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Blog entry Sun 2010-10-10 09:51 EDT

Crony Capitalism: Wall Street's Favorite Politicians

A full 90 members of Congress who voted to bailout Wall Street in 2008 failed to support financial reform reining in the banks who drove our economy off a cliff. But when you examine campaign contribution data, it's really no surprise that these particular lawmakers voted to mortgage our economic future to Big Finance: This election cycle, they've raked in over $48.8 million from the financial establishment. Over the course of their Congressional careers, the figure swells to a massive $176.9 million. The full list of these Crony Capitalists is below, along with the money they pulled in from Big Finance, according to data compiled by the Center for Responsive Politics (opensecrets.org)...

blog entry; Crony Capitalism; Wall Street's Favorite Politicians.

zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Fri 2010-10-08 19:33 EDT

Will We Have Hyperinflation In America?

I have been reading a lot lately about the coming hyperinflation in America. Among those I've read are Mr. Shadowstats John Williams, John Hussman, Jim Quinn, commentators on Zero Hedge, and Mr. Gloom Doom and Boom himself Marc Faber. My favorite philosopher, Nassim Taleb has also taken up the hyperinflation case. And I didn't forget Jim Rogers, Peter Schiff, and others...Will hyperinflation happen here? It is possible but unlikely and improbable...There are economic and political reasons why I don't think hyperinflation would occur...none of the economic or political factors required to set off hyperinflation are present. A careful analysis of theory, fact, and history leads me to conclude that inflation/stagflation is our future. It is quite a leap of fancy to say we are certain to have hyperinflation.

America; dropped; Hyperinflation; long; survival rate; Timeline; zero; Zero Hedge.

New Economic Perspectives Wed 2010-09-29 09:11 EDT

An Interview with Warren Mosler: Modern Money Theory and the Exonomy

...unemployment is evidence of a lack of aggregate demand, so what the world is lacking is sufficient aggregate demand. *In the United States, my prescription includes 1) what we call a payroll tax holiday, i.e., a tax reduction, 2) a revenue distribution to the states by the federal government and 3) a federally funded $8.00-per-hour job for anyone willing and able to work. * *For the euro zone, I propose a distribution from the European Central Bank to the national governments of perhaps as much as 20 percent of GDP to be done on a per capita basis so it will be fair to all the member nations*.

Exonomy; interview; Modern Money Theory; New Economic Perspectives; Warren Mosler.

Sat 2010-09-25 11:02 EDT

Where is the World Economy Headed?

...financial maneuvering and debt leverage play the role that military conquest did in times past. Its aim is still to control land, basic infrastructure and the economic surplus -- and also to gain control of national savings, commercial banking and central bank policy...Indebted ``host economies'' are in a similar position to that of defeated countries. Their economic surplus is transferred abroad financially, while locally, debtors lose sovereignty over their own financial, economic and tax policy. Public infrastructure is sold off to foreign buyers, on credit and therefore paying interest and fees that are expensed as tax-deductible and paid to foreigners. The Washington Consensus applauds this pro-rentier policy. Its neoliberal ideology holds that the most efficient path to wealth is to shift economic planning out of the hands of government into those of bankers and money managers in charge of privatizing and financializing the economy. Almost without anyone noticing, this view is replacing the classical law of nations based on the idea of sovereignty over debt and financial policy, tariff and tax policy...Bankers in the North look upon any economic surplus -- real estate rent, corporate cash flow or even the government's taxing power or ability to sell off public enterprises -- as a source of revenue to pay interest on debts...The original liberals -- from Adam Smith and the Physiocrats through John Stuart Mill and even Winston Churchill -- urged that the tax system be based on the economic rent of land so as to keep down the price of housing (and hence labor's cost of living). The Progressive Era followed this principle by aiming to keep natural monopolies such as transportation, communication and even banks (or at least, free credit creation) in the public domain. But the post-1980 world has encouraged private owners to buy them on credit and extract economic rent, thereby shifting the tax burden onto labor, industry and agriculture -- while concentrating wealth, first on credit and then via the enormous recent public bailouts of this failed financial debt pyramiding and deregulation...At issue is the concept of free markets. Are they to be free from monopoly and special privilege, or free for the occupying financial invaders and speculators?...

