Thursday, February 23, 2017

Edward Harrison — The negotiations over Greece aren’t about Greece

Earlier today, I was listening to an interview with IMF head Christine Lagarde dance around the issue of the unsustainability of Greece’s debt load. And she said something very telling. She said that debt haircuts were not on the table but that maturity extensions and interest rate reductions were, but only AFTER Greece implemented reforms demanded by the Troika.
What’s important to realize when Lagarde says this is that although she’s talking about Greece, the negotiations with Greece are not really about Greece itself per se. They are about the maintaining or imposing an economic paradigm for every country in the EU that Greece was not meeting – and this is a paradigm that the IMF supports as much as the ECB and the EU. Greece is just being used as an abject lessons for other larger EU economies.
Think of it this way: 25 years ago, the EU signed on to the idea of a single currency in Maastricht. The question marks at the time were Belgium and Italy – Italy because of its constant currency devaluations and Belgium because of high government debt loads. The EU figured out how to deal with Belgium and Italy by creating the stability and growth pact which said that all member states had to keep their deficits under 3% and get their debt under 60%, or at least moving in that direction. Underneath these simple rules lies a whole economic ideology though. And that orthodoxy says long-term growth and a stable currency are best maintained by liberalized free markets and fiscal discipline.…
"Liberalized free markets and fiscal discipline" is neoliberalism in a nutshell.

"Liberalized free markets" means minimized government "intrusion" in the form of regulation and oversight, along with privatization of state assets ("asset stripping").

"Fiscal discipline" means government finance based on "sound money" that limits a government's fiscal space in economic policy and thereby constrains its fiscal policy. This is tantamount to operating as if on a gold standard.

Credit Writedowns
The negotiations over Greece aren’t about Greece
Edward Harrison

Glenn Greenwald — The Increasingly Unhinged Russia Rhetoric Comes From a Long-Standing U.S. Playbook


I. F. Stone. If you don't know who he was, you should. Before there were blogs, there was I. F. Stone.

The Intercept
The Increasingly Unhinged Russia Rhetoric Comes From a Long-Standing U.S. Playbook
Glenn Greenwald

See also
Russia’s role in Trump’s election has led to a boom in Putinology. But do all these theories say more about us than Putin?
The Guardian
Killer, kleptocrat, genius, spy: the many myths of Vladimir Putin
Keith Gessen

Philip Pilkington — A New Era of Central Banking?

As I noted in my last post the Bank of England have released an official policy document that concedes that much of Post-Keynesian endoegnous money theory is indeed correct. Interestingly, they have also released some Youtube clips with the authors where they expound on their work in more details. You can watch these videos at the BoE website here.

The videos are fascinating. The language the authors use — which contains references to ‘fiat money creation’ and money as IOUs — is straight out of either David Graeber’s book Debt: The First 5000 Years or MMT. If I were to guess I would say that it is some combination of both.
This is an enormous step forward. But I found it particularly interesting how young the authors in the videos were. One of them must be in his early 30s or so. It seems that the younger folks in the BoE are finally starting to ‘get it’.
Now, the question is where this might take the BoE if it begins to spread. There are two paths that can be taken now that they’ve gotten the basic mechanics of money creation correct.
Econintersect
A New Era of Central Banking?
Philip Pilkington
ht Lambert Strether at Naked Capitalism

John Quiggin — Bastiat anticipates climate science denialism

… on Googling Bastiat + pollution, I came across a remarkable package in which Bastiat anticipates the climate change debate and takes the denialist side in advance.…
What’s striking, though, is [Bastiat's] a priori faith that everything will be OK because of Divine Providence [compare with "spontaneous natural order"], which ensures that human activity tends towards harmony. If that fails, and a laissez-faire economy does in fact produce unsustainable pollution, his whole case collapses.
Of course, it’s possible to salvage a version of laissez-faire in the way suggested by Coase, using newly created property rights. But this requires the admission that property rights are a socially constructed set of rules, enforced by coercion, rather than a category inherent in the natural relationship between people and things. It’s precisely this admission that propertarians have been unwilling/unable to make, and why they still rely on magical thinking like that displayed by Bastiat.
John Quiggin's Blog
Bastiat anticipates climate science denialism
John Quiggin | Professor and an Australian Research Council Laureate Fellow at the University of Queensland, and a member of the Board of the Climate Change Authority of the Australian Government

Jennifer Mueller — Chinese and American Consumers Have Different Ideas About What Makes a Product Creative


Marketing and consumer preferences. One size does not fit all. Just as there are different body sizes, there are also different mindsets.

