Ruling Favors a 10-Inch Citizen of France New York Times (hat tip Richard Smith)
Pharmageddon: how America got hooked on killer prescription drugs Guardian (hat tip reader May S)
Huffington Post Traffic Zooms Past The New York Times Clusterstock (hat tip reader furzy mouse)
Buiter Expects `Serious, Hard Restructuring’ for Greece: Video Bloomberg (hat tip reader Tim C). This is not a new view for Buiter, but he is pretty colorful.
Bond Deal May Augur More European Travails Wall Street Journal (hat tip Joe Costello)
India and Brazil: Inverted Yield Curves Ed Harrison
Low wages and revolutions Henry Liu, Asia Times (hat tip reader furzy mouse)
Time to panic? You Betcha. Stephanie Kelton, New Economic Perspectives
Dept. of Education breaks down Stockton mans door Central Stockton. The fraud story does not add up, period.
Rule by Rentiers Paul Krugman, New York Times
Is high unemployment the ‘new normal’ even in a recovery? McClatchy (hat tip reader Buzz Potamkin)
The Banking Emperor Has No Clothes Simon Johnson, New York Times. This is one Geithner story I wanted to thump on but events intervened. A must read.
Antidote du jour:
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Stockton story: here’s a later article on the same topic, which states “The federal search warrant is sealed by the courts, but the copy given to Wright said the Department of Education and its Office of the Inspector General are investigating the Wrights for financial aid fraud. The search allowed for the seizure of any student financial aid documents, W2 forms and electronic communications.”
I am not a californian, but a 15-man swat team sounds excessive for ‘financial aid fraud’. No mention of the ‘estranged wife’, anyway.
Exactly. Assume, for the sake of discussion, that the allegations are true: Wright’s estranged wife filed phony student loan applications and defrauded the government. Thus a search warrant was appropriately issued to seize evidence pertaining to the crime from her home.
The question is, WHY employ a SWAT team to serve a search warrant pertaining to a nonviolent crime? There was no allegation of gang activity, gun smuggling or drug trafficking which might support an expectation of armed resistance. The authorizing judge even crossed out a line in the warrant pertaining to ‘contraband.’ The husband had no criminal record. So why not just send kindly Officer Mike to knock on the door, serve the warrant, and cart out the records?
It was a federal warrant, so the California location was irrelevant: this could happen anywhere. In the distant past when Congress actually monitored and investigated the executive branch, the Dept. of Education would have been called before the pertinent House investigative committee to explain and justify its actions. This is what Wright should be pushing for, instead of merely an apology and restitution.
In the meantime, it’s not unreasonable to conclude that the Stockton incident forms part of an established, customary pattern of employing ‘security theater’ measures. An essential aspect of security theater is massive overreaction, utilizing paramilitary force to terrorize citizens. Naturally the federal government is exempt from its own terrorism laws, so there is no check on its behavior other than the feeble, inchoate concern of a co-opted Congress.
Meanwhile, in the TV news interview, an upset Wright urged student borrowers not to default and get into the sort of nightmare his estranged wife did. BINGO — meme propagation achieved! As long as there’s no serious backlash (unlikely, as government agents enjoy virtual legal impunity even after committing bloody slaughters), the Dept. of Ed can chalk up their Stockton takedown as a big win.
Did Jimmy Carter ever imagine a situation like the appalling Wright home invasion when he foolishly created this misbegotten federal agency, which lacks any constitutional authorization whatsoever? Smash the fedgov educrats …
Let this be a lesson to you all!
Wasn’t Carter. My loans dated from Nixon. It was the same then as now: No bankruptcy, no forgiveness, no statute of limitations. I eventually paid my mid-70’s loans in 2008. Defaulted more than 30 years.
I agree this was a shot across the bow. Student loan defaults must be a massive unreported story. Scare the suckers into paying, before the whole thing collapses.
Keep your kids out of school. They’ll learn more in a brothel.
“Keep your kids out of school. They’ll learn more in a brothel.”
Agree. Also, your kids will never have to pay one usurious dime of interest, although they will face certain inflationary pressures, from time to time.
But inflation is temporary, to quote The Bernank.
There has GOT to be an economist joke in there somewhere.
You are just trying to move us further along the Laffler curve…
”
#
GOT to be an economist joke in there somewhere.
#
psychohistorian says:
June 11, 2011 at 1:15 am
You are just trying to move us further along the Laffler curve…
”
Good Juan
!
SWAT was probably bored and looking for something to do, it’s more likely than you think.
