Category Archives: Guest Post

Yanis Varoufakis: Was Maastricht Another Versailles for the German Nation? A Reply to Klaus Kastner

Lambert here: This post gives some insight into how hard the hardball that led to the Euro really was. Makes “the mess in Washington” look like pattycake (though not, admittedly, the run-up to the Civil War). By Yanis Varoufakis, a professor of economics at the University of Athens. Cross posted from his website. Klaus Kastner […]

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Bill Black: The New York Times Thinks Jailing Banksters Would Cause a “Bind”

Yves here. Bill Black continues to heap well-deserved scorn on efforts to defend New York Fed president William Dudley’s revealing performance in Senate testimony last week. In its efforts to pretend that the New York Fed can’t possibly be expected to regulate, the Grey Lady goes beyond the usual hoary canard that jailing banksters is just too hard (as in trying to say that what they perpetrated didn’t break any laws, when plenty of writers, such as Charles Ferguson, long form in Predator Nation, and yours truly, among plenty of others, have cited both legal theories and fact sets that show the reverse). The additional bogus claim is….drumroll…that keeping banks out of criminal and improper conduct is somehow inconsistent with making sure they “operate successfully”. In other words, the Times is effectively saying that banks have become so dependent on criminal and near-criminal conduct as profit sources that regulators dare not deprive them of that out of fear of weakening their financial performance.

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Wolf Richter: Global Business Outlook “Darkest Picture Since Financial Crisis”

Yves here. Wolf like to paint in bright colors, but the points he makes are consistent with business and financial press reporting, if you cut through the hype. Europe is still teetering on the verge of recession. Growth in Japan has gone negative. China is slowing down, to a degree that led the authorities to give it a monetary shot in the arm. And the US simply is not getting to liftoff. Even with official unemployment falling, consumers are cautious about purchases, with most planning to spend less on Christmas than last year. Corporate capital expenditures in the US are increasing, but so far, this is in the “a robin does not mean it’s spring” category. So with the US as the one possible engine for world expansion, and that one not firing robustly, it’s not hard to see the reason for global business leaders getting more nervous.

And to add a wild card into the mix: contrary to current conventional wisdom, bond maven Jeff Gundlach thinks the Fed will raise rates next year. That seems plausible, given that ZIRP gives the Fed no policy room if anything bad happens to the financial system and that the central bank is also coming under more political heat for its continuing extreme monetary policies. Crisis junkies may recall that the Fed went from 25 basis point interest rate cuts to 75 basis points (“75 is the new 25″), when it wasn’t clear that reductions that large were necessary (ie, signaling that the Fed was on the case and taking matters seriously was probably sufficient). The magnitude of the cuts brought the central bank deeper into super-lowe interest rate terrain. I recall thinking when the Fed cut the Fed funds rate below 2% that they would come to regret that decision.

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Five Bedrock Washington Assumptions That Perpetuate Our Middle East Policy Train Wreck

Yves here. As much as I consider myself to be reasonably jaded, I was nevertheless gobsmacked to read Andrew Bacevich’s list of “Washington assumptions” that underlie US policy-making in the Middle East. They aren’t just detached from reality, they are so wildly at odds with reality as to look deranged. I’d really like to believe that Bacevich is simply describing the all-too-common syndrome of coming to believe your own PR. But as he tells it, these “Washington assumptions” aren’t simply the undergirding talking points for key domestic and foreign constituencies; they really are policy drivers.

This thinking underlying these “Washington assumptions” is not just arrogant but has a rigidity that is almost religious in nature. The neocon vision, that the US has the right to remake the world, combined with how confidence in US virtue and exceptionalism seems to be rising even as our policy initiatives looks more and more mendacious and destructive even to our close allies (well, save the UK).

You can see another set of Washington assumptions at work in the TransPacific Partnership negotiations: that no prospective treaty member will ever question the benefits of free trade (as in they’ll never look at the fine print of what the deal is really about), that they will also want to ally themselves with the US as the better hegemon than China (if nothing else, the US is willing to act as the consumer of the last resort, a role China is not keen to assume, since that is tantamount to exporting jobs).

So this post also serves to demonstrate why Kissinger in his recent public pronouncements looks vastly more responsible than the crew in charge of our foreign affairs. As much as the deservedly-derided doctor was far too willing to team up with unsavory types to achieve what he considered to be American ends, his notion of “realpolitik” explicitly took morality out of the picture. Watching the US manage to devise even worse policies out of a warped, ideologically-driven notion of virtue is both perverse and chilling, like watching someone with a mental illness play out their delusions. And although mad leaders are sadly common in history, it’s another matter completely to see a technocratic class taking that role.

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Bill Black: Dudley Do Wrong Rejects Being a “Cop” and Embraces “Foaming the Runways”

William Dudley, the President of the New York Fed, is not a stupid man. He is, however, wholly unfit to be a regulator. He has now admitted that publicly. It is time for him to return to Goldman Sachs so that he can be replaced by someone expressly chosen to be a vigorous regulator who will embrace the most critical function of a financial regulator – to be the tough “regulatory cop on the beat.”

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High Marginal Tax Rates on the Top 1%

Optimal tax rates for the rich are a perennial source of controversy. This column argues that high marginal tax rates on the top 1% of earners can make society as a whole better off. Not knowing whether they would ever make it into the top 1%, but understanding it is very unlikely, households especially at younger ages would happily accept a life that is somewhat better most of the time and significantly worse in the rare event they rise to the top 1%.

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Wolf Richter: Signs That the Startup Bubble is Totally Maxed Out

Yves here. Wolf’s longer original headline to this post focused on how gobsmacked he was to get glossy mail pieces to promote supposedly hot Silicon Valley startups. Apparently, the deemed-to-be-transgressive communications medium (by West Coast standards) was a way to cut through the new venture clutter. But what I found more surprising was how obviously lame these ideas were, yet they’ve all already gotten multiple rounds of funding and have eight figure investments so far.

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Bill Black: Why the New York Fed Isn’t Trustworthy

Yves here. Readers may recall that we criticized the New York Times’ reporting on an important story on a criminal investigation underway involving both Goldman and New York Fed employees. A Goldman employee who had worked at the New York Fed and his boss were fired because the ex-Fed staffer allegedly had obtained confidential bank supervisory information. A New York Fed employee was also fired immediately after the Goldman terminations. The piece was composed as if the intent was to be as uninformative as possible and still meet the Grey Lady’s writing standards. Readers were left in the dark as to where the two Goldman employees fit in the organization and what the sensitive information was.

Bill Black dug through later news reports, did some additional sleuthing, and based on is experience as a regulator, concluded that there is no way the Goldman employee, Rohit Bansal, didn’t recognize that he was misusing confidential bank supervisory information. That matters because whether or not breach is criminal hinges on whether he “willfully” broke the law.

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