zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Fri 2010-07-23 11:01 EDT

Charting The Second Half Economic Slowdown

Goldman's Jan Hatzius...summarizes all the adverse trends that continue to not be priced into stocks. He notes that while the inventory cycle has boosted growth, this artificial rise is now losing steam. Key headwinds facing the economy are that fiscal policy, which has been expansionary, has now become to restrictive; that there has been no overshoot in layoffs for a mean reversion expectation; that the labor market multiplier is very much limited; that while capital spending is just modestly above replacement levels, the large output gap suggests spending should be subdued; the housing overhang is still huge and house prices have further to fall; that there are risks to US from European crisis; that inflation is dropping (and non-existent) even as utilization is low everywhere, which creates a major deflation risk; that the scary budget deficit will destroy any hope for future fiscal stimulus as public debt is surging out of control; lastly, with Taylor-implied Fed rates expected to be negative, the Fed's monetary policy arsenal is non-existent...

chart; dropped; economic slowdown; long; survival rate; Timeline; zero; Zero Hedge.

Wed 2010-07-21 11:01 EDT

AlterNet: Are Our Bosses Becoming Meaner?

Sam Pizzigati

...Sreedhari Desai, Arthur Brief, and Jennifer George...have been exploring the link between executive pay and ``meanness.''...they may have shifted executive pay scholarly research in a sobering new direction, with much less attention on ``performance'' and much more on raw naked power...``exaggerated power asymmetry'' can make people with power mean to people without. Contemporary corporate workplaces, the three researchers continue, regularly display this ``exaggerated power asymmetry.'' And that asymmetry, they argue, is intensifying as pay gaps between CEOs and their workers have widened...

AlterNet; Bosses Becoming Meaner.

zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Mon 2010-07-19 16:18 EDT

Financial Reform Bill Fixes the Economy ... Not!

Washington's Blog

Congress, Bernanke, Geithner and the boys are patting themselves on the back for passing the financial "reform" legislation...In reality, as discussed below, none of the real problems have been addressed...little in the legislation really restores trust in the system...the bill does nothing to address the ever-widening gap in wealth...The rule of law has not been restored...Unemployment continues to plague the economy...bailing out the banks has simply spread their problems into sovereign crises...the U.S. hasn't reined in its profligate spending...the U.S. has become a a kleptocracy, an oligarchy, a banana republic, a socialist or fascist state ... which acts without the consent of the governed...

dropped; economy; Financial Reform Bill Fixes; long; survival rate; Timeline; zero; Zero Hedge.

Credit Writedowns Mon 2010-07-19 12:08 EDT

Misunderstanding Modern Monetary Theory

Paul Krugman wrote a post today regarding MMT called "I Would Do Anything For Stimulus, But I Won't Do That (Wonkish)." The gist of Krugman's post was to refute Modern Monetary Theory's view on money and deficits...Krugman's post mischaracterizes both MMT and Galbraith's statement...Krugman is trapped in a gold standard view of money as he assumes the government must issue bonds to fund itself. He forgets that we live in a fiat world...the problem for deficits is not national solvency but inflation and currency depreciation. That makes me worried about deficits. If that makes me an inflation hawk and anti-deficit, then so be it. Nevertheless, MMT does say the same thing about deficits, namely that they can lead to inflation. But MMT also says that inflation is not a problem when you have an enormous output gap from 17% underemployment. MMT proponents recommend deficit spending to close that gap. But you can't spend at will under MMT; eventually the output gap closes and inflation becomes a big problem...

credit writedowns; Misunderstanding Modern Monetary Theory.

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.

Tue 2010-06-01 18:24 EDT

billy blog >> Blog Archive >> In the spirit of debate ... my reply Part 2

Bill Mitchell

Today, I offer Part 2 of my responses to the comments raised in the debate so far...Modern monetary theory does not use the term ``money'' in the same way as the mainstream because it creates instant confusion. As Scott said ``Money is always someone's liability, so better to be precise about whose liabilities we are talking about than saying money.'' That is why we emphasis fully understanding the asset-liability matches that occur in monetary systems. And that leads you to realise that transactions between government and non-government create or destroy net financial assets denominated in the currency of issue whereas transactions within the non-government sector cannot create net financial positions...So modern monetary theorists prefer to concentrate on what is going on with balance sheets after certain flows have occured rather than narrowly defining some financial assets as money and others not...There is no doubt that the non-government institutions can increase credit. Some slack analysts call this an increase in money. But the accurate statement is that, as a matter of accounting it increases the (in Scott's words) ``the quantity of financial assets and financial liabilities 1 for 1 in the non-govt sector. So, with private credit, there is BY DEFINITION no NET increase in private sector financial assets created.'' Once we understand that and note that typically the non-government sector seeks to net save in the currency of issue then modern monetary theory tells you that the public sector must run a deficit to underwrite this desired net saving or else see an output gap widen...Who is in control is an interesting question. Clearly, the government cannot directly control the money supply which renders much of the analysis in mainstream macroeconomics textbooks as being irrelevant. The Monetarists via Milton Friedman persuaded central banks to adopt monetary targetting in the 1980s and it failed a few years later -- miserably...Then you might like to consider it from the other angle -- a government which accepts responsibility for full employment can ``finance'' the saving desires of the non-government sector by increasing its deficit up to the level warranted by the spending gap (left by the full employment non-government savings)...Orthodox macroeconomic theory struggles with the idea of involuntary unemployment and typically tries to fudge the explanation by appealing to market rigidities (typically nominal wage inflexibility). However, in general, the orthodox framework cannot convincingly explain systemic constraints that comprehensively negate individual volition. The modern monetary framework clearly explicates how involuntary unemployment arises. The private sector, in aggregate, may desire to spend less of the monetary unit of account than it earns. In this case, if this gap in spending is not met by government, then unemployment will occur. Nominal (or real) wage cuts per se do not clear the labour market, unless they somehow eliminate the private sector desire to net save and increase spending...to maintain high levels of employment and given that the public generally desire to hold some reserves of fiat money, the government balance will normally have to be in deficit...modern monetary theory demonstrates that if you want the non-government sector to net save...

