The Economic Populist Mon 2010-09-20 19:16 EDT

"There Is No Economic Justification for Deficit Reduction" Galbraith to Deficit Commission

James K. Galbraith

...Your proceedings are clouded by illegitimacy. In this respect, there are four major issues. First, most of your meetings are secret, apart from two open sessions before this one, which were plainly for show. There is no justification for secret meetings on deficit reduction... Second, there is a question of leadership. A bipartisan commission should approach its task in a judicious, open-minded and dispassionate way...Senator Simpson has plainly shown that he lacks the temperament to do a fair and impartial job on this commission...Third, most members of the Commission are political leaders, not economists. With all respect for Alice Rivlin, with just one economist on board you are denied access to the professional arguments surrounding this highly controversial issue...Conflicts of interest constitute the fourth major problem. The fact that the Commission has accepted support from Peter G. Peterson, a man who has for decades conducted a relentless campaign to cut Social Security and Medicare, raises the most serious questions...You are plainly not equipped by disposition or resources to take on the true cause of deficits now and in the future: the financial crisis. Recommendations based on CBO's unrealistic budget and economic outlooks are destined to collapse in failure. Specifically, if cuts are proposed and enacted in Social Security and Medicare, they will hurt millions, weaken the economy, and the deficits will not decline. It's a lose-lose proposition, with no gainers except a few predatory funds, insurance companies, and such who would profit, for some time, from a chaotic private marketplace...

deficit Commission; deficit reduction; economic justification; economic populist; Galbraith.

Sat 2010-07-24 16:13 EDT

Disequilibria: A Constant State Of Instability >> The Shadow Banking System

RueTheDay

What we saw from mid-2007 through early-2009 was a run on the shadow banking system. There were two primary channels by which the shadow banking system operated: the Money Market/Commercial Paper Channel and the Repo Channel...we have largely unregulated [money market funds (MMMFs)] taking deposits (largely withdrawable on demand and usually checkable) and making the equivalent of loans, in other words, acting as banks. Except that the MMMFs were not subject to much in the way of prudential regulation beyond some broad parameters that dictated what investments they could buy, did not have access to FDIC deposit insurance, and did not have lender of last resort access to the Fed's discount window. They were a disaster waiting to happen...Repos also became a very popular mechanism for raising funds in the pre-crisis days, with MMMFs becoming large buyers of repos (lenders) and the broker dealers becoming both buyers and sellers (borrowers and lenders)...during the crisis...the classic maturity mismatch situation...concerns about the quality of commercial paper...triggered by the collapse of Lehman...Without the traditional protection of deposit insurance and lender of last resort financing by the Fed, it turned into a full blown panic...Any meaningful financial reform must bring the shadow banking system out of the shadows. It must be treated as banking, and its institutions regulated as banks...

constant state; Disequilibria; instability; Shadow banks Systems.

naked capitalism Thu 2010-07-22 16:19 EDT

Decoding the NY Fed on Shadow Banking

Richard Smith

NY Fed: We document that the shadow banking system became severely strained during the financial crisis because, like traditional banks, shadow banks conduct credit, maturity, and liquidity transformation, but unlike traditional financial intermediaries, they lack access to public sources of liquidity, such as the Federal Reserve's discount window, or public sources of insurance, such as federal deposit insurance.

decoding; naked capitalism; NY Fed; Shadow banks.

Credit Writedowns Thu 2010-06-03 17:56 EDT

Guest Post: The 2004 Fed Transcripts: A Methodical, Diabolical Destruction of America's "Wealth"

Frederick Sheehan

The Federal Reserve releases transcripts of the Federal Open Market Committee (FOMC) meetings with a five-year lag (as required by law, the Fed would like to burn them). Transcripts for 2004 meetings were released on April 30, 2010...FOMC transcripts in 2004 confirm the Fed was afraid of markets...The FOMC seemed most concerned that higher rates might interfere with the carry trade. In the sad tale of The Financialization of the United States, the carry trade deserves a chapter...By 2004, the carry trade was a mammoth enterprise of hedge funds and banks. The too-big-to-fail banks were, by now, leveraging their own internally managed hedge funds, managing their own proprietary trading desks, and also lending to highly leveraged hedge funds. Leverage, and, the belief that access to rising levels of credit would never end, pushed up asset values on bank balance sheets -- whether real estate, bonds, stocks, or private-equity. This increased the banks' lending capacity which encouraged banks to lend more...Markets believed asset prices would only go up for many silly reasons. Belief in the Greenspan Put may have been the silliest but also the most influential...Federal Reserve Governor Donald Kohn...told his confreres that Federal Reserve policy was to distort asset prices. He also said this was deliberate and desirable. In other words, distorted asset prices were not an unfortunate consequence of such-and-such Fed policy. The Fed's goal was to distort asset prices...Consumer spending exceeded consumer income...This strategy of fixing asset prices at an artificially high rate to fool the American people into spending money they did not have was diabolical...The manipulation of markets and of the American people has grown worse under Bernanke's chairmanship...

