New Economic Perspectives Fri 2010-07-02 17:26 EDT

Europe's Fiscal Dystopia: The ``New Austerity'' Road to Neoserfdom

Michael Hudson

Europe is committing fiscal suicide -- and will have little trouble finding allies at this weekend's G-20 meetings in Toronto. Despite the deepening Great Recession threatening to bring on outright depression, European Central Bank (ECB) president Jean-Claude Trichet and Prime Ministers from Britain's David Cameron to Greece's George Papandreou (president of the Socialist International) and Canada's host, Conservative Premier Stephen Harper, are calling for cutbacks in public spending...It is a self-destructive logic. Exacerbating the economic downturn will reduce tax revenues, making budget deficits even worse in a declining spiral. Latvia's experience shows that the response to economic shrinkage is emigration of skilled labor and capital flight...A half-century of failed IMF austerity plans imposed on hapless Third World debtors should have dispelled forever the idea that the way to prosperity is via austerity. The ground has been paved for this attitude by a generation of purging the academic curriculum of knowledge that there ever was an alternative economic philosophy to that sponsored by the rentier Counter-Enlightenment...

Europe's Fiscal Dystopia; Neoserfdom; new austerity; New Economic Perspectives; Road.

Sat 2010-05-22 21:31 EDT

It's Hard Being a Bear (Part Six)?Good Alternative Theory? | Steve Keen's Debtwatch

...Chartalism rejects neoclassical economics, as I do. However it takes a very different approach to analyzing the monetary system, putting the emphasis upon government money creation whereas I focus upon private credit creation. It is therefore in one sense a rival approach to the ``Circuitist'' School which I see myself as part of. But it could also be that both groups are right, as in the parable of the blind men and the elephant: we've got hold of the same animal, but since one of us has a leg and the other a trunk, we think we're holding on to vastly different creatures...a leading Chartalist, Professor Bill Mitchell from the University of Newcastle, [writes] a précis of the Chartalist argument...The fundamental principles of modern monetary economics, By Bill Mitchell...The following discussion outlines the macroeconomic principles underpinning modern monetary theory (sometimes referred to as Chartalism)... [MMT principles]

Bear; Good Alternative Theory; hard; part; Steve Keen's Debtwatch.

Sat 2010-05-22 21:13 EDT

EconPapers: An Alternative View of Finance, Saving, Deficits, and Liquidity

L. Randall Wray

This paper contrasts the orthodox approach with an alternative view on finance, saving, deficits, and liquidity. The conventional view on the cause of the current global financial crisis points first to excessive United States trade deficits that are supposed to have "soaked up" global savings. Worse, this policy was ultimately unsustainable because it was inevitable that lenders would stop the flow of dollars. Problems were compounded by the Federal Reserve's pursuit of a low-interest-rate policy, which involved pumping liquidity into the markets and thereby fueling a real estate boom. Finally, with the world awash in dollars, a run on the dollar caused it to collapse. The Fed (and then the Treasury) had to come to the rescue of U.S. banks, firms, and households. When asset prices plummeted, the financial crisis spread to much of the rest of the world. According to the conventional view, China, as the residual supplier of dollars, now holds the fate of the United States, and possibly the entire world, in its hands. Thus, it's necessary for the United States to begin living within its means, by balancing its current account and (eventually) eliminating its budget deficit. I challenge every aspect of this interpretation. Our nation operates with a sovereign currency, one that is issued by a sovereign government that operates with a flexible exchange rate. As such, the government does not really borrow, nor can foreigners be the source of dollars. Rather, it is the U.S. current account deficit that supplies the net dollar saving to the rest of the world, and the federal government budget deficit that supplies the net dollar saving to the nongovernment sector. Further, saving is never a source of finance; rather, private lending creates bank deposits to finance spending that generates income. Some of this income can be saved, so the second part of the saving decision concerns the form in which savings might be held--as liquid or illiquid assets. U.S. current account deficits and federal budget deficits are sustainable, so the United States does not need to adopt austerity, nor does it need to look to the rest of the world for salvation. Rather, it needs to look to domestic fiscal stimulus strategies to resolve the crisis, and to a larger future role for government in helping to stabilize the economy. [MMT]

alternative view; Deficit; EconPapers; finance; liquidity; save.