Is Stephanie Kelton advocating suspending the payroll tax withholding or even more radically, income tax withholding until a sustainable recovery is underway? Either way, talk about the revenge of Reaganomics. It must be panic time.
It should be noted that MMTers in general view FICA (both sides!) as being a TERRIBLE tax at any time, and would be glad to see it simply eliminated.
Of course, MMTers also understand that neither FICA nor any other tax actually funds anything the federal government does; that these simply act as a control on inflation.
And that the tooth fairy will always be there, and teeth are always worth 25 cents.
The First Law of Economists: For every economist, there exists an equal and opposite economist.
The Second Law of Economists: They’re both wrong.
http://www.mustsharejokes.com/page/Economist+Jokes
The second law of econodynamics – chaos and confusion always increase with time in any economics discussion.
The more time you spend in it, the more confused you will be.
$ka-ching$ LOL… well played MyLTPB!
Stephanie Kelton, regarding; Obama losing the Presidency to “Paul Revere” Palin because the economy sucks so bad — and is likely to double-suck, very soon.
“So here’s what he needs to do – stop talking about the deficit … and deliver one of those jaw-dropping, awe-inspiring speeches of yesteryear.”
If I was a Presidential adviser, this is exactly what I’d be telling the President … if I got the chance. I’m pretty sure however, that anyone bearing this message — or any similar message — would get, precisely, ZERO face time.
I suspect, at this stage of the collapse, the White House bunker has cranked the paranoia knob up to 11, and anyone who attempts to turn down the volume to offer sound advice quickly finds themselves off to the old university.
(“I’m looking forward to re-engaging with young minds … beep … with my students … beep… I miss my family … beep … I wanna be the FUCKING MAYOR! … beep …)
Huh? What good will a tax holiday do for those out of work? And it’s not like many low-waged laborers pay all that much in tax to begin with. How hard is it to say “we needs a stimulus that does not consist of tax holidays like the last one”?
Foppe says: How hard is it to say “we needs a stimulus that does not consist of tax holidays like the last one”?
Pretty hard if you’ve been brainwashed into believing that the only good fixes are one’s acceptable to other people who’ve been brainwashed.
Worse, a “payroll tax holiday” is a backdoor way of gutting Social Security (since that’s where most payroll taxes, as opposed to income taxes, go). The best way to kill something is to de-fund it, perhaps “temporarily” or because of “realistic budget constraints”. That’s why a shrewd politician like FDR was so insistent on creating dedicated taxes for Social Security. He literally said something like “this will keep them from killing it” when he signed the payroll tax into law.
Not that I think everybody advocating a payroll tax holiday wants to kill Social Security, but that would be the effect. Determining who’s a fifth columnist and who’s merely naive or myopic is left as an exercise for the reader.
Then considering how much trouble we have ever raising taxes or re-instating “temporary” tax cuts, because it would be bad for the economy, and economists can even prove it with a simple GDP accounting identity, we might have to conclude that all SS funding has gone on permanent holiday.
This will be grounds for a long term budget fix.
Must.Kill.SocialSecurity….It.Is.Killing.The.Country.
Long Live Amerika!!!!!
On the politics of FICA, there’s a good discussion from an MMT perspective here.
Interesting article that seems to require a basketful of additional proposals to make the elimination of FICA work. While FICA is a regressive tax it takes away the right-wing argument that S.S. and Medicare are welfare programs. If FICA were eliminated a means tested retirement income supplement will take its place. Since the revenue will come from a bankrupt general fund, benefits will be meager subject to constant cuts. The right-wing will also tie the elimination of FICA to individual responsibility for setting up private retirement accounts, and we have seen how well that works with 401k’s. There is absolutely no chance FICA will ever be eliminated while S.S. benefits are increased, as the author advocates. While very imperfect, S.S. and Medicare is the reason my mother-in-law does not have to call us for financial support while we are putting our children through college. She retains some dignity believing she has paid in every dime she gets back.
As Foppe pointed out, tax reductions don’t help those who are out of work. But for those who do work, the FICA tax is nearly universal, whereas the income tax is less so. By design, the income tax doesn’t reach those with low incomes, sufficient dependent deductions, earned income credit, and the like.
Consequently, FICA tax reductions are proposed not out of some sinister agenda of gutting Social Security, but rather because of FICA’s near universality — thus gracefully hoisting the jaunty ghost of Frank Roosevelt on his own petard.
