Saturday, February 28, 2015

200 Years Ago, We Didn't Have To Explain "Where Money Comes From" To All Citizens. More Knew Then Than Do Now!

   (Commentary posted by Roger Erickson)

Battle Over Banking: A Public Bank for the Republic of Vermont (1803)

The first part is is a fascinating historical story, for multiple reasons. 

First, for the mere fact that a savvy set of state legislators had it right from the beginning, like multiple American Colonies had done, previously

(Just like John Law had pointed out. Maybe he could read some Greek?)

Second, for the chilling story of how widespread bank monopolies conspired to do away with the Public Bank of Vermont.

Nothing much changes? The bank lobby is still winning, so far. Keeping us from further coordinating our own returns.

James Mackenzie — Pope Francis attacks ‘throw-away’ economic globalization

Pope Francis launched a fresh attack on economic injustice on Saturday, condemning the “throw-away culture” of globalization and calling for new ways of thinking about poverty, welfare, employment and society. 
In a speech to the association of Italian cooperative movements, he pointed to the “dizzying rise in unemployment” and the problems that existing welfare systems had in meeting healthcare needs. 
For those living “at the existential margins” the current social and political system “seems fatally destined to suffocate hope and increase risks and threats,” he said.
The Argentinian-born pope, who has often criticized orthodox market economics for fostering unfairness and inequality, said people were forced to work long hours, sometimes in the black economy, for a few hundred euros a month because they were seen as easily replaceable.
“‘You don’t like it? Go home then’. What can you do in a world that works like this? Because there’s a queue of people looking for work. If you don’t like it, someone else will,” he said in an unscripted change from the text of his speech. 
“It’s hunger, hunger that makes us accept what they give us,” he said..
“When money becomes an idol, it commands the choices of man. And thus it ruins man and condemns him. It makes him a slave,” he said. 
“Money at the service of life can be managed in the right way by cooperatives, on condition that it is a real cooperative where capital does not have command over men but men over capital,” he said [addressing the cooperative movement].
One America News Network
Pope Francis attacks ‘throw-away’ economic globalization
James Mackenzie

Al Jazeera — India promises economy to 'take off' with new budget

One picture is worth a thousand words.

Al Jazeera
India promises economy to 'take off' with new budget

Revenue expenditure includes items that do not create any assets including salaries, interest payments, and subsidies. Capital expenditure includes items that create assets such as schools, roads and other infrastructure or repayment of loans. It is the capital expenditure where this budget has clearly stepped up.... 
In summary, the government is stepping on the gas on capital expenditure and on capital receipts. The plan is to build India’s future assets by monetising [privatizing] existing ones. Onward to execution now.
The two numbers that really matter in Narendra Modi’s first full budget
Pranav Kumar

Tomas Hirst — The Greek government is calling for a radical new 'basic income' welfare policy

Well, not a universal BIG.
In the case of Greece it looks like such a scheme would initially be targeted at those nearing pension age in order to prevent them from taking early retirement — providing them with an income that they would otherwise draw from the state pension fund.
What Greece obviously needs with its depression level unemployment and forced austerity is a job guarantee and safety net for those unable to work.

Business Insider
The Greek government is calling for a radical new 'basic income' welfare policy
Tomas Hirst

Mark Ames — Meet Pierre Omidyar! A handy primer for new First Look hires

Mark Ames investigates Pierre Omidyar and the investigative reporters he hired. Ouch. Serious smackdown.

Pando Daily

Sandwichman — Labour Defended Against the Claims of "Human Capital"

Thomas Hodgskin and Karl Marx versus Gary Becker on "human capital."

Labour Defended Against the Claims of "Human Capital"Sandwichman

Jan Kregel — Europe At The Crossroads – Financial Fragility And The Survival Of The Single Currency

To outside observers, Germany's insistence that the new Greek government continue to impose austerity policies in the presence of rising unemployment and mounting debt levels appears to defy economic logic. However, an acquaintance with the historical evolution of the path to the creation of the common currency in the European Union (EU) sheds some light on the logic of the German government's strategy in dealing with the eurozone sovereign debt crisis and its negative response to Greece's request for an alternative economic policy.

