By Chris Cook, former compliance and market supervision director of the International Petroleum Exchange
All is not as it appears in the global oil markets, which in my view have become entirely dysfunctional and no longer fit for its purpose. I believe that the market price is about to collapse as it did in 2008 and that this will mark the end of an era in which the market has been run by and on behalf of trading and financial intermediaries.
Read more...Adam Davidson has an article in the Sunday New York Times Magazine, “The Other Reason Europe is Going Broke,” that manages the impressive feat of making you stupider than before you read it. It misrepresents most of the few facts it contains in appealing to American prejudices about our cultural, or in this case, economics superiority, to sell worker bashing.
Davidson uses the spectacle of Europe going into an economic nosedive to claim that one of the big things wrong with Europe is its spoiled workers. The piece is anchored in a glaring, fundamental misrepresentation. It argues that Americans are much better off than Europeans because we have a higher GDP per capita (more on that in due course) and asserts that that is because Europeans are not able to compete in world markets:
Read more...By Thomas Ferguson, Professor of Political Science at the University of Massachusetts, Boston. He is the author of many books and articles, including Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems. Cross posted from Alternet
The father of the Investment Theory of Politics reveals what pundits miss in the GOP’s failure to lead its own electorate and its evangelical problem.
Read more...By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
Despite the Eurozone debt crisis, the German economy has been on a roll, with unemployment at a 20-year low. Exports surpassed €1 trillion for the first time ever. The Federation of Wholesale and Foreign Trade even issued a card to commemorate the moment. For the year, exports rose 12%. In 2012—based on demand from Asia, Latin America, Africa, and Eastern Europe—exports are expected to grow 6% to €1.139 trillion—when GDP is only €2.37 trillion ($3.1 trillion)!
But during the financial crisis, export orders fell off a cliff…
Read more...Although it is remarkably difficult to come up with decent data, from what I can tell, the Japanese bubble was considerably bigger relative to the size of its economy than the US debt binge was. Yet even though the Japanese aftermath has been remarkably protracted, and arguably worsened by a slow and cautious initial response, visitors to Japan find the country wearing its malaise remarkably well.
One of the reasons may be the Japanese preoccupation with employment. Entrepreneurs are revered not for making money but for creating jobs. Japanese companies went to great lengths to keep workers, cutting senior pay to preserve manning. That was done largely for cultural reasons, since companies are seen as being like families.
But was this preoccupation also good economic policy, and might it have played a more direct role in buffering the worse effects of the bubble aftermath?
Read more...I tend to avoid the year end retrospective/forecast blizzard, although some of the more creative compilations can be fun.
However, some 2012 forecasts crossed my screen, and two were such striking outliers that I thought I’d call them to your attention and seeing if readers have come across other Extreme Predictions for the new year (aside from the Mayan end of the world sort).
Read more...By Dan Kervick, a PhD in Philosophy and an active independent scholar specializing in the philosophy of David Hume who also does research in decision theory and analytic metaphysics. Cross posted from New Economics Perspectives
I have set out a simplified model of a monetarily sovereign government. But near the end of the previous section, I began to suggest that the United States government is indeed a monetary sovereign by this kind. The reader might now suspect that I have yielded my rational mind over to a simplistic fiction of my own creation. And by this point, the reader is probably thinking that however interesting it might be to imagine this fictional entity, the so-called monetary sovereign, such fictions have nothing to do with the complexities of the real world, because actual governments maintain accounts that are indeed constrained by the amount of money in those accounts and by the external sources of funding to which they have access. After all, can’t a government default on its debt? What about the recent debt ceiling debate in the US? What about what is happening in Europe with the sovereign debt crisis? Also, if a government like the United States government was a monetary sovereign of the kind I have described, the consequences would seem to be enormous. Surely if a democratic government possessed this kind of power, we would make much more use of it than we do. In short, monetary sovereignty as described seems both too simple to be real and too good to be true.
These skeptical intuitions are reasonable, so they need to be addressed.
Read more...By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
Well, it looks like Santa finally stuck his head out of the dark cave for a look around. It is yet to be seen if he rams it straight back in again because he doesn’t like the weather, but at least he has appeared for one night.
Read more...Yves here. It has been striking how little commentary a BIS paper by Claudio Borio and Piti Disyatat, “Global imbalances and the financial crisis: Link or no link?” has gotten in the econoblogosphere, at least relative to its importance.
As most readers probably know, Ben Bernanke has developed and promoted the thesis that the crisis was the result of a “global savings glut,” which is shorthand for the Chinese are to blame for the US and other countries going on a primarily housing debt party. This theory has the convenient effect of exonerating the Fed. It has more than a few wee defects.
Read more...By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
Nicolas Sarkozy will be the only French president since World War II with two recessions under his watch, if the forecast by the National Institute of Statistics and Economics (Insee) turns out to be correct. Recessions are rare in France: between the end of the war and the beginning of the financial crisis, there were two. Then came the four negative quarters of 2008/2009. Now, Insee forecasts another contraction: -0.2% in the fourth quarter of 2011 and -0.1% in the first quarter of 2012.
After an uptick over the summer, economic indicators have gone south.
Read more...By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
Yet another interesting night in Europe. Spain managed to over sell as it latest auction with €6.03 billion sold versus €3.5 billion targeted which in the current environment is seen as a good result.
Read more...Yves here. By happy coincidence, a mere day after Jamie Dimon offered yet another misleading defense of the 1% (among other howlers, claiming that their marginal tax rates were their effective tax rates), the gurus of income inequality, Thomas Piketty and Emmanuel Saez, say there is no good case for coddling the rich. Their analysis shows that top marginal tax rates could rise to near Eisenhower administration levels (the top tax rate then was 91%) and not hurt growth.
By Thomas Piketty, Professor, Paris School of Economic, Emmanuel Saez Professor of Economics, University of California, Berkeley and Stefanie Stantcheva, PhD candidate in Economics, MIT. Cross posted from VoxEU
The top 1% of US earners now command a far higher share of the country’s income than they did 40 years ago. This column looks at 18 OECD countries and disputes the claim that low taxes on the rich raise productivity and economic growth. It says the optimal top tax rate could be over 80% and no one but the mega rich would lose out.
Read more...By Wolf Wagner, Professor of Economics, University of Tilburg. Cross posted from VoxEU
As government advisors and central bankers race through the different options to save the euro, this column argues that one such proposal, Eurobonds, will actually increase the risk that several Eurozone countries fail together. It shows using basic arithmetic that these bonds, sometimes labelled ‘stability bonds’, may actually be more likely to harm Eurozone stability.
Read more...The denial about the existential nature of the Eurozone crisis seems to be lifting. The press has featured reports of companies and banks doing contingency planning for the possibility of a Euro dissolution or exits by some member states.
In keeping, the Wall Street Journal tonight reports that even central banks are starting to contemplate what had heretofore been unthinkable:
Read more...By David Llewellyn-Smith, the founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. He is also the co-author of The Great Crash of 2008 with Ross Garnaut. Cross posted from MacroBusiness
So, global PMIs for November have passed. Where do they suggest that the global economy is heading?
Read more...