Category Archives: Politics

Are Neocons in Iraq Thinking Like the Banks that Blew up the Global Economy?

Yves here. For the normally anodyne OilPrice to run an article, Obama Fiddles While Iraq Burns, that is openly frustrated with US conduct suggests that there is considerable consternation in the oil industry about the lack of a coherent policy in Iraq. One school of thought has been that the US wanted a breakup, but history like the dissolution of Yugoslavia shows that they are ugly, bloody affairs that hurt the population and infrastructure. Both are bad for business, such as drilling for and refining oil, which was apparent reason we occupied Iraq in the first place.

I’ve discussed with Lambert the difficult of coming up with a coherent rationale for the US stance towards Iraq.

Sacramento Bee Takes Up Our Fight Against Private Equity Firms’ Secrecy

On Monday, the Sacramento Bee published an editorial that took up many of the issues that we’ve raised in recent months about private equity firms’ fee abuses and the extraordinary shroud of secrecy that the industry has thrown over most of its activities.

Ilargi: Overshoot Loop and Evolution

Yves here. As Ilargi himself acknowledges, even by the standards of his fare, this post on “overshoot” is plenty sobering. We do seem to be on our way to precipitating a mass species die off (as in it’s underway already and humans seem remarkably unwilling to take sufficiently stern measures to stop it). The end of civilization as we know it seems almost inevitable, given that most “advanced” economies are seeing serious erosion of their social fabric, as reflected in falling social well-being measures.

However, the provocative point that Jay Hanson argues is that our hard-wired political habits guarantee our undoing.

Will the Eurozone Be Able to Align National Interests?

Yves here. We ran an earlier post by Ashoda Mody, he argued that Eurozone was failing in resolving its recurring crises successfully. That is a coded way of saying that the odds of breakup are rising. Needless to say, that view elicited a lot of commentary from his readers. Mody addresses their reactions and objection below.

Why Europe Needs Two Euros, Not One

Yves here. We remarked recently how the readings we’ve been getting from people who have senior contacts in Europe are increasingly of the view that the economic crisis in Europe is morphing into a sufficiently severe political crisis that the unthinkable – a breakup of the eurozone – is looking like a serious possibility.

One indicator is the article featured below. VoxEU has policy reach in Europe, and this post represents an effort to come up with better economic arrangements within Europe while preserving at least some of the benefits of monetary union. And it is hardly the first to recognize that one of the big problems with the Eurozone is that it put together too many disparate economies without enough in the way of fiscal transfers to buffer the differences. If the Eurozone can’t move towards more economic integration, the next-best remedy might be a structure where more homogenous countries each had their own currency.

New York’s Schneiderman Accepts Red Cross’ “Trade Secrets” Excuse to Hide Sandy Spending

It’s not clear what to make of an attorney general who opens an investigation and then accepts lame excuses for maintaining secrecy from its target, in this case, the American Red Cross. We’re flagging this example because it exemplifies an effort by organizations to use “trade secrets” as a pretext for hiding more and more of their dealings with governments. This is absurd, since the premise of Federal and state Freedom of Information Act laws is that government records should be open to the public, and that includes records of entities doing business with government agencies. In other words, if you want to have government bodies as your customers, one of the costs of doing business is having your formal interactions with them subject to public review.

Capital is Not Back: On Thomas Piketty’s ‘Capital in the 21st Century’

Yves here. This article pokes at a topic near and dear to my heart, which is the generally reverential treatment of Thomas Piketty’s Capital in the 21st Century. It appears to be a classic example of the cognitive bias called halo effect, in which people have a tendency to see things as all good or all bad. Because there is a lot to recommend Piketty’s work, for instance, the fact that it is exceptionally written, that it has made inequality into one of the hottest topics in economics, and that Piketty has done an admirable and exhaustive job of finding and analyzing the returns on certain types of income producing assets are all highly commendable.

But as readers may know, one of my pet peeves is that Piketty has made a very strong claim, in the form of his formula r>g, or the rate of return on capital (which he also calls “profit”) exceeds the growth rate of the economy, when his data falls short of what would be necessary to prove that assertion.

Europe Has Wasted a Good Crisis

Yves here. This post is an understated version of a reading that a well-connected colleague gave me after spending three weeks in Europe: that the Eurozone is headed towards breakup.

Why the Rich Aren’t Job Creators

This is a short talk by venture capitalist Nick Hanauer, who among other things, was the first non-family investor in Amazon. Hanauer in very simple and effective terms debunks the “rich are job creators” myth. Even though the video is going viral (now at over 1 million views on YouTube, it is important enough that I wanted to make sure NC readers saw it and circulated it.

Hanauer’s remarks illustrates the degree to which propaganda has overcome commercial common sense.

Why Banks Must Be Allowed to Create Money

Ann Pettifor has penned an effective rebuttal of the Chicago Plan, which has been taken up in the UK as “Positive Money”. Its advocates call for private banks to have their ability to create money taken from them, and put in the hands of a committee, independent of the state, that would decide on the level of money creation. Banks would be restricted to lending money that they already have on deposit.

Pettifor explains how the enthusiasm for the Chicago Plan rests on a fundamental misunderstanding of the nature of money and confusion about its relationship to credit. While readers may not like the notion that credit, and therefore money creation, is best left in the hands of banks, the problem is much like the one that Churchill articulated about democracy: it looks like the worst possible system until you consider the alternatives.

Philip Pilkington: ‘Uncertainty’ in Contemporary DSGE Modelling – Not Even Wrong

Yves here. This post might seem a smidge technical for generalist readers, but have faith. Pilkington uses DSGE models, a widely used type of macroeconomic forecasting model, to demonstrate the prevalence of intellectual bankruptcy in economics. As he writes,

The level of scholarship in contemporary economics is absolutely shocking. Contemporary theorists just pick up on buzzwords that they hear in the media and then assume that they have understood them. Then they scramble to build some arcane model or other in which they assure others that they have captured the meaning of the buzzword in question. The mathematics then becomes a cloak hiding the fact that they have never bothered to actually think through the concepts they are using.

This is frighteningly similar to something I wrote:

That was one of the scary things I finally figured out during my last visit to DC. I thought people constructed policy first and then reduced it to soundbites to sell it. I came to realize that most people in DC reason from soundbites (as in their analysis and policy design is constructed from soundbites from the get-go).