World Economy Headed.

Jesse's Café Américain Sat 2010-09-25 09:55 EDT

FOMC: Sound the Bell. School's In, Suckas

...What the Fed cannot do is breathe vitality into a zombie economy, and provoke a sustained recovery not tied to some sort of credit bubble. That is why stagflation remains the most likely outcome until the nation obtains the will and the determination to reform the financial system and restore a balance to trade and the real economy through a commitment to sound and practical public policy not driven by self-serving economic quackery. The dollar and bonds are made stronger through a vibrant underlying economy with the ability to generate taxable income and real returns to their holders. But in the meanwhile the special interests will be served. A profound deflation and hyperinflation remain as possibilities for the future, but they will most likely be seen on the horizon in advance of their arrival as the result of some exogenous event or catastrophic failure. So far, not a glimpse...

bell; FOMC; Jesse's Café Américain; school's; sounds; SUCKAS.

Christopher Whalen Sat 2010-09-25 09:52 EDT

Double dip or global deflation?

...Let's start with the term ``recession,'' which itself reflects the assumption that economic growth is always positive and the trend line is always upward sloping. While many economists in the U.S. remain convinced that this is an accurate descriptor, what Americans and many other people of the world need to consider is whether the assumption that the economy will grow endlessly is reasonable...much of what Americans think was real growth supported by real income and real work was, in fact, the result of deficit spending and reckless monetary expansion by the Fed, first under Alan Greenspan and now Ben Bernake...some of the leading experts in the housing sector believe that the U.S. is less than 25% through the restructuring of defaulted loans on commercial and residential real estate, and that the backlog is growing...Just as the housing sector and the related debt was the driver of the U.S. economy over the past several decades, I believe that the deflation of the housing market could spell an equally drastic period of shrinkage in economic activity in the U.S. and around the world...

Christopher Whalen; double dip; Global deflation.

zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Sat 2010-09-25 09:47 EDT

Chris Whalen On The Upcoming "Worst Economic Contraction Since WWI (Forget WWII)"

The erosion of the profitability of the U.S. banking industry over the past two years under the glorious Summers-Geithner-Bernanke rescue scheme is the proverbial fly in the ointment for both major political parties. Democrats and republicans alike are going to be fed into the meat grinder over the next several years as the banking sector deals with literally hundreds of billions of dollars in direct and indirect expenses from the deflation of the mortgage bubble. For the economy, this slow process of muddle along championed by Summers and Geithner will ensure that Barack Obama becomes the Herbert Hoover of the Democratic Party. The economic carnage that will causes these losses, as we described in a recent post in Reuters, "Double Dip or Global Deflation?," is going to represent the worst economic contraction since WWI. Forget WWII. Think "shrinkage" to use the Gilded Age description for economic deflation. And frankly nothing that either the Fed or Treasury does in the near-term can change this basic economic fact of restructuring...the economic situation at BAC and among all of the legacy zombie banks continues to worsen. No amount of bullshit from Washington changes the fundamental economic situation inside the largest U.S. lenders.

Chris Whalen; dropped; Forget WWII; long; survival rate; Timeline; upcoming; worst economic contraction; WWI; zero; Zero Hedge.

Mish's Global Economic Trend Analysis Fri 2010-09-24 15:05 EDT

Elizabeth Warren Tossed a Bone and Appointed Geithner's Lapdog

Under guise of being handed an important role, Elizabeth Warren was shoved aside and tossed a bone by President Obama. One might not know it from the New York Times headline Warren to Unofficially Lead Consumer Agency...Unfortunately, no matter how much Obama tries to spin it, this has nothing to do with a "potentially contentious confirmation" but rather everything to do with Geithner winning the battle to marginalize her...