Since Social Security is a 100% owned and controlled subsidiary of the US Government, its mix of income (between FICA taxes and direct support from general revenues) is not of great significance, either now or later when its illusory Trust Fund runs out. Its ever-growing cash flow shortfalls will continue to be reimbursed from general revenues (including borrowing and seignorage) until the current insolvency of Usgov inexorably transitions into rank illiquidity (i.e., Treasury auctions fail).
Meanwhile, party on, grey panthers! If the bastards won’t pay what they owe, pound some sense into ’em with a leaded cane. Ol’ Frank said in 1935 that they can never take your benefits away from you. But the Supreme Court said in 1960 (Flemming vs. Nestor) that they can. Sorry if y’all didn’t get the memo.
until the current insolvency of Usgov inexorably transitions into rank illiquidity (i.e., Treasury auctions fail). Jim Haygood
Who cares if Treasury auctions fail? The US Government has the sovereign right to issue money debt-free.
Jim Haygood: “FICA tax reductions are proposed not out of some sinister agenda of gutting Social Security”
As I said in my 9:04, I don’t think that’s the _intention_ of most people endorsing this, but the _effect_ will be to feed the “Social Security is broke – gotta fix (i.e. gut) it” nonsense. Payroll taxes are the bedrock on which Social Security rests, and hence why the very shrewd politician FDR wanted to enact them even in the midst of the Great Depression.
There are many ways to have stimulus, including ones that concentrate on the lower end of the income scale. Make a temporary increase in EITC. Heck, just cut every many, woman and child in the US a check for $X (that’s what Alaska does with oil money). But do not under any circumstances touch FICA. It may be proposed by those with good intentions, but who needs more paving for the road to hell?
Jim Haygood: “[Social Security’s] ever-growing cash flow shortfalls will continue to be reimbursed from general revenues”
What a joke! The worst “cash flow shortfall” will be if congress refuses to allow the general fund to pay back the $2.5T it’s borrowed from Social Security. Except in the case of a general default of the US government, that means paying back the Chinese government instead of our own elderly.
“But the Supreme Court said in 1960 (Flemming vs. Nestor) that they can.”
And H.M. George III said he could do whatever he pleased.
Best article I’ve read recently WRT Unemployment/Obama 2012 prospects (well, certainly one of the most depressing):
http://www.americablog.com/2011/06/white-house-disses-senate-dems-jobs.html
Money Quote:
“I can’t think of a single American who, come November of 2012, is going to say “cutting the deficit was more important than finding me a job.””
I can think of some Americans who think that is more important, but they’re all on Social Security and watching too much Glenn Beck.
The OA needs a massive transfer of Reality to come to terms with the UI crisis and just how real a threat it is to their very survival. They can only dance with the Beltway for so long before they WILL get shown the door. And given how truly craven the GOP is these days, that will NOT be good for the country. (No, I’m no O apologist. It’s just that I’ve watched the GOP for the past two years do absolutely NOTHING to help anyone while they play politics. As half-assed as the Dems have been, at least in some teensy respects they’ve TRIED to do something. (UI extensions, for example.))
Today, Republican elephant antidote.
Tomorrow, Democratic donkey antidote.
At Naked Capitalism, we aim to be fair and balanced.
The payroll tax holiday is a 2nd, 3rd, maybe even 4th best option, but it is the only viable option (with the opposition in control of the House). In July 2009 — when the Democrats had the power to push through a more ambitious agenda, I posted a Twelve-Step Plan for Economic Recovery at http://neweconomicperspectives.blogspot.com/2009/07/twelve-step-program-for-economic.html
It said:
1. Admit that the real economy is powerless against a de-regulated and de-supervised financial system
2. Recognize that the fiscal powers of the federal government can restore stability
3. Ignore the debt-to-GDP ratio; allow it to drift to whatever value is consistent with an economic recovery and a return to high employment
4. Enact a full payroll tax holiday by setting employer and employee FICA contributions to zero
5. Provide $1,000 per resident to state governments to help them stabilize projected budget shortfalls
6. Commit $2.5 trillion to restore our nation’s crumbling infrastructure and build a modern energy superhighway to facilitate expanded use of renewable energy, reduce greenhouse gas emissions and lessen our dependence on fossil fuels
7. Downsize the financial system; reduce the size of banks to the point that they no longer pose systemic risk
8. Ban the securitization of non-prime loans
9. Determine the real worth of bank assets; instruct the U.S. Treasury to conduct a survey of the underlying loan tapes and require banks to aggressively mark-to-market
10. Stabilize the housing market by creating a Home Owners’ Loan Corporation and bestow upon it a full range of powers, including renegotiation and rental-conversions, as deemed appropriate in each case
11. Announce a job guarantee program (like the WPA) to provide employment and income to the millions of Americans who will not find jobs in the private sector even after the economy recovers
12. Carry these messages to elected officials and urge them to practice these principles in all our affairs
It’s too late for all of this. The crisis has been “wasted”. The payroll-tax holiday remains the most viable option on the list.
