billy blog Mon 2010-09-20 09:39 EDT

The consolidated government -- treasury and central bank

...The notion of a consolidated government sector is a basic Modern Monetary Theory starting point and allows us to demonstrate the essential relationship between the government and non-government sectors whereby net financial assets enter and exit the economy without complicating the analysis unduly. This simplicity leads to many insights all of which remain valid as operational options when we add more detail to the model...the mainstream macroeconomics obsession with central bank independence is nothing more than an ideological attack on the capacity of government to produce full employment which also undermines our democratic rights...The vertical transactions which add to or drain the monetary base that I have outlined here are transactions between the government and the non-government sector... These transactions are thus unique -- they change net financial assets in the economy. All the transactions between private sector entities have no effect on the net financial assets in the economy at any point in time...

Billy Blog; central bank; consolidated government; Treasury.

naked capitalism Fri 2010-09-17 18:52 EDT

Why Do We Keep Indulging the Fiction That Banks Are Private Enterprises?

... Big finance has an unlimited credit line with governments around the globe. ``Most subsidized industry in the world'' is inadequate to describe this relationship. Banks are now in the permanent role of looters, as described in the classic Akerlof/Romer paper. They run highly leveraged operations, extract compensation based on questionable accounting and officially-subsidized risk-taking, and dump their losses on the public at large...The usual narrative, ``privatized gains and socialized losses'' is insufficient to describe the dynamic at work. The banking industry falsely depicts markets, and by extension, its incumbents as a bastion of capitalism. The blatant manipulations of the equity markets shows that financial activity, which used to be recognized as valuable because it supported commercial activity, is whenever possible being subverted to industry rent-seeking. And worse, these activities are state supported...banks can no longer meaningfully be called private enterprises, yet no one in the media will challenge this fiction...

bank; fiction; Keep Indulging; naked capitalism; private enterprise.

Jesse's Café Américain Mon 2010-08-16 16:09 EDT

Chris Whalen: Nothing Has Changed Because It's The Fraud and Corruption, Stupid

Jesse

...The dirty little secret of the Dodd-Frank legislation is that by failing to curtail the worst abuses of the OTC market in structured assets and derivatives, a financial ghetto that even today remains virtually unregulated, the Congress and the Fed are effectively even encouraging securities firms to act as de facto exchanges and thereby commit financial fraud. Allowing securities firms to originate complex structured securities without requiring SEC registration is a vast loophole that Senator Christopher Dodd (D-CT) and Rep. Barney Frank (D-MA) deliberately left open for their campaign contributors on Wall Street. But it must be noted these same firms have a captive, client relationship with the Fed and other regulators as well, thus a love triangle may be the most apt metaphor...a recent key supervisory officer appointment by the Federal Reserve Bank of New York (FRBNY)...choice of Sarah Dahlgren as Head of Supervision...Ms Dahlgren has been at the center of many of the Federal Reserve's most embarrassing failures in the area of bank supervision and in particular with respect to the failure of American International Group (AIG)...

change because; Chris Whalen; corruption; fraud; Jesse's Café Américain; Stupid.

Mon 2010-08-16 12:56 EDT

Help:How to research U.S. corporations - SourceWatch

This Guide, consisting of this main article and three more in-depth sub-articles, is designed to help researchers and activists gather essential information on any type of U.S.-based company, whether small or large, privately held or publicly traded. The resources listed here are all, in one way or another, part of the public record. The first part covers leading sources of basic information on companies of all kinds. The second part focuses on information sources relating to the key relationships every company must have in order to function. The final part shows you how to gather information about a company's "social responsibility" record. Together, these sections will help you find all the basic information needed to support efforts to get companies to do the right thing. Happy hunting!...

help; research U.S. corporations; SourceWatch.

billy blog Mon 2010-06-07 19:00 EDT

Central bank independence -- another faux agenda

There are several strands to the mainstream neo-liberal attack on government macroeconomic policy activism. They get recycled regularly. ...Today, I am looking at another faux agenda -- the demand that central banks should be independent of the political process...The agenda is also tied in with the growing demand for fiscal rules which will further undermine public purpose in policy...I find it ironical that the freedom mongers have very limited appreciation of what freedom actually is. Allowing the unemployed to be ``bullied'' by amorphous bond markets is not a path to freedom...inflation targeting countries have failed to achieve superior outcomes in terms of output growth, inflation variability and output variability; moreover there is no evidence that inflation targeting has reduced inflation persistence...Central banks operating under this charter have forced the unemployed to engage in an involuntary fight against inflation and the fiscal authorities have further worsened the situation with complementary austerity...The conclusion that I have reached from studying this specific literature for many years is that there is no robust relationship between making the central bank independent and the performance of inflation...From a MMT perspective, the concept of CBI is anathema to the goal of aggregate policy (monetary and fiscal) to advance public purpose. By obsessing about inflation control, central banking has lost sight of what the purpose of policy is about...under the CBI ideology, monetary policy is not focused on advancing public purpose. Fighting inflation with unemployment is not advancing public purpose. The costs of inflation are much lower than the costs of unemployment. The mainstream fudge this by invoking their belief in the NAIRU which assumes these real sacrifices away in the ``long-run''...

