened China.” What has it accomplished, a rich dictatorship?
Has it really been good for global economics? Has it been good for the American people, the American workers?
Frankly, I can’t see that any of it has been positive, just the opposite.
China is based upon Ponzi financing and has resulted in massive environmental degradation.
Mao was a disaster, and now Xi is starting to demand that people smile and quake in their shoes before him.
Are US corporations going to do the right thing?
⇧ Oregon Local News – Years of illegal camping in Gresham Woods leads to destruction of natural, city property
“Once you start saying, ‘Hi’ and ‘Good morning’, they are very friendly,” Michaels said, then adding that she considers the city’s actions as “not nice” because there is nowhere else for the campers to go.
Andre Stephens, who rides a bicycle on the trail, said he often sees trash on the ground, but has never felt unsafe. But of the city’s action, he said, “If that’s what it takes to preserve (the land), I understand.”
Something needed to happen, said Danielle Miles, a volunteer coordinator for the Johnson Creek Watershed Council. The creek is unusable for swimming because of high levels of E. coli from either human or animal waste, Miles said.
“It’s really a larger social issue,” Miles said. “We have a crisis right now of people experiencing homelessness, and people are being forced into areas in really large numbers. And so it’s a problem from an urban ecology point of view, but a problem we want to respond to with sensitivity.”
Homelessness is first and foremost an issue of where society funnels the money the government and banks create. We could eliminate poverty very easily. Most of the homeless would choose to live in decent housing, which would be cheaper in the long run for society than paying for all the costs associated with leaving people poor.
⇧ How to Accelerate Growth Rates
Spend money now to repair bridges, ports, and roads, and immediately boost GDP growth. But at the same time, you are investing in public capital that can incent private business to invest as well, and you are pushing out the potential LRAS curve, which ultimately is the only one that matters.
What all this means is that you cannot just look at the projected growth rate of a plan to assess it. Friedman isn’t wrong because he projects 5% growth, but he’s probably wrong because he is assuming AS policies are going to have big current effects. Kocherlakota isn’t wrong because he projects 5% growth either, but his plan is more plausible because it is based in large part on AD policies.
Okay, he’s stuck on the gap; but at least he has his eyes open more than some big names I won’t name because anyone who’s been reading the flap will know exactly already.
I’m simply saying that there are no such limits as the standard model claims. That standard model is based upon a flawed assumption concerning direct investment and increases in productivity. We simply have never had sufficient public spending directed properly so growth would not slow. That’s the fault of the capitalists running things. By capitalists, I mean in the Marxian sense: “The owners of the means of production.” They hold the public sector back. They very selfishly stifle the “competition” the public sector represents.
… the group calculated that if 44 large-scale petrochemical developments proposed or permitted in 2015 were built they would spew as much pollution as 19 new coal-fired power plants would.
While global markets chill a bit amid a rash of instability, top executives polled for the 2016 Real Confidence survey showed a higher confidence rate for the domestic economy over global concerns (63.3 percent vs. 45.4 percent) and showed a “healthy” 68.5 percent rate of confidence in the health of the U.S. real estate market.
“…chill a bit…”?
Well, don’t ask me for a rebate of any of my broker’s commission because it’s illegal for me to give any.
I agree with the law. Large players could drive small start-ups and others out of the business, which would reduce competition on other services offered by insurance brokers, such as better analysis of client needs and more in-depth underwriting up front (saving clients time, money, and frustration).
⇧ San Francisco home prices: affordable to only eight percent of households? – On The Block
Despite the first drop in home values since 2011— posted at the close of 2015— San Francisco real estate prices are still at record highs. This means that affordability is at a record low. How low? Does only eight percent of households earning enough to afford current home prices sound low enough? The only time it’s been lower, incidentally, is right before the crash of 2007. [lightly edited]
⇧ A Better Way to Control the Banks – The New York Times
The New York Times Editorial Board gets it flat-out wrong.
… it plays into the hands of Republican critics of Dodd-Frank, who want to repeal the post-crisis reforms and block any further regulation.
It absolutely, positively, does not do that. Republicans typically do not advocate breaking up the big banks. In addition, breaking up the big banks would not help Republicans lessen or block regulations. Any Congress that would vote to break up the big banks would be inclined to greater, not lesser, regulations. The idea that the Republicans would make a deal to break up the big banks but deregulate the results is nothing short of wild. They’d fall on their swords first.
This article argues against itself: Promotes Dodd-Frank, which is being fought by the Republicans anyway. What’s the point other than putting out misleading political propaganda?
The mainstream media has been full of this sort of argument: that Bernie Sanders’ plans would undo or weaken reforms. In reality, his plan is for much greater reform and stronger regulations.
The only good thing about the article is it’s beginning:
Nearly eight years after the financial crisis, behemoth banks still dominate the global economy. They are still immensely complex, highly leveraged and politically powerful. They are still difficult, if not impossible, to manage and supervise. For those reasons, they remain a threat to the economy, and the notion of breaking them up appeals to many voters, policy makers and politicians.
In his campaign for the Democratic presidential nomination, Senator Bernie Sanders has made breaking up the banks a central plank of his economic agenda. The idea has merit. Smaller, more manageable banks would allow for better internal controls over dubious ethical behavior and better regulatory oversight of risky business practices that seem entrenched despite efforts at reform.
Everything after that is flat-out wrong.
⇧ China assures U.S. no devaluation, pushing reforms forward
China’s hyper-crackdown on press freedom, its arrogance concerning the “South China Sea,” and its thoroughly anti-democratic direction has completely turned me off.
I don’t want to hurt the common Chinese citizen/worker, but “Made in China” might take on the meaning of “Don’t buy this” until the Chinese people overthrow the dictatorship that is the Chinese Communist Party.
⇧ Global regulators may propose rules for fintech: FSB’s Carney | Reuters
Global regulators may propose rules to prevent “fintech” innovations from destabilizing the broader financial system, the G20’s Financial Stability Board said on Saturday.
⇧ NASA | Winston Over Fiji – YouTube
Tropical Cyclone Winston was one of the most intense tropical cyclones recorded in the southern Pacific Ocean, and it struck the islands of Fiji just as the NASA GPM satellite was passing overhead.