Hudson-Gowan Study (or !Free Books!)
Bouncing off an earlier thread, I realized that two superlative books written the past few years on the financial history of our current crisis are available as free pdf’s.
Just throwing mud on the wall here, but combining these two for a study-discussion might be interesting as a kind of long-term discussion. If I’d seen that elsewhere, I’d have been a serious lurker. It was attempted on as couple of sites for Hudson, but they were such doctrinaire and sectarian leftists that the discussions quickly devolved into Tralin-Stotsky debates and other such religious arcana.
So here’s trying. Have a good read. Maybe we can teach each other.
Peter Gowan’s “Globalization Gamble”
Michael Hudson’s “Super Imperialism”
Stan:
In Gowan’s Part One, page 3, 3rd paragraph, he begins, “One of the central confusions…” He distinguishes between a “charge” on the system (which he will later call a “royalty”) and money as the source of new production. How might we explain this distinction in our own words?
* * *
In Hudson’s Intro on page 15, he names something called “the Washington Consensus,” then orphans the term to do a lengthy history of this thing’s development. What does a web search yield on this Washington Consensus?
15 February 2010, 9:55 amLisa:
For those interested in economics:
Hudson is a “chartalist.” He and Randall Wray and others, like Marshall Auerback, and Scott Fullwiler, are “modern money theorists.” Their viewpoint is a largely non-ideological (as economists; politically, they are “left of center”) description of how the money systems and central bank operations actually work in sovereign nations with a fiat money system. It’s not difficult theory to understand; the problem is that the economics generally keeps using terminology bound-up with gold-backed currency economies, which no longer exist; this creates endless confusion.
Most of them, Hudson included, blog at the U of Missouri at KC:
http://neweconomicperspectives.blogspot.com/
Another member of the group, Bill Mitchell (also, interestingly, a permaculturist), writes an excellent blog at:
http://bilbo.economicoutlook.net/blog/
These two recent posts are particularly relevant:
http://bilbo.economicoutlook.net/blog/?p=7864
http://bilbo.economicoutlook.net/blog/?p=8013
15 February 2010, 10:20 amStan:
Thanks for the links, Lisa. On studying these books, though, if anyone is inclined to read them, perhaps it is better that we wait until we’ve read and discussed what they actually wrote before we hang any ISM’s on them. Labelling an author or analyst as a ***ist has that tendency to impose the assumptions associated with the label on the writer, instead of letting what s/he says speak for itself.
Hudson was Dennis Kucinich’s econ advisor during the presidential campaign, so left of center does seem to describe the politics as far as that kind of category works.
I’d be more interested, however, in seeing what kind of collective discoveries we might make during these reads… especially historical, since these are both works of financial history.
15 February 2010, 12:25 pmLisa:
There’s a nice chart of what Hudson calls the FIRE economy at:
http://www.fireeconomy.com/
Flat Earth theory returns – budget aftermath
http://bilbo.economicoutlook.net/blog/?p=2301
In the “isms,” from Mitchell:
I am also of the view that I am an educator. I am not marketing a concept or appealing to what might be popular or politically practical at a particular point in time. My role is to try to understand the macro system as a totality – not just one part of it – and then communicate that as best I can. I leave it to those who take on the political roles to take the ideas and run with them. But I guess I wrote this particular blog because I am frustrated that so-called progressives keep using terms like “debt funded” or “debt financed” and “print money to generate inflation” and other orthodox neo-liberal terminology when it is plain wrong in technical terms but also incredibly naive in political terms.
15 February 2010, 4:22 pmLisa:
This article is directly relevant to Hudson’s Superimperialism, because the collapse of Bretton Woods is the key moment. It will make Hudson’s arguments clearer, I hope:
“…Ultimately, the system collapsed because Nixon’s prosecution of the Vietnam war forced him to suspend USD convertibility to allow him to net spend more. Here is an interesting historical video of Nixon abandoning the Bretton Woods system on August 15, 1971. This was the final break in the links between a commodity that had intrinsic value and the nominal currencies. From this point in, governments used fiat currency as the basis of the monetary system…”
Gold standard and fixed exchange rates – myths that still prevail
http://bilbo.economicoutlook.net/blog/?p=2562
15 February 2010, 4:42 pmStan:
Good links, as usual. Thanks Lisa.
16 February 2010, 7:35 am(Boer) Tom:
@Lisa
16 February 2010, 9:26 amA question then: Does creating money not cause inflation? I’d imagine that money created without an associated increase in the rate of production, whether as fractional reserve or as straight deficit spending (printing presses, if you’re not USA), implies inflation, as the money increases while that which the money makes claim on does not. If the production grows with the money production, I’d imagine that average inflation would be avoided. [Where] Is my understanding wrong?
Stan:
Of course printing money creates inflation. The total currency compared to the total basket of commodities has a determinative effect on price.
Hudson’s and Gowan’s histories show how the US has effectively exported inflation. We ought to read these books. (:
16 February 2010, 9:34 amCurt Kastens:
I am about 2/3 done on the Gowan book. I think that it contains the defense strategy that would be used by US Generals if they were ever brought to trial.
16 February 2010, 6:36 pmIn essence, we were only doing our job by placing the US first in our strategies and actions. Generals of every other country do the same.
My response to them is that when you conspire to wage war and wage wars of aggression you are not putting your country first. You are putting your country first, second, and last and everywhere in between at one time. You have chosen Admiral Farragaut over Mr. Paine……………………………….
Furthermore after the Second World War the US was and still is uniquily positioned to help create a framework of law that would be of benifit everyone but instead the leaders of the US chose to recreate the law of the jungle………….
I might then add something along the lines of the err is human and can be forgiven. Even to be a hypocrite is human and can be forgiven. To massively betray ones public trust is a crime that deserves a special punishment.
One punishment that comes to my mind is to place the major actors of this conspiracy on tables then wrap chains around them then attach the chains to Toyota pickup trucks then have the pickup trucks speed off in different directions. Yes I know to treat tables in such an unenlightened manor may be contriversial in some circles. But, an example needs to be set.
As the way it stands now some government officials will say anything stupid for a few dollars and to make a few headlines. A very recent example is, “Iran is becoming a M I L I T A R Y D I C T A T O R S H I P.” Furthermore that such drivle could be considered news and broadcast to millions is further proof of an explicit conspiracy being carried out by a continuing criminal enterprise. Yes some disfunctional people will say anything for a few Touman and a chance to grab someone’s attention.
Stan do you think that will grab anyone’s attention or am I writing to myself?
Curt Kastens:
I could have sworn that I posted this earlier but I can not find it so I must not have done it.
17 February 2010, 8:06 amOn one of the links to the story about Greek debt it mentioned that Greece’s Debt to GDP ratio was 84%.
Today I remembered that about 10 years ago I saw a chart with the debt to GDP ratios of the countries in the EU at that time and probably some other industrialized countries like the US and Canada for comparison. I seemed to remember that at that time some of the EU countries had worse debt to GDP ratios than what Greece has today.
Belgium was one country that came to my mind. So I did a quick google search and I got directed to a list provided by Wiki that showed debt to GDP ratios of every country in the world as estimated by the OECD and the CYA. What did I find? That Japan is far and away the worse offender in the world and other top offenders include Italy, Belgium, and Singapore. In fact Japan’s Debt to GDP ratio is twice as bad as Greece’s. So if Greece is in a crisis situation what about Japan?!!!! Why is no one talking about that and why has no one been talking about it for the past 20 years!!!!
That is a pretty strong clue to me that the whole situation is a phony crisis. I wonder if it takes Greek collaborators to make it happen or can the Americans with a few German collaborators pull it off all by themselves? What about the idiot reporters who are disseminating the story? Do they have a clue as to how stupid they are? Finally there is the Greek military. As I write this some Greek Air Force Officer who considers himself a patriot is joining the Mile High Club with an American Airman over the skies of Turkey while his country is being bent over to be raped. I hope the Greek Air Force is proud of itself. You can produce studs like Hector but you end up kissing the butts of……………………………….
I wonder if Hector likes chains?………………………………………………….
…………………………..
Curt Kastens:
Now I was just on informationclearinghouse.info watching this interview with someone I have never heard of.
17 February 2010, 8:39 amThis person that I never heard of, who sounded like he had a Russian accent, claimed that US Debt to GDP is not 70% as claimed by the CIA and other sources quoted by WIKI but is actually more than 300% and when the debts of Freedie Mac and Fannie Mae are factored in goes to 600%. I find those figures hard to accept but in any case who the hell really knows what the real debt to GDP ratio is for the US? This Russian is certainly not an unbaised source but neither is the US Government. Even if a person wanted to backtrack and go over the US budget with a fine tooth comb for the last 50 years if the person does not have access to all of the expenditures that have been classified the person can not come up with the correct answer.
Lisa:
A modern monetary theory lullaby
In recent comments on my blog concern was expressed about continuous deficits. I consider these concerns reflect a misunderstanding of the role deficits play in a modern monetary system. Specifically, it still appears that the absolute size of the deficit is some indicator of good and bad and that bigger is worse than smaller. Then at some size (unspecified) the deficit becomes unsustainable. There was interesting discussion about this topic in relation to the simple model presented in the blog – Some neighbours arrive. In today’s blog I continue addressing some of these concerns so that those who are uncertain will have a clear basis on which to differentiate hysteria from reality. We might all sleep a bit better tonight as a consequence – hence the title of today’s blog!
The rest at:
http://bilbo.economicoutlook.net/blog/?p=8117
————————————-
Useful background on the deficit-inflation question:
Deficit spending 101 – Part 2
http://bilbo.economicoutlook.net/blog/?p=352
————————————-
Who is getting robbed? The REAL “intergenerational theft”
Wednesday, 02/17/2010 – 5:19 pm by Marshall Auerback | Post a Comment
Marshall Auerback explains why when it comes to the deficit, the pundits have got it upside down. It’s not us robbing grandchildren, but grandparents robbing us.
