F Financial Sector Induced Systemic Instability of Economy

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Financial Sector Induced Systemic Instability of Economy

While I believe in usefulness of capital markets, it is clear that they are double edge sword and that banks "in a long run" tend to behave like sociopathic individuals. Mr. Capone may have something to say about danger of banks :-).That means that  growth of financial sector represents a direct threat to the stability of the society. Positive feedback loops creates one financial crisis after another with the increasing magnitude leading up to a collapse of financial system like happened in 1927 and 2008.

News Casino Capitalism Recommended Links  Stability is destabilizing: The idea of Minsky moment Corruption of Regulators Quiet coup
Neoliberalism as a New Form of Corporatism Principal-agent problem Numbers racket Criminal negligence in financial regulation Corruption of FED Invisible Hand Hypothesis
The “Too Big To Fail” Problem In Goldman Sachs we trust Citi - The bank that couldn’t shoot straight JPMorgan AIG collapse Lehman
Free Markets Newspeak as Opium for regulators Derivatives Lobby Corrupts Congress Lobbying and the Financial Crisis Control Fraud
(crisis of corporate governance)
Stock Market with buybacks as a Ponzi scheme Derivatives
Small government smoke screen Financial Bonuses as Money Laundering Corporatist Corruption: Systemic Fraud under Clinton-Bush-Obama Regime Corporatism   Financial obesity
Webliography of heterodox economists HFT Aleynikov vs. Goldman Sachs Casino Capitalism Dictionary Financial Humor Etc
  "Minsky's financial instability hypothesis depends critically on what amounts to a sociological insight. People change their minds about taking risks. They don't make a one-time rational judgment about debt use and stock market exposure and stick to it. Instead, they change their minds over time. And history is quite clear about how they change their minds. The longer the good times endure, the more people begin to see wisdom in risky strategies."

The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our Economic Future, by Robert Barbera

The flaw with Capitalism is that it creates its own positive feedback loop, snowballing to the point where the accumulation of wealth and power hurts people — eventually even those at the top of the food chain. ”

Uncle Billy Cunctator
In comment to Economic Donkeys

 
  Banks are a clear case of market failure and their employees at the senior level have basically become the biggest bank robbers of all time. As for basing pay on current revenues and not profits over extended periods of time, then that is a clear case of market failure !  
  The banksters have been able to sell the “talent” myth to justify their outsized pay because they are the only ones able to deliver the type of GDP growth the U.S. economy needs in the short term, even if that kills the U.S. economy in the long term. You’ll be gone, I’ll be gone.  
  Unfortunately, many countries go broke pursuing war, if not financially, then morally (are the two different? – this post suggests otherwise).

I occurs to me that the U.S. is also in that flock; interventions justified by grand cause built on fallacy, the alpha and omega of failure. Is the financial apparatchik (or Nomenklatura, a term I like which, as many from the Soviet era, succinctly describes aspects of our situation today) fated also to the trash heap, despite the best efforts of the Man of the hour, Ben Bernanke?

 

Introduction

While I believe in usefulness of capital markets, it is clear that they are double edge sword and that banks "in a long run" tend to behave like sociopathic individuals. Mr. Capone may have something to say about danger of banks :-).That means that growth of financial sector represents a direct threat to the stability of the society (Keynesianism and the Great Recession )

Without adult supervision, as it were, a financial sector that was already inherently unstable went wild. When the subprime assets were found to be toxic since they were based on mortgages on which borrowers had defaulted, highly indebted or leveraged banks that had bought these now valueless securities had little equity to repay their creditors or depositors who now came after them. This quickly led to their bankruptcy, as in the case of Lehman Brothers, or to their being bailed out by government, as was the case with most of the biggest banks. The finance sector froze up, resulting in a recession—a big one—in the real economy.

