Mon 2010-07-19 16:30 EDT

US gripped with offshore economy

Jobs are becoming scarcer and scarcer particularly in the United States. Is it cyclical or is it structural? Is it something that America has completely turned its back on in a way that could potentially be a factor for decades going forward? Max Keiser discusses this issue with Dr. Paul Craig Roberts...Keiser: Andy Grove, the co-founder of Intel has just written an opinion piece for Bloomberg that has totally vindicated your long held argument against outsourcing American jobs...What is left in the arsenal to fight for jobs? Roberts:Nothing, one of the reasons they like offshoring is to destroy the unions so that's one of the reasons free market economists and corporations are so keen on offshoring, it destroys the unions...the only jobs that have been created in the 21st century in America are domestic service jobs like waiters, bartenders, hospital orderlies, construction workers, real estate, they are continuing to lose manufacture jobs, and not creating jobs for scientists and engineers and this has now been going on for a decade...What the US is going through is a process of disdevelopment of becoming an undeveloped economy; it's the opposite of economic development going on in the US...

grip; Offshored Economy.

New Economic Perspectives Mon 2010-07-19 13:51 EDT

The Myths About Government Debt and Deficit as Told By Carmen Reinhart and Kenneth Rogoff

Yeva Nersisyan

...with nearly 10% of the US labor force unemployed and another 7% underemployed, the public debate is now focused on the false issue of deficits and debt. A case in point is a recent book by Carmen Reinhart and Kenneth Rogoff, ``This Time is Different'' that has become a bestseller...The media as well as academia have fawned all over this book...The crux of the book is that each time people think that ``this time is different'', that crises cannot occur anymore or that they happen to other people in other places. True. This is exactly what Hyman Minsky was arguing more than 40 years ago. Reinhart and Rogoff don't really explain why this perception leads to crises...The book is mostly on crises driven by government debt...[however] Aggregating data over different monetary regimes and different countries cannot yield any meaningful conclusions about sovereign debt and crises. It is only useful if the goal is to merely validate one's preconceived myth about government debt being similar to private debt...As far as I can tell Rogoff and Reinhart haven't identified a single case of government default on domestic-currency denominated debt with a floating exchange rate system...Professional economists are a major impediment on the way to using our economic system for the benefit of us all. And Reinhart and Rogoff are no exception.

Carmen Reinhart; Deficit; government debt; Kenneth Rogoff; myth; New Economic Perspectives; told.

billy blog Thu 2010-07-15 16:35 EDT

Employment gaps -- a failure of political leadership

Overnight a kind soul (thanks M) sent me the latest Goldman Sachs US Economist Analysis (Issue 10/27, July 9, 2010) written by their chief economist Jan Hatzius...It presents a very interesting analysis of the current situation in the US economy, using the sectoral balances framework, which is often deployed in Modern Monetary Theory (MMT)...some of the top players in the financial markets have a good understanding of the essentials of MMT...he US is likely to have to endure on-going and massive employment gaps (below potential) for years because the US government is failing to exercise leadership. The paper recognises the need for an expansion of fiscal policy of at least 3 per cent of GDP but concludes that the ill-informed US public (about deficits) are allowing the deficit terrorists to bully the politicians into cutting the deficit. The costs of this folly will be enormous...

Billy Blog; employment gap; failure; political leadership.

Fri 2010-06-18 10:24 EDT

The Progressive Economics Forum >> Remembering Wynne Godley

Jim Stanford

Progressive economists everywhere should say a thank you this week to Wynne Godley, who passed away May 13...His final major volume (published by Palgrave in 2007) was a tour de force of heterodox macro theory, co-written with Canada's (and the PEF's) own Marc Lavoie: Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth. Like Minsky, he can say ``I told you so'' to the whole neoclassical profession - although unlike Minsky, Godley could do this while he was still alive...His work exploring the implications of basic macro identities (such as the basic but oft-ignored fact that all sector deficits in the economy have to sum to zero in equilibrium, and hence not all sectors can be paying down debt simultaneously - someone must be increasing their debt to keep the money flowing) has influenced heterodox writers of all stripes...

Progressive Economics Forum; Remembering Wynne Godley.

Thu 2010-06-03 17:42 EDT

World Order, Failed States and Terrorism, Part 3: The Business of Private Security

