Yearly Archives: 2011

The Fed Bails Out Eurobanks Yet Again

Watching re-enactments of scenes from the global financial crisis is a very peculiar experience indeed. The opening by the Fed of currency swap lines to allow the ECB and other central banks to extend dollar funding to Eurobanks was seen as an extreme measure the first time around, a sign of how close to the abyss the financial system had come. This time, allegedly because the powers that be acted before things got quite so dire, bank stocks rallied impressively. Similarly, the media treated this move as just another episode in the ongoing Perils of Pauline drama running on the other side of the Atlantic. The $2 billion loss by a UBS rogue trader got far more extensive coverage, even though rogue traders also seem to be all of a muchness.

Latest Lame Obama Excuse: “Geithner Blew Me Off”

This does not pass the smell test. An Associated Press report on a to-be-released book by Ron Suskind tells us that Obama said that Geithner ignored his request to look into the feasibility of breaking up Citigroup (hat tip Buzz Potamkin):

A new book offering an insider’s account of the White House’s response to the financial crisis says that U.S. Treasury Secretary Tim Geithner ignored an order from President Barack Obama calling for reconstruction of major banks…

“Australia has Baumol’s disease”

Yves here. I thought this discussion of Baumol’s disease would be of interest to NC readers because the issues are relevant for advanced economies generally, not just Australia.

By Cameron Murray, aka Rumplestatskin, a professional economist with a background in property development, environmental economics research and economic regulation. Cross posted from MacroBusiness

Why does the wage of a musician in a string quartet rise over time at roughly the same pace as wages in other areas of the economy, despite the lack of productivity gains in the performance of music?

William J Baumol solved this riddle in the 1960s. His insight, known as Baumol’s cost disease, is fundamental to understanding changes in the economy over time. If we are going to debate the shift towards a service economy, productivity, unemployment, health and education costs and government intervention in markets, we need to fully appreciate his insight. Unfortunately you won’t find his ideas in many introductory economics textbooks.

Matt Stoller: Happy Lehman Brothers Bankruptcy Day

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller. Cross posted from New Deal 2.0

Lehman’s bankruptcy happened three years ago today. It should be quite clear at this point that another Lehman is going to happen again. Policymakers didn’t deal with the crisis of 2008-2009; they turned it into a much longer crisis with far greater lasting damage.

Links 9/15/11

Anne Sibert: The damaged ECB legitimacy

Yves here. This post may strike readers as a tad wonky, but the role and governance of central banks has become a subject of debate in the US, and I expect it to move more into the spotlight in the EU as the crisis continues. And as you read the post, the ECB had been trying to avoid scrutiny for good reason. It manages to make the oft-criticized Fed look good.

Anne Siebert is the wife of former central banker, now Citigroup chief economist Willem Buiter, who was a very outspoken and vocal critic of the Fed during the crisis, particularly of its “quasi fiscal role,” meaning the way it subsidized banks in ways that involved taking real balance sheet risk outside Congressional budgetary processes. Buiter argued this might well be a violation of the Constitution.

He and Siebert have written and done advisory work together, often for central banks. They were called in by Iceland shortly before its crisis erupted, and apparently told the central bank it was toast. Her experience makes Siebert a commentator who cannot easily be ignored.

By Anne Siebert, Professor and Head of the School of Economics, Mathematics and Statistics at Birkbeck College, London and a member of the a member of the Monetary Policy Committee of the Central Bank of Iceland. Cross posted from VoxEU

The European Central Bank was once known for its obsessive focus on price stability. Since the global economic crisis, however, its role has extended to preventing the insolvency of banks and sovereign countries. This column argues that such a move has badly harmed the institution’s legitimacy – something that will damage both its policy effectiveness and confidence in the governing bodies of the EU as a whole.

Bianco on earnings volatility and recession

Edward here. Economists are telling us that the economy is decelerating rather quickly. What does that mean for stocks, in either a recession or no-recession scenario? Jim Bianco was on Bloomberg Television yesterday with some insightful comments about stock valuations and economic cycles. Bianco told Bloomberg that he believes the likelihood of recession in the […]

Links 9/14/11

Guest Post: Massive New Radiation Releases Possible from Fukushima … Especially If Melted Core Materials Hit Water

Things are NOT getting better …

Poverty Rate Highest Since 1993; Median Income Reveals Lost Decade and a Half

Both official data and numerous news stories confirm how badly average citizens have fared in the wake of the global financial crisis. Food stamp use has fallen only a tad from record high levels. WalMart has reinstituted layaway. The average home with a mortgage has no equity in it.

Further confirmation comes via the Census Bureau release that showed the US poverty rate has risen a full percent in the last year to 15.1%, a level not seen since 1993, the end of a short but nasty downturn. And 1/4 of American children are living in poverty.

Elizabeth Warren to Announce Senate Campaign Tomorrow

Huffington Post reported that Elizabeth Warren is announcing her Senate campaign for Scott Brown’s seat tomorrow.

As readers probably know, we believe that Warren has decided to drink a poisoned chalice handed her by the Democratic party hackocracy.

Guest Post: Obama Team Feared Revolt If He Prosecuted War Crimes

Did the Obama administration chicken out of prosecuting Bush era war crimes because they were afraid of a revolt by the military/national security forces that he is supposed be commanding?

Links 9/13/11

David Graeber: On the Invention of Money – Notes on Sex, Adventure, Monomaniacal Sociopathy and the True Function of Economics

A Reply to Robert Murphy’s ‘Have Anthropologists Overturned Menger?

By David Graeber, who currently holds the position of Reader in Social Anthropology at Goldsmiths University London. Prior to this he was an associate professor of anthropology at Yale University. He is the author of ‘Debt: The First 5,000 Years’ which is available from Amazon

Last week, Robert F. Murphy published a piece on the webpage of the Von Mises Institute responding to some points I made in a recent interview on Naked Capitalism, where I mentioned that the standard economic accounts of the emergence of money from barter appears to be wildly wrong. Since this contradicted a position taken by one of the gods of the Austrian pantheon, the 19th century economist Carl Menger, Murphy apparently felt honor-bound to respond.

In a way, Murphy’s essay barely merits response. In the interview I’m simply referring to arguments made in my book, ‘Debt: The First 5000 Years’. In his response, Murphy didn’t even consult the book; in fact he later admitted he was responding at least in part not even to the interview but to an inaccurate summary of my position someone had made in another blog!

We are not, in other words, dealing with a work of scholarship. However, in the blogsphere, the quality or even intention of an argument often doesn’t matter. I have to assume Murphy was aware that all he had to do was to write something—anything really—and claim it rebutted me, and the piece would be instantly snatched up by a right-wing echo chamber, mirrored on half a dozen websites and that followers of those websites would then dutifully begin appearing across the web declaring to everyone willing to listen that my work had been rebutted. The fact that I instantly appeared on the Von Mises web page to offer a detailed response, and that Murphy has since effectively conceded, writing an elaborate climb-down saying that he had no intention to cast doubt on my argument as a whole at all, only to note that I had not definitively disproved Menger’s, has done nothing to change this. Indeed, on both US and UK Amazon, I have seen fans of Austrian economics appear to inform potential buyers that I am an economic ignoramus whose work has been entirely discredited.

I am posting this more detailed version of my reply not just to set the record straight, but because the whole question of the origins of money raises other interesting questions—not least, why any modern economist would get so worked up about the question