“only viable option (with the opposition in control of the House)”
If your enemies agree to a plan, it’s prudent to question their motivation.
Why aren’t those big corporations spending the $2 trillion in cash?
It’s becoming very clear to me that money and matter share certain physical properties — such as gravity and mass. Once you get enough money in one place, it starts to collapse in on itself and it can, in the extreme, form a black hole.
A black hole is a concentration of matter/energy whose gravitational field is so dense that no light escapes. A money black hole is a concentration of spirit/energy whose thanatic field is so dense that no mind-light escapes. This suggests some perceptions about the formal energetic structure of money.
And since money = property like wave = particle and since particles can only be observed through the collapse of their wave function and since property can only be observed through the collapse of its money wave function — which is powered by imagination and instinct — and since mind-light is a form of imagination and instinct, then the density of the thanatic field of the money black hole prevents the mind-light wave from forming a money wave function that collapses on property — therefore the depression we face.
It’s amazing how obvious this all is. :) I figured it out riding the bus, so it’s a surprise to me that people still think money is something that can be stored and measured, like water, when it’s really more like electricity, you can’t look at unless you are using it and then you see its property manifestation and its mind-light wave, which depends far more on Imagination and social structure than on any absolute so-called quantity of it. How does a wave have quantity unless it collapses into matter through observation? And then Imagination is the agent of the collapse.
So if you’re an economist Ms. Kelton, what is money to you and why should it matter what the definition of money is?
You can make long lists, but you’re just twisting your spaghetti around and around and around.
Because you can only really know things through their proper names and those are the names you give them with your full consciousness and imagination.
Yes,of course. And the way it works in the corporate world is corporate money disappears into stock buybacks.
Don’t tell economists or even MMTers, because facts would just make them feel useless.
About a year ago, the Obama Admin already ran a poll asking corporations if a payroll tax holiday would induce them to hire more. The poll came back almost unanimously NO.
But I guess if we press the point, corporations will agree to it because then they can do more stock buybacks.
But they do want to keep more cash on hand than usual nowadays, because you can’t count on banks or money markets for short term borrowing anymore. Companies hate getting shoved into bankruptcy during short term credit crunch periods.
But in the mean time, I guess we get to hear how MMTers, progressives, Roosevelt Institute people, New deal 2.0 people and bleeding heart liberal college econ professors are all behind wiping out social security.
On the first day God created the sun – so the Devil countered and created sunburn. On the second day God created sex. In response the Devil created marriage. On the third day God created an economist. This was a tough one for the Devil, but in the end and after a lot of thought he created a second economist!
http://daryld.com/economist-jokes/
I am cross-posting this comment. It is not the size of the stimulus plan but rather the contents that would be important. Furthermore we can not tax cut our way out of this crisis even if that tax cut is to the most vulnerable earners in our society. A payroll tax holiday would basically be a backdoor bailout to the financiers as a significant portion of that money would go to average families deleveraging. We are not going to get anywhere else if we follow the same pathway that we followed to get us here in the first place.
We need an investment plan that makes this country more energy, water, and resource efficient, rolling out clean/renewable technologies that have been demonstrated to work, while supporting those that have not. This healthcare crisis needs to be handled and we need to seriously curb speculation in the markets. Medicare buy-in, bulk pharmaceutical bargaining, increasing capital gains to historic rates, tobin tax, closing loopholes, and higher rates on top earners would be a good step. No one has incentive to invest in their business if they can throw it in the market and make money at a lower tax rate there.
We need to get out of these two damn wars and decriminalize, curbing military and prison spending significantly, while returning money to social safety nets, science, and education programs where it should be. Expand the corps programs and integrate univeral specialized service corps for students that want real federal student loan debt relief in exchange for work in healthcare, education, engineering, and international development. A carbon tax whose revenues would be recycled into home renewable energy/efficiency programs nationwide (special tax assessment areas) and support for community investment financial institutions, would also be beneficial. Serious effort on writedowns for underwater mortgages would also get us further than any tax cut.