Harvard Business Review
Chinese and American Consumers Have Different Ideas About What Makes a Product Creative
Jennifer Mueller | Associate Professor at the University of San Diego

The “Natural” Interest Rate and Secular Stagnation: Loanable Funds Macro Models Don't Fit Today’s Institutions or Data

Can America recover ideal rates of growth through interest-rate policies? This important analysis suggests that most economists misunderstand the issue. Updating Keynes, the analysis suggests that fiscal stimulus, labor union bargaining power, and more progressive income taxes are needed to support growth. (The article includes some algebra, which some readers may choose to skip.)
The main points of this paper are that loanable-funds macroeconomic models with their “natural” interest rate do not fit with modern institutions and data. Before getting into the numbers, it makes sense to describe the models and how to think about macroeconomics in the first place....
Unfortunately, the article cited is behind a paywall. This is a useful short summary however.

Naked Keynesianism
Lance Taylor — The “Natural” Interest Rate and Secular Stagnation: Loanable Funds Macro Models Don't Fit Today’s Institutions or Data
Lance Taylor | Arnhold Professor of International Cooperation and Development and director of the Center for Economic Policy Analysis at the New School for Social Research

David F. Ruccio — “In this interregnum morbid phenomena of the most varied kind come to pass”

In his Prison Notebooks, Antonio Gramsci wrote: “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum morbid phenomena of the most varied kind come to pass.”
The world is once again living an interregnum. It is poised between the failed economic model of recovery from the crash of 2007-08 and the birth of a new model, one that would actually work for the majority of Americans....
Occasional Links & Commentary
“In this interregnum morbid phenomena of the most varied kind come to pass”
David F. Ruccio | Professor of Economics, University of Notre Dame

See also

Fabius Maximus
New research reveals the people guilty of wrecking America!

Bill Black — Why Was Tom Perez Willing to be the New Democrats’ DNC Stalking Horse?

The New Democrats faced a difficult tactical problem, however, in coming up with a workable plan to defeat Ellison. The DNC had proven ineffective and been caught putting its thumb on the scale to try to ensure that Hillary beat Bernie. The New Democrats lacked a strong candidate. They could have supported Ellison, who is widely viewed as likely to be a highly effective DNC leader that will lead the revitalization of the Party. Obama and the Clintons, however, are enraged at the prospect that a Bernie supporter would lead the DNC. Their highest national political priority is defeating Ellison. Do not fall for the “cool Obama” hype. Obama is furious with Bernie and Ellison and has pulled out all the stops to try to prevent progressives’ from challenging his legacy as a New Democrat. The Clintons share his rage....
The losers are trying to maintain control after the world has passed them by.

New Economic Perspectives
Why Was Tom Perez Willing to be the New Democrats’ DNC Stalking Horse?
William K. Black | Associate Professor of Economics and Law, UMKC

See also recently by Bill

Kenneth Arrow’s (Ignored) Impossibility Theorem


Arthur MacEwan — Is It Oil?

U.S. foreign policy, as I elaborated in the 2003 article, has long been designed not simply to protect U.S.-based firms in their international operations, but to establish the right of the firms to access and security wherever around the world. Oil firms have been especially important in promoting and gaining from this right, but firms from finance to pharmaceuticals and many others have been beneficiaries and promoters of the policy.
Whatever else, as the Iraq and Middle East experience has demonstrated, this right comes at a high cost. The best estimate of the financial cost to the United States of the war in Iraq is $3 trillion. Between the 2003 invasion and early 2017, U.S. military forces suffered 4,505 fatalities in the war, and allied forces another 321. And, of course, most of all Iraqi deaths: estimates of the number of Iraqis killed range between 200,000 and 500,000.
Triple Crisis
Is It Oil?
Arthur MacEwan | Professor Emeritus, Department of Economics, University of Massachusetts Boston and Senior Research Fellow, Center for Social Policy

Wednesday, February 22, 2017

Fox News host, Brenda Buttner has died. So sad. She was a good friend.

Brenda Buttner has died at the age of 55 after a battle with cancer.

In my 12 years at Fox News there was probably nobody I felt closer to than Brenda Buttner. She was the host of Bulls & Bears, the Saturday show where I appeared so many times.



Brenda was not just a great host--smart, witty and always in control--she was not afraid to comment and editorialize outside the ideological "party line" of Fox News. So many times she let me loose on the many clueless, ideological, gold-bug morons on these shows' panels. It was fun.

She was a wonderful person. Gone way too soon.

Two Year German Govt Bonds at all time (negative) lows


So is the Fed going to raise rates in the face of all of this over there?  I don't see it happening for now, looks like continued ZIRP at least short term. US Two year at least positive 1.22%. US overnight being supported at 0.5% pretty pathetic.