Billy Blog; blogs Archive; Debate; reply Part 2; Spirit.

Culture of Life News Mon 2010-04-26 18:42 EDT

Xenophobia Is Very Destructive

Elaine Supkis

Japan always interests me because it is at the center of the ZIRP system which is, in the Cave of Wealth and Death, the place where economies go to die. Despite a 50 year record of successfully preventing any US penetration of Japan's domestic market while selling higher and higher quality goods to the US, the country finds itself mired in a perpetual depression. The gap between the rich and poor are widening while the country struggles with xenophobia which prevents foreign influences from seeping in...

Culture; DESTRUCTION; Life News; Xenophobia.

naked capitalism Thu 2009-11-19 10:41 EST

Fed Authorized 100% Payout by AIG on CDS

It had generally been assumed that the AIG payouts of 100% on credit swaps (when the insurer was under water and bankrupt companies do not satisfy their obligations in full) was the result of some gap in oversight plus traders at AIG exercising discretion (they were unhappy about bonus rows and had reason to curry favor with dealers, who were potential employers). The article makes clear that AIG had been negotiating to settle on the swaps prior to getting aid from the government, and was seeking a 40% discount. The Fed might not have gotten that much of a discount, but there was clearly no need to pay out at par. This massive backdoor subsidy to the likes of Goldman, DeutscheBank was authorized by Geithner while he was at the New York Fed.

AIG; CDS; Fed Authorized 100; naked capitalism; payout.

zero hedge Mon 2009-10-26 09:28 EDT

How The Federal Reserve Bailed Out The World

The Bank of International Settlements [BIS] just released a major paper titled "The US dollar shortage in global banking and the international policy response" which goes on to demonstrate just how it happened that Fed chief Ben Bernanke in essence bailed out the entire developed world, which was facing an unprecedented dollar shortage crisis due to the sudden implosion of FX swap lines and other mechanisms which until that point were critical in maintaining the dollar funding shortfall for virtually every foreign Central Bank...When the financial system almost imploded in the fall of 2008, one of the primary responses by the Federal Reserve was the issuance of an unprecedented amount of FX liquidity lines in the form of swaps to foreign Central Banks. The number went from practically zero to a peak of $582 billion on December 10, 2008. The number of swaps outstanding was almost directly inversely correlated with the value of the dollar...what happened is that short-term sources to sustain the massive dollar funding mismatch disappeared virtually overnight, and CBs were suddenly facing a toxic spiral of selling increasingly more worthless assets merely to satisfy currency funding needs in an environment where all of a sudden nobody was willing to provide FX swap lines...had the Fed not stepped in, the rest of the world...would have simply collapsed as the $6.5 trillion dollar funding gap closed in on itself, causing a indiscriminate selling off of all dollar denominated assets. The implosion of the basis trade would have seemed like a picnic compared to what was about to ensue had the Fed not stepped in to perpetuate the Fiat banking way of life.

Federal Reserve bail; world; Zero Hedge.

Willem Buiter's Maverecon Sat 2009-10-10 14:00 EDT

Expect little and you may yet be disappointed

Willem Buiter

...the most disappointing development this year was the performance of president Barack Obama and his administration - and my expectations were modest to begin with...On the fiscal side, Barack Obama is presiding over the biggest peace-time government deficits and public debt build-up ever. According to my back-of-the-envelope calculations there is about a 10 percent of GDP gap between the medium and longer-term spending plans of the Obama administration and the taxes the Congress is willing and able to impose. The reality that you cannot run a West-European welfare state (with decent quality health care, decent pre-school, primary and secondary school education for all), rebuild America's crumbling infrastructure, invest in the environment and fulfill your post-imperial global strategic ambitions while raising 33 percent of GDP in taxes, has not yet dawned on the Obama administration or on the American people at large...Clearly, the qualities one needs to get elected to high office in western democracies are not qualities that are likely to be helpful once you have achieved high office and are expected to govern and lead. To survive the selection process to become president you have to be able to stitch together a coalition of special interests that can provide sufficient financial and sweat equity resources to win this grueling race to the top. Once you get there, you should shed the unfortunate baggage you accumulated on your way up and govern in the interest of all the people. Few can do that. Apparently Obama is not one of them.

disappointment; expectations; Willem Buiter's Maverecon.

