Category Archives: The destruction of the middle class

CBO – Still Pushing Deficit Scaremongering Propaganda

Yves here. We’ve written from time to time about the shameless partisan role that the Congressional Budget Office plays in stoking misguided and destructive concern about budget deficits. It’s important to recognize the CBO’s openly partisan stance on this issue, because it is supposed to make independent, apolitical budget forecasts and is widely and mistakenly seen as “objective”. In fact, the CBO’s regularly takes stances that put them in the same camp as billionaires like Pete Peterson and Stan Druckenmiller, who want to slash Social Security and other social safety nets.

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Technology Displacing Jobs: The European Case

Yves here. Some technology enthusiasts predict that as many as 47% of current jobs will be displaced in the next decade. Candidates include not only trucking and bus driving (to be eliminated by self-driving vehicles) but more and more white collar work, as computer get better at the sort of information scanning and analysis that is now done by entry and low-level workers. This post examines different scenarios for how that might play out in Europe.

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Yellen Tells Whoppers to the New Yorker

A Nicholas Lemann profile of Janet Yellen in the New Yorker, based on interviews with her, is creating quite a stir, and for many of the wrong reasons. The article verges on fawning, but even after you scrape off the treacle, it’s not hard to see how aggressively and consistently the Fed chair hits her big talking point, that’s she’s on the side of the little guy. As correspondent Li put it:

She’s simultaneously Mother Teresa (spent her whole life caring about the poor without actually meeting any poor people) and Forrest Gump (present when all bad deregulatory polcies were made, but miraculously untainted by them).

Puh-lease! She’s Bernanke in a granny package, without the history lessons.

In fact, as we’ll discuss, Yellen’s record before and at the Fed shows she’s either aligned herself with banking/elite interests or played two-handed economist to sit out important policy fights. Even if she actually harbors concern for ordinary citizens, she’s never been willing to risk an ounce of career capital on it.

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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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The Corporate Illogic of Outsourcing and Offshoring

You must go, now, and read a critically important piece questioning the logic of sending American manufacturing jobs offshore. It’s titled Losing Sparta (hat tip Dikaios Logos) by Ester Kaplan in VQR. We have written regularly about how we have been repeatedly told by managers and executives that the case for offshoring was often not compelling, particularly when risks, such as higher financing and shipping costs, exposure to foreign exchange losses, and inventory risk were included. This makes perfect sense when you consider that for most manufactured goods, factory labor is a mere 10-15% of total wholesale cost, and any savings in factory labor will be offset by higher shipping and greater managerial costs (more coordination, performed by much more highly paid workers). It is thus more accurate to regard a lot of offshoring as not being about cost savings, but a transfer from ordinary workers to managers and executives.

The article focuses on a world class manufacturing plant in Sparta, Tennessee, owned by Phillips that made florescent light bulbs.

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Reform and Be Re-Elected

Yves here. I suspect many will take issue with the cheery view expressed in this article. The authors contend that reformist candidates in the post-crisis era do better at polls than status quo types. That makes sense, but the authors appear to define “reform” in terms in more modest terms than most readers would deem to be sufficient. But this finding sounds correct, intuitively. Look at Elizabeth Warren. Even though she has made great use of her Senate bully pulpit, and has kept a focus on bank re-regulation, her policy proposals, such as her student loan fixes, have been cautious. A frame-breaking reformer, such as a Huey Long, would require a far more divided electorate with geographic concentrations of radicalized voters to be viable.

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Can Grass Root Efforts Combat Greed?

Bill Moyers’ current show focuses on how formerly disparate grass roots groups are starting to work together to shift cultural values away from greed and towards social and economic justice.

To Naked Capitalism readers, this notion may seem a bit quixotic. But Jim Hightower, who has been working with populist movements for over 30 years, sees these groups starting to collaborate on broad-based issues.

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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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Capital is Not Back: On Thomas Piketty’s ‘Capital in the 21st Century’

Yves here. This article pokes at a topic near and dear to my heart, which is the generally reverential treatment of Thomas Piketty’s Capital in the 21st Century. It appears to be a classic example of the cognitive bias called halo effect, in which people have a tendency to see things as all good or all bad. Because there is a lot to recommend Piketty’s work, for instance, the fact that it is exceptionally written, that it has made inequality into one of the hottest topics in economics, and that Piketty has done an admirable and exhaustive job of finding and analyzing the returns on certain types of income producing assets are all highly commendable.

But as readers may know, one of my pet peeves is that Piketty has made a very strong claim, in the form of his formula r>g, or the rate of return on capital (which he also calls “profit”) exceeds the growth rate of the economy, when his data falls short of what would be necessary to prove that assertion.

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NY Fed’s Bogus Estimate of Return on College and the Neglect of the Intellectual Commons

Yesterday, the New York Fed released a new report by Jaison R. Abel and Richard Dietz, Do the Benefits of College Still Outweigh the Costs? which is getting good coverage in the mainstream media. Its major finding is that despite the fall in wages to college graduates due to the crappy economy, a college degree is still worth the expense because wages of high-school graduates have fallen too, keeping the wage premium of a college education high while reducing the opportunity cost of staying in school.

But while the media is repeating the findings of this report uncritically, in fact it relies on a discredited methodology for calculating returns, and also promotes the view that the only reason to get a higher education is to get a better job.

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Bill Black: The EU Center-Right and Ultra-Right’s Continuing War on the People of the EU

The New York Times has provided us with an invaluable column about the interactions of the EU’s rightist and ultra-rightest parties. It is invaluable because it is (unintentionally) so revealing about the EU’s right and ultra-right parties and the NYT’s inability to understand either the EU economic or political crises. The NYT article illustrates its points by presenting a tale entitled “A German Voice, Hans-Olaf Henkel, Calls for Euro’s Abolition.” It treats Henkel, an open racist and austerian, as a reputable figure, apparently because he is wealthy.

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