Brian Romanchuk — Paperback Edition Of Abolish Money Now Available

The paperback edition of Abolish Money (From Economics)! is now available at online booksellers. It will take time for it to appear on some websites.…
Bond Economics
Paperback Edition Of Abolish Money Now Available
Brian Romanchuk

2017 IRS Tax Refunds Coming Week of Feb. 27


This is about a 3 to 4 week refund processing delay YoY. Pushing refunds well into March and could effect 1Q business/earnings.





Zero Hedge — "It's Absolutely Out Of Control": Did Trump Just Spoil The Deficit-Spending Party?


Taking away the punchbowl? Sounds like signing on to the Ryan budget?

Zero Hedge
"It's Absolutely Out Of Control": Did Trump Just Spoil The Deficit-Spending Party?
Tyler Durden

Robert Parry — NYT’s Fake News about Fake News

The West’s anti-Russian propaganda links Moscow to the blight of “fake news” but the evidence doesn’t connect the two. So, The New York Times makes the case with its own “fake news,” reports Robert Parry.
The m.o. on this is usually the same.  Reports that are verifiably true but peripheral to the point are introduced first to establish credibility and then reports that are not documented are brought in to persuade uncritical readers (probably most) to accept information that is dubious or bogus to carry home the propaganda point. The key to success is to repeat the narrative.

Consortium News
NYT’s Fake News about Fake News
Robert Parry

Duncan Green — How do we encourage innovation in markets? What can systems thinking add?

Earlier this month I spent a fun 3 days at a seminar discussing Market Systems Innovation. No really. I discovered a community of very smart people working on markets, who seem to be on a similar journey to the people working on governance and institutions, who I have spent most of my time with in recent years. Chatham House Rule, so the speakers must remain shrouded in mystery, but I will say it was at the Rockefeller Foundation’s Bellagio Centre, just to make you jealous....
From Poverty to Power
How do we encourage innovation in markets? What can systems thinking add?
Duncan Green

Norbert Häring — How India became Bill Gates’ guinea pig: A conspiracy as recounted by the main actors

Microsoft’s Bill Gates is one of the richest and most influential people on earth. He announced in 2015 that his Bill & Melinda Gates Foundation was aiming at achieving full digitalization of the payment systems of India and other populous developing countries by 2018. This “financial inclusion” program for India dates back to well before Narendra Modi came to power. It was elevated to official US policy by Executive Order in 2012, because the President saw vital US security interests are at stake....
Real-World Economics Review Blog
How India became Bill Gates’ guinea pig: A conspiracy as recounted by the main actors
Norbert Häring, Handelsblatt

See also
Merijn Knibbe

Ruble is up 11% since the rate cuts last June. I said to buy it back then.

The ruble is up 11% since the rate cuts last June. I said to BUY THE RUBLE at the time. By the way, an 11% move in currency markets is big.

Rate cuts are bullish for currency, all else equal. People don't understand that, yet we see it over and over again.

Rate cuts are price reductions--deflationary. It literally means the currency has more purchasing power. It's reflected in forex markets as a higher exchange rate.

Rate hikes are the opposite. They are bearish, not bullish. Rate hikes are price increases and that means the currency buys less, not more. It's reflected in forex markets as lower exchange rate.

Another way to think about it is, a currency is like a government security of zero maturity. Everyone understands that when the central bank raises rates the PRICE of the government security (a Treasury, for example) goes DOWN. Price is inverse to the rate. The discount to "par" reflects the interest rate. 

Conversely, when the central bank cuts rates the PRICE of the government security goes UP.

Same with currency. The dollar is a Treasury of zero maturity.

Moon of Alabama — The War Hawks Rolled Donald Trump


Lt. Gen. H. R. McMasters may be better than Ambassador John Bolton as national security advisor but Moon of Alabama doesn't think by much. 

And now that Flynn has been disposed of, Bannon is next on the list.

