Author Archives: Yves Smith

Links 10/3/14

Tom Engelhardt, Gretchen Morgenson, Wired on Naked Capitalism: “Splendid,” “Must Read,” “Piercing”

Seasoned, savvy media professionals across a wide range of beats recognize the value that Naked Capitalism delivers. Here are some recent accolades.

David Quentin and Nicholas Shaxson: The “Patent Box” – Proof That the UK is a Rogue State in Corporate Tax

Yves here. We are delighted to welcome two world-recognized tax experts as writers on our site. They also happen to fall in the minority that believes that paying taxes is the price of civilization. And to top it off, they write in a layperson-friendly yet technically accurate manner.

Rolling Jubilee: A Wolf in Sheep’s Clothing?

Yves here. As much as we we’ve been vocal supporters of many of the initiatives of the Occupy Wall Street movement, such as the excellent work of Occupy the SEC, the impressive relief efforts of Occupy Sandy, the success of local Occupy Homes groups in combatting foreclosures, the many projects of the Alternative Banking Group (including both a book explaining the crisis and its 52 Shades of Greed card deck, and last but not least, Strike Debt’s Debt Resistors’ Operations Manual.

However, Rolling Jubilee is a notable exception.

Randy Wray: Rising Tides Lift All Yachts – Why the 1% Grabs all the Gains From Growth

Yes, the rich, and particularly the 1%, are getting richer. It’s the result of rewriting the rules in their favor.

Links 10/2/14

Naked Capitalism – An Irreplaceable Resource

By Anchard Scott, an economist and member of Occupy the SEC

Anyone reading this already knows what an invaluable site this is, so I what I’d like to offer is my own perspective as a long-time reader whose work has been heavily influenced by Yves and her work at Naked Capitalism.

Ilargi: Europe Is Crumbling Into Collapse

Yves here. The word “collapse” may seem overwrought when applied to Europe, but cold-blooded, clear eyed colleagues who have good connections and have spent a bit of time there recently say things that are broadly similar to Ilargi’s take. Despite the conventional wisdom that the cost of a Eurozone breakup is catastrophically high
and thus will never take place, that confidence may prove to be the currency union’s undoing. Ideological rigidity about austerity is leading to policies that are crushing large swathes of the population. And Europe, unlike the US, had enough of a tradition of popular revolt that that uprisings, either on the street or in the ballot box, are real possibilities, as the sudden rise of the anti-EU right shows.

My sources, who also read the foreign language press, say that political fracture is underway and the Eurozone leadership is not taking anything remotely resembling adequate measures to halt its progress. That does not mean upheaval is imminent. But the flip side is this sort of unraveling tends to progress not via an clearly discernible decay path, but through sudden state changes.

Thanks! Met Our Second Target Rapidly, On to the Third!

Thanks to the prompt responses of over 370 members of the Naked Capitalism community, we’ve met our first target, an increased budget for site improvements and IT support, and the second target, funding for travel and related site coverage, with gratifying speed.

We are $500 towards our goal of $17,500 for our guest bloggers.

Exclusive: How Private Debt Strangles Growth, Stokes Financial Crises, and Increases Inequality

Yves here. Richard Vague has been kind enough to allow us to feature an extract from his recent book, The Next Economic Disaster: Why It’s Coming and How to Avoid It. I first met Richard several years ago at the Atlantic Economy Summit. If my memory serves me correctly, he was then taken with the conventional view that debt was a dampener to growth…meaning government debt. The issue of what caused our economic malaise and what to do about it troubled him enough to lead him to make his own study, and he has come to reject the neoliberal view that government debt is problem and must therefore be contained.

This view implies, as many readers have pointed out, that the great lost opportunity of the crisis was restructuring mortgage debt. That would also have allowed housing prices to reset to levels in line with consumer incomes. Vague also mentions a less-widely-commeneted on debt explosion prior to the crisis, that of business debt. One big contributor was an explosion in takeover debt for private equity transactions. Indeed, a lot of experts were concerned about a blowup due to the difficulty of refinancing these deals in the 2012-2014 time horizon. But ZIRP and QE produced enormous hunger among investors for any type of asset with non-trivial yield, so the Fed enabled the deal barons to refinance on the cheap.

Links 10/1/14

David Sirota: Naked Capitalism – Financial Journalists’ Secret Weapon

It is no coincidence that the ongoing journalism and financial crises are happening at roughly the same time. Though the government is supposed to be a watchdog, regulatory capture has often turned it into a lapdog — the kind which, in the words of This American Life, “licks the face of an intruder, and plays catch with the intruder, instead of barking at him.” That has left the financial press to serve as the last line of defense to spotlight lawbreaking, malfeasance and fraud. And quite often, the financial press has been the watchdog that didn’t bark.

There are many reasons for the media’s silence — some of it is their version of regulatory capture, but a lot of it has to do with resources and expertise, or, really, lack thereof.

Bill Black: Fed Failure – A “Perfectly Legal” Scam is Perfectly Unacceptable to Real Regulators

Yves here. In this post, Bill Black does the yeoman’s work of stepping through one revelation in Fed whistleblower Carmen Segarra’s tapes from some of her discussions with more senior colleagues at the New York Fed. A critical section involves how Fed officials became aware of the fact that Goldman had slipped language into an already-closed transaction with the Spanish bank Santander that indicated that the Fed had been informed of the deal and had not objected, neither of which was the case. The staffers tried to rouse themselves to challenge Goldman on this misrepresentation, and lost their nerve.

But as bad as letting Goldman roll the Fed on the matter of non-existant non-objections is concerned, Black stresses the much more serious underlying failure: Goldman had created the impression that the Fed was kosher with Goldman helping Santander fool European bank regulators by pretending it was more solvent than it was. The effort to game banking regulations is an even bigger deal than the effort to pretend the Fed was all on board. Black blasts the clearly captured New York Fed “relationship manager” Mikel Silva in gratifying detail.

Tom Engelhardt: How American Intelligence Works in the Twenty-First Century

The American intelligence services, despite their lavish funding, are not as smart as they’d have you believe. In fact, by many standards, they are colossal failures. Why is that?

Wow, Met Our First Goal, On to Our Second!

Thanks to our loyal readers! We’ve already gotten nearly 200 donations in the first 24 hours (out of our fundraiser target of 1000 donors), and blew past our first goal, which was $12,700 to provide for more technology investments in the site, which will provide for a better reader experience on mobiles and tablets, and faster resolution of other site issues.