What is a fiscal crisis? When does deficit spending become “unsustainable”? Today, we can see net public spending rising (sharply as a percentage of GDP in some cases) as private spending has plummeted. Still, unemployment has skyrocketed. So whatever government spending has hitherto taken place has been insufficient to offset the loss of private sector output.
http://www.newdeal20.org/?p=8407
17 February 2010, 6:31 pmLisa:
[PDF]
Essential elements of a modern monetary economy with applications …
e1.newcastle.edu.au/coffee/pubs/wp/2005/05-01.pdf
17 February 2010, 6:33 pmLisa:
Tuesday, February 16, 2010
Wall Street Still Doesn’t Get It
Peasant Insurance, Greek Debts, and CLX Derivatives
…And that is what this whole Wall Street house of cards boils down to: risky bets, private profits, socialized losses. Worse, yet, it misaligns interests so that Wall Street profits are higher if there is economic and social instability—and Wall Street is powerful enough to generate exactly those conditions. Until Wall Street is constrained and downsized, it will continue on its path of death and destruction.
By L. Randall Wray
http://neweconomicperspectives.blogspot.com/2010/02/wall-street-still-doesnt-get-it.html
17 February 2010, 6:36 pmStan:
FULL
17 February 2010, 7:14 pmLisa:
Lightening up a bit:
Onion News Network:
In The Know: Should The Government Stop Dumping Money Into A Giant Hole?
11.11.08
WASHINGTON—The U.S. economy ceased to function this week after unexpected existential remarks by Federal Reserve chairman Ben Bernanke shocked Americans into realizing that money is, in fact, just a meaningless and intangible social construct.
http://www.theonion.com/content/news/u_s_economy_grinds_to_halt_as
18 February 2010, 5:04 pmLisa:
Thursday, February 18, 2010
Time to Throw Some Water on The Deficit Hysteria Fire
CAN OR SHOULD THE FEDERAL GOVERNMENT BALANCE ITS BUDGET?
Yeva Nersisyan and L. Randall Wray
Nowadays the only thing on everybody’s mind is the level of government deficit and national debt. Deficit hysteria is being fueled by reports that the US budget deficit will reach “an all time high” this year. President Obama is going to appoint his own commission to study how to reduce the deficit—since Congress failed in its attempt to establish one. He frets that we will leave crippling mountains of debts for our grandkids. The deficit hysteria hydra is too big to cover in one blog—but here we will address the “deficit cycle” and the possibility of ending it.
More:
http://neweconomicperspectives.blogspot.com/2010/02/time-to-throw-some-water-on-deficit.html
18 February 2010, 5:13 pmLisa:
“Punch,” April 3, 1957:
Q: What are banks for?
A: To make money.
Q: For the customers?
A: For the banks.
Q: Why doesn’t bank advertising mention this?
A: It would not be in good taste. But it is mentioned by implication in references to
reserves of $249,000,000,000 or thereabouts. That is the money they have made.
Q: Out of the customers?
A: I suppose so.
Q: They also mention Assets of $500,000,000,000 or thereabouts. Have they made that
too?
A: Not exactly. That is the money they use to make money.
Q: I see. And they keep it in a safe somewhere?
A: Not at all. They lend it to customers.
Q: Then they haven’t got it?
A: No.
Q: Then how is it Assets?
A: They maintain that it would be if they got it back.
Q: But they must have some money in a safe somewhere?
A: Yes, usually $500,000,000,000 or thereabouts. This is called Liabilities.
Q: But if they’ve got it, how can they be liable for it?
A: Because it isn’t theirs.
Q: Then why do they have it?
A: It has been lent to them by customers.
Q: You mean customers lend banks money?
A: In effect. They put money into their accounts, so it is really lent to the banks.
Q: And what do the banks do with it?
A: Lend it to other customers.
Q: But you said that money they lent to other people was Assets?
A: Yes.
Q: Then Assets and Liabilities must be the same thing?
A: You can’t really say that.
Q: But you’ve just said it! If I put $100 into my account the bank is liable to have to pay it
back, so it’s Liabilities. But they go and lend it to someone else, and he is liable to have to
pay it back, so it’s Assets. It’s the same $100 isn’t it?
A: Yes, but….
Q: Then it cancels out. It means, doesn’t it, that banks haven’t really any money at all?
A: Theoretically……
Q: Never mind theoretically! And if they haven’t any money, where do they get their
Reserves of $249,000,000,000 or thereabouts??
A: I told you. That is the money they have made.
Q: How?
A: Well, when they lend your $100 to someone they charge him interest.
Q: How much?
A: It depends on the Bank Rate. Say five and a-half percent. That’s their profit.
Q: Why isn’t it my profit? Isn’t it my money?
A: It’s the theory of banking practice that………
Q: When I lend them my $100 why don’t I charge them interest?
A: You do.
Q: You don’t say. How much?
A: It depends on the Bank Rate. Say a half percent.
Q: Grasping of me, rather?
A: But that’s only if you’re not going to draw the money out again.
Q: But of course I’m going to draw the money out again! If I hadn’t wanted to draw it out
again I could have buried it in the garden!
A: They wouldn’t like you to draw it out again.
Q: Why not? If I keep it there you say it’s a Liability. Wouldn’t they be glad if I reduced
their Liabilities by removing it?
A: No. Because if you remove it they can’t lend it to anyone else.
Q: But if I wanted to remove it they’d have to let me?
A: Certainly.
Q: But suppose they’ve already lent it to another customer?
A: Then they’ll let you have some other customers money.
Q: But suppose he wants his too….and they’ve already let me have it?
A: You’re being purposely obtuse.
Q: I think I’m being acute. What if everyone wanted their money all at once?
A: It’s the theory of banking practice that they never would.
Q: So what banks bank on, is not having to meet their commitments?
A: I wouldn’t say that.
Q: Naturally. Well, if there’s nothing else you think you can tell me….?
A: Quite so. Now you can go off and open a banking account!
Q: Just one last question.
A: Of course.
Q: Wouldn’t I do better to go off and open up a bank?
[Found at Gang8]
18 February 2010, 5:19 pmLisa:
Thinking the Unthinkable: What if China Devalues the Renminbi?
By Marshall Auerback, a fund manager and investment strategist who writes for New Deal 2.0 and Yves Smith
Conventional wisdom holds that the Chinese are due (as in overdue) for a revaluation of their currency, the renminbi. For instance, a recent report from Goldman argues that China will raise the value of the RMB against the dollar by 5% this year. The argument is that the move is needed to slow down an overheating economy.
But to a large degree, whether you agree with that as a remedy depends on what one’s reading is not just of China’s notoriously misleading statistics, but of the underlying growth dynamics, which are well out of bounds of any previous pattern, and not in a good way, either.
We question whether a revaluation is the right answer for them, and more important, whether the Chinese themselves see a revaluation as a plus. The government has engineered an enormous increase in money and credit in the past year. In fact, it seems to be as great as 5 years’ growth in credit in the previous Chinese bubble. The increase in money and credit is so great and so abrupt that you tend to get a high inflation quite quickly even if there are under utilised resources. Add to this the fact that China simultaneously is providing massive fiscal stimulus.
This combination is the making of a very messy situation. If China seeks to sustain demand via fiscal policy, the result is likely to be a big inflation problem. With many Chinese students steeped in Chicago School monetary theory coming home and assuming positions of authority, they could push for an aggressive, Paul Volcker-style effort to stop inflation.
But, what if the they don’t? Inflation can take off and thereby begin to ERODE the competitiveness of Chinese exports. Nouriel Roubini pointed out this issue in 2007: if China didn’t revalue, inflation would do the trick regardless. A continued high rate of inflation relative to its trade partners would push up the price of goods in home currency terms, which in turn translates into higher export prices. This might be the real reason why China is so reticent to revalue its currency. The Americans might go crazy if the Chinese devalued, but if the inflation is high enough, they might have to do it, as it will severely erode their terms of trade and cause their tradeables sector to collapse.
Or the hard-line monetarists triumphing by fighting inflation and the result is riots as unemployment increases.
It could get very ugly.
The rest at:
http://www.nakedcapitalism.com/2010/02/thinking-the-unthinkable-what-if-china-devalues-the-renminbi.html
19 February 2010, 11:18 amLisa:
More on Greece, the European Union and Goldman-Sachs:
Memo To Greece: Make War Not Love With Goldman Sachs
http://neweconomicperspectives.blogspot.com/2010/02/memo-to-greece-make-war-not-love-with.html
—————————————-
The Great Goldman Sachs Fire Sale of 2008
http://opinionator.blogs.nytimes.com/2010/02/18/the-great-goldman-sachs-fire-sale-of-2008/
—————————————
CDS: Just Another Evanescent Bubble?
http://www.eurosavant.com/2010/02/21/cds-just-another-evanescent-bubble/
—————————————
Will We Have to Blow Up a Continent (Again) Before We Stop Wall Street?
http://www.newdeal20.org/?p=8355
22 February 2010, 12:02 pmDeAnander:
Something’s been nagging at me about the Onion piece linked to upthread. It’s the sting in the tail of the joke:
The satire flirts with the truth — the notional or fictitious nature of currencies and debt — but then returns safely to mocking dismissal of any attempt to step outside that totalising fiction. It’s interesting that “complicated life saving surgery” (highly technical, third-watershed stuff in the Illichian paradigm) is the ultimate carrot offered to validate/justify the whole capital/money/debt system. It seems a particularly ironic choice given the number of USians who cannot afford even basic medical care. It also seems to convey a not-so-subtle threat (carrot/stick): people who opt out of the money system will lose access to medical care, and their loved ones will die. So get back to work, stay away from local currencies, and pay those usurious debts!
Even comedy/satire, in a totalising ideological system, is careful to indicate where the limits of acceptable discourse lie
24 February 2010, 4:48 amStan:
True that!
24 February 2010, 8:29 amLisa:
Of course. That’s what made it interesting.