Given the continuing divergence between progress in the monetary field and political integration in the euro area, the German interest in imposing austerity may be seen as representing an attempt to achieve, de facto, accelerated progress toward political union; progress that has long been regarded by Germany as a precondition for the success of monetary unification in the form of the common currency.
Yet no matter how necessary these austerity policies may appear in the context of the slow and incomplete political integration in Europe, these policies are ultimately unsustainable.

The survival and stability of the euro, in the absence of further progress in political unification, paradoxically require either sustained economic stagnation or the maintenance of what Hyman Minsky would have recognized as a Ponzi scheme. Neither of these alternatives is economically or politically sustainable.
Levy Economics Institute of Bard College
Europe At The Crossroads – Financial Fragility And The Survival Of The Single Currency
Jan Kregel | Senior Scholar

Note: Paragraphing changed for ease of reading online.

Branko Milanovic — What remains of Pareto?

My class on personal income distribution theories (within-nations) begins with Pareto. Pareto will indeed be for ever part of such classes because he was the first economist to have been seriously interested in empirical analysis of inter-personal inequality. Before him, economics was about functional income distribution which, of course, makes sense if you assume that all workers are at subsistence, all capitalists rich, and all landlords even richer. Then, you do not need to bother with inter-personal inequality. It is just a transformation of factoral income distribution. (This is, I think, most obvious in Ricardo who cannot even conceive of a possibility of wages ever going above subsistence—except temporarily to precipitate the Malthusian movement. The advantage for modeling—since Ricardo’s “Principles” are in reality an exercise in verbal modelling—is that you have one fixed quantity and you can then let others vary).

It is just a minor simplification to say that Pareto thought that there was an iron law of income distribution, namely that inequality did not change whatever social system was in power. It gave consistency to his theory of the circulation of the elites, because whatever elite be in power (land-owning, capitalist or bureaucratic), income distribution would be the same although the people who would be rich or poor would be different. It was a serious critique of the idea that Marxist socialism would reduce income inequalities.
What remains of Pareto’s claim? Several things are clear now--more than a century after Pareto defined his power low and showed that the number of recipients of a given income decreases in proportion as that income threshold is raised. Pareto law does not apply to any entire distribution.
Global Inequality
What remains of Pareto?
Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace

Kenneth Thomas — EU goes to WTO over Boeing subsidies

Just as I predicted, the European Union has filed a World Trade Organization complaint against Boeing's new round of subsidies from Washington state totaling $8.7 billion from 2025 to 2040 (h/t @ThomasCafcas). I'll go out on a limb and predict that the EU will win this case. 
Okay, that's not really out on a limb: The WTO found that Boeing's last round of state and local subsidies violates its Agreement on Subsidies and Countervailing Measures, and the facts are exactly the same -- except for the fact that the subsidies have grown from $160 million a year to $543 million a year, more than three times as much. This case is a slam-dunk
Of course, after it loses, it's not like Washington state will comply with the ruling. It's not complying with the last ruling. But it gives us an opportunity to remember that Boeing embodies everything that's wrong with corporate America....
Middle Class Political Economist
EU goes to WTO over Boeing subsidies
Kenneth Thomas | Professor and Research Fellow, Center for International Studies, University of Missouri at St. Louis

The Saker — Good news out of Russia – even the “non-system” opposition refuses to blame the Kremlin

Honestly, I never thought the day would come where I would have anything good to say about the Russian “liberal” or “democratic” “non-system” opposition but apparently this day has come today. To my surprise, all the leaders of this opposition have so far made very moderate and reasonable statement and all those which I have heard have apparently dismissed the notion that the Kremlin was behind the murder [of Boris Nemstsov]. Now this might be self-evident for most of us, but for the Russian “liberal” or “democratic” “non-system” opposition this is quite a change of tone.  Many have even said that this murder was a “provocation” (which in this context means “false flag”!) to destabilize Russia and create a crisis.  Even Irina Khakamada, normally a real crackpot, has said that this was either a “provocation” or the action of a small group of extremists....
The Vineyard of the Saker
Good news out of Russia – even the “non-system” opposition refuses to blame the Kremlin
The Saker

Steve Keen — What Is Money And How Is It Created?

