Category Archives: Globalization

From Bad to Worse for the IMF

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.

For some time now I have been pointing out poor economic policy implementations within the European economy and how those policies are likely to effect the real economies of European nations. As I re-stated on Monday, my major concern with the current thinking from European economic leaders is their misguided belief that implementing austerity before credit write-downs/offs is a credible policy for a highly indebted, non-export competitive nation with a non-deflatable currency.

Matt Stoller: Why Does the Dallas Fed President Want to Destroy West Coast Port Unions?

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller. Cross posted from New Deal 2.0

The FOMC is far more secretive than most government agencies, and after reading the transcripts of its meetings, it’s not hard to see why.

Has the Global Business Cycle Ended?

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?

Is a Eurofix Around the Corner?

After telling readers that the Eurozone leadership looks to be suffering from “dulled reaction times…so out of line with market events that even if they were to snap our of their stupor now, it would be too late,” news reports suggest that they have finally roused themselves.

Or have they?

“Validated Carbon Credits”: a Correction, a Confirmation, Questions, and No Hint of an Apology

The Gibraltar regulator confirms by email that James Richards company Baron Traders Limited is registered in Gibraltar.

Moron from Scam Companies “Validated Carbon Credits” and “Baron Traders Limited ” Threatens This Blog

By Richard Smith

I posted this a few days ago, about the screechingly obvious fake Gibraltar company Validated Carbon Credits, a trading name of Baron Traders Ltd and its lying “CEO” James Richards. Two comments to the post have caught my eye:

It´s obvious your posting is not only slanderous but based on pure conjecture without any circumstantial evidence whatsoever. Why is it you don´t have a “contact us” link? Did you even bother contacting the company / individuals to try and establish some facts?

This was purportedly by a lady called Karen Johnson, who guilelessly provides an email address, bubblybosun@gmail.com, which, a quick Google reveals, is a handle used by none other than James Richards, the aforementioned lying CEO. Rather than dwell on that, or on the fact that “she” evidently doesn’t understand the meanings of the words “circumstantial evidence” and “slanderous”, I responded as follows:

“FTAdviser” Tricked Into Lending the Good Name of the Financial Times to Carbon Credit Scammers

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“When Offshoring Backfires”

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Readers may know that I have strong feelings about offshoring. There is plenty of evidence that the case for offshoring and outsourcing are considerably overdone. First, direct factory labor is only a small part of the total wholesale cost of manufactured goods, typically 10% to 15%. While offshoring clearly reduces those costs, there are offsets: increased managerial/coordination cost, greater transport and inventory financing costs. I’ve had some executives in different lines of business tell me their company decided to outsource/offshore despite the fact that the business case was not compelling. Second, offshoring increases risk, particularly the risk of getting stuck with inventory you can’t sell.

This VoxEU article does a nice job of looking at the tradeoffs between cost savings and customer responsiveness.

Eurozone Leaders Ready €80 Billion Band-Aid for Banking Industry Gunshot Wound

I must confess I don’t stay on top of the blow by blow of the ever-devolving Eurozone mess. The broad lines of the trajectory look all too predictable. The officialdom could patch up things for quite a while if the powers that be let the ECB monetize the debt (eventually, you could have an inflation problem, but with the EU and global economy so slack, “eventually” will take quite a while to show up).

However,everyone in positions of authority seems to believe in certain-to-fail-much-faster austerity instead. So the permissible short-to-medium term fixes involves lots of complicated programs, multi-party negotiations, and in some cases, political approvals. The timeline for the governmental maneuvering seems badly out of line with what Mr. Market requires. And to make matters worse, an earlier deal on a Greek funding, which involved bondholders taking a 21% haircut, is now deemed not to be punitive enough to banks. While that is narrowly true, having this deal come unglued could be the detonator that sets off a crisis chain reaction.

And from a wider vantage, none of these remedies address the real issue

Rob Parenteau: Blinded by Faith – Sinking the Eurozone

By Rob Parenteau, CFA, sole proprietor of MacroStrategy Edge, editor of The Richebacher Letter, and a research associate of The Levy Economics Institute

Wolfgang Munchau has raised a very important point in his current Financial Times article, “Why Europe’s officials lose sight of the big picture.” The eurozone, Wolfgang points out, is more like a large closed economy than a collection of small open economies, and this has implications for fiscal policy outcomes, yet these implications remain largely unrecognized by policy makers within the region. Wolfgang noted:

Steve Rattner, Card Carrying Member of Top 1%, Tells Us We Should Lie Back and Enjoy Much Lower Wages Resulting From Globalization

A corollary to Upton Sinclair’s famous saying, “It is difficult to get a man to understand something if his salary depends on his not understanding it” is “People promote ideas that help them secure or preserve a privileged position on the totem pole.”

A glaring example of these observations came in an op ed in the Sunday New York Times by Steve Rattner, former Lazard mergers & acquisition partner, later head of the private equity firm, Quadrangle Partners. He is best known as the chief negotiator in the auto bailouts (and he was criticized for not involving any auto industry experts). He paid $10 million to settle a kickbacks investigation and agreed not to work for a public pension fund in any role for five years. I happened to see Rattner on a panel at a Financial Times conference earlier this week and he elaborated on some of the themes in this piece, “Let’s Admit It: Globalization Has Losers,” which reader Brett asked me to debunk line by line. I’ll spare you and focus just on the most critical and bald-facedly dishonest bits.

New Zealand: a Great Place to do Business…and Scams

By Richard Smith

The little story NC carried a couple of months ago about New Zealand scam companies has come out from behind the paywall, courtesy of the NZ Herald (hat tip: John G.). We hinted at the time that the problem’s large and nasty, and the NZ Government admits this in a cabinet paper:

The Very Important and of Course Blacklisted BIS Paper About the Crisis

Admittedly, my RSS reader is hardly a definitive check, but it does cover a pretty large number of financial and economics websites, including those of academics. And from what I can tell, an extremely important paper by Claudio Borio and Piti Disyatat of the BIS, “Global imbalances and the financial crisis: Link or no link?” has been relegated to the netherworld. The Economist’s blog (not the magazine) mentioned it in passing, and a VoxEU post on the article then led the WSJ economics blog to take notice. But from the major economics publications and blogs, silence.

Why would that be? One might surmise that this is a case of censorship.

Income Inequality Produces Indebtedness and Global Imbalances

The IMF has a passel of articles up on income inequality. “Unequal = Indebted,” by Michael Kumhof and Romain Rancière, focused on macroeconomic effects.

It stars with the observation that countries showing a significant increase of income inequality (defined as the share going to the top 5%) have deteriorating current accounts (note these are all advanced economies; they discuss the glaring exception of China later in the article).