There you go that is the framework for a stimulus plan. But, before all that we seriously need political reform in this country reducing corporate, lobbyist, PAC influence, and the revolving door/golden parachute.
a bit off topic, but some nice award winning nature photos for those of you who love the antidote du jour…
http://www.dailymail.co.uk/news/article-2001152/Wildlife-photography-award-winners-Gorilla-makes-friends-duckling.html
I refuse to read anything Simon Johnson says. Talk about Peterson Institute lackey!
By the way, what happened to DownSouth and attempter?
Attempter has disappeared for weeks at a time. Dunno what is up with DownSouth.
I’m so new to all this that everything catches my attention. The Simon Johnson article rang true to me because it answered a recent question I had about Dodd Frank being able to resolve a big bank insolvency. And although it (Dodd Frank) is touted (by the likes of Timmy G.) to be able to so resolve, according to Simon Johnson, it has no such ability. It is a fantasy because the big “cross-border financial operations are immune from orderly resolution.” So the logic that they should have adequate capital requirements is perfectly reasonable when the alternative is the tax payer. And his 30/70 sounds so steep it will never be resolved. That’s how bad off things probably are. 30/70 means good-bye banks.
How is Simon Johnson a Peterson pimp? Could you provide some links to corroborating pieces, please. The main concepts I’ve read from him are to write down the banks debt and spit the TBTF banks into many smaller, more efficient banks.
My bad. I investigated. It amazes me that someone who’s affiliated w/ Peterson advocates sensible positions on banking issues.
This is embarrassing! Peterson has an institute–for foreign relations, and a foundation–to destroy the US middle class. The Institute doesn’t seem to advocate for scabrous policies as the Foundation does. That would seem to present some sort of quandary of intellectual and moral integrity for folks employed by and affiliated with the Institute.
Okay, I’m picking nits and I know I’m a wretch, but from the Simon Johnson story:
“Lawrence H. Summers, Mr. Geithner’s former mentor…”
If someone’s your mentor aren’t they always your mentor, even if you’re all grown up?
It doesn’t mean that Geithner is incapable of wrecking the economy without Summers’ help, but unless you replace your mentor with another mentor, aren’t they always considered such?
I think “former mentor” emphasizes that the mentoring stage of the relationship is past.
Awwwwww, The elephant pic is fantastic!
That McClatchy article on unemployment by Kevin Hall is so full of BS that it puts the Augean stables to shame.
“A ‘new normal’ is emerging for the U.S. jobs market, and a growing number of economists warn that it’s likely to mean that unemployment will remain persistently high, at 7 percent or more, for years to come.”
There is nothing new about this idea. Enablers and apologists of kleptocracy also known as “economists” have been trying to define away the country’s severe unemployment problem for years. Back during the Bush years, they called it “jobless recovery”. Now it is all about finding justifications to jack up the rate of “structural unemployment”. Oh, and who are these economists? Well the ones cited in the article are from Wells Fargo, Bank of America, and the Fed. So they run the gamut from A to, well, pretty much A.
“The 9.1 percent unemployment rate reported in May remains high by post-World War II standards long after the economy resumed growth following the worst recession in 70 years. It’s prompting economists to rethink basic assumptions about the U.S. labor market.”
First, growth has been pathetic since the “end” of the last recession. Indeed for many Americans, the recession never ended. Subtract out the effects of temporary government stimulus programs, most of which are or already have wrapped up, and there has been little if any improvement. And Hall, that recession 70 years ago was called the Great Depression. If you are going to invoke it, then call it what it is, and, more importantly, call what our current economic situation is: depression.
Second, Hall seems to have no grasp of even basic ideas about employment. His whole thesis, or the one he has been fed by his handlers, and is trying to sell to us, is based on the U-3 unemployment rate, which was 9.1% last month. But as anyone who has looked through the BLS site knows. It is a very incomplete measure. The BLS also has the U-6 which measures un- and under employment. It was 15.8% last month. Part of the U-6 is the marginally attached. These were 2.2 million last month and the BLS does not count them in the labor force. The marginally attached are themselves part of a larger category Not in Labor Force Want a Job Now. They numbered 6.2 million in May. The BLS keeps these numbers because it knows that the U-3 “official unemployment” rate hardly tells the whole story. But even in this last category, there are problems. I have taken to calculating it using an alternate method. The number I get is 400,000 larger than the BLS’ or 6.6 million. If you take all these together, what I and others call disemployment, you get an 18.1% rate for last month.