The Money Game Fri 2010-03-19 12:38 EDT

Kenneth Rogoff's Sovereign Debt Warnings Are So Wrong, It's Like He's Living In A Different Time Period

Marshall Auerback

We've persistently taken the view that there is no economic doctrine, no magic number, which would imply a firm external constraint as far as public spending goes, when dealing with a sovereign government issuing debt its own floating rate, non-convertible currency. At some point, we may indeed have a resource constraint, or an inflation constraint, but not a national solvency issue. Yet the hysteria surrounding fiscal policy has moved from the realm of rational debate and metamorphosed into a matter of national theology...A sovereign government is never hostage to the dictates of financial capital because it no longer faces the external constraint that was always present under a gold standard regime. A nation that adopts its own floating rate currency can always afford to put unemployed domestic resources to work. Its government may issue liabilities denominated in its own currency (for interest rate maintenance reasons or to offer its savers an interest-bearing alternative to cash), and will service any debt it issues in its own currency...

different time periods; Kenneth Rogoff's Sovereign Debt Warnings; lively; Money game; wrong.

THE PRAGMATIC CAPITALIST Wed 2010-02-10 11:22 EST

AN INSIDER'S VIEW OF THE REAL ESTATE TRAIN WRECK

TPC

The first time I spoke with real estate entrepreneur Andy Miller was in late 2007, when I asked him to serve on the faculty of a Casey Research Summit...what most intrigued me about Andy was that he had been almost alone among his peer group in foreseeing the coming end of the real estate bubble, and in liquidating essentially all of his considerable portfolio of projects near the top...he remains deeply concerned about the outlook for real estate...the United States home mortgage market has been nationalized without anybody noticing...If government support goes away, and it will go away, where will that leave the home market? It leaves you with a catastrophe...eventually the bond market is going to gag on the government-sponsored paper...commercial properties are not performing and that values have gone down, although I've got to tell you, the denial is still widespread, particularly in the United States and on the part of lenders sitting on and servicing all these real estate portfolios...The current volume of defaults is already alarming. And the volume of commercial real estate defaults is growing every month...When you hit that breaking point, unless there's some alternative in place, it's going to be a very hideous picture for the bond market and the banking system...second quarter 2010 is a guess...the FDIC and the Treasury Department have decided that rather than see 1,000 or 2,000 banks go under and then create another RTC to sift through all the bad assets, they'll let the banking system warehouse the bad assets. Their plan is to leave the assets in place, and then, when the market changes, let the banks deal with them. Now, that's horribly destructive...it's exactly a Japanese-style solution...The entire U.S. residential mortgage market has in effect been nationalized, but there wasn't any act of Congress, no screaming and shouting, no headlines in the Wall Street Journal or the New York Times...That's a template for what they could do with the commercial loan market.

insider's view; pragmatic capitalists; Real Estate Train Wreck.

Mon 2010-02-08 17:08 EST

The Bernanke Disaster: The Road to Debt Peonage

Michael Hudson

...On the political front, his reappointment is being cited as yet another proof that the Democrats care more for bankers than for American families and employees. As a result, it will do what seemed unfathomable a year ago: enable GOP candidates to strike the pose of FDR-type saviors of the embattled middle class. No doubt another decade of abject GOP economic failure would simply make the corporate Democrats appear once again to be the alternative. And so it goes... For Bernanke, the current financial system (or more to the point, the debt overhead) is to be saved so that the redistribution of wealth upward will continue...Meanwhile, the government is permitting corporate tollbooth to be erected across our economy -- and un-taxing this revenue so that it can be capitalized into financialized wealth paying only a 15 per cent tax rate on capital gains...Financial and fiscal policy thus reinforce each other in a way that polarizes the economy between the financial sector and the ``real'' economy.