Mon 2009-10-05 11:23 EDT

New Bubble Threatens a V-Shaped Rebound

Andy Xie

...What we are seeing now in the global economy is a pure liquidity bubble. It's been manifested in several asset classes. The most prominent are commodities, stocks and government bonds. The story that supports this bubble is that fiscal stimulus would lead to quick economic recovery, and the output gap could keep inflation down. Hence, central banks can keep interest rates low for a couple more years...I think the market is being misled. The driving forces for the current bounce are inventory cycle and government stimulus. The follow-through from corporate capex and consumption are severely constrained by structural challenges. These challenges have origins in the bubble that led to a misallocation of resources. After the bubble burst, a mismatch of supply and demand limited the effectiveness of either stimulus or a bubble in creating demand...he structural challenges arise from global imbalance and industries that over-expanded due to exaggerated demand supported in the past by cheap credit and high asset prices. At the global level, the imbalance is between deficit-bound Anglo-Saxon economies (Australia, Britain and the United States) and surplus emerging economies (mainly China and oil exporters)...The old equilibrium cannot be restored, and many structural barriers stand in the way of a new equilibrium. The current recovery is based on a temporary and unstable equilibrium in which the United States slows the rise of its national savings rate by increasing the fiscal deficit, and China lowers its savings surplus by boosting government spending and inflating an assets bubble.

New Bubble Threatens; Shaped Rebound.

Bogarty Files Sun 2009-09-20 14:22 EDT

Bogarty Files: The Postmodern Explanation

...Every time there is a gap between what appears to be reality, and what mainstream seems to believe, I get this uneasy feeling. Is it me, I wonder, am I missing something?...I ordered a few books on postmodernism...So now everything is starting to make sense. This is the Obama strategy -- the ``Geithner plan''. While I'm busy studying the balance sheets of the banks, unemployment data etc. they acted, creating a new reality, one without another great depression. Are the banks insolvent? What is insolvency? My definition or Ken Lewis's? There is no universal meaning for insolvent, there is no transcendental signified, just some archaic meaning handed down to us. We don't have to accept it, we can define it anyway we want, especially if another great depression hinges on its meaning...

Bogarty Files; Postmodern Explanation.

Fri 2009-06-26 00:00 EDT

Jesse's Café Américain: A Final Word on Inflation and Deflation

Jesse's Café Américain: A Final Word on Inflation and Deflation; ``serious monetary inflation is triggered by excessive government debt obligations, and not private debt, that can no longer be adequately serviced by a productive real economy and domestic taxation...the output gap is no sure barrier to this type of inflation is that it ironically serves to feed it in the presence of profligate government spending, since it dampens tax revenues and domestic GDP.

deflation; final words; Inflation; Jesse's Café Américain.

Tue 2008-09-23 00:00 EDT

The Perilous Price of Oil - The New York Review of Books

The Perilous Price of Oil, by George Soros - The New York Review of Books; ``prices in financial markets do not necessarily tend toward equilibrium...There is a two-way, reflexive interplay between biased market perceptions and the fundamentals, and that interplay can carry markets far from equilibrium. Every sequence of boom and bust, or bubble, begins with some fundamental change, such as the spread of the Internet, and is followed by a misinterpretation of the new trend in prices that results from the change. Initially that misinterpretation reinforces both the trend and the misinterpretation itself; but eventually the gap between reality and the market's interpretation of reality becomes too wide to be sustainable.''

books; New York Review; Oil; Perilous Price.

Thu 2008-07-03 00:00 EDT

Information Arbitrage: Straight-talk on FAS 157: Blackstone and their Banker Buddies Have it Wrong

gap management; "Trading risk becomes liquidity risk when you can't trade...Do real stress-testing of liquidity scenarios and construct a capital structure that address much of the liquidity risk posed by non-standard assets...So why do risk managers and bank managements' so consistently make bad decisions? Probably because there is an over-reliance on measures that are seemingly quantifiable."

Banker Buddies; Blackstone; FAS 157; Information Arbitrage; straight-talking; wrong.

Tue 2006-12-19 00:00 EST

Closing the 'Collapse Gap': the USSR was better prepared for peak oil than the US | EnergyBulletin.net | Peak Oil News Clearinghouse

Closing the 'Collapse Gap': the USSR was better prepared for peak oil than the US, by Dimitry Orlov | EnergyBulletin.net | Peak Oil News Clearinghouse

better prepared; closed; Collapse Gap; EnergyBulletin; net; Peak Oil; Peak Oil News Clearinghouse; USSR.