Originally published at the Tax Justice Network
In Edition 87 of the March 2019 Tax Justice Network monthly podcast/radio show, the Taxcast (available on iTunes, Stitcher, Spotify and other podcast platforms):
- we discuss misleading reporting from the mainstream media on the financial crisis: it was overloaded with finance ‘experts’, fed us all sorts of misunderstandings about the financial crash, sold us the austerity narrative and omitted alternative solutions
- Plus: two huge court case tax and social justice wins – firstly, an unprecedented case in Kenya by Tax Justice Network Africa regarding a double tax agreement between Kenya and the tax haven of Mauritius. Secondly, a US court has ruled that international financial institutions like the IMF and the World Bank CAN be sued when their development projects hurt communities
- And we’re happy to report that the EU Commission WILL now investigate one of the cases exposed by the #LuxLeaks whistleblowers…in last month’s Taxcast we joined the International Consortium of Investigative Journalists in calling on the Competition Commissioner to prove there was no conflict of interest.
“the way the mainstream media reported on the financial crisis, the structural explanations were largely missing from most media accounts, the deeper structural problems with the banking sector and issues around financialisation and how that affected the economy these weren’t really covered”
Mike Berry of Cardiff University’s School of Journalism, Media and Culture
and author of The Media,the Public and the Great Financial Crisis
Featuring:
- Mike Berry of Cardiff University’s School of Journalism, Media and Culture and author of The Media, the Public and the Great Financial Crisis
- Simon Bowers of the International Consortium of Investigative Journalists
- John Christensen of the Tax Justice Network
- Produced and presented by Naomi Fowler of the Tax Justice Network
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3 comments
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We thought independent central banks would bring us financial stability, but they had no idea what they were doing.
The FED never really stood a chance.
They are trying to run the economy with an economics that doesn’t consider debt, neoclassical economics.
https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png
Greenspan and Bernanke can’t see the problems building before 2008.
No one can work out what caused 2008, and afterwards and they attribute it to a “black swan”.
Janet Yellen is not going to be looking at that debt overhang after 2008 and so she can’t work out why inflation isn’t coming back.
It’s called a balance sheet recession Janet, you know, like Japan since the 1990s.
QE can’t get into the real economy due to a lack of borrowers. Most people are deleveraging from that debt fuelled boom you had before 2008 and they won’t take on more debt no matter how low interest rates go.
Richard Koo shows the ridiculous levels of bank reserves built up by the FED, BoE, ECB and BoJ that can’t get into the real economy due to a lack of borrowers.
https://www.youtube.com/watch?v=8YTyJzmiHGk
QE can get into stock and real estate markets inflating them.
Richard Koo tells us the worst thing you can do in a balance sheet recession is austerity.
The money supply ≈ public debt + private debt
If the private debt component is going down with deleveraging from a debt fuelled boom you need to increase Government borrowing to maintain the money supply. In curing a private debt problem, Japan created a public debt problem. It’s just money supply maths, unless you use Government created money, MMT.
Jerome Powell is not looking at the debt overhang after 2008 and so thinks the US economy is fixed and raises interest rates. Raising interest rates with all that debt in the economy will soon cause a downturn and there is no way he will get anywhere near normalising rates.
The FED don’t stand a chance until they start looking at private debt.
Neoclassical economics predates the GDP measure and we have gone back to the way they saw things in the 1920s.
The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at private debt, neoclassical economics.
Neoclassical economics has still got the same old problems it’s always had.
1) It doesn’t look at private debt
2) It makes you think inflating asset prices is creating real wealth
Bank credit flows into asset price inflation until you hit the Minsky Moment.
https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png
1929 and 2008 look so similar because they are; it’s the same economics and thinking.
In the 1930s, they pondered over where all that wealth had gone to in 1929 and realised inflating asset prices doesn’t create real wealth, they came up with the GDP measure to track real wealth creation in the economy.
The transfer of existing assets, like stocks and real estate, doesn’t create real wealth and therefore does not add to GDP. The real wealth creation in the economy is measured by GDP.
Inflated asset prices aren’t real wealth, and this can disappear almost over-night, as it did in 1929 and 2008.
We have forgotten where the real wealth creation in the economy occurs; it’s producing new products and services in the economy, not inflating asset prices.
We have confused making money with creating wealth and these are two different things.
If you have a huge excess of money, you get hyper-inflation and wheel barrows of the stuff won’t buy you anything. It has no intrinsic value, its value comes from what it can buy.
Money is created by typing numbers into a keyboard, it comes out of nothing.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
Too much you get inflation and too little you get deflation, it’s just an instrument for carrying out transactions within the economy.
Alan Greenspan tells Paul Ryan the Government can create all the money it wants and there is no need to save for pensions.
https://www.youtube.com/watch?v=DNCZHAQnfGU
What matters is whether the goods and services are there for them to buy with that money.
For a nation, money is just numbers typed in at a keyboard and the last thing you want is too much of the stuff as it won’t be worth anything. The real value in an economy does not lie in money.
All bank lending creates money (see BoE link), only bank lending into business and industry to produce new goods and services creates wealth (GDP).
Before 1980, the UK knew how to create wealth with bank credit
https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.53.09.png
Before 1980 – banks lending into the right places that result in GDP growth (business and industry creating new products and services in the economy)
After 1980 – banks lending into the wrong places that don’t result in GDP growth (real estate and financial speculation)
I am not an economist, but I’m pretty smart. Still, I had to read Michael Lewis’s book “The Big Short” twice, because I constantly stopped to ask “What’s a CDO again? What’s a CDS?” It reminded me of when years ago I asked an SEC acquaintance to explain “naked short selling” and his answer left me dumbfounded–as did a definition of “rehypothecation.” The fact that all these nonsensical financial games are legal is why I own no stock. And since Congress and the SEC have changed none of the causes (so we now have CLOs instead), we again are on the verge of another implosion. I’m just wondering, if we have 2008 all over again, will average people finally revolt?