Bernanke Disaster; DEBT peonage; Road.

Debtor's prison Sun 2010-01-03 10:37 EST

Would a Single World Currency be GOOD for the world?

MAAA

...One Single World Currency (SWC) is a topic that we have discussed many times from the very early days of this blog. For months, our discussions have focused on the causes behind the eventual collapse of the current USD-backed financial system, the apparent INEVITABILITY of this collapse and the very high LIKELIHOOD that the proposed solution to this will be a global monetary system backed by a single currency unit -- perhaps a modified version of an IMF SDR as Jesse suggests, or something new altogether. While most of our energy has been spent demonstrating the high likelihood (in our opinion, inevitability) of a SWC, we have been cowards when it comes to taking a stance on a SWC either way. Our apparent neutrality thus far has been largely motivated by a desire to remain unbiased while we explored some of the Numbers/definitions first. Having set these foundations and thought about the matter for some time, the gloves finally come off and we declare ourselves to be VEHEMENTLY OPPOSED to a SWC, both technically and in principle and spirit...we argue that the significantly increased trade granularity of the past few decades diminishes the need for a SWC, and in fact, creates ideal situations for the establishment of more localized currencies, which would be infinitely more stable than a SWC...increased trade granularity (which is a fact) increases the pheasibility and stability of local, floating currencies, to the point that they might be a preferable alternative to a SWC.

Debtor s Prison; good; Single World Currency; world.

naked capitalism Thu 2009-10-15 17:12 EDT

Hyperinflation, national bankruptcy, dollar crash and other exaggerations

Edward Harrison

Marc Faber, Martin Wolf... George Soros' comments on dollar weakness: ``The dollar is a very weak currency except all the others.'' Right now, there is no alternative to the dollar. Some people are fleeing U.S. assets if they can. But the alternatives are limited and this limits how far the dollar will fall. And this is unfortunate because the monetary system now in place is in need of change. Without it, we are likely to see nationalistic policy responses to economic weakness, which will induce conflict.

dollar crash; exaggerated; Hyperinflation; naked capitalism; nationalized bankruptcy.

zero hedge Sun 2009-10-11 16:45 EDT

Interview With A Mad Hedge Fund Trader

...Mad Hedge: Stay away from natural gas. The volatility will kill you. If you are a masochist, then buy it only when it's cheap, on big dips, in the $3/MBTU range. In the last three years, thanks to the new ``fracting'' technology used in oil shales, we have discovered a 100 year supply of natural gas sitting under the US, and the producers have not been able to cut back fast enough. So now we have a supply glut, and we are almost out of storage. This is what took us down from $13 to $2.40 in 18 months. The lack of hurricanes has not helped demand either. Producers have been cutting back like crazy, trying to balance supply and demand, with a breakeven point of $2. They need a cold winter to help bring things back into balance. If the industry gets organized, then gas can become the 20 year bridge we need, until energy alternatives kick in. That makes me a big supporter of the ``Pickens Plan.''

interview; Mad Hedge Fund Trader; Zero Hedge.

TraderFeed Sat 2009-10-10 13:48 EDT

Quick Look at TIPS and Beyond

Brett Steenbarger, Ph.D.

U.S. Treasury Inflation-Protected Securities (TIP; above) are making multi-month highs, amidst the weak dollar and strong gold. I've noticed a tick up in inflation talk among traders as well. With unemployment--not inflation--making the headlines, the Fed hardly has the political cover to begin serious talk of rate increases. With the Reserve Bank of Australia hiking rates, however, there are concerns that we are just a bit closer to the long-awaited exit from monetary ease. Meanwhile, higher Aussie rates only fuel the carry trade that has traders selling U.S. dollars and finding higher yielding alternatives elsewhere.

quick look; tip; TraderFeed.