 Augusto Graziani, an Italian Professor of Economics, who died early last year ... understood what money is because he posed and correctly answered a simple question: how does a monetary economy differ from one in which trade occurs by barter?
What Is Money And How Is It Created?
Steve Keen

Robert Paul Wolff — Human Capital

Enter Gary Becker, who resurrected the concept of "human capital" to take account not of the worker's body or her food and clothing but rather to incorporate into Economic Theory the important fact that in a modern capitalist economy, some categories of workers regularly earn wages significantly higher than the standard pay for semi-skilled machine operatives, as a consequence of their educational credentials and the skills supposedly thereby represented. These workers, it is suggested, have invested in themselves by holding themselves off the labor market while they acquire further education, often at considerable expense, thereby accumulating "human capital." . They are thus like business owners who use a portion of their profits [or take loans] to purchase more sophisticated machinery, the cost of which, amortized over the life of the machines, is a good deal less than the market value of the additional product churned out by the improved capital goods. 
This modern version of the old notion of human capital allows economists to blame the low wages of unskilled workers on their own improvident failure to invest rather than consume, an interpretation of poverty that is quite comforting to those sitting atop piles of accumulated capital. 
But the analytical concept of human capital has other interesting uses in our attempts to understand modern capitalism, which exhibits a segmented and highly pyramidal wage structure. It can, for example, be deployed to make sense of the notion of relative exploitation. High wage workers can be understood as both exploited by their employers and exploiting lower wage workers, a construal that seems to comport with our intuitive sense that corporate executives, lawyers, professors, and such like high wage employees occupy a social position more akin to the owners of capital than to hourly wage earners at the bottom of the income pyramid.
The Philosopher's Stone
Robert Paul Wolff | American political philosopher[ and professor emeritus at the University of Massachusetts Amherst

Michał Kacewicz — A Final Interview With Boris Nemtsov

Thought experiment" As you are reading this, replace "Russia" with the United States, "Putin" with the sitting US president as unitary executive, "inferiority complex" with "superiority complex." Is what Boris Nemtsov alleged is happening in Russia bear any relation to the US war hawks, neocons, military-industrial-congressional complex, and deep state.

Does this bear any resemblance to Saddam and the the lead up to the Iraq war?

Collision course developing.

A Final Interview With Boris Nemtsov
Michał Kacewicz

Crude Storage

And these are the just the amounts that we have extracted and stored above ground...

Meanwhile reports are surfacing that storage may soon reach limits of capacity.

Current U.S. refinery input is running at just above 15 Mbpd,

Russia no longer requires $100 oil to balance its Fiat? - For Pete's Sake!

   (Commentary posted by Roger Erickson)

They don't sleep. They never sleep!

Do you ever feel like you're surrounded by the propaganda?

You might be reading a news story about a completely obvious reality, when right in the middle of it, TINA'S LINE comes crawling out, to kill any relevance to the real world.

"Russia no longer requires $100 oil to balance its budget"

What? Balance fiat? WTF? Again?

Where did that come from? Is there any way to stop it? Are we fatally infected?

There's got to be some way to stop this auto-loop from endlessly scrolling across our Kabuki screens. Otherwise, the implication is that we'll all die, with a horrific look of fiat frozen on our aggregate faces.

What's the solution? Turn off the set? Cancel the subscriptions? Talk to real people, about real stuff?

I know, that's crazy talk. Right?

When fiat balances.  Is that like when time stands still?

Vermont Radio Live Interview With Sibel Edmonds, Similarities of Black-Ops & Orthodox MacroEconomics

(Commentary posted by Roger Erickson)

It's about money, lots of money, and who gets to touch it (not us).

Every flavor of orthodoxy is just another tool in the great game?