Henry C K Liu

...Social order is the main component of domestic security. Social security is the foundation of social order. Henry J Aaron of the Brookings Institution calls the US Social Security system "the great monument of 20th-century liberalism". Privatization of social security is not a solution; it is an oxymoron. It merely turns social security into private security. Neo-liberal economics theory promotes as scientific truth an ideology that is irrationally hostile to government responsibility for social programs. Based on that ideology, neo-liberal economists then construct a mechanical system of rationalization to dismantle government and its social programs in the name of efficiency through privatization. Privatization of social security is a road to government abdication, the cause of failed statehood...In the era of financial globalization, nations are faced with the problem of protecting their economies from financial threats. The recurring financial crises around the world in recent decades clearly demonstrated that most governments have failed in this critical state responsibility. The economic benefits associated with the unregulated transfer of financial assets, such as cash, stocks and bonds, across national borders are frequently not worth the risks, as has been amply demonstrated in many countries whose economies have been ravaged by external financial forces. Cross-border capital flows have become an increasingly significant part of the globalized economy over recent decades. The US depends on it to finance its huge and growing trade deficit. More than $2.5 trillion of capital flowed around the world in 2004, with more than $1 trillion flowing into just the US. Different types of capital flows, such as foreign direct investment, portfolio investment, and bank lending, are driven by different investor motivations and country characteristics, but one objective stands out more than any other: capital seeks highest return through lowest wages. The United States is not only losing jobs to lower-wage economies, the inflow of capital also forces stagnant US wages to fall in relation to rising asset values.

business; failed state; Part 3; private security; terror; World ordering.

Mon 2010-05-24 10:57 EDT

Asia Times Online :: World Order, Failed States and Terrorism

Henry C. K. Liu

The Washington Consensus, the synchronized ideology of US-based establishment economists, has for a quarter of a century wrought havoc in the developing world, leaving in its wake "failed states" vulnerable to economic, if not military, takeover. Yet the great failure of our age is not the concept of the sovereign state, but market fundamentalism itself...[10 part series]

Asia Times Online; failed state; terror; World ordering.

Sat 2010-05-22 20:28 EDT

New Economic Perspectives: What If the Government Just Prints Money?

Scott Fullwiler

As Congress gets set in the near future to consider raising the debt ceiling yet again, my fellow blogger L. Randall Wray creatively suggests not raising the debt ceiling but instead having the Treasury continue spending as it always does: by simply crediting bank accounts...Wray's proposal is based upon modern monetary theory (MMT) that is the focus this blog and those by Bill Mitchell, Warren Mosler, and Winterspeak. Of course, given the lack of understanding of basic reserve accounting at the heart of MMT and Wray's proposal on the part of the public, the financial press, and the vast majority of economists, one can already anticipate the outpouring of criticism suggesting that such a proposal amounts to ``printing money'' and thereby destroying the value of the currency...The approach here recognizes the importance of understanding the balance sheet implications of both of these options that are central to MMT. While most economists typically assume a supply and demand relationship, as in the hypothesized loanable funds market, and then build models accordingly, such an approach can miss important relationships in the real world...Both the Treasury's bond sales and the Fed's operations affect only the relative quantities of securities, reserve balances, and currency held by the non-government sector; the total sum of these is set by the outstanding government debt. With or without bond sales, it is the non-government sector's decision to spend or save that matters in regard to the potential inflationary impact of a given government deficit. Indeed, to be more precise, a deficit accompanied by bond sales is actually the MORE potentially inflationary option, as the net financial assets created by the deficit will be increased still further when additional debt service is paid.

Government Just Prints Money; New Economic Perspectives.

Sat 2010-05-22 13:46 EDT

KOO's "Good News": Nomura Economist Says GDP Needn't Fall In "Balance Sheet Recession"

...Koo's theory and his prescriptions for what currently ails the world are as fascinating as they are unconventional. Considering the woeful track record of orthodox economists (across the entire spectrum from liberal to conservative) in diagnosing, much less treating, the body economic as it has been wracked with credit ills, Koo's fresh perspectives, grounded in the searing experience of Japan's Great Recession, demand careful consideration...

Balance Sheet Recessions; GOOD NEWS; Koo's; Nomura Economist Says GDP Needn't Fall.

zero hedge Thu 2010-05-20 15:41 EDT

Perspectives From Rosenberg On Hyperinflation As A Loss Of Faith In A Currency

In today's note by David Rosenberg, the economist quotes a reader letter which provides a unique perspective on how hyperinflation arises: ...Where I disagree is that you can't have inflation with such a significant slack in the economy. For those of us that lived or worked in the hyperinflationary South American zone of the seventies and eighties, inflation comes when people lose faith in the currency and see material goods as a store of value. Because commodities rise and the goods can no longer be expected to be made at the same cost structure, people assume that they will be worth more in the future creating a self fulfilling upward spiraling effect. You can anticipate that these state governments will introduce price controls as well as potentially fixing exchange rates worsening the situation...

currency; Faithful; Hyperinflation; losses; perspective; Rosenberg; Zero Hedge.

Fri 2010-05-14 17:49 EDT

Ezra Klein - Galbraith: The danger posed by the deficit `is zero'

James Galbraith is an economist and the Lloyd M. Bentsen Jr. chair in government and business relations at the University of Texas at Austin. He's also a skeptic of the prevailing concern over America's long-term deficit. With many people now comparing America's fiscal condition to Greece, I spoke with Galbraith to get the other side of the argument...

dangers posed; Deficit; Ezra Klein; Galbraith; zero.