2004 Fed Transcripts; America's; credit writedowns; Diabolical Destruction; Guest Post; Method; wealth.

Sun 2010-02-07 10:10 EST

Web of Debt - THE BATTLE OF THE TITANS: JPMORGAN VS. GOLDMAN SACHS

Ellen Brown

The late Libertarian economist Murray Rothbard wrote that U.S. politics since 1900, when William Jennings Bryan narrowly lost the presidency, has been a struggle between two competing banking giants, the Morgans and the Rockefellers. The parties would sometimes change hands, but the puppeteers pulling the strings were always one of these two big-money players...In 2000, the Rockefellers and the Morgans joined forces, when JPMorgan and Chase Manhattan merged to become JPMorgan Chase Co. Today the battling banking titans are JPMorgan Chase and Goldman Sachs, an investment bank that gained notoriety for its speculative practices in the 1920s...Goldman's superpower status comes from something more than just access to the money spigots of the banking system. It actually has the ability to manipulate markets...But Goldman Sachs has been caught in this blatant market manipulation so often that the JPMorgan faction of the banking empire has finally had enough.

battle; debt; Goldman Sachs; JPMorgan; titans; Web.

Mish's Global Economic Trend Analysis Tue 2009-11-03 20:30 EST

Is Debt-Deflation Just Beginning?

Michael Shedlock

You should not be afraid of deflation. You should be afraid of policies attempting to fight it. Deflation (rather price deflation) is actually the natural state of affairs. As productivity increases, more goods and services are produced relative to the population and prices would therefore be expected to drop. It is the Fed, along with misguided Keynesian and Monetarist economists who think falling prices are a bad thing. Who amongst us does not like falling prices (except of course on things we own like houses, but even then who is not sick of higher property taxes that result)? The reality is inflation benefits those with first access to money. Guess who that is? The answer is easy: banks, government, and the already wealthy. Inflation is actually a tax on the middle class and the poor who get access to money last. During the housing bubble, by the time the poor could get access to to money easily, it was far too late to buy. Given that inflation benefits those with first access to money, any targeted inflation at all is morally wrong.

Debt-Deflation Just Beginning; Mish's Global Economic Trend Analysis.

ClubOrlov Wed 2009-08-26 14:22 EDT

That Bastion of American Socialism...the United States military

kollapsnik

Over the past few months the American mainstream chatter has experienced a sudden spike in the gratuitous use of the term "Socialist." It was prompted by the attempts of the federal government to resuscitate insolvent financial institutions. These attempts included offers of guarantees to their clients, injections of large sums of borrowed public money, and granting them access to almost-free credit that was magically summoned ex nihilo by the Federal Reserve. To some observers, these attempts looked like an emergency nationalization of the finance sector was underway, prompting them to cry "Socialism!" Their cries were not as strident as one would expect, bereft of the usual disdain that normally accompanies the use of this term. Rather, it was proffered with a wan smile, because the commentators could find nothing... ``Since the end of the Civil War, Americans have become accustomed to thinking of war as something that happens elsewhere, to other people. Thus, the news that the US is bombing this or that land, for no adequate reason, killing and maiming numerous civilians, produces in us neither the normal human reaction of revulsion, nausea and disgust, nor the conviction that we must take the fight to our own monstrous leaders, lest we too become monsters. Life under domestic military occupation might bring home some welcome realizations, and start Americans down the long road of atoning for the sins of their forefathers, who have run roughshod over much of the rest of the planet for far too long.''

American social; bastion; ClubOrlov; United States military.

Tue 2008-10-07 00:00 EDT

naked capitalism: Crunch Hits Real Economy: Wachovia Funds Limits Access by Colleges

College; Crunch Hits Real Economy; naked capitalism; Wachovia Funds Limits Access.

Fri 2007-11-16 00:00 EST

naked capitalism: Rating Agencies Created Incentives to Issue Paper More Profitable for Them to Rate

Einhorn on credit; rating agencies compromised; securitization flawed; charging too little for risk-bearing; rating agencies have privileged access to deal data; artificial securitization bias

issues papers; naked capitalism; profits; rate; Rating Agencies Created Incentives.

Sat 2007-08-25 00:00 EDT

Articles : Dual-purpose cattle give small acreage graziers access to two high profit markets

by Allan Nation, Stockman Grass Farmer; Vermont organic farmer Doug Flack

article; Dual-purpose cattle give small acreage graziers access; high profit markets.