Category Archives: Economic fundamentals

Satyajit Das: “All Feasts Must Come to an End” – China’s Debt & Investment Fueled Growth (Part 1)

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

The re-emergence of China has dominated recent economic and political discourse. The Chinese economy is forecast to expand by around 60% in the period between 2007 and 2012, compared to around 3% for developed economies. While China’s rise is important, its drivers are frequently misunderstood and poorly analysed.

China’s economic structure is deeply flawed and fragile. The Chinese growth story may be ending. As an old Chinese proverb, probably apocryphal, holds: “There is no feast that does not come to an end.”

Lynn Parramore: Schools Without Toilet Paper? The Pain in Spain Falls Mainly on the Plain Folks

By Lynn Parramore. Cross posted from Alternet

Lately, European elites have been congratulating themselves for averting disaster in the eurozone. But who, exactly, is breaking out the champagne?

The New Priesthood: An Interview with Yanis Varoufakis Part II

Yanis Varoufakis is a Greek economist who currently heads the Department of Economic Policy at the University of Athens. From 2004 to 2007 he served as an economic advisor to former Greek Prime Minister George Papandreou. Yanis writes a popular blog which can be found here. His treatise on economic theory ‘Modern Political Economics: Making Sense of the Post-2008 World’, co written with Nicholas Theocrakis and Joseph Haveli is available from Amazon.

Interview conducted by Philip Pilkington.

Philip Pilkington: In the book you talk about how humans are extremely hard to model – you go as far as to call them a ‘radical indeterminacy’. Now, some of this comes back to the classical theory of value that we already discussed. That theory of value seeks out the basis of value in the human capacity for labour – essentially putting humans out front and centre when modelling is undertaken. But the neoclassical theory of value – that is the marginal theory of value – also relies on humans to build models, in that it concentrates on their consumption preferences and derives so-called laws from these. Could you talk about this a little?

Europe’s Recession Has Barely Begun

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.

The reserves from the ECB’s LTRO stage II operation are making their way back into the excess reserve facility at the ECB. The overnight holdings were at an all time record of €820.81bn. As I explained previously, this in itself isn’t a problem. In fact, unless the reserves are moving to some other non-commercial bank accounts at the ECB there is little other place they can go. However, what is the problem:

…is that the increasing use of the ECB’s marginal lending facility shows that not all of these parked reserves are actually “excess to market requirements”.

The statistics from last night show that for the last 3 days there is still €783 million being rolled over using the ECB’s margin lending facility. With €0.8trn technically available for interbank lending it is certainly a concern that there is at least one bank still having to lean on the ECB for overnight liquidity.

Wolf Richter: The Debacle of My Last Post

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience, who writes at Testosterone Pit.

As some readers have pointed out, there was a major problem in my last post, Deep Trouble at the Core of the Eurozone. I thank all commenters who criticized or defended my post, and I apologize for the errors it contained.

Adrift in a Sea of Economic Data

Yves here. This post from MacroBusiness provides a good point of departure, and I’ll provide some comments further down.

By Sell on News, a global macro equities analyst. Cross posted from MacroBusiness

A little known fact about John Maynard Keynes, detailed in Jane Gleeson-White’s book “Double Entry” is that he was responsible for the development of national economic statistics and that he expected them to be aggregated only on a temporary basis.

It was being done for the war effort, and would, he reasoned, not be necessary afterwards. This certainly puts “Keynesianism” in a different perspective, and poses the intriguing question: where would we be without economic statistics?
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Wolf Richter: Deep Trouble at the Core of the Eurozone

In France, new vehicle registrations are plunging: -17.8% in December, -20.7% in January, -20.2% in February. French automakers suffered the most. PSA Peugeot Citroën -29.2% and Renault -28.5%. The German auto industry is still basking in last year’s glow of record worldwide sales and profits, and record bonuses for their beaming employees. But in January registrations edged down, and in February they collapsed brutally. And it’s just the beginning.

Cathy O’Neil: Economists Don’t Understand the Financial System (Quelle Surprise!)

By Cathy O’Neil, a data scientist who lives in New York City and writes at mathbabe.org

A bit more than a week ago I went to a panel discussion at the Met about the global financial crisis. The panel consisted of Paul Krugman, Edmund Phelps, Jeffrey Sachs, and George Soros. They were each given 15 minutes to talk about what they thought about the Eurocrisis, especially Greece, the U.S., and whatever else they felt like.

It was well worth the $25 admission fee, but maybe not for the reason I would have thought when I went. I ended up deciding something I’ve suspected before. Namely, economists don’t understand the financial system, and moreover they don’t get that they don’t get it. Let me explain my reasoning.

Philip Pilkington: Vote or Die! – The Coming Irish Election Blackmail

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

Vote or die muth#%#^*#, muth#%#^*# vote or die,
Rock the vote or else I’m gonna stick a knife through your eye,
Democracy is founded on one simple rule,
Get out there and vote or I will muth#%#^*# kill you.

– P. Diddy ‘Vote or Die’

The Irish Taoiseach Enda Kenny has announced that a referendum will be called so that the Irish people can vote on the new and oh-so-suicidal fiscal compact.

Michael Hudson: 2,181 Italians Pack a Sports Arena to Learn Modern Monetary Theory – The Economy Doesn’t Need to Suffer Neoliberal Austerity

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College

I have just returned from Rimini, Italy, where I experienced one of the most amazing spectacles of my academic life. Four of us associated with the University of Missouri at Kansas City (UMKC) were invited to lecture for three days on Modern Monetary Theory (MMT) and explain why Europe is in such monetary trouble today – and to show that there is an alternative, that the enforced austerity for the 99% and vast wealth grab by the 1% is not a force of nature.

Chris Cook: The Oil End Game

By Chris Cook, former compliance and market supervision director of the International Petroleum Exchange. Cross posted from Asia Times

The end game is about to begin. On the one hand you have the noise and rhetoric. Greedy speculators gouging gasoline prices; mad mullahs preparing to wipe Israel off the map; bunker buster bombs and fleets being positioned; huge demand for oil from the BRIC countries; China’s insatiable thirst for oil; the oil price will head for $200 a barrel and will never again fall below $130 …

On the other hand you have the reality.

Michael Olenick: Debunking the “Housing Has Bottomed” Meme

By Michael Olenick, creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick or read his blog, Seeing Through Data

The normally astute Bill McBride of Calculated Risk has joined the chorus of cheerleaders to argue that an alleged decrease in housing inventory means that house prices are near their ethereal bottom.

Living in W. Palm Beach, FL, the epicenter of the foreclosure crisis, it seems more likely that analytical ethics related to housing finance is the only element nearing a bottom, and only then because the home price pundits on which people like McBride rely can’t go much lower.
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Wolf Richter: Greece, “The Bottomless Barrel,” As Germans Say

In Greece, three-quarters of the independent doctors, lawyers, and engineers declare taxable income below the existential minimum. Tax fraud amounts to €20 billion per year (8.5% of GDP). And tax dodgers owe €63 billion in unpaid taxes (27% of GDP). The country is bankrupt and has been kept afloat by the Troika (EU, ECB, and IMF), of which Germany is by far the largest contributor. But there is a plan. And it’s not an endless bailout.