Appointed Geithner's Lapdog; bones; Elizabeth Warren Tossed; Mish's Global Economic Trend Analysis.

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

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

...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.

Mon 2010-09-20 10:14 EDT

Mish's Global Economic Trend Analysis: Fictional Reserve Lending And The Myth Of Excess Reserves

...1) Lending comes first and what little reserves there are (if any) come later. 2) There really are no excess reserves. 3) Not only are there no excess reserves, there are essentially no reserves to speak of at all. Indeed, bank reserves are completely "fictional". 4) Banks are capital constrained not reserve constrained. 5) Banks aren't lending because there are few credit worthy borrowers worth the risk. ...concern that excess reserves will lead to lending and inflation is totally unfounded in theory and practice. Fractional Reserve Lending is really Fictional Reserve Lending. In practice, the major constraints to lending are insufficient capital and willingness of credit worthy borrowers to seek loans.

excess reserves; Fictional Reserve Lending; Mish's Global Economic Trend Analysis; myth.

Mon 2010-09-20 10:12 EDT

Mish's Global Economic Trend Analysis: Fiat World Mathematical Model

...Conditions today are essentially the same as during the great depression...It is the destruction of credit, coupled with the fact that what the Fed is printing is not even being lent that matters...we are in deflation based on the following definitions: Inflation is a net expansion of money and credit. Deflation is a net contraction of money and credit. In both definitions, credit needs to be marked to market...the mark to market value of credit is contracting faster than base money is rising...The Fed tries to hide the contraction in the market value of bank credit by its Don't Ask, Don't Sell policy...The credit bubble that just popped exceeded that preceding the great depression, not just in the US but worldwide. Thus, it is unrealistic to expect the deflationary bust to be anything other than the biggest bust in history. Those looking for hyperinflation or even strong inflation in light of the above, are simply looking at the wrong model...

Fiat World Mathematical Model; Mish's Global Economic Trend Analysis.

naked capitalism Mon 2010-09-20 09:24 EDT

Theoclassical Law and Economics Makes the Law an Ass

...The Supreme Court's Citizens United decision allows businesses to make unlimited political contributions to judges and politicians. When judges are elected, the need for these contributions inherently turns judges into politicians. Sympathetic judges are corrupt businesses' most valuable allies. Corporations and their senior officials can commit civil or criminal wrongs with impunity if their case is assigned to a friendly judge...Yves noted that the Chamber of Commerce was leading the effort to elect CEO-friendly judges...The Chamber distributed a plan for a hostile takeover of university departments of economics and finance (and the courts and the media) proposed by Lewis Powell (the soon to be Supreme Court Justice). Extremely conservative ``law and economics'' proved to be central to this effort. The law and economics movement began as a non-ideological approach to explaining and aiding judicial decision-making. The scholars leading the movement had diverse views. The Olin Foundation transformed law and economics into an ultra ideological field dominated almost exclusively by passionate opponents of government ``interference'' in ``free enterprise.'' Olin specialized in creating well-funded positions in academia for scholars that had an ``Austrian'' approach to economics...Law and economics has, for over two decades, been dominated by theoclassical economic dogmas that have proved false...There are now tens of thousands of law and economics graduates that have taken a class in theoclassical law and economics. They were taught that theoclassical economic assertions (often falsified decades ago) were objective facts devoid of ideological content. They have been taught that economics has proven that regulation is unnecessary, hopeless, and harmful...

ass; economics make; Law; naked capitalism; Theoclassical Law.

