Category Archives: Economic fundamentals

Restoring Trust in the American Economy: The Real World v. The Confidence Fairy

By Paul Davidson,the author of “The Keynes Solution: The Path to Global Economic Prosperity” and the editor of the Journal of Post Keynesian Economics. Cross posted from Alternet

Recently I went to a well-known restaurant in Evanston, Illinois. This restaurant has a reputation for providing excellent food and service. But the night I was there, it was less than half full. I asked the manager if he would he hire more waiters and chefs if his taxes were reduced and/or government removed the existing regulations controlling the way his restaurant could operate. His answer was that even if his taxes were reduced and regulations eliminated, he would only hire more staff if more customers came in for dinner. On the other hand, if there were twice as many customers for dinners than there were on this night (and there were many more customers before the recession began in 2007) he would gladly double the number of workers he employed even if his taxes were not reduced or regulations changed.

That’'s how things work in the Real World.

Michael Olenick: The Real Estate Market’s Continuing Data Vacuum

By Michael Olenick, creator of NASTIACO, 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

As it turns out, information is not perfect, volatility does not define risk, markets are not efficient, the individual is adaptable.
– Dr. Michael Burry, UCLA Economics Commencement Speech, June 20, 2012

Roubini Warns a Crisis in 2013 Would Be Worse Than 2008

Nouriel Roubini, the dour seer who was early (too early in the minds of some) to warn of possible financial crisis prior to the Great Upheaval, has been more cautious in his calls since having ascended to official pundit status. Nevertheless, he’s been warning of a possible crisis in 2013 for some time and is not backing off from that call as the date approaches.

Will China Face a Lost Decade?

Although various commentators (including our Marshall Auerback) have raised warning flags about the long-term viability of China’s growth model, the middle kingdom’s performance during the crisis seemed to prove skeptics wrong. Never mind that creditors like China tend to suffer most in the aftermath of major financial crises, or that no country has ever sustained such a high combination of exports plus investment (over 50% of GDP) for very long. And the ongoing reports of all those vacant cities seemed to be irrelevant.

The critics have been looking less off base of late.

Europe’s Crisis is Re-Emerging

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.

As I‘ve been saying over the last few days, last week’s EU summit provided Europe with some political success but actual deliverables are some time off. According to the Finnish PM at least a year. There is already rumbling from a number of countries, including Germany, about what exactly was and wasn’t decided last Friday morning and my suspicious are, as we’ve seen many times before, that final outcomes will be some 17, or 27, headed beast built on layers of political compromise.

Death of the China Cult

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

hile the mistrust of the political class of China continues in Hong Kong (and will certainly continue for much longer), the doubts on the strength of the Chinese economy and the doubts on the ability of the political class
to manage the economy have more or less evaporated after 15 years of Chinese rule.

No one would ever dispute the achievement of the Chinese economy….the extraordinary bull market and the seemingly unstoppable economic growth has created a China cult, a cult among the investing community that China is the best place to invest.

Europe Has No Levers for Growth

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 http://www.macrobusiness.com.au/2012/06/the-european-summit-is-a-write-off/“>MacroBusiness.

It’s the eve of the 19th EU summit and as I type Angela Merkel and Francois Hollande should be getting started on their pre-summit meeting. I don’t think there is doubt in anyone’s mind that although we have seen 18 before it, this summit is of particular importance. Hollande and Merkel had a few words to say before their meeting:

The European Summit is a Write Off

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.

Spain took a beating overnight after Moody’s downgraded the long term debt and deposit ratings of 28 Spanish banks on the back of the sovereign downgrade earlier in the month. Yields on short term debt spiked at auction:

Can the Fed Really Do More?

By Stephanie Kelton, Associate Professor of Economics at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives.

I’ve grown increasingly frustrated by the near universal cry for more action from the Fed. My friend and fellow blogger Marshall Auerback has quipped that it’s as if every mainstream progressive received the same White House memo. I imagine it looked something like this:

Yanis Varoufakis: Greece is Finished

Yves here. Yanis just posted an interview with ABC (Australia’s BBC) which describes how Greece cannot be salvaged. Its fate will be determined at the eurozone level, and its possible outcomes range from bad to awful. You can watch the conversation here. Transcript below:

Michael Olenick: Irrational Exuberance, Housing Edition

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

… how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions…
– Alan Greenspan, Dec. 5, 1996

In any context except a Gay Pride parade grown men wearing short skirts and carrying pom-poms look out of place. But if they’re cheering the artificial rise of housing prices we’ve seen lately, they seem to be not only accepted but welcome.

Adam Davidson Strikes Again, Tells Us to Ignore Downer Data and Trust the Confidence Fairy

While Adam Davidson’s current New York Times column, “How to Make Jobs Disappear” refrains from blatant advocacy of the interests of the 1%, his “Let Dr. Pangloss explain it” approach to economic news is still flattering to the established order. To the extent that anyone in the officialdom pays attention to his work, he’s holding up a rosy-colored mirror to their stewardship. And for the rest of us, his relentless “see, everything really is fine, now take your Soma” denies the reality of the hardships and stresses most ordinary Americans face.

It’s hitting the point where I’m getting such sharp, annoyed commentary about Davidson’s columns by e-mail that I have to work to read his columns with a fresh eye. From one correspondent:

Michael Hudson/Jeffrey Sommers: Latvia is No Model for Austerity

By Michael Hudson and Jeffery Sommers, a distinguished professor at the University of Missouri-Kansas City and associate professor at the University of Wisconsin-Milwaukee respectively, who have both advised members of Latvia’s government on alternatives to austerity. They are also contributors to the forthcoming book by Routledge Press: The Contradictions of Austerity: The Socio-Economic Costs of the Neoliberal Baltic Model. Cross posted from the Financial Times by permission of the authors

Austerity’s advocates depict Latvia as a plucky country that can show Europe the way out of its financial dilemma – by “internal devaluation”, or slashing wages. Yet few of the enthusiastic commentators have spent enough time in the country to understand what happened.

“The Eurozone’s Strategy is a Disaster”

Yves here. Mr. Market is in a tizzy today over, per Bloomberg, “concerns over the slowdown of growth”. Cynics might note that journalists have to attribute motives to market moves, when their waxing and waning often defies logic. Nevertheless, we’ve had disappointing reports out of China, a bad Philly Fed manufacturing report, a less than stellar initial jobless claims report, and not so hot housing data this AM, and more and more signs of inability to bail out the sinking Titanic of the Eurozone (a meaningless announcement compounded by continued focus on ongoing German court challenges to more aggressive support of rescues. Even if these cases lose, any uncertainty and delay has the potential to accelerate the ongoing bank run out of periphery countries).

This post from VoxEU is a good short form summary of how the Eurozone got into this fix.