Category Archives: Free markets and their discontents

Germany Bucking Toxic, Nation-State Eroding Transatlantic Trade and Investment Partnership

We’ve inveighed against the dangers of two Orwellianlly-branded “trade” deals, the TransPacific Partnership and its ugly twin, the Transatlantic Trade and Investment Partnership. Both negotiations have been shrouded in a deeply troubling level of secrecy, with their draft terms being given classified status and Congressmen kept largely in the dark as to their content (summaries provided by the US Trade Representative aren’t remotely adequate, since as in all contracts, much hinges on exact language).

The business press in the US has tended to amplify Administration messaging, that both deals are moving forward. In fact, as we’ve covered in some detail, the TransPacific Partnership is in quite a lot of trouble, and as we’ll discuss below, the Transatlantic Trade and Investment Partnership is also going pear shaped.

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Bill Black: Two EU Finance Ministers Throw Their Bosses and Nations Under the Bus

The finance ministers of Italy and Serbia have just publicly thrown their heads of state and their nations under the bus.  In a testament to the crippling effect of the belief that “there is no alternative” (TINA) to austerity, these finance ministers have insisted on bleeding economies that are in desperate need of fiscal stimulus.  Their pursuit of economic malpractice is so determined that they eagerly sought out opportunities to embarrass the democratically elected head of state in Serbia when he dared to support competent economic policies.

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Ignacio Portes: Paul Singer v. Argentina – Where Did All That Debt Come From?

With Argentina’s payment to the holders of its restructured debt on June 30th in limbo at the Bank of New York Mellon, blocked by Federal Judge Thomas Griesa, and the 30 day grace period to official default ticking away, financial pundits have taken a keen interest in the biggest debt struggle in memory.

Some have been very critical of both the judge’s interpretation of the pari passu clause that created this mess and, more importantly, of his damaging precedent. But no one seems able to resist adding digs at Argentina, even when generally supporting its position in the litigation.

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Bill Black: Merkel’s Pyrrhic Victory over Cameron

The old line that one should be very careful about what one wishes for – for you may receive it applies to Germany’s installation of Jean-Claude Juncker as head of the EU Commission. Germany’s Prime Minister Angela Merkel has just crushed her UK counterpart (David Cameron) by orchestrating a nearly unanimous vote among EU nations to appoint (not, really, “elect”) Juncker as head of the EU Commission (not, really, “Parliament”).

But Merkel has two self-created strategic problems with regard to the EU that threaten the EU and Germany’s dominance over the EU.

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China Attacks Oz Banks for Laundering Flight Capital

Yves here. China is cracking down on flight capital, starting with Australian banks. As the most casual readers of the business press know, the international wealthy, particularly Russians and Chinese, have been using residential real estate in “world cities” as their favorite lockbox. As we’ve written, it’s stunning to see how much real estate has been hoarded in London. Mayfair was depopulated during the petrodollar recycling of the 1970s; now much of Belgravia, Chelsea near Sloan Square, and Kensington are visibly underpopulated. Vancouver has been bid to the sky by Chinese flight capital. New York is a big destination for Russian and Chinese investors, and Chinese money has been pouring into Australian real estate.

The Chinese move may be an admission of stress on the financial system.

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How Mandatory Arbitration Cheats Consumers

A few weeks ago, the topic of arbitration clauses became a contretemps when General Mills tried the remarkably cheeky stunt of trying to assert that consumers who had downloaded coupons or simply liked the company on Facebook had given up their right to sue if they were harmed by using its products and could seek remedy only through “informal negotiation via email” or arbitration. The firestorm of criticism forced the food giant to back down.

But consumers and other customers, like small businesses, are increasingly being denied access to courts though the use of mandated “pre-dispute” arbitration clauses and these are often paired with class action waivers.

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Michael Hudson: EU Association Agreement with Ukraine Is a Gift to Kleptocrats

This video is a great, accessible discussion by Michael Hudson on the Real News Network about how the widely-touted EU deal with the Ukraine is actually an exercise in looting by kleptocrats. Hudson explains that unlike earlier pacts, the EU is making no investment in Ukraine, nor is it allowing Ukraine, which has an agricultural producing region, to have the benefits of the CAP that French farmers enjoy. Hudson point out that the supposed benefit of Ukraine having access to the EU for exports is a smokescreen, since Ukraine is going to lose its main export market, Russia, and the Europeans don’t want to buy Ukraine’s products. Hudson contends that this deal is a de facto takeover, with kleptocrats to be installed in key governmental positions. He anticipates that the result will be mass unemployment and unrest.

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BIS Warns About Destabilizing Low Interest Rates

The financial media is all atwitter (no pun intended) over the Bank of International Settlement’s just released annual report, since it shook a stern finger at central banks for keeping super low interest rates and warned them about the difficulty of renormalizing without kicking up a lot of upheaval.

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Corporate Bond Trading a Casualty of QE and ZIRP

The Financial Times has an article on how corporate bond dealers are going to create a new trading hub to try to preserve their market position while “boosting liquidity” in the market. Narrowly speaking, there’s nothing wrong with the piece as a description of investor unhappiness and planned bank responses. But it curiously missed how Fed policy has helped generate conditions that are reducing corporate bond market liquidity.

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Why a Carbon Tax is Better Than Obama’s Cap and Trade

This weekend, former Treasury secretary Hank Paulson weighed in at the New York Times abouyt the need for more urgent action on the climate front, and described how various indicators of how quickly climate change is taking place, such as the speed of Arctic and Antarctic ice melt, are moving much faster than models had predicted.

Paulson, who has long been an ardent conservationist (and in contrast to his alpha Wall Street male standing, lives modestly), made a forceful pitch for carbon taxes. The irony of this proposal is that we have a Republican showing what a right-winger Obama really is.

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Wikileaks Exposes Super Secret, Regulation-Gutting Financial Services Pact

The document that Wikileaks exposed on Thursday is a portion of the financial services section. It is clearly designed to serve the pet interests of big international players. This agreement is designed to institutionalize the current level of deregulation as a baseline and facilitate the introduction of new products, further ease the movement of funds, data, and key personnel, and facilitate cross-border acquisitions and other forms of market entry.

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Wolf Richter: Fed’s Bullard Calls Out Ignoring Bubbles Developing “Under Our Noses,” So What About Now?

Yves here. It’s been astonishing to see members of the Fed in denial about their own handiwork, so when St. Louis Fed President James Bullard berates his fellow central bankers for their abject refusal to notice pre-crisis bubbles, it’s an all too rare departure from their usual insularity and willful blindness.

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