The propagandistic exhortation that we all need to need to learn to love or at least accept the crappy economy known as “the new normal” is starting to wear a bit thin. One of the things that has allowed the punditocracy to pretend that “the new normal” really isn’t all that bad are various myths that they get investors and sometimes the broader public to believe in succession or better yet simultaneously:
Read more...As much as your humble blogger still regards Elizabeth Warren as preferable to Scott Brown in the Massachusetts Senate race, the evidence from her campaign is that she is no progressive, unless you define “progressive” to mean “centrist/Hamilton Project Democrat willing to throw a few extra bones to the average Joe.”
We’ve warned repeatedly that Warren not being all that left leaning was a real possibility.
Read more...By Cameron Murray, a professional economist with a background in property development, environmental economics research and economic regulation. Cross posted from MacroBusiness
The word efficiency carries a meaning immersed in all things positive – you never hear that being more efficient could possibly be detrimental. In fact, if you can bear the evangelical fervour, you may have read about achieving ‘Factor Four’ or ‘Factor Five’ gains in energy efficiency, as part of a ‘Natural Capital’ revolution comprising a ‘decoupling’ economic growth from a growth in the consumption of exhaustible resources – also known as ‘sustainability’. You may even have heard about the equation I=PAT or I = P x A x T, where environmental impact (I) is a function of population (P), affluence (A) and technology (T), and that becoming more efficient will enable a desired level of affluence with far less environmental cost.
Historical experience shows that these claims are untrue.
Read more...By Rob Parenteau, CFA, sole proprietor of MacroStrategy Edge, editor of The Richebacher Letter, and a research associate of The Levy Economics Institute
Wolfgang Munchau has raised a very important point in his current Financial Times article, “Why Europe’s officials lose sight of the big picture.” The eurozone, Wolfgang points out, is more like a large closed economy than a collection of small open economies, and this has implications for fiscal policy outcomes, yet these implications remain largely unrecognized by policy makers within the region. Wolfgang noted:
Read more...By Zarathustra, who is the founder of Hong Kong blog Also sprach Analyst. He was educated at the London School of Economics and the Chinese University of Hong Kong and was once a Hong Kong-based equity research analyst focusing on Hong Kong real estate (which he did not really like), with a secondary coverage on China real estate sector (which he actually hated). Cross posted from MacroBusiness
Zero interest rate policy and quantitative easing is not working to stimulate the real economy. No country has succeeded. The pioneer of quantitative easing, the Bank of Japan, failed (and Japanese yen is uber-strong). The Federal Reserve has failed, and the Bank of England has failed.
Read more...A new research piece from Barclays raises some far reaching implications.
Many economic pundits forecast the housing market will bottom in 2012 and start recovering thereafter. I’d like to know exactly how that happens when the odds of a Eurobanking crisis is the next six months look high, and it’s bound to blow back to the US.
But even the more realistic pundits (meaning those not in the employ of financial firms) may be unduly optimistic.
Read more...By Zarathustra, the founder of Hong Kong blog Also sprach Analyst. He was educated at the London School of Economics and the Chinese University of Hong Kong and was once a Hong Kong-based equity research analyst focusing on Hong Kong real estate (which he did not really like), with a secondary coverage on China real estate sector (which he actually hated). Cross posted from MacroBusiness
Let’s face it, China is manipulating its currency. You can call it whatever you want, but China is manipulating its currency.
Read more...The Financial Times reports that the Chinese sovereign wealth fund Huijin will buy shares in the four biggest banks in a move to goose the flagging stock market, which is at its lowest point since early 2009. This is the first time the fund has mad this sort of intervention since the onset of the crisis.
Read more...Yves here. Note I beg to differ with Das in his comments on government debt levels for countries that control their own currency. As we’ve noted, a country can always repay debts in its own currency, and the funding of federal deficits by borrowing is a political constraint and a holdover from the gold standard era. Moreover, there is a great deal of evidence that the solution implicit in that view, of cutting government spending in the aftermath of a demand-depressing, private balance sheet wrecking global financial crisis only makes matters worse. This is a case where you need to steer into the skid to get the car back on course. But this section is not core to Das’s discussion.
