Category Archives: Credit markets

Michael Hudson on How Finance Capital Leads to Debt Servitude

This edited transcript is expanded from a live phone interview with Michael Hudson by Dimitris Yannopoulos for Athens News. It summarizes some of the major themes from Hudson’s new book, The Bubble and Beyond: Fictitious Capital, Debt Deflation and Global Crisis, which is available on Amazon.

Q: How has the financial system evolved into the form of economic servitude that you call “debt peonage” in your book, implying a negation of democracy as well as free-market capitalism as classically understood?

Yanis Varoufakis: The Game of the Two Marios

Yves here. Yanis called this post “Europe’s Modern Titanomachy: How Europe’s future is being shaped by large battles on seemingly small matters (Part C)” but that title obscures the point. His piece works though how the choices of ECB chief Mario Draghi and Italy’s prime minister Mario Monti interact with each other, and what that means for the future of the Eurozone: “Today’s Great Expectations (regarding the ECB’s intervention, banking union, Brussel’s federal moves etc.) are more likely to prive Dickensian than literal.”

Central Banks Versus the People

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

As you are surely aware by now, the US Federal Reserve has announced a new round of quantitative easing which like the ECB’s outright monetary transactions (OMT) is a new program of large scale asset purchases by a central bank. I thought I’d spend a bit of time today talking about these programs because once again I have noticed some large misconceptions in the media about what these operations are, and more importantly, what the likely outcome of them is.

Is QE3 Yet Another Stealth Bank Bailout?

It’s difficult to puzzle out what Bernanke thinks he is accomplishing with QE3. The level of bond buying, as various commentators have pointed out, is much lower than in the earlier QE programs. And pulling out bigger guns in the past was not terribly productive. As we wrote in April 2011 in a post titled “Mirabile Dictu! Economists Agree All the Fed Has Done is Goose Financial Markets!“:

Eugene Linden: In a World of Underpriced Risk, What Could Possibly Go Wrong?

By Eugene Linden, a journalist and author of seven books who has written extensively about animal behavior, environmental issues, and markets

On a recent conference call, the strategist of a major international bank (it was an off-the-record call for clients only) laid out the bare bones of what he called the world’s “giant experiment” in debt and interest rates. Never before have so many countries maintained such low base rates for so long; never before in peacetime have so many countries had such huge deficits and debt burdens; never before in U.S. history had long term rates been so low; never before has the U.S. gone so many decades without deflation following inflation. Because we live in these unprecedented times, it’s easy to lose sight just our strange they are… and how dangerous.

The Fed’s QE3: No Exit

The Fed’s launch of QE3 looks more than a tad desperate. If you believe the central premise of the Fed’s action, that propping up asset price gains would have enough effect on consumptions to lift the economy out of stall speed, it would seem logical to sit back a bit and let the recent stock market rally and the (supposed) housing market recovery do their trick. But the Fed has finally taken note of the worsening state of the job creation in an already lousy employment market and has decided it needed to Do Something More.

Quelle Surprise! Regulatory Measures to Reduce Systemic Risk Are Proving to Be Ineffective, Possibly Counterproductive

In an perverse case of synchronicity, one headline last night touted regulatory efforts to address systemic risk as another highlighted bank efforts to increase it. And the ongoing efforts of banks to expand risk creation is no accident.

Sheila Bair Visits Occupy Wall Street

Sheila Bair, the former FDIC chairman who heads the Systemic Risk Council, and Ricardo Delfina, a fellow Systemic Risk Council member, met on Sunday with members of several Occupy Wall Street working groups: Occupy Bank, Alternative Banking, and Occupy the SEC. I’ve watched presentations by Bair twice previously: once when she was at the FDIC, another not long after she had left government service. Even though she had been pretty direct in those discussions, she was surprisingly specific in this meeting about some of the impediments she faced during the crisis. Some of the topics:

Markets Applaud Draghi’s New, Improved Kick the Can Down the Road Strategy

On Thursday, ECB chief Mario Draghi announced a bond-buying program that had been largely leaked the day prior, namely that of a new bond buying program, the Outright Monetary Transactions, or OMT. Bond yields in Italy and Spain had already come down on the rumor, and stock markets around the world rallied on the news.

The enthusiasm appears overdone when you look at the sketchy details.

Quelle Surprise! Banks Getting Credit for What They Would Have Done Anyhow in Mortgage Settlement

Today, Joseph Smith, the official monitor for the Federal-state mortgage settlement entered into earlier this year with five major servicers, released a glossy initial report on program progress. Needless to say, my cynicism was piqued both by the glossy format of the document and the decision to release it well before the required date of second quarter 2013.

But the distressing part is the way the settlement is playing out according to script.

“Nonsense Economics” and the Deepening Greek Crisis

Real News Network has a sobering interview with Costas Lapavitsas,a professor at the University of London School of Oriental and African Studies, who gives an update on the political and economic situation in Greece.

New Real Estate Train Wreck Coming: Securitized Rentals

No matter how bad things get, it turns out they can always get worse. Wall Street is about to foist a new “innovation” on investors that even the ratings agencies won’t touch.

Greece’s Great Depression: “Everyone is Going into a Black Hole”

RT interviews University of Athens economics professor Yanis Varoufakis on the latest round of Greek bailout negotiations.

Draghi Does His Best

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness

Two weeks ago I wrote a post about Mario Draghi and what appeared to be ECB’s step across the Rubicon into the arena of politics and fiscal policy in order to force Europe’s politicians to break the ‘chicken and egg’ stand-off that has plagued Europe for over a year. In that post I described his actions as a bluff called of both sides of the divide:

New York Times Publishes Apology for Obama’s Failed Housing Policies

On the one hand, the dismal failure of the Administration’s cosmetic responses to the foreclosure mess is so evident that the New York Times is willing to acknowledge it, via a first page article titled, “Cautious Moves on Foreclosures Haunting Obama.” On the other, what the story offers is a whitewash, not an analysis.