Author Archives: Yves Smith

Noam Chomsky: America’s Real Foreign Policy –  A Corporate Protection Racket

The question of how foreign policy is determined is a crucial one in world affairs.  In these comments, I can only provide a few hints as to how I think the subject can be productively explored, keeping to the United States for several reasons.  First, the U.S. is unmatched in its global significance and impact.  Second, it is an unusually open society, possibly uniquely so, which means we know more about it.  Finally, it is plainly the most important case for Americans, who are able to influence policy choices in the U.S. — and indeed for others, insofar as their actions can influence such choices.  The general principles, however, extend to the other major powers, and well beyond.

There is a “received standard version,” common to academic scholarship, government pronouncements, and public discourse.  It holds that the prime commitment of governments is to ensure security, and that the primary concern of the U.S. and its allies since 1945 was the Russian threat.

There are a number of ways to evaluate the doctrine.  One obvious question to ask is: What happened when the Russian threat disappeared in 1989?  Answer: everything continued much as before.

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Wolf Richter: How Private Equity Firms Manipulate the Buy-to-Rent Housing Racket

Private equity firms are the ultimate smart money on Wall Street; they know how to wring out the last dime from their own clients, such as pension funds and rich individuals, through hidden fees, obscure expenses, elaborate expense shifting, lackadaisical disclosure, and “zombie advisers,” to the point where SEC Inspection Chief Andrew Bowden singled them out in a speech in May. Now the lawyers are circling.

And these private equity firms invented a whole new business: buying vacant homes out of foreclosure and from banks and renting them out. But how do they exit at a profit?

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New York’s Schneiderman Accepts Red Cross’ “Trade Secrets” Excuse to Hide Sandy Spending

It’s not clear what to make of an attorney general who opens an investigation and then accepts lame excuses for maintaining secrecy from its target, in this case, the American Red Cross. We’re flagging this example because it exemplifies an effort by organizations to use “trade secrets” as a pretext for hiding more and more of their dealings with governments. This is absurd, since the premise of Federal and state Freedom of Information Act laws is that government records should be open to the public, and that includes records of entities doing business with government agencies. In other words, if you want to have government bodies as your customers, one of the costs of doing business is having your formal interactions with them subject to public review.

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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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Gaius Publius: Arctic Seafloor Methane Release is Double Earlier Estimates

one of the cornerstones of the idea that mankind still has a “carbon budget” — that we can still release even more CO2 and other greenhouse gases like methane, though a “limited” amount — is the idea that we can do a good job of modeling climate-changing feedbacks. We can do a good job of modeling some feedbacks, but we’re very bad at modeling others, and some feedbacks have so much randomness about them that modeling them becomes next to impossible.

The release of frozen methane is one of the biggest uncertainties in climate modeling. Results so far are much worse than forecasted.

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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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Don Quijones: Mini Tax Havens – How Europe’s 1% Gets to Pay Only 1%

If you thought tax havens were limited to tax haven destinations like Switzerland and the Caymans and the Isle of Man, think again. European governments happily accommodate tax schemes that allow the wealthy to shift funds into super low tax vehicles. Yet at the very same time, ordinary citizens are being broken on the rack of austerity.

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The Crapification of Biomedical Research

An urgent warning from PNAS, the Proceedings of the National Academy of Sciences:

In the context of such progress, it is remarkable that even the most successful scientists and most promising trainees are increasingly pessimistic about the future of their chosen career. Based on extensive observations and discussions, we believe that these concerns are justified and that the biomedical research enterprise in the United States is on an unsustainable path.

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Randy Wray: The Rise of Monetary Cranks and Fixing What Ain’t Broke

In the aftermath of the Great Recession, we all wax “desperate with imagination”, looking for explanation. For solution. For retribution!

The financial system is rotten. Our banking regulators and supervisors failed us in the run-up to the crisis, they failed us in the response to the crisis, and they are failing us in the reform that we expected in the aftermath of the crisis.

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