Economist Ann Pettifor discusses how economies around the world moved from using borrowing to support productive investments to fueling speculation and consumption, and how that led to the financial crisis. She also describes how the post-crisis response to the debt overhang isn’t merely ineffective but in fact counterproductive.
Read more...China faces the first big test of its shadow banking system, in the form of a pending default. How is it likely to fare?
Read more...Why the real constraint on energy production isn’t the availability of resources, but the cost of developing them, and how these neglected investment constraints have big ramifications for “peak energy” and economic growth generally.
Read more...After the last few years of strong sales growth, the US auto industry may be headed for a world of hurt. If that happens, the US economy would suffer too.
Read more...Yves here. While this piece provides a solid overview of the fallen status of cars, it misses an obvious contributor to the lack of enthusiasm for them among the young: with weak incomes and in many cases, heavy student debt loads, an automobile is too large an expense relative to what they get out of it.
Read more...The Fed is explicitly relying on the wealth effect to stimulate spending. It’s theory is that if asset values rise, people will feel richer and spend more. But that’s not exactly how this movie is playing out.
Read more...Chile is often a social laboratory that gives an advance view of what is coming……
Read more...Yves here. In case you missed it, there was a great deal of consternation at the surprisingly low level of job additions in Friday’s employment reports.
Read more...The Obama administration and the mainstream media are now talking up an imminent recovery, perhaps even a modest boom. There is no reason why we should be optimistic now.
Read more...Among the big energy stories of 2013, “peak oil” — the once-popular notion that worldwide oil production would soon reach a maximum level and begin an irreversible decline — was thoroughly discredited. The explosive development of shale oil and other unconventional fuels in the United States helped put it in its grave.
But this assessment may be premature.
Read more...George Soros has caused a bit of a frisson by calling China the greatest risk to the global economy. The Chinese shadow banks are the trouble spot to watch.
Read more...Warren Mosler tells a good story that shows how our economy works at its most basic level.
Imagine parents create coupons they use to pay their kids for doing chores around the house. They “tax” the kids 10 coupons per week. If the kids don’t have 10 coupons, the parents punish them. “This closely replicates taxation in the real economy, where we have to pay our taxes or face penalties,” Mosler writes.
So now our household has its own currency. This is much like the U.S. government, which issues dollars, a fiat currency. (Meaning Uncle Sam doesn’t have to give you something else for it. Say, like a certain weight in gold.) If you think through this simple analogy, all kinds of interesting insights emerge.
Read more...The European Union is riddled with fatal flaws and defects. Chief among them is the single currency which, rather than serving as the Union’s springboard to global dominance, could well be its ultimate undoing.
Read more...Simon Johnson wrote a remarkably blunt article for the Atlantic in May 2009 titled The Quiet Coup. In case you managed to miss it, it remains critically important reading. He provided an update of sorts in a New York Times column today.
Read more...Nothing could have been a more potent metaphor for the current investment climate than the headline, “Macau gambling revenue hits record $45 bn in 2013.”
Read more...