naked capitalism Fri 2010-09-17 19:42 EDT

Auerback: TARP Was Not a Success -- It Simply Institutionalized Fraud

...the only way to call TARP a winner is by defining government sanctioned financial fraud as the main metric of results. The finance leaders who are guilty of wrecking much of the global economy remain in power -- while growing extraordinarily wealthy in the process. They know that their primary means of destruction was accounting ``control fraud'', a term coined by Professor Bill Black, who argued that ``Control frauds occur when those that control a seemingly legitimate entity use it as a `weapon' to defraud.'' TARP did nothing to address this abuse; indeed, it perpetuates it. Are we now using lying and fraud as the measure of success for financial reform?...Money was ``repaid'', not because the banks were accumulating massive profits as a consequence of their revival, but largely as an outgrowth of the accounting tricks sanctioned by Congress and the White House in the wake of the 2008 financial crisis...When we lie about accounting and leave zombie banks in the hands of those that looted them and caused trillions of dollars of losses we eviscerate our integrity and our efforts at economic recovery...

Auerback; naked capitalism; Simply Institutionalized Fraud; Success; TARP.

Christopher Whalen Fri 2010-09-17 19:31 EDT

The key to the future of finance is now emerging

Basel III is entirely irrelevant to the economic situation and even to the banks. Through things like minimum capital levels, the Basel II rules provided the illusion of intelligent design in the regulation of banking and finance. In fact, Basel II made the subprime crisis possible and the subsequent bailout inevitable [by enabling off-balance sheet finance and OTC derivatives]...Part of the reason for my undisguised contempt for the Basel III process comes from caution regarding the benefits of regulating markets...But a large portion of my criticism for Basel III and the entire Basel framework is even more basic, namely the notion that any form of a priori regulation, public or private, can prevent people from doing stupid things...The key premise of Basel III is that the use of minimum capital guidelines and other strictures will somehow enable regulators to prevent a crises before it occurs. The only trouble is that regulators have no objective measures for compliance with Basel II/III, much less predicting market breaks...As in past decades and crises right through to 2008, the regulators will be the last to know about a problem...

Christopher Whalen; Emergency; finance; future; Key.

Wed 2010-09-15 13:55 EDT

billy blog >> Blog Archive >> Export-led growth strategies will fail

The United Nations Conference on Trade and Development (UNCTAD) released their annual Trade and Development Report, 2010 yesterday (September 14, 2010). The 204 page report which I have been wading through today is full of interesting analysis and will take several blogs over the coming weeks to fully cover. The message is very clear. Export-led growth strategies are deeply flawed and austerity programs will worsen growth and increase poverty. UNCTAD consider a fundamental rethink has to occur where policy is reoriented towards domestic demand and employment creation. They consider an expansion of fiscal policy to be essential in the current economic climate as the threat of a wide-spread double dip recession increases. The Report is essential reading...

Billy Blog; blogs Archive; Export-led growth strategies; fail.

Mish's Global Economic Trend Analysis Mon 2010-09-13 15:53 EDT

Debating the Flat Earth Society about Hyperinflation

Over the past few weeks, many people have asked me to comment on John Hussman's August 23, 2010 post Why Quantitative Easing is Likely to Trigger a Collapse of the U.S. Dollar. Most wanted to know how that article changed my view regarding deflation. It didn't...I was asked about a guest post by Gonzalo Lira on Zero Hedge. I had seen the article and I made an off-the-cuff statement that the post was so silly it was not worth commenting not...Commenting on the above is tantamount to debating the flat earth society. The premise is so silly it's not worth discussing, yet here I am trapped into discussion by a mischaracterization of my statement "Hyperinflation Ends The Game"...The commonality between Zimbabwe and Weimar is they are both political events. In Zimbabwe a political event triggered capital flight, in Weimar a political event started massive printing, triggering hyperinflation...To understand how powerless the Fed is, one needs to understand the difference between credit and money, how much the former dwarfs the latter...Hyperinflation could theoretically come from massive sustained political will to bail out the little guy at the expense of the banks, the wealthy, and the political class. However, unlike Mugabe and Zimbabwe, neither the banks nor the Fed nor the political class wants to bail out the poor at the expense of the wealthy. Indeed, Bernanke's, Paulson's, and Geithner's actions to date have done the exact opposite!...

