I don’t know about you, but I’m suffering from debt ceiling/Eurozone mess fatigue and thought readers might enjoy a wee respite. This engaging presentation by Kevin Slavin provides some useful food for thought about how the use of algorithms are coming to literally reshape our world.
Read more...By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Economic Perspectives
For all its talk of the importance of averting a debt default, Barack Obama.is increasingly signaling that major deficit reduction has become more than just a bargaining chip to bring Republicans aboard a debt deal. He actually believes that cutting entitlements and reducing the deficit are laudable goals, which would mark “transformational” moments in his President. Let’s face it: the man is not a progressive in any sense of the word; he’s a Tea Party President through and through.
Read more...The latest revelations in the widening News International scandal are simply stunning. “Uneasy lies the head that wears the crown” is apparently as true now as it was in Shakespeare’s day. The idea that a news organization would have the audacity to target a head of state, as News International papers the Sun and the Sunday Times did with Gordon Brown, and not with the usual tools of invective and gossip, but via the theft of personal information, raises the scandal to a whole new level.
Read more...When a moderate (meaning anachronistic) Republican proves to be a more tough minded regulator than Democrats, it serves as yet another proof of how far the county has moved to the right. Bair, in a long “exit interview” with Joe Nocera, says a number of things that would have been regarded as commonsensical and obvious in the 1980s, yet have a whiff of radicalism about them in our era of finance uber alles. For instance: Bear should have been allowed to fail, TBTF banks are a menace (well, she doesn’t say that, but makes it clear she regards them as repugnant), bank bondholders should take their lumps.
Bair was alert to the dangers of subprime, having recognized how dangerous it could be in the early 2000s (when a smaller version of the market blew up, taking homeowners along with it), and was not a believer of the Paulson/Bernanke party line that subprime would be “contained”. She long championed mortgage mods as better for lenders, borrowers, and the economy, and has fought an uphill battle with the Administration on that front. With the IndyMac failure, which put the subprime lender/servicer in the FDIC’s lap, she pushed hard to develop a template for how to do them, which then was ignored by the Administration (they did HAMP instead, an embarrassment which she refused from the outset to endorse).
The piece serves as an indictment of the banking industry toadies in the officialdom, namely the Treasury, Fed, and OCC. One priceless quote:
Read more...I hate to seem to be beating up on Brad DeLong. Seriously.
As I’ve said before, he is one of the few economists willing to admit error and not try later to minimize or recant his admission (unlike, say, Greenspan). And he seems genuinely perplexed and remorseful. This puts his heads and shoulders above a lot of his colleagues, at least the sort whose opinion carries weight in policy circles.
Even with DeLong making an earnest effort to figure out why he went wrong, his latest musings, via a Bloomberg op-ed, “Sorrow and Pity of Another Liquidity Trap,” show how hard it is for economist to unlearn what they think they know. And as the great philosopher Will Rogers warned us, “It’s not what you know that gets you in trouble. It’s what you know that ain’t so.”
So it’s important to regard DeLong as an unusually candid mainstream economist, and treat his exposition as reasonably representative if you could somehow get his peers to take a hard, jaundiced look at how wrong they have been of late.
DeLong’s mea culpa is about how he and his colleagues refused to take the idea that the US could fall into a liquidity trap seriously. As an aside, this is already a troubling admission, since many observers, including yours truly, though the Fed was in danger of creating precisely that sort of problem if if dropped the Fed funds rate below 2%. It would leave itself no wriggle room if the crisis continued and it had to lower rates further into the territory where further reductions would not motivate changes in behavior. That’s assuming we were in a “normal” environment. But the big abnormality is that we are in what Richard Koo calls a balance sheet recession. And as we will discuss below, Keynes (and Minsky) had a very keen appreciation of the resulting behavior changes, but those ideas were abandoned by Keynesians (it is key to remember that Keynesianism contains significant distortions and omissions from Keynes’ thinking.
But notice how he starts his piece:
Read more...William Rees is one of the pioneers of ecological economics and is the originator and co-developer of ‘ecological footprint analysis’. This video contains some basic facts about current consumption levels in advanced economies that are attention-grabbing. I’d normally say “Enjoy” but this is not that sort of video.
Read more...By L. Randall Wray, a Professor of Economics at the University of Missouri-Kansas City. Cross posted from FireDogLake
Yves Smith set off a firestorm in her criticism of several progressive groups that have joined forces with Pete Peterson to whip up deficit hysteria. There are three issues that need to be addressed:
Read more...1. Can a progressive take tainted money and remain progressive?