24 February 2010, 4:42 pmLisa:
Worst Revelation Yet in the On-going Goldman-AIG-NYFed Scandal
By L. Randall Wray
Richard Teitelbaum reported today (here) that Timothy Geitner’s New York Fed hid the smoking gun that proves Goldman played the key role in bringing down AIG. The only plausible explanation for hiding the document is that Geithner et.al. were protecting Goldman. Is this the worst scandal in US history? To ask the question is to answer it.
http://wallstreetpit.com/17489-a-control-fraud
=======================================
February 24, 2010
How Goldman Sachs and AIG Got Top Dollar for Worthless Assets
Geithner’s Gotta Go
By MIKE WHITNEY
Would it be wrong to take out a $1,000,000 policy on your wife and then put strychnine in her double-tall nonfat mocha?
Not if you are Goldman Sachs it wouldn’t. In fact–according to an article on today’s Bloomberg News–that’s exactly what they did. They slapped together $17.2 billion in garbage CDOs and then insured the hell out of them with credit default swaps (CDS) issued by AIG. As soon as the CDS blew up, G-Sax collected 100 cents on the dollar for their ingenuity. (G Sax received $14B altogether)
Richard Teitelbaum’s excellent article “Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs ” is a must read for anyone who wants a peak into the sleazy underworld of high finance and the Ponzi scamsters who run it.
http://counterpunch.org/whitney02242010.html
———————————————
Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs
Share Business ExchangeTwitterFacebook
By Richard Teitelbaum
http://www.bloomberg.com/apps/news?pid=20601109&sid=ax3yON_uNe7I&pos=11
24 February 2010, 4:47 pmLisa:
Yummy at first then you get fat!
What do you do when you read strongly worded opinion pieces in national media outlets from people who hold themselves out to the public as experts in the area of interest and which reveal the writers are deliberately choosing to mislead their readers and/or haven’t a clue about the subject matter they are pontificating about? Answer: you write a blog and allow your frustrations to emanate into the ether! That’s what! Usually, mainstream economics commentators and macroeconomic textbooks hold out the analogy that the government budget is just like a household budget. So eventually the government has to pay the piper if they consume beyond its means and that means we all end up paying. Today, we had a new analogy enter the fray – the fiscal stimulus is like a box of chocolates. Yummy at first then you get fat! Lets proceed.
http://bilbo.economicoutlook.net/blog/?p=8216#more-8216
24 February 2010, 4:54 pmLisa:
A tale of two banksters
Tuesday, 02/23/2010 – 9:22 am by Jeff Sovern | 2 Comments
In the fictional conversation below, two fatcat bankers chat about the creation of a new agency to regulate consumer financial products like credit cards and mortgages. They express their dearest hope that whatever happens, they can look to the shelter of banker-friendly federal regulators rather than state regulators who would enforce new consumer rules.
Martin: How’d you do this year?
Powell: Low seven figures. You?
Martin: It’d just make you feel bad.
Powell: You got more? This new restraint is just killing me.
Martin: You guys should never have taken the bailout.
Powell: What else could we do? The bank would have gone down.
Martin: Yeah, well, I really need the money. Promised the kid a new Porsche.
Powell: Again? What for?
Martin: Nothing below a B on his report card.
Powell: Well, he deserved it then.
Martin: You know what they say. Money is the mother of all incentives.
Powell: Oh, I’ve been meaning to ask you: did you guys switch your regulator?
Martin: Yeah, of course. The state was demanding all sorts of stuff from us, so we changed. Goodbye state regulator, hello federal regulator.
Powell: I love the federal agencies. They give us a lot of freedom. Plus they kept those crazy state predatory lending laws from applying to us.
Martin: Well, the feds want the fees we pay, and they know if they fuss at us, we might as well stay with the states. And when things don’t work out so well, bailout city. But you think Congress will mess it up?
Powell: Can you believe the nerve? They want a new agency to protect borrowers? What, they think there’s an agency that protects banks?
Martin: You know, we’re lucky all these issues go over people’s heads. No soundbite for the Consumer Financial Protection Agency. It’s not like when Congress passed that credit card bill last summer. People got that one. The senators we give contributions to didn’t dare vote against it. But when the issues are complicated, the old scare tactics work.
Powell: Can you say it with me: “Pass this bill and people will get less credit and it’ll cost more.”
Martin: Hey, have you been paying attention to this proposal to change the disclosure forms? You know, the forms the borrowers get when they take out the loans to tell ‘em what they’re going to have to pay? The ones that said the subprime borrowers? Monthly payments would be lower than they really were?
Powell: I sure hope they’ll leave them alone. The old ones worked for twenty years. Why switch now?
Martin: Yeah, I mean, who even reads those things? Well, gotta go spend some money.
Powell: Go prop up the economy. But be discreet.
[Found at: http://www.newdeal20.org/?p=8477
24 February 2010, 4:57 pmLisa:
Towards an Economics of Common Sense
“…As Professor Michael Hudson has brilliantly demonstrated, the combination of compound interest on debt, and private property in land, has for thousands of years concentrated wealth in the hands of the few to the exclusion of the many. We are in the process of learning once again that this combination is simply unsustainable, and the brilliance of Alan Greenspan’s recent tenure at the US Federal Reserve Bank has been to bring forward this collapse by perhaps ten years.”
http://nordicenterprisetrust.wordpress.com/2009/04/12/towards-an-economics-of-common-sense/
==============================
Economics of Common Sense – Part 2
http://nordicenterprisetrust.wordpress.com/2009/09/18/economics-of-common-sense-part-2/
==============================
Debt-free or Date-free?
There was an interesting piece of financial pornography in the Financial Times yesterday by Professor Michael Hudson, who was US Congressman Dennis Kucinich’s economic advisor during his brief Presidential candidacy last year. The until recently unprintable premise was that perhaps national debt, such as that of Iceland or Latvia, might perhaps no longer be sacrosanct.
A pragmatic economic principle is at work: a debt that cannot be paid, will not be. What remains an open question is just how these debts will not be paid. Will many be written off? Or will Iceland, Latvia and other debtors be plunged into austerity in an attempt to squeeze out an economic surplus to avoid default?
Clearly the pillars of global capitalism are crumbling, when such sedition may be found in the FT, but it does actually beg a few questions. In particular, why does a government have to repay debt at all, other than the fact that it is the convention?
Well, actually it doesn’t.
http://nordicenterprisetrust.wordpress.com/blog/
24 February 2010, 5:34 pmjuannie:
DE,
The way out of that conundrum is simple. It is accepting the inevitability of our leaving this realm without doubt or sorrow or regrets. If my life is in order and right relationship right now, I’m ready for the Mac Truck or anything that deems ready to take me. Either the next instant or tomorrow or six month down the path. We’re all propagandized to believe in the sanctity of immortality. It’s bullshit and it’s time to break that hobgoblin. And then it’s the ultimate freedom here in this realm.
There’s huge profit in keeping us tied to the hobgoblin.
24 February 2010, 7:55 pmStan:
Top ten contributors to Barack Obama 2008.
Among them: Goldman-Sachs, Citigroup, JP Morgan Chase, Morgan Stanley.
This is why no one will be fired, no one will be punished, and your money will keep rolling into Wall Street.
25 February 2010, 4:22 pmLisa:
Hyperbole and outright lies
Its been a big weekend for hyperbole which in this context is a polite term for outright hysterical lies. Today’s blog reviews a few of the choice selections from a weekend’s reading. It amazes me how people can even mis-represent their own research when they know the audience hasn’t even read it in detail. It also is interesting to follow the way the media commentators are trying to out-do each other in use of superlatives – how much catastrophic can a catastrophy get – sort of thing. The analogies, the adjectives … are all designed to transport uninformed readers into a particular ideological space where the conservative forces can garner more of the national pie than otherwise might be the case. Anyway, that is what today’s blog is about.
While we all think of Harvard University as some high quality ivy league sort of a place up there Cambridge, MA its economists are among those leading the charge in the mis-information stakes. I feel sorry for their students who get such a warped idea of how the economy works.
Over the weekend I read that Harvard’s Rogoff Sees Sovereign Defaults, ‘Painful’ Austerity. That sounds bad. I wondered which countries he is talking about.
At the outset this is a case of someone who has conned a publisher into supporting the publication of a book that is timely – that is, will sell heaps to the growing deficit-terrorism market – but, which is highly misleading in several ways that are not necessarily apparent to the untrained reader.
And the more I read about the adventures of Rogoff and his co-auther Reinhart out into the popular media and the derivative articles that reference them the more I realise that the general public doesn’t really know what is in the book and the authors use the book in ways that cannot be justified by its content and analysis.
http://bilbo.economicoutlook.net/blog/?p=8322
1 March 2010, 3:53 pmLisa:
Galbraith on the economists who got it right:
None of this was foreseen by
mainstream economists, who generally find crime a topic beneath their dignity.
http://www.nea.org/assets/docs/HE/TA09EconomistGalbraith.pdf
1 March 2010, 4:28 pmLisa:
Why some economists could see the crisis coming
By Dirk Bezemer
From the beginning of the credit crisis and ensuing recession, it has become conventional wisdom that “no one saw this coming.” Anatole Kaletsky wrote in The Times of “those who failed to foresee the gravity of this crisis”—a group that included “almost every leading economist and financier in the world.” Glenn Stevens, governor of the Reserve Bank of Australia, said: “I do not know anyone who predicted this course of events. But it has occurred, it has implications, and so we must reflect on it.” We must indeed.