Moon of Alabama
The War Hawks Rolled Donald Trump
b

Tuesday, February 21, 2017

Reuters — Trump's new security advisor differs from him on Russia, other key issues


Is Trump adopting Obama's team of rivals approach?
U.S. President Donald Trump has shown little patience for dissent, but that trait is likely to be tested by his new national security adviser, Army Lieutenant General H.R. McMaster.
McMaster is joining the White House staff with views on Russia, counterterrorism, strengthening the military and other major security issues that diverge not only from those of the Trump loyalists, but also from those the president himself has expressed.…
McMaster will not be alone, however. His prominent administration allies include Defense Secretary Jim Mattis; Marine General Joseph Dunford, the chairman of the Joint Chiefs of Staff; and Senator John McCain, chairman of the Senate Armed Services Committee; as well as many of the soldiers who have served with him....
Reuters
Trump's new security advisor differs from him on Russia, other key issues
John Walcott

Interfax — Moody’s upgrades Russia rating outlook to stable

Moody’s Investors Service has changed the outlook for Russia’s sovereign ratings to stable from negative.
Russia’s issuer rating and the rating for Russian government bonds have been affirmed at Ba1, and the short-term rating has been affirmed at Not Prime, the rating agency said in a press release....
Johnson's Russia List
Interfax: Moody’s upgrades Russia rating outlook to stable

The New Cold War — Academia.edu: Ivan Katchanovski, Interview with Telepolis magazine (Germany) Concerning New Revelations in the Maidan Massacre Investigation.

Ivan Katchanovski PhD is a researcher and lecturer at the School of Political Studies of the University of Ottawa. The English text of the above interview is published online here on Academia.edu. The original in German is here.
Interviewer: Can you give a very short summary of your theory about the sniper-killings on 20th February in Kiev?
IK: My academic study of the Maidan massacre concludes that this mass killing was a false flag operation, which was rationally planned and carried out with a goal of the overthrow of the government and seizure of power. It found various evidence of the involvement of an alliance of the far right organizations, specifically the Right Sector and Svoboda, and oligarchic parties, such as Fatherland. Concealed shooters and spotters were located in at least 20 Maidan-controlled buildings or areas. The various evidence that the protesters were killed from these locations include some 70 testimonies, primarily by Maidan protesters, several videos of “snipers” targeting protesters from these buildings, comparisons of positions of the specific protesters at the time of their killing and their entry wounds, and bullet impact signs. The study uncovered various videos and photos of armed Maidan “snipers” and spotters in many of these buildings. Unreported revelations from the Maidan massacre trial and the investigations by the Prosecutor General Office of Ukraine, such as forensic ballistic and medical reports, testimonies of eyewitnesses in the investigation documents, newly released videos, and court rulings concerning investigations of the far right involvement in the Maidan massacre, corroborated major findings of my study.
I presented an expanded and updated version of my Maidan massacre paper at the Annual Meeting of the American Political Science Association in San Francisco in September 2015. This paper is freely downloadable without any registration from the Social Sciences Research Network and APSA conference websites, and it is also available on my Academia and Researchgate websites. My chapter summarizing the Maidan massacre study is scheduled for publication on February 11, 2016 in a Routledge book edited by two Canadian political scientists. My article, which includes examination of the role of the Maidan massacre in escalation of the conflict in Ukraine into a civil war in Donbas and subsequent Russian military interventions, is forthcoming in a special issue of a British refereed journal concerning the conflict in Ukraine.
The New Cold War
Academia.edu: Ivan Katchanovski, Interview with Telepolis magazine (Germany) Concerning New Revelations in the Maidan Massacre Investigation.
ht Johnson's Russia List

Anonymous — Paris On Brink Of Civil War’ Warns Le Pen – Media Blackout


May explain Le Pen's rise in the polls.

Security and order are the highest priority of government and when government seems to be failing, the tendency is toward greater authoritarianism.

Anonymous
‘Paris On Brink Of Civil War’ Warns Le Pen – Media Blackout

UPDATE: The Anonymous post has been taken down. Here is another link.

Adam Kredo — U.S. Government Computers Still Not Safe From Cyber Attacks


Can't afford it, I guess.

Washington Free Beacon
U.S. Government Computers Still Not Safe From Cyber Attacks
Adam Kredo

Ryan McMaken — Alan Greenspan Admits Ron Paul Was Right About Gold

AG: I view gold as the primary global currency.
OK, we got that cleared up.

Remember that Alan Greenspan said that central banks operate "as if" on a gold standard. He had also said that gold is the premier currency.

Mises Dailies

Chinese economy 2016-2017

China will maintain strong growth in consumption this year with deepening supply-side structural reform, Commerce Minister Gao Hucheng said Tuesday....
China on track in shifting away from an investment-export led economy to a consumption-domestic economy.