For those of you worried about the utility of our policy landscape, and trying to tell the difference between Clapper and Putin, or black-ops versus orthodox macroeconomics, you might want to hear this interview Monday, March 2, on Vermont Public Radio, by host Jim Hogue, who has interviewed both Bill Black of UMKC and Birgitta Jonsdottir, a prosecutor of Iceland's banksters.

Sibel Edmonds on her expose "Classified Woman" and subsequent novel "The Lone Gladio"
Another interesting review of Gladio is found here.

Upcoming Sibel Edmonds interview: Monday, March 2nd, at 1:00 PM, LiveStream

For more background, here's text of a prior interview with Edmonds, 11 years back.

Transcript of 2004 Interview with Sibel Edmonds

Friday, February 27, 2015

John Pilger — Why the rise of fascism is again the issue

No, it's not about the rise of far right groups and parties.

The new fascism is Anglo-American neoliberalism.
Since 1945, more than a third of the membership of the United Nations - 69 countries - have suffered some or all of the following at the hands of America's modern fascism. They have been invaded, their governments overthrown, their popular movements suppressed, their elections subverted, their people bombed and their economies stripped of all protection, their societies subjected to a crippling siege known as "sanctions". The British historian Mark Curtis estimates the death toll in the millions. In every case, a big lie was deployed....
Uniting fascism old and new is the cult of superiority. "I believe in American exceptionalism with every fibre of my being," said Obama, evoking declarations of national fetishism from the 1930s. As the historian Alfred W. McCoy has pointed out, it was the Hitler devotee, Carl Schmitt, who said, "The sovereign is he who decides the exception." This sums up Americanism, the world's dominant ideology. That it remains unrecognised as a predatory ideology is the achievement of an equally unrecognised brainwashing. Insidious, undeclared, presented wittily as enlightenment on the march, its conceit insinuates western culture.
"American exceptionalism" was initially a phrase to describe America's different history and meteoric rise owing to the frontier that allowed it to expand hugely and quickly in while most of the rest of the world land was already distributed. Of course, this overlooks the fact that much of the territory was already in use by indigenous tribes and nations.

However, "American exceptionalism" later came to mean that God had especially favored America as his "chosen people" giving it a very different sense, not all that different from the semi-religous Nazi teaching of "Aryan superiority."

John Pilger
Why the rise of fascism is again the issue

See also

The Real American Exceptionalism
Alfred W. McCoy, TomDispatch

Cooperation with China on joint assessment of the impermissibility of meddling in other countries’ affairs is a major stabilizing factor in the current international situation
Russia and China advance new global order — Russian foreign minister

Ian Welsh — The Problem with Basic Income

So basic income, at any level that would be equivalent to a living wage (aka. letting people live a decent life, not just barely scrape by), can be expected to spike inflation in various commodities, including oil. This is a problem, but it’s not a huge problem, because we finally have the technology which allows us to move off oil (not completely, but enough to mitigate the effect of demand increases), and because, hey, we’re flirting with deflation anyway. 
The real problem with basic income has to do with who controls our economy—with the fact that we are sold what we need, by and large, by oligopolies.... 
What this means is that increases in income, especially at the lower end, tend to be simply taken away by those who have what you must have. Everyone will know what the basic income is, and they will know who is surviving on just that, or just that plus a low-wage job. And they will raise prices so that money goes to them.... 
So if you want basic income to work, you must also make capitalism work. You must create actual competitive markets, you must-trust bust, you must regulate and you must move, as government, to ensure that the important things people will spend that basic income on are not scarce—either naturally or artificially.This extends far beyond basic income. 
Good post. Read the whole thing if you are into basic income.