Because, in fact, many had seen it coming for years. They were ignored by an establishment that, as the former Federal Reserve chairman Alan Greenspan professed in his October 2008 testimony to Congress, watched with “shocked disbelief” as its “whole intellectual edifice collapsed in the summer [of 2007].” Official models missed the crisis not because the conditions were so unusual, as we are often told. They missed it by design. It is impossible to warn against a debt deflation recession in a model world where debt does not exist. This is the world our policymakers have been living in. They urgently need to change habitat.
http://www.levy.org/vdoc.aspx?docid=1189
Study: http://mpra.ub.uni-muenchen.de/15892/
1 March 2010, 4:47 pmLisa:
IMF-Style Austerity Comes to America
By ELLEN BROWN
When billionaires pledge a billion dollars to educate people to the evils of something, it is always good to peer closely at what they are up to.
http://counterpunch.org/brown03022010.html
2 March 2010, 4:05 pmLisa:
Tuesday, March 2, 2010
Video: Control Fraud and the Financial Crisis + Wm. K. Black
http://neweconomicperspectives.blogspot.com/2010/03/control-fraud-and-current-crisis.html
2 March 2010, 6:41 pmLisa:
Ellen’s article is very good, but has a few errors of fact:
The government doesn’t borrow from anyone when it issues “money.” It creates credit at the Fed, which then does the same with banks. Its profit is returned to the government. The government is the monopoly issuer of money. It “spends” it into the economy. The government as such neither has not does not “have” money, any more than–to use the example of an economist–a stadium “has” points when it assigns them to the teams playing.
As a sovereign nation issuing fiat money, the US cannot go “bankrupt.” It is a matter of moving numbers from one side of the ledger to another. A sovereign nation may get into that sort of trouble when it owes in another currency than its own, or under certain conditions inflation can result from its own currency. The nations of the European Union have problems because the various nations are like the US states and cannot act as sovereign nations within the Union.
Regarding the US public debt and its holders, see the Wiki artcle at:
http://en.wikipedia.org/wiki/United_States_public_debt
The latter half of this post will clarify a lot of such issues:
A modern monetary theory lullaby
http://bilbo.economicoutlook.net/blog/?p=8117
Best book on the subject: Understanding Modern Money, by Randall Wray, a colleague of Michael Hudson.
3 March 2010, 1:10 amStan:
Dearest readers and writers,
I want to commend Lisa, who has posted and linked an enormous amount of material here on finance and economics. I wish (wink) she would comment directly on the linked books. The history is key.
As dismal as this subject can be for many of us, I strongly recommend that anyone who has the time, look it over, and try to get your head around this foreign language. It is important. I also want to suggest, again, that people actually read the recommended and linked free books, because they demonstrate how these processes have been used to extend and consolidate the power of the US in the world since WWII.
Public discussion and debate revolve around these issues, and much of that discussion is mystified in the arcane language of finance. It behooves us to learn it, so we are not ourselves taken in by simplistic accounts of finance and economics. I say this with the admission that my own fluency is sadly lacking.
One reaction I have, and that I suspect will be shared by others, is that these accounts, even when as accurate (IMO) as Hudson, Gowan, et al, still ignore the elephants in the living room, ie, extractive resource peaks, especially oil, ecocide, and climate destabilization. Easy talk about the benefits of import, for example, take no account of the physical/entropic consequences of import, because this remains an externality to the language of finance.
These are really big elephants.
That said, I hope this caveat doesn’t give us a handy excuse to ignore the whole topic… which would be a non-sequitur in my view. The state is not going away. Interstate relations are not going away. Money is not going away. Not in our lifetimes. People who care like many of you here may not be in positions of power, and may suffer the anxieties and frustrations of Kassandra; but if you have a moral obligation to do what you can with what you’ve got, then while you wait for openings in the clouds, you need to teach.
3 March 2010, 7:38 amStan:
Gowan excerpt (for the footnotes, see the actual pdf)
3 March 2010, 8:26 amLisa:
Thank you, Stan. I think people should read your “Food and Finance” article, to get a view of the “elephants.”
http://www.insurgentamerican.net/download/StanGoff/FoodandFinance.pdf
Bill Mitchell is sensitive to this, as he is a permaculturist. It doesn’t often come through in his blog, since he is focused on explaining the actual operation of the system.
3 March 2010, 2:40 pmLisa:
Very interesting discussion going on here:
http://moslereconomics.com/2010/03/02/response-to-dem-debate/
3 March 2010, 3:02 pmLisa:
March 3, 2010
Will Sanity Prevail?
We Need Bigger Deficits … or We’re Toast
By MIKE WHITNEY
http://counterpunch.org/whitney03032010.html
3 March 2010, 3:21 pmLisa:
Going Off on Rogoff
Tuesday, 03/2/2010 – 5:22 pm by Marshall Auerback | 17 Comments
Marshall Auerback answers a new cry from the deficit hawks.
We’ve persistently taken the view that there is no economic doctrine, no magic number, which would imply a firm external constraint as far as public spending goes, when dealing with a sovereign government issuing debt its own floating rate, non-convertible currency. At some point, we may indeed have a resource constraint, or an inflation constraint, but not a national solvency issue. Yet the hysteria surrounding fiscal policy has moved from the realm of rational debate and metamorphosed into a matter of national theology. Hardly a day goes by, it seems, where groups such as the Concord Coalition or the Peter G. Peterson Foundation do not bring us the message that we are all doomed unless we do something drastic to cut back our mounting federal debt.
http://www.newdeal20.org/?p=8682
5 March 2010, 5:39 pmLisa:
Would someone please put something in the water supply
When I read the financial and economic news every day I sense a global madness has emerged. Global political processes are becoming distorted by the types of debates that the conservative media companies and the mainstream economists are driving. Every day a new whacko proposition is suggested or entertained by governments. Old hatreds are also resurfacing as our economies labour on (or not labour to be more accurate!) in the face of a major private spending collapse accompanied by inadequate government fiscal responses. The collateral damage of the deficit terrorism is increasing and spreading and still the major political parties in most countries slug it out as to which one will deliver the most fiscal austerity. Would someone please put something in the water supply so that we can refocus this debate onto what is important. That was the plan in the late 1960s to chill everyone out and distinguish the meaningful from the nonsense. Something has to restore our sense of priorities. The longer this madness goes on the worse it is going to get. There is no sensible solution that will come from following the present path.
http://bilbo.economicoutlook.net/blog/?p=8457#more-8457
5 March 2010, 5:43 pmLisa:
In Defense of Deficits
By James K. Galbraith
http://www.thenation.com/doc/20100322/galbraith/single
5 March 2010, 5:52 pmLisa:
Oops. I forgot to include a little of the above article:
———————
The Simpson-Bowles Commission, just established by the president, will no doubt deliver an attack on Social Security and Medicare dressed up in the sanctimonious rhetoric of deficit reduction. (Back in his salad days, former Senator Alan Simpson was a regular schemer to cut Social Security.) The Obama spending freeze is another symbolic sacrifice to the deficit gods. Most observers believe neither will amount to much, and one can hope that they are right. But what would be the economic consequences if they did? The answer is that a big deficit-reduction program would destroy the economy, or what remains of it, two years into the Great Crisis.
For this reason, the deficit phobia of Wall Street, the press, some economists and practically all politicians is one of the deepest dangers that we face. It’s not just the old and the sick who are threatened; we all are.
5 March 2010, 6:09 pmLisa:
Video From the Make Markets Be Markets Conference Online
Felix Salmon tweeted that “An 8-minute boiled-down Simon Johnson presentation is pretty concentrated & devastating.” I agree, and here it is…
And here is Elizabeth Warren’s defense of a Consumer Financial Protection Agency. Like Simon’s presentation, I had been following the argument for a long time, but seeing it all in one short presentation was pretty intense.
The first few minutes of Frank Partnoy’s talk where he gives you a balance sheet and asks you to guess who it belongs to is pretty damn effective too.
http://www.newdeal20.org/?p=8762
9 March 2010, 11:40 pmLisa:
Coming to a Country Near You: Let a dozen Latvias bloom?
Marshall Auerback and Rob Parenteau explain why self-imposed political constraints on economic policy is ‘neo-liberal madness’ that threatens countries around the globe. Are we next?
Want to see the real consequence of smash mouth economics? Forget about Greece and take a look at Latvia. Its 25.5 per cent plunge in GDP over just the past two years (almost 20 per cent in this past year alone) is already the worst two-year drop on record. The country recently reported a 12% decline in annual wages in Q4 2009 versus Q4 2008. The IMF projects another 4 percent drop this year, and predicts that the total loss of output from peak to bottom will reach 30 percent. The magnitude of this loss of output in Latvia is more than that of the U.S. Great Depression downturn of 1929-1933.
…
It has taken the people of Iceland to make the first stand against this growing neo-liberal madness. In a historic referendum, over 90 per cent of the population has rejected a proposal for the repayment of billions of pounds lent by Britain and Holland to compensate depositors in a failed Icelandic bank.
The deal would have saddled citizens of Iceland with an additional $16k in debt to compensate the UK and Holland with a $5.3 billion note for the failure of their local banks. This, in a country of a mere 300,000 citizens. The vote failure has already prompted the ratings agencies to downgrade the country to junk, as well as leaving an IMF-led loan in limbo. The “experts” are declaring this a disaster for Iceland, but they and their banking allies must secretly be dreading the result, demonstrating as it does that an international bailout watchdog is truly powerless when the people of the bailout recipient nation want to have nothing to do with a poisoned chalice of an economic “rescue”, which does nothing but create a country of indentured serfs.
It is now time for the rest of us to follow the Lilliputians of Iceland: to take the rentier juggernaut down before it completes the task. Time to pry the vampire squid off our faces so we can see the light of day again. Hopefully, Iceland represents the future, not Latvia.
9 March 2010, 11:44 pmLisa:
Sorry, here’s the URL:
http://www.newdeal20.org/?p=8749
9 March 2010, 11:46 pmLisa:
Bill Mitchell answers questions arising from some recent blogs:
Questions and answers 2
This is the second Q&A blog where I try to catch up on all the E-mails (and contact form enquiries) I receive from readers who want to know more about modern monetary theory (MMT) or challenge a view expressed here. It is also a chance to address some of the comments that have been posted in more detail to clarify matters that seem to be causing confusion. So if you send me a query by any of the means above and don’t immediately see a response look out for the regular blogs under this category (Q&A) because it is likely it will be addressed in some form here. While I would like to be able to respond to queries immediately I run out of time each day and I am sorry for that.