China.org.cn
China's consumption to maintain strong growth in 2017
Xinhua
Consumption contributed to 64.6 percent of China's economic growth in 2016, up 4.9 percentage point compared with the year before, said Chinese Minister of Commerce on Tuesday.
Gao Hucheng, Minister of Commerce, said consumption has become the most important boost in the Chinese economy since 2014, which indicates that the country's economic structure has been undergoing historic changes.
Meanwhile, new characteristics have shown up in Chinese people's consumption. Demands for high-quality, multi-function and intelligent products have been increasing, said Gao. For instance, the sales volume of vehicles has exceeded 28 million, seeing a 13.7 percent year-on-year growth. Sales of SUVs under various brands have increased by 44.6 percent, added the minister.
The e-commerce development is booming in China. The 2016 online turnover has increased by 25.6 percent, accounting for 12.6 percent of the total turnover of the social consumption. "It is hard to imagine how the distribution industry would be like without the internet plus," said Gao.
More trends have also shown up in the consumption. For example, service consumption has taken a larger portion in the total consumption, and consumers have shifted to purchase personalized and customized commodities. A greener trend is on the rise in people's consumption concept as well....
Ecns
MOC: Consumption contributes 64.6% to economic growth in 2016

Diane Coyle — Markets, states and humans

I was eager to read Paul De Grauwe’s The Limits of the Market because I profoundly agree with its premise that the false dichotomy between ‘the state’ and ‘the market’ has led to bad public policies and lower social welfare. The book is a short overview of the flaws of this dichotomous view of the world. It organises its discussion around two sets of reasons why a ‘free market’ is a meaningless abstraction: externalities and ‘internalities’…
Short and important. Deals with economic and non-economic factors that influence economic behavior that are not taken into account as information in market behavior.

The Enlightened Economist
Markets, states and humans
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

Andrew Spannaus — Towards a New Trade Policy

International trade deals have lost their consensus support as more workers view them as anathema to good-paying jobs, requiring the U.S. politicians to rethink these strategies, writes Andrew Spannaus...
The goal is not to close borders and restrict trade, but to ensure that trade takes place without undermining the social and living standards of developed countries. Regulations need to be drawn up to certify whether companies, or entire countries, comply with certain standards. Some examples include rules on workplace safety, child labor and pollution, which can be enforced through both tariffs and in some cases outright bans.
Selective targeting of low-quality production will be complex at times, in part due to the existence of global supply chains, which exploit comparative advantages in terms of not only labor costs, but also logistics and infrastructure.
Yet the complexity of these issues is no excuse for ignoring the enforcement of provisions that are essential to protect economic well-being. Politicians and economists constantly make assurances that such standards are integral to the notion of free trade, yet on the list of priorities they seem to be squarely at the bottom.
The current political situation offers an opportunity to chart a new course, not of isolationism, but of setting clear rules for trade between countries aiming for high living standards....

Funny how it is OK to introduce artificial barriers in markets when it benefits capital but not when it benefits labor.

Consortium News
Towards a New Trade Policy
Andrew Spannaus

Dan Goodin — Hacks all the time. Engineers recently found Yahoo systems remained compromised


Yahoo is getting smashed. Verizon drops bid by 350M. 

C. J. Hopkins — Goose-stepping Our Way Toward Pink Revolution

The deep state, of course, is not a conspiracy. It is simply the interdependent network of structures where actual power resides (i.e., the military-industrial complex, multinational corporations, Wall Street, the corporate media, and so on). Its purpose is to maintain the stability of the system regardless of which party controls the government. These are the folks, when a president takes office, who show up and brief him on what is and isn’t “possible” given economic and political “realities.” 
Despite what Alex Jones may tell you, it is not George Soros and roomful of Jews. It is a collection of military and intelligence officers, CEOs, corporate lobbyists, lawyers, bankers, politicians, power brokers, aides, advisers, and assorted other permanent members of the government and the corporate and financial classes. Just as presidents come and go, so do the individuals comprising the deep state, albeit on a longer rotation schedule. 
And, thus, it is not a monolithic entity. Like any other decentralized network, it contains contradictions, conflicts of interest. However, what remains a constant is the deep state’s commitment to preserving the system … which, in our case, that system is global Capitalism.
I’m going to repeat and italicize that to hopefully avoid any misunderstanding. The system the deep state primarily serves is not the United States of America, i.e., the country most Americans believe they live in; the system it serves is globalized Capitalism. The United States, the nation state itself, while obviously a crucial element of the system, is not the deep state’s primary concern. If it were, Americans would all have healthcare, affordable education, and a right to basic housing, like more or less every other developed nation.[paragraphing introduced for readability]
Pretty much as I have been saying.

The author shows how the Left has been duped into supporting totalitarian corporate globalism in an effort to provoke a color revolution in the United States.

Counterpunch
Goose-stepping Our Way Toward Pink Revolution
C. J. Hopkins, American ex-pat author living in Berlin