herrnaphta — Marxism and Monetary Theory: A Bibliography

Since reading David Graeber’s Debt last fall, I’ve become interested in the relationship between Marxist economic theory and the heterodox theory of money Graeber supports in his work. Graeber holds to a chartalist position, which argues that money is not, as the classic account in Carl Menger goes, simply the most salable commodity, but rather a symbol that has value because the state requires us to pay taxes in it. Though this theory of money dates back to Aristotle, today it has been developed into the body of theory known as ‘Modern Monetary Theory.’ 
MMT’s focus on the role of the state in making money gives it a very different emphasis from Marx’s analysis in the first three chapters of Capital. There, Marx argues for something quite similar to Menger, drawing an account of the way that a society based on commodity production has need for one commodity to serve as a universal equivalent. In other words, monetary theory appears to make for strange bedfellows. On one side, we have the neo-classicals, the Austrians, and Marx. On the other, the left-leaning post-Keynesians. What to make of all this? 
Personally, I’m pulled by the arguments of MMT. As I began researching what Marxists had to say on the subject, I was relieved to find a number of them arguing that value theory does not require commodity money, and that Marx himself in the later volumes of Capital appears to recognize this....
Marxist Marginalia
Marxism and Monetary Theory: A Bibliography
h/t Rodger Mitchell at Chartalism

John Helmer — What Is Russia’s Answer To Greece’s Plan B — Smile, Blow The Whistle, Pass The Red Card

Stalin’s decision not to contest Greece with the Americans, and the calculation in Moscow at the time of higher priority state interests have been well documented. Less well-known is the calculation of the last Soviet Politburo in 1989, then ruled by Mikhail Gorbachev: he decided not to come to the aid of Prime Minister Andreas Papandreou, who requested assistance ahead of the parliamentary election of June 1989. Papandreou lost that election. 
The calculation this time round is unchanged. The new Prime Minister, Alexis Tsipras, is viewed in Moscow as a closet American.
Dances with Bears
John Helmer

Michael Stephens — The Greek Debt Problem and Selective Historical Memory

Michalis Nikiforos, Dimitri Papadimitriou, and Gennaro Zezza, who put together the Levy Institute’s stock-flow consistent macroeconomic model and simulationsfor Greece, have just released a new policy note, the upshot of which is that restructuring Greece’s unsustainable public debt is a necessary but not sufficient condition for a sustained economic recovery in that country. They also point to an interesting historical precedent that ought to inform the ongoing discussion of Greece’s debt and the conditions imposed by its official creditors.

The troika’s official story—about how Greece’s debt-to-GDP ratio will be brought down from its current 175 percent to 120 percent by 2022—is, as the authors put it, “wildly implausible.”....

Multiplier Effect
The Greek Debt Problem and Selective Historical Memory
Michael Stephens

Geoff Coventry — When good analogies go bad

We've all heard it.

"If I ran my business like the government I'd be bankrupt".

It sounds so intuitive; so moral. It would be irresponsible for a government to keep spending more than is earns. And for many governments, it really is true - all those cities, states, and the nations that do not issue their own currency (like Greece). Yep - they all have to get the money they spend because they are all users of a currency.
But what about nations that issue their own currency? After-all, that's most sovereign nations.

Let's go back to our analogy. We said if I ran my business like the government... stop right there. What business issues its own money? Businesses are currency users just like cities, but the United States is a currency issuer. In what way can a business ever run like a currency issuer?
Yep, some analogies are just bad. So bad, in fact, that they can mislead whole nations into thinking something false is true, and something true is false. Or, to put it in moral terms, they lead us to believe that something very destructive to our economy is actually the only righteous solution, and that the very thing that could help society and people is deemed irresponsible and even evil.

That's what happens when good analogies go bad....
It's the people's money
When good analogies go bad
Geoff Coventry

Bill Mitchell — The superiority of economists!

Its the Friday lay day blog and today I briefly discuss economists. What a topic! There is an interesting article just published in the Journal of Economic Perspectives that examines the way economists think of themselves and other social science disciplines. It is a horror story really. Having been immersed in the profession for many years now, I sometimes forget how bad it is. Here is what the study found. The title is a deliberate double entendre. It is more about the way economists think they are superior rather than any absolute finding of superiority....
Smackdown follows.

Bill Mitchell – billy blog
The superiority of economists!
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

Peter Cooper — What is Modern Money?