Billy Blog; Central bank independence; faux agenda.

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.

Mon 2010-04-26 15:01 EDT

Economic Plague in the Euro Zone

Marshall Auerback

President Obama has long decried our ``out of control'' government spending. He clearly gets this nonsense from the manic deficit terrorists who do not understand these accounting relationships that we've sketched out. As a result he continues to advocate that the government leads the charge by introducing austerity packages -- just when the state of private demand is still stagnant or fragile. By perpetuating these myths, then, the President himself becomes part of the problem. He should be using his position of influence, and his considerable powers of oratory, to change public perceptions and explain why these deficits are not only necessary, but highly desirable in terms of sustaining a full employment economy...

economic plague; Euro Zone.

zero hedge Fri 2010-01-29 16:36 EST

Guest Post: Government Spending, Bank Lending And Inflation

Submitted by Kletus Klump In his latest weekly commentary, Inflation Myth and Reality, Dr. John Hussman makes the argument that changes-in federal government spending dictate the future path of inflation. As shown below, his data set covers the period from 1951 through 2008 and there appears to be a decent correlation. However, his data set is incomplete in 2 respects: 1. It does not include the Great Depression years and 2. It does not include data on bank lending. The relationship between government spending and future inflation was vastly different during the years of 1932 to 1941. The correlation between the 2 series for this time period is negative 0.25. The factor causing this is change in mortgage-loan growth...fears of government-spending-induced extended inflation in terms of time and magnitude are not a concern until the lending mechanism improves.

bank lending; government spending; Guest Post; Inflation; Zero Hedge.

Fri 2009-11-20 09:59 EST

Interfluidity :: Sympathy for the Treasury

On Monday, I was among a group of eight bloggers who attended a discussion with "senior Treasury officials" in Washington...Although the format of our meeting did not lend itself to forging deep relationships, I was flattered and grateful for the meeting and left with more sympathy for the people I spoke to than I came in with. In other words, I have been corrupted, a little...The most interesting aspect of the meeting was anthropological, getting a look at how senior Treasury officials behaved, how they interacted with us and what kind of a thing this was to them. It was a two hour meeting, but different groups of officials came at us in shifts, and stayed with us for 20 to 40 minutes. The tone of the meeting was open, earnest, and informal. But somehow, it never felt like we connected, like there was a lot of actual communication occurring.

Interfluidity; sympathy; Treasury.

zero hedge Thu 2009-11-19 10:23 EST

Guest Post: Dear Prudence, Won't You Come Out To Play?

Contrary Investor

...consumers appear to have for now taken a vow of frugality. Whether by necessity or choice, prudence seems the order of the day. Does that mean consumers are not going to come out to play in the land of increased personal consumption any time soon? We think that's the theme, along with continued household balance sheet reconciliation that must come. Is monetary policy now impotent in an environment where consumers choose not to borrow and spend? If so, that leaves increased fiscal policy as the lever ahead for the government, with all the consequences that come along with that...it is critical to at least be open to the thinking that economic and financial market relationships we have grown to know and love over the past three to four decades are in the midst of meaningful change, perhaps secular change.

comes; Guest Post; play; prudence; Zero Hedge.

zero hedge Fri 2009-08-28 17:15 EDT

The Oil-Gas Six Sigma Dislocation

The CFTC has earned its stripes by allowing speculators to take the oil to natty relationship to unprecedented arb levels. Represented in energy content equivalents, where oil traditionally has been in the 6x-12x range for gas, the most recent reading is 26.36! This is, as the chart indicates, your six sigma event for the day. A long NG1 - short CL1 arb may take some abuse but absent Amaranth coming out of somewhere (and even they were eventually prosecuted), this relationship should collapse to some semblance of normalcy. Although in this bizarro market it is guaranteed to do the opposite of what any fundamental or technical relationships dictate.

Oil gas; Sigma Dislocation; Zero Hedge.

Thu 2008-07-03 00:00 EDT

Faustian economics:

Hell hath no limits--By Wendell Berry (Harper's Magazine); "Our true religion is a sort of autistic industrialism"; "our 'identity' is located not in the impulse of selfhood but in deliberately maintained connections"; "in the phrase 'free market,' the word 'free' has come to mean unlimited economic power for some, with the necessary consequence of economic powerlessness for others"; "we confuse limits with confinement...our human and earthly limits, properly understood, are not confinements but rather inducements to formal elaboration and elegance, to _fullness_ of relationship and meaning"; "we want to make our economic landscapes sustainably and abundantly productive, we must do so by maintaining in them a living formal complexity something like that of natural ecosystems. We can do this only by raising to the highest level our mastery of the arts of agriculture, animal husbandry, forestry, and, ultimately, the art of living."

Faustian economics.

Thu 2008-07-03 00:00 EDT

naked capitalism: Bloomberg's Jonathan Weil Probes Lehman-R3 Hedge Fund Relationship

Bloomberg's Jonathan Weil Probes Lehman-R3 Hedge Fund Relationship; naked capitalism.