It seems that a host of questions were spawned by the two simple teaching models (STMs) I have put up in recent weeks – Barnaby, better to walk before we run and Some neighbours arrive.
These posts should be read in conjunction with the following blogs – A simple business card economy and What causes mass unemployment?.
And then – to map the models into the real world I would recommend you read the following trilogy: Deficit spending 101 – Part 1 – Deficit spending 101 – Part 2 – Deficit spending 101 – Part 3.
http://bilbo.economicoutlook.net/blog/?p=8192
10 March 2010, 1:19 amLisa:
“Bill Black’s Top Ten Ways to Crack Down on Corporate Financial Crime”
by Corporate Crime Reporter*
Ninety-five percent of criminologists study blue collar crime.
Five percent study white collar crime.
Of the tiny minority who study white collar crime, ninety five percent focus on the individuals who rip off the corporation.
We are left with a small handful of criminologists – think Edwin Sutherland, John Braithwaite, Gil Geis – who have studied or are studying – corporate crime.
That would be crime by the corporation.
Bill Black is one of the most prominent of those living corporate criminologists.
His specialty – control fraud.
Control fraud is when the CEO of a company uses the corporation as a weapon to commit fraud.
Bill Black is a lawyer and former federal bank regulator.
He’s the author of the corporate crime classic – The Best Way to Rob a Bank is to Own One: How Corporate Executives and Politicians Looted the S&L Industry (University of Texas Press, 2005.)
Black says there are steps we can take as a society to control corporate crime – in particular financial crime.
In an interview with Corporate Crime Reporter last week, Black laid out his top ten.
http://neweconomicperspectives.blogspot.com/2010/03/bill-blacks-top-ten-ways-to-crack-down.html
10 March 2010, 4:24 pmLisa.:
REAL-WORLD ECONOMICS REVIEW
Formerly the post-autistic economics review
Issue no. 52, 10 March 2010 back issues at http://www.paecon.net
You can download the whole issue as a pdf document:
http://www.paecon.net/PAEReview/issue52/whole52.pdf
In this issue:
Pragmatism versus economics ideology: China versus Russia
David Ellerman
Racism and Economics
Free enterprise and the economics of slavery
Marvin Brown
Why some countries are poor and some rich – a non-Eurocentric view
Deniz Kellecioglu
The GFC
Declaring victory at half time
Steve Keen
Modern finance, methodology and the Global Crisis
Esteban Pérez Caldentey and Matías Vernengo
A Keynes moment in the Global Financial Collapse
Thodoris Koutsobinas
Tragedy, law, and rethinking our financial markets
David A. Westbrook
Whither economics? What do we tell the students?
Peter Radford
11 March 2010, 5:03 pmLisa:
SqueezePlay : March 11, 2010 : Fighting Deficit Hysteria [03-11-10 5:30 PM]
Are deficit hawks right about the dangers of mounting government debt? Or, is pursuing fiscal sustainability a recipe for continuing the economy’s downward spiral? BNN speaks to Marshall Auerback, fund manager, RAB Capital.
http://watch.bnn.ca/#clip275341
12 March 2010, 7:01 pmLisa:
iWorry about the conservatives
There was an interesting article by Wall Street Journal writer Thomas Frank on Wednesday (March 10, 2010) entitled –
The Rise of the Reactionary Right Conservatism as a revolt against civilization itself.
The main argument is that:
Conservative philosophies of government have brought us to the brink of economic disaster. So how do conservatives respond? By pondering anew the imagined crimes of the progressive and New Deal eras. By rededicating themselves to an even purer version of their tainted faith. The halfhearted liberals in the White House dream of bringing health-care costs under control, and conservatives demand in response a more thorough antiliberalism than ever before. Tear out the welfare state root and branch, and abolish the Fed, too! That will show the meddlers of the past 120 years.
Frank uses the keynote speech by Glenn Beck’s speech at the Conservative Political Action Conference in Washington a few week’s ago to motivate his argument.
As an aside, I was sent the link to the Glen Beck speech at CPAC the day it was presented. Upon watching it I concluded that, given his popularity, there is a major failing in the US education system. Something went very wrong in his childhood and those of his followers. I note he is fixated on scrawling one line statements on his blackboard that make no sense at all and usually include Socialism = Government or something along those lines. Something happened to him in primary school and development stopped.
But the point Frank makes is that the popularism preached by Beck doesn’t even stack up with the facts. His nemesis Woodrow Wilson didn’t do what Beck claimed he did and Beck’s hero Coolidge did do what Beck claimed Wilson did! That sort of distortion and worse riddles the Beck rhetoric.
On this new conservatism, Frank notes that the “sort of people who watch Glenn Beck” express “more ‘visceral’ sentiments” than the Republican conservatives and are motivated by:
“Fear” and “Extreme negative feelings toward existing Administration.” These donors are, in the language of the presentation, “Reactionary.”
http://bilbo.economicoutlook.net/blog/?p=8686
12 March 2010, 7:20 pmLisa:
Geithner and Bernanke’s Possibly Criminal Roles
Lehman Brothers Scandal Rocks the Fed
By Mike Whitney
March 15, 2010 “Information Clearing House” — After a year-long investigation, court-appointed bank examiner Anton Valukas has produced a deadly 2,200 page report which details the activities that led to the Lehman Brothers bankruptcy. The report is a keg of dynamite. The question now is whether anyone in government has the nerve to light the fuse. Valukas provides powerful evidence that Lehman executives were involved in “balance sheet manipulation” by implementing an arcane accounting procedure called “Repo 105” which masked the bank’s true financial condition from investors and regulators.
http://www.informationclearinghouse.info/article24984.htm
————————————————–
They Cooked The Books
The Video That Will Put Geithner Behind Bars
One Of The Greatest Crimes Ever Perpetrated
By Mike Whitney
March 13, 2010 “Information Clearing House” — You gotta see this! If this doesn’t convince you that the Timothy Geithner knew about the securities shenanigans that were going on at Lehman, than I don’t know what will.
Keep in mind, that Geithner ran Lehman through 3 “stress tests” prior to bankruptcy; all of which Lehman failed, and yet, nothing was done. Anton R. Valukas–the examiner who wrote the 2,200 page investigative-report which was released on Thursday– has provided plenty of information detailing Lehman’s “materially misleading” accounting and “actionable balance sheet manipulation.”
In other words, they cooked the books.
http://www.informationclearinghouse.info/article24980.htm
15 March 2010, 3:56 pmLisa:
http://finance.groups.yahoo.com/group/gang8/message/14965
Reprint of WSJ and NY TImes articles on the Lehman Bros. report.
Michael Hudson’s comment:
These two articles from the NYT and WSJ today show that Ernst & Young
15 March 2010, 4:17 pmwere as crooked as Arthur Andersen was in helping Lehman Bros. falsify its accounts. Paulsen obviously hoped to pawn off the fraudulent firm ($50 billion in fake cash) on Barkley’s and other foreign buyers, which now would have to be suing on grounds of failure to disclose. It shows how the deception extended throughout Wall St and the US Treasury and Fed.
Lisa:
Collapse of Lehman Brothers: What Did Geithner Know and When Did He Know It?
Monday, March 15, 2010
Lehman Brothers managed to conceal from the outside world a multi-billion-dollar mess that was years in the making, according to an audit investigation released last week. But the size and scope of Lehman’s manipulative accounting has led some Wall Street critics to wonder what the New York branch of the Federal Reserve—led then by current Treasury Secretary Timothy Geithner—knew about the scheming that eventually led to the venerable bank’s collapse in 2008.
The audit report by Anton Valukas, the United States Trustee in the Lehman Brothers case, states that Lehman executives carried out “materially misleading” accounting tricks that hid billions of dollars in debt from regulators. Known internally as “Repo 105,” the bank’s leaders began as early as 2001 to move huge amounts of money—eventually $50 billion—off its books to “conceal its dependence on leverage, or borrowed money,” as The New York Times put it. “Repo” stands for “repurchase agreement,” or extremely short-term loans.
But Yves Smith of Naked Capitalism wonders if Lehman realistically could have hidden a fraud so large from the New York Fed, given Geithner’s close relationship with leading figures on Wall Street. “It also emerges that the NY Fed, and thus Timothy Geithner, were at a minimum massively derelict in the performance of their duties, and may well be culpable in aiding and abetting Lehman in accounting fraud and Sarbox violations,” writes Smith, referring to the Sarbanes-Oxley Act of 2002. “We need to demand an immediate release of the e-mails, phone records, and meeting notes from the NY Fed and key Lehman principals regarding the NY Fed’s review of Lehman’s solvency.”
http://www.allgov.com/Controversies/ViewNews/Collapse_of_Lehman_Brothers__What_Did_Geithner_Know_and_When_Did_He_Know_It_100315
15 March 2010, 4:25 pmLisa:
Lehman Brothers Examiner’s Report, Vol.1
http://www.scribd.com/doc/28228424/Lehman-Brothers-Examiner-s-Report-Vol-1?secret_password=&autodown=pdf
15 March 2010, 4:34 pmLisa:
Good articles at Naked Capitalism on the Lehman Bros. report:
http://www.nakedcapitalism.com/2010/03/not-only-repo-105-total-return-swaps-also-used-for-window-dressing.html
15 March 2010, 4:36 pmLisa:
Frank Partnoy: Lehman Examiner Punted on Valuation
By Frank Partnoy, Professor of Law and Finance University of San Diego School of Law and author of Fiasco, Infectious Greed, and The Match King
The buzz on the Lehman bankruptcy examiner’s report has focused on Repo 105, for good reason. That scheme is one powerful example of how the balance sheets of major Wall Street banks are fiction. It also shows why Congress must include real accounting reform in its financial legislation, or risk another collapse. (If you have 8 minutes to kill, here is my recent talk on the off-balance sheet problem, from the Roosevelt Institute financial conference.)
