Will Cyprus Become Creditanstalt 2.0?
The cheery view that Europe had moves past its crisis now looks to have been a tad premature.
Read more...Author Archives: Yves Smith
Cyprus: The Next Blunder
Yves here. Our post today on Cyprus provides some broad background, including the political dynamics and the not-terribly-defensible reasons the Eurozone went that route, and a short discussion of the large risk that this inept move precipitates a wider crisis. This article by Charles Wyplosz serves as a companion, since it discusses the “tax,” um, expropriation option versus other alternatives. Even more important, it sketches out why this scheme, even if it manages not to kick off a crisis, is still inadequate to rescue Cyprus. It is thus a toxic variant of the Eurozone “kick the can down the road” strategy.
Read more...Links 3/17/13
You Too Can Live the Galtian Fantasy….12 Miles from San Francisco!
Michael Shedlock (hat tip furzy mouse) described a new gimmick for those who want to skirt international law: live in a fancy ship, 12 miles offshore from San Francisco, with all the tech amenities. He summarizes the pitch:
Read more...Links 3/16/13
James Steele: America’s Point Man in Fomenting Sectarian Violence and Torture in Iraq
The Guardian has released a documentary on American operative in Iraq, James Steele, which appeared on BBC. From the related news story in the Guardian:
Read more...The Pentagon sent a US veteran of the “dirty wars” in Central America to oversee sectarian police commando units in Iraq that set up secret detention and torture centres to get information from insurgents. These units conducted some of the worst acts of torture during the US occupation and accelerated the country’s descent into full-scale civil war.
Jeff Madrick: CBO’s Lack of Independence Means We Need a Shadow CBO
Yves here. The Congressional Budget Office is widely depicted in the media as “nonpartisan” and therefore above reproach. It’s time to treat that view as outdated. Like the Fed, the CBO continues to profess its independence but is in fact an aggressive promoter of neoliberal policies. We discussed at some length how Fed economists savaged its health care cost model, which is the driver of budget hysteria.
Jeff Madrick describes even more problems with CBO forecasts, and how they have become so significant that the public needs a shadow CBO to challenge the often-flawed official projections.
Read more...Live Blogging JP Morgan Senate Hearing – a Rogue Institution on the Hot Seat
Yves here. I wasn’t planning on liveblogging this hearing, but listing to the introductory remarks, the knives are really out for JPM. In all the post-crisis hearings I’ve watched, I’ve never seen such unanimity between the Democrats and the Republicans on the severity of the problem and the need for more regulation.
Read more...Senate “Whale” Report Reveals JP Morgan as a Lying, Scheming Rogue Trader (Quelle Surprise!)
There is so much grist in the just-released Senate Permanent Subcommittee report on the JP Morgan London Whale trades that the initial reports are merely high level summaries, which is understandable. Even with the admirable job done by the committee in documenting its findings and recommendations, it will take some doing to pull out the critical observations and convey them to the public. Plus the hearings tomorrow should provide good theater and further hooks for commentary.
But some critical findings emerge, quickly. We here at NC were particularly harsh critics of JP Morgan’s conduct, and disappointed in the media’s failure to understand that the information JP Morgan presented as it bobbed and weaved showed glaring deficiencies in risk controls. Yet the failings described in the report are even worse than we imagined.
Read more...Yanis Varoufakis: Lest We Forget – The Neglected Roots of Europe’s Slide to Authoritarianism
By Yanis Varoufakis, Professor of Economics at the University of Athens. Cross posted from his blog
Europe is being torn apart by a titanic clash between (a) the unstoppable popular rage against misanthropic austerity policies and (b) our elites’ immovable commitment to more austerity. Precisely how this clash will play out no one knows, except of course that the odds do not seem to be on the side of the good. While at the mercies of this crushing uncertainty, it is perhaps useful to take a…short quiz.
Read more...Links 3/12/13
What is Modern Monetary Theory, or “MMT”?
By Dale Pierce. Cross posted from New Economic Perspectives
Modern Monetary Theory is a way of doing economics that incorporates a clear understanding of the way our present-day monetary system actually works – it emphasizes the frequently misunderstood dynamics of our so-called “fiat-money” economy. Most people are unnerved by the thought that money isn’t “backed” by anything anymore..
Read more...FDIC Hides “Scores” of Bank Settlements Since 2007
The FDIC has been doing banks a big favor by agreeing not to publish the fact that they’d engaged in sufficiently wayward behavior for the agency to threaten regulatory action and negotiate a settlement. The Los Angeles Times unearthed this practice via a Freedom of Information Act request:
Read more...China’s Exploding Debt
By C.P. Chandrasekhar, Professor of Economics, School of Social Sciences, Jawaharlal Nehru University, New Delhi, India. Cross posted from Triple Crisis
If the international media are to be believed the world, still struggling with recession, is faced with a potential new threat emanating from China. Underlying that threat is a rapid rise in credit provided by a “shadow banking” sector to developers in an increasingly fragile property market.
Read more...Did Intrade Do an MF Global?
By Rajiv Sethi, Professor of Economics, Barnard College, Columbia University. Cross posted from his blog
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