By Satyajit Das, the author of Extreme Money: The Masters of the Universe and the Cult of Risk
Powered flight requires air to flow smoothly over the wing at a certain speed. Erratic or slow air flow can cause a plane to stall. Most modern aircraft are fitted with a “stick shaker” – a mechanical device that rapidly and noisily vibrates the control yoke or “stick” of an aircraft to warn the pilot of an imminent stall.
The global economy too needs air flow -smooth, steady and strong growth. Unfortunately, the global economy’s stick shaker is vibrating violently.
Read more...One of the things that has been intriguing about the handwringing among European policy-makers has been the general refusal to consider the idea that one of the countries being wrung dry by doomed-to-fail austerity programs might just pack up and quit the Eurozone. The assumptions have been three fold. One is a knee-jerk assumption that the costs of exiting are prohibitive (this argument comes from Serious Economists in Europe, but they never compare it to the hard costs of austerity and the less readily measured but no less real cost of loss of sovereignity). Second is that an exit would come via a country being expelled, since the Eurozone treaties prohibit unilateral departure. Third is that it would be too much of an operational mess to revive a defunct currency.
A very good piece by Floyd Norris in the New York Times fills this gap by describing that Greece has the motivation and the means to leave.
Read more...By Gal Noir, an undercover investigator of hijacked economic truths and an occasional blogger at New Economic Perspectives
In his Congressional testimony on October 4th, Federal Reserve Chairman Bernanke uncharacteristically praised the benefits of fiscal policy, calling it “of critical importance” and conveying concerns with the looming deficit reductions. He cautioned: “an important objective is to avoid fiscal actions that could impede the ongoing economic recovery.”
Many economists expressed worry that such advocacy of fiscal policy will erode America’s (already) wavering confidence in the Fed and will further weaken their support for austerity measures. More troubling still, the economists said, was the possibility that the public may follow suit and start demanding from Congress bolder government action on the jobs front.
A few dissenting scholars thought that it was high time for Bernanke to put his money where his mouth was, so to speak.
Read more...Yves here. Stuart Zechman is a keen observer of how corporatist policies are peddled through various Rubinite/Hamilton Project organizations and other mouthpieces and skillfully messaged so as to snooker or co-opt bona fide progressives who ought to know better.
His article mentions Third Way. For benefit of those who have been so fortune as to have limited contact with the netherworld inside the Beltway, here is a brief description from an earlier post:
Read more...And make no mistake about the role of Third Way. Third Way runs the policy apparatus of the Democratic Party. In Congress, staffers attend regular Third Way policy briefings, where the group hands out pre-packaged legislative amendments in legal form, generic press releases, polling around those policy ideas, and talking points. It’s a soup-to-nuts policy apparatus. Most of these ideas are harmless – like increased volunteerism – but some are not, like various tax proposals.
The group has enormous juice.
Yves here. Police efforts to contain OccupyWallStreet have had the opposite effect to what the officialdom no doubt assumed would happen: that the demonstrators would either become discouraged or become violent, which would make it easy to discredit them. Instead, the macing of a group of women last weekend, followed by the arrest of over 700 people on Brooklyn Bridge on Saturdy, has given the movement legitimacy and media attention. It was the lead item on the BBC website over the weekend.
Press efforts to diminish the potential of this effort are now shifting.
Read more...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. Edited Interview by Bonnie Faulkner September 2, 2011 (first aired on Pacifica, September 14, 2011).
“Without consumption, markets are going to shrink. Companies won’t invest, stores will close, “for rent” signs will spread on the main streets and local tax revenues will fall. Companies will lay off their employees and the economy will shrink more. Why aren’t economists talking about these effects of debt deflation, which are becoming the distinguishing phenomenon of our time? They advocate giving more money to the banks, hoping that somehow everything will be okay, as if the banks would lend out the money to fund new production and employment. Mainstream economics and political leaders in both parties are failing to ask why the banks are using these giveaways to speculate abroad, pay their managers bonuses and high salaries or to pay dividends rather than to lend to small businesses or do other things to actually get the economy moving again. This phenomenon cannot be explained without seeing that debt service is siphoning off revenue into the financial sector, which is not recycling it back into the production-and-consumption economy.”
Read more...The Eurocrats finally seem to have realized time is running out. The abrupt market downdraft of last week appears to have focused their minds on the need for a much larger scale rescue mechanism of some form, with numbers like trillions attached, and that will move the Eurozone further towards fiscal integration, another badly needed outcome.
Read more...