I have written about this many times, our disemployment is a problem that is around twice as large as “official” unemployment. But look how it is shrunk 18.1 > 15.8 > 9.1, and subtracting out Hall’s new normal of 7% > 2.1. This corresponds to 3-3.5 million, a large number but hardly an earthshaking one. You buy into this kleptocratic tripe and you can see why there really is no need for any major employment program. If you don’t you are just believing your lying eyes.
“‘full’ employment can’t be zero because there’ll always be people in transition between jobs, and others with disabilities or just plain lazy who’ll be excluded from the workforce.”
Not only is the “lazy” remark gratuitous. It’s wrong. The BLS bases, and this has been a criticism of its methods, its numbers on those looking for work. If you are unemployed and looking for work, you are part of the labor force, period.
These are just the first few lines but the whole article is like this. It even tries to dish the old canard that there are plenty of jobs but a reason for higher structural unemployment is that workers don’t have the skills. Of course, Hall never presents any evidence that this is true and it never seems to enter his darkest dreams to ask why industry wouldn’t train workers as they used to do.
As I said, this article is kleptocratic BS from beginning to end.
I’d love to add some pithy remark, but you’ve covered all the bases so well all I can add is “well said”.
Amen. You are my hero.
If I have to hear one more overpaid, pampered “elite” tell me I need more GD “skills” or “training” in addition to my two college degrees, fifteen years’ experience, and continuing ed., I’m going to scream bloody murder.
If you add banksters who should be unemployed but are not, the number gets even bigger.
Current & Currency
They just sprung the trap on me … for the last time. Ooooh, I’m frightened. I’m frightened. Ok, so, that’s the beginning, middle, and end of my job. If the media bothers you, don’t look. Just do your f***ing job. They killed Galileo, and the rest, for refusing to save them from themselves. No one can save others from themselves. Don’t take that bait. Look at how fast evolution was accelerated by simple, stupid dc machines.
Where there is efficient waste, there is gravity, ready for use. Remember, you are drilling a tap; let your most adroit electrons go first. The others will follow. It’s simple math, voltage times amperage. Build your rough adjuster/tuner with simple math, and then dial in your integral adjusters with more complex math. It’s all the same (loop). Let the machine worry about the dimensions as much as possible. Just get the tap started; if your feedback mechanism is adjusting properly, the rest will take care of itself. Resist the urge to over-adjust, which you will see immediately, if you have an instrument for each stage. Account for the affect of the instrument (cluster).
So, the talented kid is placed at the bottleneck to show them how to solve their problems, and gets fired for the trouble, getting hit by the revolving door on the way out, when they are satisfied that the ponzi accounting numbers in their pension accounts will rise accordingly. They are printing money/credit to make payroll, taking out pension contributions, and offsetting the debt creation with the confiscated pension contributions. Do critters get any dumber than that? Yes.
Now that it is Tuesday, and the bill for all those hamburgers is due, with interest and penalties, they are increasingly throwing their scapegoats in front of the train, hoping to slow it down, which is accelerating regardless, igniting bigger and bigger logs (recycle), which they stored, of all places, next to the incinerator.
The algebraic reduction part of the system is automatic. You are provided with orbiting homogeneous filters, delay mechanisms, and your machine will apply a gravity of its own, pulling in the final alignment, at an acceleration beyond expectation. Whether you end up with a sun or a gamma ray depends upon your adjustment. My best guestimate is that you could bring it into equilibrium at around 9 billion, but that depends upon 7 billion interactions. You only need a few hundred million. That’s a huge margin for error, so there is no need to even think about being nervous. That’s an instrument affect.
That natural gas ping was classic by the way. The boys at GE must have liked that. Keep drilling. Quantum physics is like a concrete fastener and you are employing gravity as the pry bar. When it pops, you want to do something with the backlash. A closed system naturally induces leverage, which is why the price of oil exploded with a small decrease in expected demand on the margin, when it reached saturation. It is “hovering” around $100, which is igniting the next log.
central control protecting the weak from the strong. on what planet….?
as far as China is concerned, the US has already defaulted, but so has China…poor Greece is at the end of that stack.
From Simon Johnson’s article:
On logic, Mr. Geithner’s thinking includes a major non sequitur, as he continues to deny that the size of our largest banks poses a problem. “Some argue that the U.S. financial system is too concentrated, which could promote systemic risks,” he said. “But the U.S. banking system today is less concentrated than that of any other major country.”
