Category Archives: Social values

Michael Hudson: The State and Local Budget Crisis

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College

The cost of the 2011 cutbacks in federal spending will fall most directly on consumers and retirees by scaling back Social Security, Medicare, Medicaid and social spending programs. The population also will suffer indirectly, by lower federal revenue sharing with U.S. states and cities. The following chart from the National Income and Product Accounts (NIPA, Table 3.3) shows how federal financial aid has helped cities shift the tax burden off real estate, although the main shift has been off property taxes onto income – and onto consumption (sales) taxes.

Michael Hudson: The Case Against the Credit Ratings Agencies

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College

In today’s looming confrontation the ratings agencies are playing the political role of “enforcer” as the gatekeepers to credit, to put pressure on Iceland, Greece and even the United States to pursue creditor-oriented policies that lead inevitably to financial crises. These crises in turn force debtor governments to sell off their assets under distress conditions. In pursuing this guard-dog service to the world’s bankers, the ratings agencies are escalating a political strategy they have long been refined over a generation in the corrupt arena of local U.S. politics.

Philip Pilkington: Profits in a Capitalist Economy – Where Do They Come From, Where Do They Go?

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

The engine that drives enterprise is not thrift, but profit – John Maynard Keynes

Profits are without doubt the key driving force in a capitalist economy. No respectable entrepreneur would try to sell goods or services were they not to make some sort of profit out of it. And yet profits are spoken of surprisingly little in mainstream neoclassical economics. For the neoclassicals there is, in fact, a deafening silence surrounding the role that profits play in the functioning of our economies; economies that are, of course, founded on the profit motive.

For example, if we turn to a fairly standard mainstream textbook – in this case Samuelson and Nordhaus’ ‘Economics: Fifteenth Edition’ – we find just how little neoclassical economics concerns itself with profits (some will say that Samuelson is a Keynesian, indeed he would probably have said so himself, but Samuelson is not really a Keynesian, his ‘neoclassical synthesis’ was just a grafting of a vulgarised Keynes onto the neoclassical edifice). This 800-odd page book devotes all of three pages to the topic. And even in this short space the authors are vague and fuzzy. We are told that profits come from ‘a hodgepodge of different elements’; that they are earned as a ‘reward for bearing risk’ and that occasionally they take the shape of ‘monopoly returns’. At no point do the authors even dare to suggest where profits come from.

This must appear to anyone with even a cursory interest in how our economies work as a rather unusual evasion. And it should. Usually when people are evasive on such important issues it is because – whether they know it or not – they are hiding something. In this case the authors are – again, whether they know it or not – hiding something extremely important; namely: the origin, source and function of profits in a capitalist economy.

Video: The Bankers as the Enemy of Humanity

This video is stunning, in that it is a very articulate and well done rant that will resonate with many readers. The fact that it appeared on Karl Denninger’s site (hat tip reader Scott, Denninger’s been very critical of the TBTF banks) is an indication that the level of frustration with the major banks’ refusal to take responsibility for wrecking the global economy and their efforts to preserve their ability to loot is moving to a new level.

Quelle Surprise! New York Fed Director Shills for Bank of New York, Argues Against Rule of Law

Given the Federal Reserve’s abysmal regulatory record in the runup to the crisis (even the uber bank friendly Office of the Comptroller of the Currency was more aggressive in going after subprime abuses, for instance), it should be no surprise that some of its directors are utterly lacking in propriety and common sense when it comes to defending the rights of banks to profit at the expense of customers and society at large.

The only good news about the latest example is that it was so ineptly done that it appears to be backfiring.

“Freedom Versus Markets”

Yves here. Blogger Sell on News echoes an argument made in ECONNED, namely, that “free markets” are a contradictory and incoherent construct, albeit from a different perspective. He also advocates another view near and dear to our heart, namely getting rid of economists (actually, that is overkill and will never happen. Keynes had it right: “If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.”)

By Sell on News, a macro equities analyst . Cross posted from MacroBusiness

Probably the most wicked intellectual subterfuge of the last three decades — and goodness knows there have been many — has been the pretence that democracy and markets are two sides of the same coin.

Marshall Auerback: A Beer(s) Hall Putsch From the Rentiers?

By Marshall Auerback, a hedge fund manager and portfolio strategist

So the ratings agencies have reared their ugly heads again. David Beers, head of S&P’s government debt rating unit, announced Friday night that S&P has downgraded the U.S. credit rating for the first time, from AAA to AA+. It’s a sham: S&P’s whole analytical framework reflects ignorance about modern money. If the US government, Treasury, and the Federal Reserve, capitulate to this outrageous act of economic extortion, it will effectively be sanctioning a beer hall putsch by the rentier class.