Debate; Flat Earth Society; Hyperinflation; Mish's Global Economic Trend Analysis.

naked capitalism Fri 2010-09-10 18:46 EDT

Auerback: China is Still a Renegade Nation

...In response to Beijing's mind boggling increase in real credit in the first half of 2009,Chinese fixed investment in industrial tradables rose dramatically...By the second quarter of this year some -- but only some -- of this new capacity began to come on stream. Further production responses to this new round of Chinese overinvestment lie ahead...But because of the potential protectionist threat and the underlying fragility at the heart of China's capex boom (along with the corruption of its political class), the change in status might prove to be ephemeral, much as Japan's vaunted rise to number 2 ultimately gave way to a post-bubble morass...in July Chinese domestic demand may have gone negative in real terms. It was only a huge improvement in net trade that kept production growth significantly positive on a sequential basis...The fact that China has the greatest fixed investment excess ever suggests that, when it unwinds, there will be a nasty economic adjustment in China...

Auerback; China; naked capitalism; Renegade Nation.

naked capitalism Wed 2010-09-08 17:27 EDT

Economic consequences of speculative side bets -- The case of naked CDS

...We argue that the existence of naked credit default swaps has significant effects on the terms of financing, the likelihood of default, and the size and composition of investment expenditures. And we identify three mechanisms through which these broader consequences of speculative side bets arise: collateral effects, rollover risk, and project choice...the existence of zero-sum side bets on default has major economic repercussions. These contracts induce investors who are optimistic about the future revenues of borrowers, and would therefore be natural purchasers of debt, to sell credit protection instead. This diverts their capital away from potential borrowers and channels it into collateral to support speculative positions. As a consequence, the marginal bond buyer is less optimistic about the borrower's prospects, and demands a higher interest rate in order to lend. This can result in an increased likelihood of default, and the emergence of self-fulfilling paths in which firms are unable to rollover their debt, even when such trajectories would not arise in the absence of credit derivatives. And it can influence the project choices of firms, leading not only to lower levels of investment overall but also in some cases to the selection of riskier ventures with lower expected returns...

Case; economic consequences; naked capitalism; Naked CDS; speculative side bets.

Clusterstock Sat 2010-09-04 11:16 EDT

Your Textbooks Lied To You: The Money Multiplier Is A Myth

The following comes from an excellent new paper from the Fed. The paper describes the myth of the money multiplier and is an absolute must read for anyone who is trying to fully understand the current environment. It turns much of textbook economics on its head and describes in large part why the bank rescue plan and the idea of banks being reserve constrained is entirely wrong: ``Simple textbook treatments of the money multiplier give the quantity of bank reserves a causal role in determining the quantity of money and bank lending and thus the transmission mechanism of monetary policy. This role results from the assumptions that reserve requirements generate a direct and tight linkage between money and reserves and that the central bank controls the money supply by adjusting the quantity of reserves through open market operations. Using data from recent decades, we have demonstrated that this simple textbook link is implausible in the United States for a number of reasons...bank loan supply does not respond to changes in monetary policy through a bank lending channel, no matter how we group the banks...''

ClusterStock; Money Multiplier; myth; textbook lying.

New Deal 2.0 Fri 2010-09-03 18:57 EDT

The Real Lesson from the Great Depression: Fiscal Policy Works!

...At the outset of the Great Depression, economic output collapsed, and unemployment rose to 25 per cent. Influenced by his ``liquidationist'' Treasury Secretary, Andrew Mellon, then President Hoover made comparatively minimal attempts to deploy government fiscal policy to stimulate aggregate demand...This all changed under FDR...The government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York's Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown...once the Great Depression hit bottom in early 1933, the US economy embarked on four years of expansion that constituted the biggest cyclical boom in U.S. economic history. For four years, real GDP grew at a 12% rate and nominal GDP grew at a 14% rate. There was another shorter and shallower depression in 1937 largely caused by renewed fiscal tightening (and higher Federal Reserve margin requirements)...