Johnson- “But big banks in almost all other major countries have run into serious trouble, including those in Britain and Switzerland — where policy makers are now open about the potential scope of further disasters…”
Sorta the same logic used by the very last lemming, just as he is springing headlong off the edge of the cliff, isn’t it?
“Sorta the same logic used by the very last lemming, just as he is springing headlong off the edge of the cliff, isn’t it?”
That would be true if Timmy were jumping himself, but he’s pushing other people off the cliff. What does he care, as long as he does the bidding of his masters in the finance industry.
IMHO it’s not the size that’s the problem, it’s the complexity and interconnectedness of the system. E.g. the cross-border stuff that Simon mentioned.
“Size” is kind of a red herring.
Yves likes to use the term “closely coupled system” which is borrowed from servo system theory.
It states that if you build a financial system from crappy, poorly designed, dangerous parts that no one paid for and have no warranty(capital cushion), connect them together with big copper pipes stretched around the entire world, turn off all your monitoring equipment and feedback loops, then power them with an enormous amount of derivatives, it doesn’t really matter if you used 20 big parts or 2000 small parts. The next time the wind blows in a different direction, the sucker is going unstable.
Don’t disagree about the proven risks inherent in closely coupled systems. But size does matter.
If the management team of a small company performs poorly and it fails, that’s a shame, but it doesn’t generally cause taxpayers to lose their shirts. Recent history clearly shows one can’t say the same about the poor judgment calls made by the management teams of the TBTF financial institutions.
This site has repeatedly connected the dots between growth beyond reasonable size = TBTF = implicit government support= moral hazard = perverted incentives = outsized risk taking by TBTF institution management or employees = huge taxpayer losses.
Here is a weekly news cast about the economy,the FED, related to employment numbers this week. Metions the 15.9 true unemployment percent. tell me what you think.
http://www.youtube.com/user/zedgehero
Good Links. I’m only half way thru. While I’m taking a breather, some comments on Henry Liu. I like him but he is very time consuming. However he is consistent. His other writings always bring home the point that we need wages to keep up with production. Of course we have no production. It is scary to think that (my thinking) the US has replaced a strong dollar and economy with a strong debt and military, which means it is a defacto mercenary military. Definitely do not like that part.
I think it is pretty clear that we could get rid of our debt if we did Medicare for all; cut back our military adventures and sold most of our global outposts; invest long-term in ourselves. And put so many constraints on banks that they would wish they had been nationalized. And also do like Brazil with our garbage: manufacture methane. No? Maybe not high speed rail, but at least lets do some rail.
Back to Henry: Good synopsis of European history. Never heard the inland v. rimland theory of mideval states before; makes sense because we are doing the same thing now. The history of Europe is the history of political gains made by economic gains. But it seems that then, as now, the prize was the taxpayer who paid for protection.
I disagree strongly with his assessment of the conservative movement behind Barry Goldwater: that although Goldwater lost the 64 election the conservative party went on to control foreign policy. I think the conservatives were completely swamped when the country was forced into Vietnam by a few ideologues. The dollar never recovered, the economy never found its way, ergo the conservatives never recovered. It was a coup. Remember that in 1964, Goldwater lost his bid for the presidency because Henry Cabot Lodge, LBJ’s high envoy to Vietnam, came home to fragment the Republican Party by running against Goldwater. He had also been Nixon’s VP running mate in 1960. The fail safe man.
Liu has some interesting things to say, but this line of his galls me: “The exporting nations must then buy US government debt with the dollars they earned as trade surplus from the US because of dollar hegemony.”
Total apologist nonsense! While the USD’s reserve currency status make it prudent for countries to hold _some_ USD reserves, there is absolutely no reason for China or any other country to hold USD reserves of anywhere near the 50%/GDP they have (Taiwan is even worse at 100%/GDP). Anything over say, 10-20% of GDP (and that’s being very generous) is pure currency manipulation.
Reserve currency is everybody’s currency so they are just buying up their own currency backed by nothing therefore inflationary?
I don’t understand your point/question.
Appropriate Dollar holding is probably best viewed not as a % of GDP, but a % of import needs.
For example, hypothetically, if your living consists of exporting water that pours from the sky in your country, you don’t need a lot of dollars.
If you living consists of buying lumber from Indonesia and converting it to furniture, you’d be prudent to have enough dollar reserve just in case.
“Appropriate Dollar holding is probably best viewed not as a % of GDP, but a % of import needs.”
Makes sense to me, but that doesn’t make China’s (Taiwan’s, etc.) any more justifiable.
