Category Archives: The destruction of the middle class

Marshall Auerback and Rob Parenteau: The Myth of Greek Profligacy & the Faith Based Economics of the ‘Troika’

By Marshall Auerback, a portfolio strategist and hedge fund manager, and Rob Parenteau, CFA, sole proprietor of MacroStrategy Edge and a research associate of The Levy Economics Institute

Historically, Greeks have been very good at constructing myths. The rest of the world? Not so great, if the current burst of commentary on the country is anything to go by. Reading the press, one gets the impression of a bunch of lazy Mediterranean scroungers, enjoying one of the highest standards of living in Europe while making the frugal Germans pick up the tab. This is a nonsensical propaganda. As if Greece is the only country ever to cook its books in the European Union! Rather, the heart of the problem is in the antiquated revenue system that supports that state, which results in a budget shortfall consistently about 10% of GDP. The top 20% of the income distribution in Greece pay virtually no taxes at all, the product of a corrupt bargain reached during the days of the junta between the military and Greece’s wealthiest plutocrats. No wonder there is a fiscal crisis!

So it’s not a problem of Greek profligates, or an overly generous welfare state, both of which suggest that the standard IMF style remedies being proposed here are bound to fail, as they are doing right now. In fact, given the non-stop austerity being imposed on Athens (which simply has the effect of deflating the economy further and thereby reducing the ability of the Greeks to hit the fiscal targets imposed on them), the Greeks really are getting close to the point where they may well default and shift the problem back to those imposing the austerity.

Philip Pilkington: My European Nightmare – An Infernal Hurricane Gathers?

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

The infernal hurricane that never rests
Hurtles the spirits onward in its rapine;
Whirling them round, and smiting, it molests them.

– Dante, The Divine Comedy

Every now and then a terrible thought enters my mind. It runs like this: what if the theatre of the Eurocrisis is really and truly a political power-game being cynically played by politicians from the core while the periphery burns?

Yes, of course, we can engage in polemic and say that such is the case. But in doing so we are trying to stoke emotion and generally allowing our rhetorical flourish to carry the argument. At least, that is what I thought. I had heard this rhetoric; I had engaged in it to some extent myself; but I had never really believed it. Only once or twice, in my nightmares, I had thought that, maybe, just maybe, it might have some truth.

And then the Financial Times published this ‘strictly confidential’ document leaked to them from within the Eurostructure. That is when my nightmare started becoming increasingly real.

Bill Black: The Anti-Regulators Are the Job Killers

By Bill Black, Associate Professor of Economics and Law at the University of Missouri-Kansas City, a former senior financial regulator, and the author of The Best Way to Rob a Bank is to Own One. Cross posted from New Economic Perspectives.

The new mantra of the Republican Party is the old mantra – regulation is a “job killer.” It is certainly possible to have regulations kill jobs, and when I was a financial regulator I was a leader in cutting away many dumb requirements. We have just experienced the epic ability of the anti-regulators to kill well over ten million jobs. Why then is there not a single word from the new House leadership about investigations to determine how the anti-regulators did their damage? Why is there no plan to investigate the fields in which inadequate regulation most endangers jobs?

Marx Versus Capitalism Versus You

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

It is a measure of how un-self critical modern economics has been, that the Marxists are starting to appear to be making the most sense of the current crises. The supine acceptance that “the market is always right” — a truism only to traders and vested interests — means that there has been precious little understanding developed about how markets can go wrong. Or what is wrong, as well as right, with markets and the modern practices of capitalism. An article in the London Review of Books came to my attention recently by Benjamin Kunkel that shows how Marxist analysis is actually looking quite pertinent to the current mess.

Steve Rattner, Card Carrying Member of Top 1%, Tells Us We Should Lie Back and Enjoy Much Lower Wages Resulting From Globalization

A corollary to Upton Sinclair’s famous saying, “It is difficult to get a man to understand something if his salary depends on his not understanding it” is “People promote ideas that help them secure or preserve a privileged position on the totem pole.”

A glaring example of these observations came in an op ed in the Sunday New York Times by Steve Rattner, former Lazard mergers & acquisition partner, later head of the private equity firm, Quadrangle Partners. He is best known as the chief negotiator in the auto bailouts (and he was criticized for not involving any auto industry experts). He paid $10 million to settle a kickbacks investigation and agreed not to work for a public pension fund in any role for five years. I happened to see Rattner on a panel at a Financial Times conference earlier this week and he elaborated on some of the themes in this piece, “Let’s Admit It: Globalization Has Losers,” which reader Brett asked me to debunk line by line. I’ll spare you and focus just on the most critical and bald-facedly dishonest bits.

Call or Go to Zuccotti Park to Protest Removal of #OccupyWallStreet From Zuccotti Park

I’m sorry to be late to this item which broke this afternoon, but I’ve been off the grid all day, and hope readers seeing this now have or will take action to support OccupyWallStreet.

Bloomberg has decided to crack down on OccupyWallStreet, and the ruse being used is that Zuccotti Park needs to be “cleaned” as in cleared. I was down at OWS on Tuesday and remarked that it was notably cleaner than most New York City streets.

The cleaning is device to force the removal of the belongings of people encamped there; they will not only not be permitted to bring their goods back, but even lying down on the ground or benches or putting a covering on the ground will be prohibited going forward.

Will internal devaluation work?

Edward here again. I was talking to my friend Rob Parenteau about internal devaluation. He doesn’t think it will work. His argument against it is similar to the one I have been making about the origins of this crisis. Here’s what I said. I do not believe this private sector balance sheet recession can be […]