0; Fiscal policy worked; Great Depression; new dealing 2; Real Lesson.

Money Game Wed 2010-09-01 10:53 EDT

Why Ben Bernanke's Next Round Of Quantitative Easing Will Be Another Huge Flop

There is perhaps, no greater misunderstanding in the investment world today than the topic of quantitative easing [QE]. After all, it sounds so fancy, strange and complex. But in reality, it is quite a simple operation...The Fed simply electronically swaps an asset with the private sector. In most cases it swaps deposits with an interest bearing asset...The theory behind QE is that the Fed can reduce interest rates via asset purchases (which supposedly creates demand for debt) while also strengthening the bank balance sheet (which entices them to lend). Unfortunately, we've lived thru this scenario before and history shows us that neither is actually true. Banks are never reserve constrained and a private sector that is deeply indebted will not likely be enticed to borrow regardless of the rate of interest...The most glaring example of failed QE is in Japan in 2001. Richard Koo refers to this event as the ``greatest monetary non-event''...Since Ben Bernanke initiated his great monetarist gaffe in 2008 there has been almost no sign of a sustainable private sector recovery. Mr. Bernanke's new form of trickle down economics has surely fixed the banking sector (or at least bought some time), but the recovery ended there. ..The hyperventilating hyperinflationists and those investors calling for inevitable US default are now clinging to this QE story as their inflation or default thesis crumbles before their very eyes...With the government merely swapping assets they are not actually ``printing'' any new money. In fact, the government is now essentially stealing interest bearing assets from the private sector and replacing them with deposits...now that the banks are flush with excess reserves this policy response would in fact be deflationary - not inflationary...

Ben Bernanke's; Huge Flop; Money game; Quantitative Easing.

billy blog Tue 2010-08-31 18:22 EDT

Monetary policy under challenge ... finally

The central bankers have been meeting in Wyoming over the weekend as part of the annual Economic Symposium organised by the Federal Reserve Bank of Kansas City...some notable presentations...suggest that key central bankers are starting to realise that the economic crisis in not over and the fiscal-led recovery is slowing and that monetary policy alone cannot provide the solution. Moreover, one leading central banker [BOE deputy Charles Bean] indicated that monetary policy is not a suitable tool for controlling longer term problems such as price bubbles in specific asset classes. This view challenges the basis of the mainstream macroeconomics consensus that has dominated the policy debate for 30 odd years and culminated in the worst financial and economic crisis in 80 years. It is certanly a welcome trend in a debate which is typically flooded with ideological input from the mainstream macroeconomics profession....

Billy Blog; challenges; final; monetary policy.

Mish's Global Economic Trend Analysis Thu 2010-08-26 15:11 EDT

"Contained Depression"

Kevin Feltes, an economist for the Jerome Levy Forecasting Center, solicited my opinion on a couple of their recent articles. Levy comes down on the side of deflation, as do I. However, the devil is in the details...That Levy managed to come to what I believe is the proper overall conclusion stems from Levy's rock-solid case presented in section 2: Why Aggressive Monetary Policy Isn't Causing and Won't Cause Inflation...

contained Depression; Mish's Global Economic Trend Analysis.

Thu 2010-08-26 09:03 EDT

Why Doesn't the United States Have a European-Style Welfare State? | The Weatherhead Center for International Affairs

European countries are much more generous to the poor relative to the US level of generosity. Economic models suggest that redistribution is a function of the variance and skewness of the pre--tax income distribution, the volatility of income (perhaps because of trade shocks), the social costs of taxation and the expected income mobility of the median voter. None of these factors appear to explain the differences between the US and Europe. Instead, the differences appear to be the result of racial heterogeneity in the US and American political institutions. Racial animosity in the US makes redistribution to the poor, who are disproportionately black, unappealing to many voters. American political institutions limited the growth of a socialist party, and more generally limited the political power of the poor. [2001 Brookings Papers on Economic Activity; pdf downloaded]

European-Style Welfare State; internal affairs; United States; Weatherhead Center.