Tue 2009-09-29 11:14 EDT

Take This Monetary System, Please - Up and Down Wall Street Daily - Barrons.com

RANDALL W. FORSYTH

The current exchange-rate regime can't go on, but what's the alternative?...As long as China's currency remains joined at the hip to the dollar, the impact of the dollar's weakness ironically is felt more outside the U.S. than within its borders. And to keep that exchange rate stable requires China to continue to accumulate U.S. assets, notwithstanding that nation's vocal complaints about American deficits that it is compelled to fund. [reserve currency]

Barrons; com; monetary System; please; take; Wall Street Daily.

Minyanville Sat 2009-09-05 11:47 EDT

Why Hanging On to UNG Is Risky Business

People have been up in arms for months now about the troubles at the United States Natural Gas Fund LP (UNG) the ETF designed to track the price of natural gas. And as far as I can tell rightly so. ETFs were meant to be a nearly frictionless relatively simple alternative to the clunky closed-end funds (CEFs) and managed products that our parents and grandparents had to contend with. But UNG recently traded at a 19% premium to its net asset value (NAV) -- behavior far more fitting a CEF...But since hand-wringing over UNG seems to be the consensus approach, here's a contrarian thought: UNG has, to date, tracked natural gas futures (NG) fairly well.

hang; Minyanville; Risky Business; UNG.

Thu 2009-07-23 00:00 EDT

Interfluidity :: Continuous bankruptcy

alternative to the customary form of corporate debt

Continuous bankruptcy; Interfluidity.

Tue 2009-04-21 00:00 EDT

naked capitalism: Guest Post: Mother of All Stealth Scams?

pension fund scam involved ``alternative investments, allowing private funds to collect exorbitant fees and senior pension fund managers to collect huge bonuses based on bogus benchmarks''

Guest Post; mother; naked capitalism; Stealth Scams.

Tue 2009-04-21 00:00 EDT

naked capitalism: Guest Post: What Do Pensions Have in Common with AIG?

by Leo Kolivakis; ``Both were claiming to run a core business when in reality they were fueling a Ponzi scheme using "sophisticated instruments" or "alternative investments" that threaten the security of the global financial system''

AIG; common; Guest Post; naked capitalism; pension.

Wed 2009-02-11 00:00 EST

Jesse's Café Américain: Some Thoughts on the Debt Disaster in the US and UK and Possible Alternatives

Jesse's Café Américain: Some Thoughts on the Debt Disaster in the US and UK and Possible Alternatives

Debt Disaster; Jesse's Café Américain; possible alternative; thought; UK.

Tue 2008-10-07 00:00 EDT

The Big Picture | An Alternative Plan for Fixing Credit & Housing

The Big Picture | An Alternative Plan for Fixing Credit & Housing; Bill King bailout plan

Alternative Plan; Big Picture; Fixing Credit; Housing.

Tue 2008-07-08 00:00 EDT

protobuf - Google Code

-- Protocol Buffers encode structured data; XML alternative; Google in-house protocol

Google Code; ProtoBuf.

Thu 2008-06-19 00:00 EDT

Ron Paul and Dwight D. Eisenhower -- True Patriots by Jim Quinn

Ron Paul and Dwight D. Eisenhower - True Patriots by Jim Quinn; If as a country we continue to allow our politicians and their military industrial complex corporate sponsors to spend $700+ billion per year on weapons, to the detriment of higher education, alternative energy projects, and national infrastructure needs...as deficits accumulate, the dollar plummets, and inflation rears its ugly head, our great country will decline as other empires who overstepped their bounds declined"

Dwight D. Eisenhower; Jim Quinn; Ron Paul; true patriot.

Fri 2007-11-02 00:00 EDT

Mish's Global Economic Trend Analysis: Jobs Report From Alternate Universe

overstating employment; birth/death adjustments

Alternate university; jobs reporting; Mish's Global Economic Trend Analysis.