A modern money system, as that term is applied in Modern Monetary Theory, typically has three key features. Two of these features are always present. The third is optional but normally should be in place for the full benefits of modern money to be enjoyed: 
1. The currency is a public monopoly. Government issues the currency and is the only entity allowed to do so. 
2. The currency is nonconvertible. It is a fiat currency. The government does not promise to convert its currency into a precious metal or some other commodity at a set price. 
3. The exchange rate is allowed to float. The government does not promise to maintain a fixed exchange rate with any foreign currency. Instead, the exchange rate is ‘flexible’ or ‘floating’. As already mentioned, this feature is usually operative, but not always. 
Taking these three features together, we can say that modern money normally involves a ‘flexible-exchange-rate nonconvertible currency’, or ‘flex-rate currency’ for short....
What is Modern Money?
Peter Cooper

Price of Olive Oil

Screen capture of current price at US Costco for 6L of Greek Olive oil at $60.00 for 6L:

If this represented the only trade between the US and Greece; and the Greeks re-established the drachma and set the initial exchange rate at 1 USD to 1 drachma.

If the Greek olive producers immediately faced reduced price competition in the US market, and reduced the price of this oil to the US market from $10/L to $9/L in order to maintain share, then the "exchange rate" would proceed directly to $.90 to 1 drachma; the drachma would be "devalued" by 10% (to USD).

It would not matter how many forex traders were long or short, or short or long, blah, blah....  or what M1 was or M2 or M16, "base money", blah, blah...... before these REAL events would transpire in this agricultural market and move the "exchange rate" in the banking system.

Darkside Of European Union's Freedom Of Movement

(Commentary posted by Roger Erickson)

Young Spaniards moving to Germany get trapped in dismal jobs

"This is the downside of the European Union's freedom of movement ... Other countries pay for the education of these people and then German companies bring them here to exploit them."
That is rather reminiscent of the strategy behind sharecropping. Freedom of Teilpächten?

Thursday, February 26, 2015

Simon Wren-Lewis — Can helicopter money be democratic?

Simon Wren-Lewis asks the fundamental question.

Helicopter money is by definition central bank policy. Can that be democratic is the central bank is to remain politically independent? It would seem not.

Moreover, helicopter money is fiscal. It increases the net financial assets of non-government whereas

Mainly Macro
Can helicopter money be democratic?
Simon Wren-Lewis | Professor of Economics, Oxford University

Updates on a couple of students who took my Forex course

Good news to report folks, I just got some emails from a couple of students who took my Forex course and they gave me an update on their progress.

One student, who took the course earlier this month is up 4.0%. He also told me that he was able to successfully work out of a difficult position that initially had shown some losses. He kept his cool, employed the technicques that I taught and turned things around.

The other student took the course last April and he is up 40%. Not bad.

Both were complete Forex trading novices coming into the class.

J.D. Alt — The Millennials’ Money Pt. 1

The ebook Diagrams & Dollars has been a top-seller on Amazon (in the category “macroeconomics”) for over a year now. There have been many requests for a paper-back version. In deciding to undertake that mission, I started to expand the original long essay into something that would be more book-like in length—and before I knew it, the effort morphed into something else: a different “frame” for the whole argument. The new “frame” evolved as I was reading Millennial Momentum by Morley Winograd and Michael D. Hais, which views U.S. history from the perspective of a repetitive cycle of four archetypal generations. Every eighty years or so, this cycle repeats, beginning with a “civic” generation—and each of these “fourth turnings” (as they are referred to in the book) is accompanied by dramatic, traumatic, social upheaval. When the upheaval is finally resolved, the “civic” generation is firmly in control, and things settle down, but with a dramatically changed social structure. The “civic” generation that is now leading us into the next “fourth turning” are the Millennials—the children of the baby-boomers—and they now, specifically, are the target audience for the book. 
Before I complete—or even decide to publish—the book, I’d be grateful for feedback and responses to some key sections of it. With that in mind, this is the first of several posts presenting these key sections for comment by the NEP readers.
Please comment as NEP as J. D. requests so he can use the feedback.

New Economic Perspectives 

Matias Vernengo — The Economist is concerned with debt-deflation

TPTB becoming concerned enough to think about taking their blinders off?

Naked Keynesianism
The Economist is concerned with debt-deflation
Matias Vernengo | Associate Professor of Economics, Bucknell University