Fabius Maximus Wed 2010-08-25 09:31 EDT

The face of America's decline

...Mark Hurd, until recently CEO of HP. See the face of America's economic decline...from ``The Real Reason for Ousting H.P.'s Chief``, Joe Nocera, New York Times: [according to] Charles House, a former longtime H.P. engineer: The way H.P. made its numbers...was not just cutting any old costs, but by ``chopping R.&D.,'' which had always been sacred at H.P. The research and development budget used to be 9% of revenue, Mr. House told me; now it was closer to 2%. ``In the personal computer group, it is 0.7%''...Here we see America's formula for decline... 1. Fantastic pay for leaders 2. Stagnant pay for employees 3. Cutting jobs (efficiencies, forcing harder work, moving off-shore) 4. Slash investments in the future (capex, training, R&D)...

America s decline; Fabius Maximus; Faces.

Tue 2010-08-24 20:09 EDT

EconomicPolicyJournal.com: Is China Executing a Cunning Sun Tzu Strategy to Destroy the Dollar and Cause an Upward Price Explosion in Gold?

Could China be coveting the role of the next economic superpower, thereby supplanting the USA? If so, is China planning to do this by design or is it simply awaiting this result by default as a result of the total collapse of the American economic system?...At a superficial level, it may appear to the onlooker that China has been sucked into a giant malinvestment by purchasing these bonds, but a closer look at Master Sun's stratagems may reveal a well conceived and even cunning plan...China may well be heading in the direction of pegging its currency in some form to something else and that that something else, is very likely to be gold. Then China could offload its US bonds by sale , once again raising the price of gold dramatically which in turn would compensate for the dollar losses...Not only would this give China the only trustworthy currency in the world, but it would simultaneously and conveniently constitute the knock-out blow to the USA as the economic superpower...

caused; China executive; com; Cunning Sun Tzu Strategy; destroyed; Dollar; EconomicPolicyJournal; gold; Upward Price Explosion.

naked capitalism Tue 2010-08-24 20:02 EDT

Boston Fed's New Excuse for Missing the Housing Bubble: NoneOfUscouddanode

It is truly astonishing to watch how determined the economics orthodoxy is to defend its inexcusable, economy-wrecking performance in the runup to the financial crisis...From the Wall Street Journal Economics blog: Should economists and policy makers have identified the housing market bubble before it burst? The answer is most likely no, says the Federal Reserve Bank of Boston, because economic theory was not up to the challenge... Yves: This recitation is truly embarrassing, in that the writers clearly see this abject failure as completely reasonable, as opposed to compelling evidence that the discipline is not qualified to provide policy advice. What could be more damning than admitting that economics was incapable of seeing the blindingly obvious?...

Boston Fed's New Excuse; housing bubble; missing; naked capitalism; NoneOfUscouddanode.

Mon 2010-08-23 11:03 EDT

A Program for Monetary Reform, the 1939 Document | Economic Stability

[pdf download] ...Our own monetary policy should likewise be directed toward avoiding inflation as well as deflation, and in attaining and maintaining as nearly as possible full production and employment. ...[100% Reserve System] Since the fractional reserve system hampers effective control by the Monetary Authority over the volume of our circulating medium it is desirable that any bank or other agency holding deposits subject to check (demand deposits) be required to keep on hand a dollar of reserve for every dollar of such deposit, so that, in effect, deposits subject to check actually represent money held by the bank in trust for the depositor.

1939 document; Economic stability; Monetary Reform; program.

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