But an even more troubling section of the Lehman report is not Volume 3 on Repo 105. It is Volume 2, on Valuation. The Valuation section is 500 pages of utterly terrifying reading. It shows that, even eighteen months after Lehman’s collapse, no one – not the bankruptcy examiner, not Lehman’s internal valuation experts, not Ernst and Young, and certainly not the regulators – could figure out what many of Lehman’s assets and liabilities were worth. It shows Lehman was too complex to do anything but fail.
http://www.nakedcapitalism.com/2010/03/frank-partnoy-lehman-examiner-punted-on-valuation.html
15 March 2010, 4:44 pmLisa:
De[constructing/functing] Ernst & Young
Courtesy of Tyler Durden
Ultimately the biggest loser from the whole Repo 105 scandal may not be the perpetrators, i.e., Fuld, the firm’s numerous CFOs, Tim Geithner and Mary Schapiro, but the alleged “fact-checkers” – auditors Ernst & Young. Just like Enron’s Star Wars-based off balance sheet accounting gimmicks brought down Arthur Anderson, so “Repo 105? may likely be responsible for the downfall of E&Y. Although while in Enron’s case, it was just the accounting that brought the firm down, in Lehman’s case the confluence of numerous factors will render each individual one relatively less critical, potentially to the point of irrelevance. And while book cooking was just as big of an issue for Lehman as it was for Enron, the fact that the bank did pretty much every other borderline illegal thing possible, will take away focus from just the Repo 105 fiasco, or just the liquidity misrepresentations, or just the commercial real estate book mismarking, and so forth. So to facilitate a decision on E&Y culpability, we present a candid look at Ernst & Young’s Financial Services Office, the company’s presentation on Paragraph 10 of IAS 39 overseeing Repo agreements, E&Ys analysis of FAS 140 “Accounting for Financial Transfers and Repurchase Financial Transactions”, the Examiner’s conclusions on the firm’s breach of conduct, the firm’s soon to be dwindling banking client base, and last, and most certainly least, a snapshot of E&Y’s Lehman co-lead partner, Hillary Hansen, against whose negligent actions, as part of the Lehman E&Y practice, the Examiner concludes “that sufficient evidence exists to support a colorable claim for malpractice.”
Follows a presentation of E&Y’s Financial Services Office.
In the United States, Ernst & Young LLP is the only public accounting firm with a separate business unit dedicated to the financial services marketplace. Created in 2000, the New York–based Financial Services Office today includes more than 3,300 professionals in more than 30 locations across the US, as well as in Bermuda, the Bahamas and the Cayman Islands. Key offices throughout the US include Boston, Charlotte, Chicago, Dallas, Los Angeles, McLean, Minneapolis, New York, Philadelphia, San Francisco and Stamford. Our financial services professionals provide high-quality assurance, tax, transaction and advisory services, including operations, risk and technology, to our asset management, banking, capital markets and insurance clients.
In addition, Ernst & Young professionals in our financial services practices worldwide align with key global industry groups, including Ernst & Young’s Global Asset Management Center, Global Banking & Capital Markets Center and Global Insurance Center, which act as hubs for sharing industry-focused knowledge on current and emerging trends and regulations in order to help our clients address key issues.
http://www.philstockworld.com/2010/03/14/deconstructingfuncting-ernst-amp-young/
15 March 2010, 4:49 pmLisa:
The lives of the Lehman ladies
As the deceit behind the Lehman Brothers collapse is exposed, a new book unveils the cult-like power that its executives held over their wives.
http://women.timesonline.co.uk/tol/life_and_style/women/the_way_we_live/article7061698.ece
15 March 2010, 5:04 pmLisa:
Here is the full text of the report on Lehman’s collapse prepared by court-appointed examiner Anton Valukas:
http://www.iimagazine.com/top_news/Articles/2445867/Valukas-Report.html
16 March 2010, 3:37 pmLisa:
Tuesday, March 16, 2010
What Do Our Nation’s Biggest Banks Owe Us Now?
By William K. Black
This week, ABC News World News with Diane Sawyer is airing a series about the struggling middle class. The show’s producers posed the following question to a few of the nation’s leading economic and financial analysts, including UMKC’s own William K. Black.
QUESTION: As the nation’s largest banks have regained their footing, what, if anything, can or should they do to help Americans still struggling as a result of the financial crisis and recession? Are there specific solutions or actions the banks should take or HAVE they already done enough? Do the banks have an “ethical obligation” to help those average American families still struggling?
ANSWER: First, banks have not recovered. It is essential to remember that the banks used their political clout last year to induce Congress to extort the Financial Accounting Standards Board (FASB) to change the accounting rules such that banks no longer have to recognize losses on their bad assets unless and until they sell them. Absent this massive accounting abuse, hiding over a trillion dollars in losses, banks would (overall) not be reporting these fictional “profits” and would not be permitted to award the exceptional executive bonuses that they have paid out.
http://neweconomicperspectives.blogspot.com/2010/03/what-do-our-nations-biggest-banks-owe.html
16 March 2010, 3:37 pmLisa:
Time for Truth: Three Card Monte is for Suckers
Tuesday, 03/16/2010 – 12:50 pm by Eliot Spitzer and William Black | Post a Comment
Eliot Spitzer and William Black call for an immediate Congressional investigation of Lehman’s accounting deception and the release of relevant emails and internal documents.
In December, we argued the urgent need to make public A.I.G.’s emails and “key internal accounting documents and financial models.” A.I.G.’s schemes were at the center of the economic meltdown. Three months later, a year-long report by court-appointed bank examiner Anton Valukas makes it abundantly clear why such investigations are critical to the recovery of our financial system. Every time someone takes a serious look, a new scandal emerges.
The damning 2,200-page report, released last Friday, examines the reasons behind Lehman’s failure in September 2008. It reveals on and off balance-sheet accounting practices the firm’s managers used to deceive the public about Lehman’s true financial condition. Our investigations have shown for years that accounting is the “weapon of choice” for financial deception. Valukas’s findings reveal how Lehman used $50 billion in “repo” loans to fool investors into thinking that it was on sound financial footing. As our December co-author Frank Partnoy recently explained as part of a major report of the Roosevelt Institute, “Make Markets Be Markets“, such abusive off-balance accounting was and is endemic. It was a major cause of the financial crisis, and it will lead to future crises.
According to emails described in the report, CEO Richard Fuld and other senior Lehman executives were aware of the games being played and yet signed off on quarterly and annual reports. Lehman’s auditor Ernst & Young knew and kept quiet.
http://www.newdeal20.org/?p=8954
16 March 2010, 3:38 pmLisa:
The Next Big Bailout is on the Way
Prepare To Get Reamed!
By Mike Whitney
March 16, 2010 “Information Clearing House” — Housing is on the rocks and prices are headed lower. That’s not the consensus view, but it’s a reasonably safe assumption. Master illusionist Ben Bernanke managed to engineer a modest 7-month uptick in sales, but the fairydust will wear off later this month when the Fed stops purchasing mortgage-backed securities and long-term interest rates begin to creep higher. The objective of Bernanke’s $1.25 trillion program, which is called quantitative easing, was to transfer the banks “unsellable” MBS onto the Fed’s balance sheet. Having achieved that goal, Bernanke will now have to unload those same toxic assets onto Freddie and Fannie. (as soon as the public is no longer paying attention)
Bernanke’s cash giveaway has helped to buoy stock prices and stabilize housing, but market fundamentals are still weak. There’s just too much inventory and too few buyers. Now that the Fed is withdrawing its support, matters will only get worse.
Of course, that hasn’t stopped the folks at Bloomberg from cheerleading the nascent housing turnaround. Here’s a clip from Monday’s column:
“The U.S. housing market is poised to withstand the removal of government and Federal Reserve stimulus programs and rebound later in the year, contributing to annual economic growth for the first time since 2006. Increases in jobs, credit and affordable homes will help offset the end of the Fed’s purchases of mortgage-backed securities this month and the expiration of a federal homebuyer tax credit in April. Sales will rise about 6 percent this year, and housing will account for 0.25 percentage point of the 3.6 percent growth, according to forecasts by Dean Maki, chief U.S. economist for Barclays Capital in New York…“The underlying trend is turning positive,” said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York.”
Just for the record; there has been no “increases in jobs”. It’s baloney. Unemployment is flat at 9.7 percent with underemployment checking-in at 16.8 percent. There’s no chance of housing rebound until payrolls increase. Jobless people don’t buy houses.
http://www.informationclearinghouse.info/article25001.htm
16 March 2010, 4:39 pmLisa:
2010-2015 – hyperdeflation, followed by rampant inflation
That is the forecast from Societe Generale’s so-called strategist Albert Edwards. I often wonder why they call these characters strategists which implies a modicum of sense.
In the right wing Australian corporate rag Business Spectator, the columnist decided to devote her whole column – Beware the deflation quicksand – to these loony ideas today (March 17, 2010).
Apparently, Edwards reports that “total credit in the US economy is collapsing, despite the central bank’s money printing efforts”. And who in their right mind would have thought that the US central banks policies to increase commercial bank reserves would stimulate lending anyway? Just the use of the terminology “printing money efforts” gives the game away and tells you that the “strategist” is locked into erroneous mainstream thinking. Or should I say lack of thinking!
But it is true that credit is not growing in the US at present and why should it … the place is in a mess.
Edwards is quoted as saying:
Most shockingly … the household sector shrank its borrowing for the seventh quarter in a row – the minimal signs of any abatement to the process. Combined with continued rapid balance sheet shrinkage in both the corporate and financial sectors, total domestic debt contracted for the fourth quarter in a row.
Well what else would you expect. There is a severe deflation going on in the US – it is called 10 per cent unemployment (17 per cent if you count those who have given up looking) and that has come on top of a long period of suppressed (almost non-existent real wages growth) and a huge build-up in private indebtedness.