Sat 2010-04-24 08:59 EDT

Rent-A-Front: New Group Wages Stealth Battle Against Wall Street Reform | TPMMuckraker

TPM Media

...every indication is that Stop Too Big To Fail is an astroturf operation funded by corporate interests to give the appearance of grassroots opposition to reform..."These guys made the KGB look like amateurs, and I used to work in Russia quite a lot," says Simon Johnson, a former chief economist at the IMF, now at MIT, who is a prominent advocate of breaking up the big banks...the group pays lip service to the idea of breaking up the big banks while at the same time adopting "bailout fund" rhetoric used by Republicans, all the while devoting its resources to trying to kill financial reform altogether...Stop Too Big To Fail co-founder Bob Johnson...is president of Consumers for Competitive Choice (C4CC), which runs Stop Too Big To Fail...Before C4CC was Consumers for Competitive Choice it was Consumers for Cable Choice. That group was funded by big telecoms like Verizon and fought to deregulate the cable industry...the man who reached out to economist Simon Johnson about joining the Stop Too Big To Fail call was Oliver Wolf, a director with the DCI Group. DCI is the Washington public affairs firm that specializes in astroturf efforts and has worked for everyone from the Burmese junta to the tobacco industry.

front; New Group Wages Stealth Battle; renting; TPMmuckraker; Wall Street reforms.

naked capitalism Thu 2010-04-22 18:21 EDT

Guest Post: Are Interest Rate Derivatives a Ticking Time Bomb?

Washington's Blog

...Most economists and financial institutions assume that interest rate derivatives help to stabilize the economy. But cumulatively, they can actually increase risky behavior, just as portfolio insurance previously did. As Nassim Taleb has shown, behavior which appears to decrease risk can actually mask long-term risks and lead to huge blow ups. Moreover, there is a real danger of too many people using the same strategy at once... Given that the market for interest rate derivatives is orders of magnitude larger than credit default swap market -- let alone portfolio insurance -- the risks of a ``black swan'' event based on interest rate derivatives should be taken seriously...

Guest Post; Interest Rate Derivatives; naked capitalism; ticking time bomb.

naked capitalism Wed 2010-04-21 12:20 EDT

Guest Post: Dodd Financial Reform Bill Is All Holes and No Cheese

George Washington

In a letter to Senate majority leader Harry Reid and minority leader Mitch McConnell, luminaries including former SEC Chief Accountant Lynn Turner, former Labor Secretary Robert Reich, hedge fund owner Jim Chanos, former Lehman Brothers Vice Chair Peter Solomon, former S&L investigator Bill Black, former Senate Banking Committee Chief Economist Rob Johnson, economists Dean Baker, Barry Eichengreen and others pointed out that Dodd's proposed financial reform legislation wouldn't have prevented the current crisis ... and won't prevent the next crisis...

cheese; Dodd Financial reform Bill; Guest Post; holes; naked capitalism.

naked capitalism Mon 2010-04-12 18:08 EDT

Guest Post: Is Debt Repudiation a Good Thing or a Bad Thing?

Washington's Blog

I hesitated in posting on this subject, as I thought it might be too ``radical''. But after reading what economists Steve Keen, Michael Hudson and Murray Rothbard said about debt repudiation, I decided to post it. This essay rounds up arguments for debt repudiation, because that side is rarely heard. But feel free to post comments on why debt should not be repudiated -- the issue is still an open question in my mind.

bad things; Debt Repudiation; good thing; Guest Post; naked capitalism.

Jesse's Café Américain Wed 2010-04-07 19:14 EDT

The Case for Position Limits: What is the 'Spot Price' of Gold and Silver And How Is It Set?

Jesse

...almost all retail transactions for physical bullion in the US key off a 'spot price' that is derived from a paper market which is not based in the reality of physical supply, since the futures exchanges explicitly allow for the settlement in cash if physical bullion is not available. In fact, the vast majority of transactions are settled in cash, and are little more than derivatives bets it seems, and often hedges related to other things like another commodity or interest rates...As someone who approaches it as an amateur economist, and has been looking at its dynamics for the past few years, I may be missing something, but this seems less like an efficient market mechanism for price discovery and capital allocation, and more like a carney game.

Case; gold; Jesse's Café Américain; position limit; set; Silver; Spot Prices.

naked capitalism Sat 2010-04-03 09:55 EDT

Guest Post: Top Analyst Says ``Developed Market Governments Are Insolvent By Any Reasonable Definition''

Washington's Blog

Dylan Grice, a top analyst for European financial giant Société Générale, writes: Developed market governments are insolvent by any reasonable definition. Who could have known? Everyone, actually...Grice also says: Eventually, there will be a crisis of such magnitude that the political winds change direction, and become blustering gales forcing us onto the course of fiscal sustainability. Until it does, the temptation to inflate will remain, as will economists with spurious mathematical rationalisations as to why such inflation will make everything OK . Until it does, the outlook will remain favorable for gold. But eventually, majority opinion will accept the painful contractionary medicine because it will have to. That will be the time to sell gold.

developed market governments; Guest Post; insolvent; naked capitalism; reasonable definition; Top Analyst Says.