2. Did the Roosevelt Institute (in particular) take tainted money and remain progressive?
3. What would a progressive approach to federal budgeting look like?
Sorry if you were looking for listing of the various Greek assets on offer. You need to be a really heavyweight investor (and have been verified as such) to get a real viewing. And you are late if you are taking interest only now. The Guardian last week visited a road show of sorts in London (note that the properties were being hawked BEFORE the Greek parliament had approved the sale). The potential bidders were very cool:
Read more...By Mark Ames, author of Going Postal: Rage, Murder and Rebellion from Reagan’s Workplaces to Clinton’s Columbine. Cross posted from The Exiled.
I’ve often wondered why the American Right has been so quiet about V.S. Naipaul. He’s easily the most talented reactionary writer in the English language–maybe the only living talent left in the right-wing zombiesphere. The American Right devotes an insane amount of resources into manufacturing hagiographies on anyone whom they believe makes them look good–even the Soviets couldn’t compete with today’s American Right when it comes to glorifying their pantheon of degenerate cretins like Ayn Rand, Phyllis Schlafly, Friedrich von Hayek…
I found a few passages that I think explain why they never liked Naipaul much.
Read more...The latest column by Gillian Tett provides further support for our pet thesis: that the role of the state in banking is so great and the subsidies so wideranging that they cannot properly be considered private companies and should be regulated as utilities.
Key extracts:
Read more...Andrew Sheng, Chief Adviser to the China Banking Regulatory Commission, is wonderfully straightforward and realistic for an economist. He is willing to say, as he does in this video, things that are obvious yet somehow unacceptable to ‘fess up to in policy circles, like the planet simply cannot support 3 billion people in Asia living European lifestyles. He warns of the danger of creating the mother of all crises if governments cannot stem the tide of leveraged capital flows, and also discusses the role of China on the global stage.
Read more...By Philip Pilkington, a journalist and writer based in Dublin, Ireland
Watch out, I have a large, very large fur, with which I could cover you up entirely, and I have a mind to catch you in it as in a net.
– Leopold von Sacher-Masoch
Many aspects of contemporary economic theory certainly seem to have their origins in the mythic and the moral rather than in the realm of the rational. But while this seems to be an accurate description of the system as a whole, it does not seem quite able to account for certain aspects of this system which appear to be rather obsessive in the minds of its adherents.
These obsessions, or ‘fetishes’, can be explained in like terms, that is: compared to certain primitive rituals and superstitions. To do so we will first have to form a better understanding of the fetish itself; an Enlightenment concept that has a long and interesting history.
The specific fetishes we will explore will be the most important today: the government, inflation and gold. All these phenomena are interconnected in neoclassical economic theory (yes, even gold, or at least the ghost thereof), however, they tend to lead their own individual existence outside of the Grand Neoclassical System itself. In and of themselves they are, for economists and economic commentators, fetishes that can be worshipped in dark rooms away from the great hall. They are like fragments of the main theory that adherents smuggle out of the temple and obsess over in their own private shrines.
Read more...Several readers sent me links to a Brad DeLong post which they took to be a rebuttal to a takedown I did of a recent Ezra Klein piece.
Since DeLong did not link to or mention my post, I doubt his piece had anything to do with mine. But his post is noteworthy for a completely different reason: it illustrates how economists have refused to learn much, if anything, from the crisis.
Read more...As much as the rest of the world has chosen to look down on Japan in its post bubble era for its failure to clean up its banking mess and resultant stagnant economy, it has managed its relative decline in status with considerable aplomb. It still has the longest life expectancy in the world, universal health care, not bad unemployment (3% to 5%) and ranks well on other social indicators And now that the US is going down the Japan path, it might behoove us to take heed of their example.
One of the striking difference between the cultures is importance ascribed to job creation.
Read more...By Bill Black, an Associate Professor of Economics and Law at the University of Missouri-Kansas City. He is a white-collar criminologist, a former senior financial regulator, and the author of The Best Way to Rob a Bank is to Own One. Cross posted from New Economic Perspectives
Mitt Romney chose to unveil the economic plank of his campaign for the Republican nomination with a speech in Aurora, Colorado decrying banking regulation. He could not have picked a more symbolic location to make this argument, for Aurora is the home and name of one of the massive financial frauds that caused the Great Recession. Lehman Brothers’ collapse made the crisis acute and Lehman’s subsidiary, Aurora, doomed Lehman Brothers. Lehman acquired Aurora to be its liar’s loan specialist. The senior officers that Lehman put in charge of Aurora, which was inherently in the business of buying and selling fraudulent loans, set its ethical plane at subterranean levels.
Aurora sealed Lehman’s fate by serving as a “vector” that spread an epidemic of mortgage fraud throughout the financial system and caused catastrophic losses far greater than Lehman’s entire purported capital. Aurora epitomizes what happens when we demonize the regulators and create regulatory “black holes.” Romney literally demonized banking regulators as “gargoyles” and claimed that banking regulations and regulators were the cause of the economy’s weak recovery.
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