And on top of all that the US government crippled by its mainstream economics ideology, a dysfunctional legislature, and a growing chorus of idiots who parade as conservatives and progressives alike who do not understand what they are talking about but take succour from putting up so-called national debt clocks on the Internet and then watching the JavaScript counter tick over before their eyes…
http://bilbo.economicoutlook.net/blog/?p=8761#more-8761
17 March 2010, 3:21 pmLisa:
Do not learn economics from a newspaper
Last weekend, the senior economics writer for the Sydney Morning Herald became a salesman. He has been seemingly recruited voluntarily into the marketing campaign for Mankiw’s economics textbooks which dominate the world supply. In his textbook the Principles of Economics, which is just palpable indoctrination, students are introduced at the outset to the 10 Principles of Economics. These principles resemble the hard sell you get from a salesperson who knows their product will not stand scrutiny but wants the commission nonetheless. But Gittins, knowing his power to influence the economic thinking among his readership, presents the principles as if they are all you need to know to understand economics. What a total con that is.
http://bilbo.economicoutlook.net/blog/?p=6980
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Understanding central bank operations
http://bilbo.economicoutlook.net/blog/?p=9392#more-9392
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The Deficit: Nine Myths We Can’t Afford
Has the federal government run out of money? Will we have to slash Social Security? Will we have to borrow dollars from China for our children to pay back?
The national debate over fiscal responsibility and sustainability is entering a new, critical phase. Today, an 18-member bipartisan commission to examine the government’s fiscal problem will meet for the first time. Everything is on the table, including Social Security and Medicare.
With so much at stake, the time has come to examine our fundamental assumptions about government deficits and debt. The danger of accepting oft-repeated orthodoxies has been clearly demonstrated in the recent financial crisis. For decades, free market fundamentalism went virtually unquestioned, and we’ve all seen the result – an epic economic catastrophe. We can’t afford to make the same mistake on fiscal responsibility. It’s time to consider alternatives perspectives before we rush down potentially destructive policy paths that could compromise our future.
The Roosevelt Institute’s New Deal 2.0 asked seven economic thinkers to address what they see as the most dangerous myths currently circulating on the deficit. Several of these experts will be on hand to educate the public on April 28, 2010 at George Washington University in Washington, D.C. at a “Fiscal Sustainability Teach-In.”
http://www.newdeal20.org/2010/04/27/the-deficit-nine-myths-we-cant-afford-10162/
27 April 2010, 1:10 pmLisa:
http://michael-hudson.com/2010/04/trouble-in-europe-eric-janszen-interview/
Trouble in Europe: Eric Janszen interview
April 16, 2010
Eric Janszen from iTulip caught up with economist Michael Hudson on his way to the 19th Annual Hyman P. Minsky Conference on the State of the U.S. and World Economies, and he is in rare form.
• What’s wrong with New Europe?
27 April 2010, 6:19 pm• Why is the euro falling?
• Debtors versus creditor nations split the EU
Lisa:
China’s Next Phase: Janszen interview (pt2)
April 27, 2010
Tags: China, globalisation, neoliberalism
Part 2 to the interview Michael had with iTulip’s Eric Janszen. Part 1 covered Trouble in Europe.
http://michael-hudson.com/2010/04/chinas-next-phase-janszen-interview-pt2/
28 April 2010, 2:16 pmStan:
Re-solicitation.
That’s from part one, but it distills the essence of Hudson’s observations, doesn’t it? The structure of international finance, a structure under the management of the DWSR as Gowan calls it, is a parasitical one. It is structural parasitism, with one tenth of the world’s population – in various technical roles – feeding on a host population of 9/10s. It’s mutually-dependent (in the most pathological way), self-organized and self-correcting, and progressive… like cancer is progressive. It’s also in many ways unstoppable. The first step to realism is the recongition that some things grow out of control, and that some consequences have passed the point of no return.
I’d still like to hear some visionary conversations on how people might make a mission of achieving various forms of local independence from money. Money is the fuel/accelerent for the whole process. There need to be new ways to think about money, about property, and about land (reform)… but money is imo the most mysterious and intractible of the three issues, and somehow at the very center of it all.
Since society cannot excise its own processes – it would be like taking out one’s own tonsils – then healthy cells need to be generated, and they need to learn how to quarantine themselves until the unhealthy structures die away.
Still would like to read these books together with others, take each section and unpack it, with the notion of getting our collective head around Money. If I were a lurker, as I am elsewhere, I’d very much enjoy reading the comments from a reading group like that. Then I might be able to read along in the primary texts and have all the advantages of being in a classroom with a bunch of others helping me animate those texts.
29 April 2010, 7:34 amStan:
So begins Gowan’s book. What are the two different “beast” metaphors he uses to frame the central question of his introduction? One “beast” is merciless and invulnerable, and the other is fragile and in need of state protection and support.
His first reference is to the “physionomy” of globalization. In medicine this means the structures and actions of nerve conduction and coordination. It’s a nice analogy, because it suggests that to understand which of these polemical beasts most closely resembles the real flows of power, we need to map the actual nervous system of the beast, and its evolutionary development.
What is particularly interesting about high finance is how different money is than our experience of it day-to-day. It is reified to the point where it has “mobility” and “velocity,” yet there is seldom an actual exchange of physical specie.
29 April 2010, 8:39 amStan:
There’s the “beast” analogy again.
And there’s the neurological analogy.
And there’s the answer to his own opening rhetorical question? This “neurological” process is not one that has evolved out of the grasp of the state, but one that has become dependent on one particualr state.
And here he points to the separation between the practical and the ideological in the representation of globalization. Morgan Stanley maintainsw a symbiotic relation to the US state, while ideologues suggest a system with a natural inevitability.
Another claim, this one dialictical: There are two centers of intent that combine to form the whole “regime” — the monetary regime and the machinations of US power politics vis-a-vis the rest of the world.
So the promise Gowan makes is that an historical account of this state-financial axis will reveal our map of the central nervous system of the photophobic cat: globalization.
29 April 2010, 2:46 pmJon:
From an intuitive point of view, money is practically synonymous with wealth, to the extent it is universally accepted and transferable in a society–or to the extent it is legally binding, as in the payment of taxes. It’s been called a claim on wealth, but what’s the difference in practice? Once a currency or money ceases to be identified with a commodity that is accepted as a common unit of exchange, then you get real power. A government or central bank issues money at will, presumably in accordance with what is actually being produced. Presumably. But it seems that to the extent the currency gets abstract it provides occasions for leveraging to a degree undreamed of by past usurers. Just think derivatives: these things are actually turned into money. The qualitative element disappears and is supplanted by pure quantity, which is limitless. I think the problem resides in definition. For example, if derivatives yield a profit that gives someone purchasing power, something has gone wrong with the thinking behind what money is. According to Aristotle, at least, the great error, and a perversion that leads to injustice, is to think that money is fruitful of itself. I suspect that nails it. It would also be the deathknell of modern commerce.
Modern Money Theory posits an analogy between money and score points. The problem with this–and it may be that the real problem is my level of understanding–is that whihle the link between the abstract points and the activity of scoring a goal is clear and obviously causes no problem, the link between all the computer entries on bank ledgers and a complex industrial economy is not obvious, not by a long shot. The wrong ideas can bring the whole house down, as we have been seeing.
Could I walk into a casino and get chips for the purpose of betting on who is more likely to lose and who is more likely to win at the various gaming tables and poker and blackjack and other tables? Would the casinos let me see the stats of their regular customers, big and small, so that I could “invest” appropriately? I don’t think so.
29 April 2010, 3:16 pmLisa:
A Creditary perspective:
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What is Money?
From The Banking Law Journal, May 1913.
By A. Mitchell Innes.
The fundamental theories on which the modern science of political economy is based are these…
So universal is the belief in these theories among economists that they have grown to be considered almost as axiom which hardly require proof, and nothing is more noticeable in economic works than the scant historical evidence on which they rest, and the absence of critical examination of their worth.
Broadly speaking these doctrines may be said. to rest on the word of Adam Smith, backed up by a few passages from Homer and Aristotle and the writings of travelers in primitive lands. But modern research in the domain of commercial history and numismatics, and especially recent discoveries in Babylonia, have brought to light a mass of evidence which was not available to the earlier economists, and in the light of which it may be positively stated that none of these theories rest on a solid basis of historical proof that in fact they are false…[there follows a long and interesting section on history]
…Adam Smith’s position depends on the truth of the proposition that, if the baker or the brewer wants meat from the butcher, but has (the latter being sufficiently provided with bread and beer) nothing to offer in exchange, no exchange can be made between them. If this were true, the doctrine of a medium of exchange would, perhaps, be correct. But is it true?
Assuming the baker and the brewer to be honest men, and honesty is no modern virtue, the butcher could take from them an acknowledgment that they had bought from him so much meat, and all we have to assume is that the community would recognize the obligation of the baker and the brewer to redeem these acknowledgments in bread or beer at the relative values current in the village market, whenever they might be presented to them, and we at once have a good and sufficient currency. A sale, according to this theory, is not the exchange of a commodity for some intermediate commodity called the a medium of exchange, but the exchange of a commodity for a credit..
There is absolutely no reason for assuming the existence of so clumsy a device as a medium of exchange when so simple a system would do all that was required. What we have to prove is not a strange general agreement to accept gold and silver, but a general sense of the sanctity of an obligation. In other words, the present theory is based on the antiquity of the law of debt…
The governments of the world have, in fact, conspired together to make a corner in gold and to hold it up at a prohibitive price, to the great profit of the mine owners and the loss of the rest of mankind. The result of this policy is that billions of dollars worth of gold are stored in the vaults of banks and treasuries, from the recesses of which they will never emerge, till a more rational policy is adopted. Limitations of space compel me to close this article here, and prevent the consideration of many interesting questions to which the credit theory of money gives rise; the most important of which, perhaps, is the intimate relation between existing currency systems and the rise of prices.
