Category Archives: Free markets and their discontents

The Hissing Sound of Air Leaving the Economy

There’s a remarkable amount of optimism in the US financial media given the underlying health of the economy. Of course, the sort of short term investors that have come to dominate securities trading had been in a “risk on/risk off” pattern for a protracted period before commodities weakness and the remarkable run of the Nikkei has led to some renewed focus on relative values of various macro plays. But the markets are still dominated by an underlying faith in the willingness of central bankers to protect the backs of investors and limit any downside (while, ironically, many of these same investors howl about ZIRP and QE, which were clearly intended to goose the value of financial assets and real estate, with the hope that would lead to more consumer spending).

And why shouldn’t the professional investors (as opposed to widows and orphans who can no longer rely on low risk bond investments to produce adequate income) be pleased as punch?

Obama Moves Forward with Cutting Social Security and Medicare as We Lecture Europe Otherwise

It must be really hard to be an Obama defender these days, at least if you are not on a big corporate payroll.

BBC on Child Poverty in the US

One of the ongoing frustrations in being (of necessity) a heavy consumer of what passes for media in the US is how insistent and disconnected the official narrative is with conditions on the ground. This BBC documentary gives a much-needed counterpoint.

Fiduciary Duty to Cheat? Jim Chanos Reveals the Perverse New Mindset of Financial Fraudsters (by Lynn Parramore)

By Lynn Parramore, a senior editor at Alternet. Cross posted from Alternet

Editor's note: This article is the first in a new AlterNet series, "The Age of Fraud."

Hustlers. Cheaters. Crooks. American business has always had them, and sometimes they’ve been punished. But today, those who cheat and put the rest of us at risk are often getting off scot-free. The recent admission of Attorney General Eric Holder that systemically dangerous megabanks may escape prosecution because of their size has opened a new chapter in fraud history. If you know your company won’t be prosecuted, a perverse logic says that you should cheat and make as much money for shareholders as you can.

The Capital Controls in Cyprus and the Icelandic Experience

Cyprus has imposed temporary capital controls. This column sheds light on how temporary and how damaging they are likely to be, based on Iceland’s experience. The longer controls exist, the harder they are to abolish. Icelandic capital controls, which have been ‘temporary’ for half a decade, deeply damage the economy by discouraging investment.

Yanis Varoufakis: The Good, the Bad and the Extremely Ugly (Aspects of the Cyprus Deal)

Yves here. The longer you look at the Cyprus “rescue,” the worse it looks. As you can learn from our compendium in today’s Links, the Cypriot economy is already reeling. It’s straining under the extended bank holiday, which is scheduled to end Thursday. Moreover, the impact of losses radiating from number two bank Laiki are already propagating through the island.

And that’s before we get to the wider ramifications. Whether Germany understands it or not, it has delivered a fatal blow to the Euro project. How long it continues is anyone’s guess, but the Balkanization of the financial system that the Eurocrats have set in motion means they won’t be able to go the US/Japan zombification route.

Philip Pilkington: Mistaking Men for Machines – How Neoclassical Economics Relies on Computer Science to Misunderstand Human Communication

By Philip Pilkington, a writer and research assistant at Kingston University in London. You can follow him on Twitter @pilkingtonphil

We have a lot to be thankful for today that we owe to Alan Turing – who is generally recognised as among the first, if not the first, computer scientist. But, on the other hand, we also have a lot that we can trace back to Turing that we should be in no way grateful for as it has filled our minds with stupidities and our universities with people talking nonsense. Without detracting from Turing’s undoubtedly important achievements we here focus on the latter and how some of Turing’s ideas came to infect the human sciences in general and economics in particular.

Free Trade and Unrestricted Capital Flow: How Billionaires Get Rich and Destroy the Rest of Us

Yves here. This post highlights an issue that gets far too little attention: how the “free trade” agenda has been used to promote a capital mobility agenda, and why that works to the detriment of ordinary citizens. It focuses on the real economy side of the free-flowing capital experiment; we’ll discuss next week how the Trans-Pacific Partnership is an alarming advance in this process of grinding down what is left of the middle class to benefit of the rich.

Philip Pilkington: Why MMT is Right and the Dreamers are Wrong – Kaldor Versus the Kaldorians

By Philip Pilkington, a writer and research assistant at Kingston University in London. You can follow him on Twitter @pilkingtonphil

Dreaming, I was only dreaming
I wake and I find you asleep

– Billie Holiday “Gloomy Sunday”

The criticisms of Modern Monetary Theory (MMT) on the internet and in academia can be placed into three categories: the cranks; the nit-pickers; and the Kaldorians.

Will Cyprus Become Creditanstalt 2.0?

The cheery view that Europe had moves past its crisis now looks to have been a tad premature.

David Dayen: The Gradual Privatization of Medicaid

Over the past week, both houses of the Florida legislature have rejected the Medicaid expansion program endorsed by Governor Rick Scott. You may recall the huzzahs from the progressive world when Scott, a self-possessed anti-Obamacare warrior, decided to accept the Medicaid expansion. What didn’t get reported as much is that Scott’s announcement coincided with the go-ahead from the Administration for Florida to fully privatize their Medicaid system.

So what was up with the Legislature’s rejection? Tea Party politics? Some unlikely show of principle against crony capitalism and corporate welfare?

No. They just want a different kind of privatization.

Cathy O’Neil: Black Scholes and the normal distribution

By Cathy O’Neil, a data scientist. Cross posted from mathbabe

There have been lots of comments and confusion, especially in this post, over what people in finance do or do not assume about how the markets work. I wanted to dispel some myths (at the risk of creating more).