“If you living consists of buying lumber from Indonesia and converting it to furniture, you’d be prudent to have enough dollar reserve just in case.”
I think that’s a poor example of your point. That lumber is only needed to the extent that you export furniture. Other than a short term cash flow (you have to buy the lumber before you sell the furniture) the furniture provides the forex needed to buy more lumber. Keeping an “inventory” of dollars other than what’s needed for the short term cash flow is like a car company keeping 10 years worth of steel in inventory.
Yeah, it’s needed for the short term cash flow. The percentage is based on that.
If China wants to keep running a trade surplus with us, it has to take our dollars. Holding bonds rather than cash is an investment decision. Switching out of dollars will make their currency appreciate and reduce their trade surplus. China does not want that to happen.
In re Krugman article: http://www.nytimes.com/2011/06/10/opinion/10krugman.html?src=me&ref=general
He is mixing things up again. 0% interest rate does not benefit rentiers. More aggressive fed action will not help either rentiers or the ‘regulars’. It’s the bankers that are being protected. Period.
He is extrapolating that bankers interests are aligned with rentiers. Not really. The only reason it might seem that so-called rentiers are the protected class is because the bankers bonuses are dependent on those big accounts. The more stable the big accounts, the more predictably stable the bonuses will be. They couldn’t care one iota if a rentier can make use of that money to create jobs or even buy a coffee. Ask a non-famous, non-mainstream rentier if their bank will let them spend their gagillions on jobs – no they can’t. Try and move your billions? They won’t let you.
The shenanigans are to protect the political contributions of banks, not to protect people with large accounts in those banks.
I should clarify. By “non-mainstream” I do not mean not the top five banks. I mean, not the top five investment choices.
What Your Taxes Do (and Don’t) Buy for You. The money shot:
‘Looking at taxes alone, the burden in the United States is 25 percent below the O.E.C.D. average, but including the additional health costs Americans pay, the United States is just 4.7 percent below average.’
Yup. And, of course, Americans average the 37th best/worst medical outcomes in the world for those additional health costs they pay, which come out per capita at roughly double what healthcare costs in the OECD nations.
The interesting thing is that it’d benefit — make more competitive — vast swathes of American industry if the vestiges of the employer-paid system weren’t still around. Nevertheless, they and we are held hostage by the medical-industrial complex — more by big pharma, than the health insurance corporations.
Re: Kelton
At this point, we’ve seen the elite’s anti-government sabotage happen too many times at too many levels to think it’s anything else. The lying equation “tax cuts = economic activity = jobs” has, like any other Big Lie, been droned into us until we hardly know it’s not one of the sounds of Nature. Birdsong, waterfalls, tax cuts.
The deficit terrorists keep running the same play over and over. The idea that they’re going for the kill, the end of the federal government through ending taxes, shows how far we’ve fallen from reality and into Reaganomics. These folks have never forgiven the citizens of this country for the New Deal, for proving government can be used to protect the vast majority from the rapacious minority.
The myth of the deficit and Federal bankruptcy aren’t a bug, they’re the feature. Obama isn’t too stupid to see his part in the game, he’s playing it just the same . He’s already joined with the Rethugs to keep the cuts-deficits-cuts-deficits-cuts cycle going. He’s a lackey to the same masters. He just keeps up a pretense that his bootlicking is different from their bootlicking. He grovels with the same vocabulary, just uses his favorite trick of saying the two opposite propositions and later choosing one that he “meant.”
If the anti-government party didn’t own the traditional media and most of the current officeholders, they’d be just another fringe group sitting around muttering “GUB-mint” with only thumb suckers to repeat it. However, journalists have to eat, drink and pay mortgages, so we get to hear how our “responsible” leaders can destroy both the social safety net and any pretense at governing and be called “visonary.”
I still don’t understand how come Geithner keeps his job. If Obama fails to get re-elected, that’s going to be mostly his fault. If Obama does get re-elected, it’s going to be despite Geithner’s best efforts, not thanks to them.
OK, I know, Obama is a servant to the big corporations and all that. But does it trump even his re-election bid? If so, things are even much worse than is generally assumed.
Another possibility is that Obama isn’t as smart as people give him credit for.
Skin color aside, Geithner and Obama are the same person.
Madam;
I didn’t know Geithner (Geistner?) was a Harvard lawyer. If so, it would explain a lot about his biases in ‘economics.’ As for being the same person, I thought Doppelgangers were supposed to burst into flames when they met. Another much loved superstition bites the dust.