Category Archives: Economic fundamentals

G20 Finance Ministers Reveal Impotence in the Face of Rising Stresses

Yves here. It’s hardly uncommon for big international pow-wows like the G20 to produce grand-sounding statements that when read carefully call for unthreatening, which usually means inconsequential, next steps. But this G20 just past was revealing, in a bad way, about the state of international political economy.

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Is Rising Inequality Inevitable?

Yves here. In the wake of increased debates over rising inequality, particularly income inequality, many economists take the point of view that high levels of disparity are a state of nature. But that’s a terribly uninformed way to look at the question. Economies of any complexity are not natural; even modern capitalism comes in many forms. This post looks at developing economies that have done a better job of dampening inequality to see what they have in common.

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Media Giving Corporate Executives a Free Pass on Their Value Extraction

Executive rentiers and their media lackeys are invoking the canard that they can’t find decent investment opportunities. The truth is that they’ve exhausted the first and second lines of value extraction, that of labor-squeezing and disinvestment, and aren’t prepared to accept the lower but still attractive returns of taking real economy risks.

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Bill Black: The New York Times’ Coverage of EU Austerity Remains Pathetic

Yves here. Bill Black shellacks a New York Times article that gives a big dose of unadulterated neoliberal propaganda supporting austerity. To give you a sense of the intellectual integrity of this piece, it including citing a Peterson Institute staffer without cluing readers in to the fact that the Institute has what is left of the middle class in its crosshairs.

Black stresses that one of the major lies behind the continuing for more, better hairshirts for long-suffereing Europeans is that the explosion in debt levels in Europe was the result of overly-generous social safety nets. In fact, as in the US, the tremendous rise in government debt levels was the direct result of the crisis. Tax revenues collapsed due to GDP whackage (and the costs continue as GDP is well below potential). And any economist worth their salt will also say that social safety nets ameliorated the severity of the damage, that those automatic stabilizers increased government spending when it was needed most, at the depth of the implosion, and prevented a spiral into a much deeper downturn.

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Ilargi: Subprime is Back With a Vengeance

Yves here. While it remains an open question as to whether frenzied efforts to push investors even further out on the risk limb will come to fruition, the fact that so many measures are underway looks like an officially-endorsed rerun of early 2007. If the Fed indeed raises rates in the not-insanely-distant future, getting into subprime and other speculative credits is a quick path to losses. But even if the Fed and other central banks remain super-dovish, risky borrowers can and will go tits up independent of interest rates. Credit risk is not the same as interest rate risk, but the inability to get any return for the latter is producing an extreme underpricing of the former.

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Matt Stoller: The Solution to ISIS Is the First Amendment

Yves here. This post focuses on ISIS as a symptom of what is wrong with US policy-making. One way of reading it is as an introduction to the role of Saudi Prince Bandar and the sway that the Saudis have had over US policy for decades. This obvious fact is curiously airbushed out of most […]

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US Corporate Executives to Workers: Drop Dead

The Washington Post has a story that blandly supports the continued strip mining of the American economy. Of course, in Versailles that the nation’s capitol has become, this lobbyist-and-big-ticket-political-donor supporting point of view no doubt seems entirely logical. The guts of the article: Three years ago, Harvard Business School asked thousands of its graduates, many […]

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Oil – The Next Commodity Domino?

Yves here. As we’ve written, austerity in Europe and Chinese efforts to rein in construction-related lending have delivered enough of a hit to global growth so as to start denting oil prices, which were holding up in large measure due to tensions in the Middle East. This post suggests that more oil price weakness is in the offing. This is a big negative for the fracking boom, needless to say, and may give environmentalists more time to stymie further development.

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