Future ages will laugh at their forefathers of the nineteenth and twentieth centuries, who gravely bought gold to imprison in dungeons in the belief that they were thereby obeying a high economic law and increasing the wealth and prosperity of the world.
————————
Read the rest, plus a discussion which follows, at:
http://moslereconomics.com/mandatory-readings/what-is-money/
30 April 2010, 2:10 amHenry:
I found this brief monograph very helpful:
Chartalism and the tax-driven approach to money
Pavlina R. Tcherneva
http://pavlina-tcherneva.net/Tcherneva-Chartalism.pdf
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For example, this footnote is very illuminating:
4. Henry further adds that money cannot exist without power and authority. Societies based on hospitality and exchange simply had no use for it, while in a strati?ed society the ruling class is compelled to devise standard units of account, which measure not only the economic surplus collected in the form of taxes,but also the royal gifts and religious dues that were imposed on the underlying population (2004: p. 90).
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It seems that size and complexity matter a great deal, as does the distinction between nomadic and sedentary societies based on agriculture. It doesn’t look as though a society “based on hospitality and exchange” could number too many individuals, perhaps not much larger than the Hopi and Pueblo communities. As Jon pointed out, the element of pure abstract quantity progressively insinuating itself is absolutely crucial, inasmuch as it tends to override the qualitative element. Somewhere I read that Amish and Mennonite communities have learned that there is an optimum number for a “hospitality and exchange”–or cooperative–community, after which they split off and form a new one.
By modern standards, ancient cities would be small towns. Even Alexandria, around 400 AD probably had only 250,000 or so people. More ancient cities, such as Mohenjo-daro, only in the 30-50,000 range. Even by 1850, only three cities in the world had a population of 1 million. Thus, modern vast agglomerations of people in urban settings is something hitherto unknown, and appears to entail intractable problems on a global scale.
Money–the state–quantity: these seem to be closely related assemblages of possibilities.
30 April 2010, 3:12 amStan:
Hospitality-and-exchange. Dunbar. Money, the dead administrator. Money, the solvent that dissolves the connective tissue of communities.
@Henry, so we see from the chartalist perspective that state-money is an aspect of the debt system.
30 April 2010, 8:28 amStan:
“The Brenner thesis” is controversial among leftists, though the arguments can be arcane and polluted with dogma. Still worth a look, if you want to google up the debates. Brother Gowan is emphasizing Brenner’s notion of “long cycles.” Here’s an interview with Brenner.
Another key point in Gowan’s thesis: Nothing was inevitable. One of the articles of faith omaong neoliberal economists is that this trend is inevitable.
He doesn’t say economic conflicts. He says political conflicts. So the explication of these conflicts, often with “allies,” is central to his explanation.
The “patterned, self-reproducing regime” served as a weapon, which is one reason there has been reluctance on the part of serial US administrations to give it up, even when it did not perform as its apologists said it would or should.
So keep your eye on the US state’s employment of ‘neoliberalism’ not as a policy, but as a bludgeon against political rivals.
30 April 2010, 8:52 amStan:
from Brenner’s interview:
30 April 2010, 9:29 amHenry:
If I understand their perspective correctly, yes, money is a creature of the state. That is the basic point. If policy opts for a fiat currency–which it is not constrained to do out of principle; it is a policy choice. In a fiat system there is no numerical constraint on issuing currency, any more than a stadium would run out of points during a high-scoring game. The gov’t is the monopoly issuer of currency. In this system, federal taxes do not “pay” for anything; the gov’t does not “need” taxes to “pay” for anything. Taxes are imposed to legalize the system and as a way of withdrawing money: taxes withdraw money; deficit spending injects money. It injects money when employment falls and not enough money circulates; it withdraws money once full employment is reached. Currently, taxing is counterproductive, and we have a financial system that is an enormous parasite, extracting rents from all sectors, when, as Bill Black explains, it should simply be a middleman. It needs severe downsizing and restructuring.
In short, like all human activity, for it to work well it requires wisdom and correponding intentions. No system or ideology can substitute for that.
BTW, another excellent article by Pavlina Tcherneva:
Do Not Confuse Solvency with Sustainability
http://neweconomicperspectives.blogspot.com/2010/04/do-not-confuse-solvency-with.html
30 April 2010, 2:44 pmHenry:
I think the other basic point that MMT’ers are trying to make clear is that MMT is descriptive of the way the money system actually operates, and not prescriptive, which is a matter of public policy. And those who make policy may or may not understand the system to one degree or another, or they may be in the service of certain powerful interests who abuse it, etc., etc. Those are all socio-politico-philosophical problems.
BTW, another good article on MMT in connection with non-industrialized or “developing” countries is here:
“Modern monetary theory in an open economy”, which you can find in the:
Archive for the ‘Debriefing 101’ Category
http://bilbo.economicoutlook.net/blog/?cat=11
It is a nice collection of “clearing the ground articles.”
I’m grateful to Lisa for having revealed this resource, among others. Mitchell, in particular, is extremely helpful.
30 April 2010, 5:06 pmLisa:
A lucid presentation here of the basics of what money is in a modern economy using fiat, non-convertible currency:
http://www.netrootsmass.net/fiscal-sustainability-teach-in-and-counter-conference/warren-mosler-the-deficit-the-debt-the-debt-to-gdp-ratio-the-grandchildren-and-government-economic-policy/
2 May 2010, 10:41 amLisa:
Friday, April 30, 2010
PAUL SAMUELSON ON DEFICIT MYTHS
TIME TO DROP THAT OLD-TIME RELIGION
By L. Randall Wray
On Wednesday April 28 several New Economic Perspective bloggers participated in a 1960s style “teach-in” in Washington DC to explode some of the myths about Federal Government deficits. Our event was timed to counter the Pete Peterson-funded extravaganza that promoted all of the fallacies used to stoke hysteria and fear of deficits. You can find more information about our event, as well as our power point presentations (here).
Right before the event, we also issued a joint piece examining the nine worst myths, posted at both New Deal 2.0 (here) and at the Huffington Post (here). The flurry and fury of comments to our piece was amazing, nay, shocking. I think these comments demonstrate just how successful the billions of dollars spent in Peterson’s campaign have been at promulgating dangerous falsehoods over the past two decades. Indeed, the level of commentary is notable both for the vitriol and for its sheer ignorance. One wonders whether civil and informed discussion on the topic of money is even possible.
http://neweconomicperspectives.blogspot.com/2010/04/paul-samuelson-on-deficit-myths.html
2 May 2010, 10:03 pmLisa:
May 3, 2010
Was There a Plan to Blow Up the Economy?
The Subprime Conspiracy
By MIKE WHITNEY
Many people now believe that the financial crisis was not an accident. They think that the Bush administration and the Fed knew what Wall Street was up to and provided their support. This isn’t as far fetched as it sounds. As we will show, it’s clear that Bush, Greenspan and many other high-ranking officials understood the problem with subprime mortgages and knew that a huge asset bubble was emerging that threatened the economy. But while the housing bubble was more than just an innocent mistake, it doesn’t rise to the level of “conspiracy” which Webster defines as “a secret agreement between two or more people to perform an unlawful act.” It’s actually worse than that, because bubblemaking is the dominant policy, and it’s used to overcome structural problems in capitalism itself, mainly stagnation.
http://counterpunch.org/whitney05032010.html
(My last post here, as there does not seem to be much interest in this field at this blog.)
3 May 2010, 5:55 pmStan:
The links (thanks linkers!) that have accumulated on this thread already constitute some kind of research-and-study, one-stop resource.
Went out of town for a couple days to see members of our scattered clan. So I’ll get back to my duties now, and unpack/insert-links for a couple more paragraphs of Gowan:
Knowing the definition of a “capital market” is a precondition for understanding the rest of this book. The wiki-link above serves as a good baseline, and Gowan goes into the subject with a good deal of depth later.
4 May 2010, 4:38 amStan:
FULL
5 May 2010, 11:14 amSteve:
Your link to Hudson’s book no longer works
18 May 2010, 2:51 pmStan:
Try again. Just worked for me.
Here’s Whitney today:
FULL
20 May 2010, 10:31 amPete:
The link only leads to Hudson’s home page, but there is no longer a link to the pdf file of the book itself. And the old link at .soilandhealth.org just gives the intro. There’s a note there saying that you can download the pdf, but only with the author’s permission.
It is available through Scribd.com, however.
21 May 2010, 5:57 pmStan:
Thanks for the re-link.
By Howard Schneider and Neil Irwin
Washington Post Staff Writer
Monday, May 24, 2010; A01
If the trouble starts — and it remains an “if” — the trigger may
well be obscure to the concerns of most Americans: a missed budget
projection by the Spanish government, the failure of Greece to hit
a deficit-reduction target, a drop in Ireland’s economic output.
But the knife-edge psychology currently governing global markets
has put the future of the U.S. economic recovery in the hands of
politicians in an assortment of European capitals. If one or more
fail to make the expected progress on cutting budgets…
FULL
24 May 2010, 9:46 amm.c.:
A while ago I wrote here about a French journalist I quoted who made the connection between Money & Wisdom. It occurred to me that Money also bestows Virtue & Honor. Visit any large expensive city and catch a taxi at the airport or train staition to take you to a hotel you can’t afford(or princess Fergie taking the CASH on video; she wouldn’t be taking the CASH if she didn’t need it)
24 May 2010, 2:09 pmThis must have changed over the 20th century. When Roosevelt angered the big bankers in the early ’30(he didn’t nationalize or smash them like some here would have liked), the masses thought he was Wise, Virtuous and Honourable,{he won overwhelmingly 4 nationwide elections}. The Working Classes, IMHO don’t have any pride left.
Marcilla Elizabeth Smith:
That article actually reads like wide-eyed innocence (at best) to me, but granted, it’s the Washington Post.
I’d like to see a thread on financial collapse as prelude to global war (and perhaps economic collapse as prelude to downfall of empire).
26 May 2010, 7:23 am