Neoliberal revolution, or, as Simon Johnson called it after "quite coup" (Atlantic), brought political power to the financial oligarchy deposed after the New Deal. Deregulation naturally followed, with especially big role played by corrupt Clinton administration.  Positive feedback loops creates one financial crisis after another with the increasing magnitude. "Saving and loans" crisis followed by dot-com crisis of  2000, which in turn followed by the collapse of financial system in 2008, which looks somewhat similar to what happened in 1927.  No prominent financial honcho, who was instrumental in creating "subprime crisis" was jailed.  Most remained filthy rich.

Unless the society puts severe limits on their actions like was done during New Deal,  financial firms successfully subvert the regulation mechanisms and take the society hostage.  But periodic purges with relocation of the most active promoters of "freedom for banks" (aka free market fundamentalism) under the smoke screen of "free market" promotion does not solve the problem of positive feedback loops that banks create by mere existence. That's difficult to do while neoliberal ideology and related neoclassical economy dominates the society thinking (via brainwashing), with universities playing especially negative role -- most of economics departments are captured by neoliberals who censor any heretics. So year after year brainwashing students enter the society without understanding real dangers that neoliberalism brought for them.  Including lack of meaningful employment opportunities.

Of course, most of high level officers of leading finance institutions which caused the crisis of 2008-2009 as a psychological type are as close to  gangsters as one can get. But there is something in their actions that does not depend on individual traits (although many of them definitely can be classified as psychopaths), and is more related to their social position.  This situation is somewhat similar to Bolsheviks coup d'état of 1917 which resulted in capturing Russia by this ideological sect.  And in this sense quite coupe of 1980 is also irreversible in the same sense as Bolsheviks revolution was irreversible:  the "occupation" of the country by a fanatical sect lasts until the population rejects the ideology with its (now apparent) utopian claims.

Bolshevism which lasted 75 years, spend in such zombie state the last two decades (if we assume 1991 as the year of death of Bolshevism, its ideology was dead much earlier -- the grave flaws in it were visible from late 60th, if not after the WWII).  But only  when their ideology was destroyed both by inability to raise the standard of living of the population and by the growing neoliberal ideology as an alternative (and a new, more powerful then Marxism high-demand cult) Bolsheviks started to lose the grip on their power in the country. As a result Bolsheviks lost the power only in 1991, or more correctly switched camps and privatized the country. If not inaptness of their last General Secretary, they probably could last more. In any case after the ideology collapsed, the USSR disintegrated (or more correctly turn by national elites, each of which wanted their peace of the pie).

The sad truth is that the mere growth of financial sector creates additional positive feedback loops and increases structural instability within both the financial sector itself and the society at large. Dynamic systems with strong positive feedback loops not compensated by negative feedback loops are unstable. As a result banks and other financial institution periodically generate a deep, devastating crisis. This is the meaning of famous Hyman Minsky phrase "stability is destabilizing".

In other words, financial apparatchiks (or Financial Nomenklatura, a term from the Soviet era, which succinctly describes aspects of our situation today) drive the country off the cliff because they do not have any countervailing forces, by the strength of their political influence and unsaturable greed. Although the following analogy in weaker then analogy with dynamic systems with positive feedback loops, outsized financial sector can be viewed in  biological terms as cancer.

Cancer, known medically as a malignant neoplasm, is a broad group of diseases involving unregulated cell growth. In cancer, cells divide and grow uncontrollably, forming malignant tumors, and invading nearby parts of the body. The cancer may also spread to more distant parts of the body through the lymphatic system or bloodstream. Not all tumors are cancerous; benign tumors do not invade neighboring tissues and do not spread throughout the body. There are over 200 different known cancers that affect humans.[1]

Like certain types of cancer they depend of weakening "tumor suppressor genes"  (via "Quiet coup" mechanism of acquiring dominant political power) which allow then to engage in uncontrolled growth, destroying healthy cells (and first of all local manufacturing).   

The other suspicion is the unchecked financialization always goes too far and the last N percent of financial activity absorbs much more resources (especially intellectual resources) and creates more potential instability than its additional efficiency-benefits (often zero or negative) can justify. It is hard to imagine that a Hedge Fund Operator of the Year does anything that is even remotely socially useful to justify his enormous (and lightly taxed) compensation. It is pure wealth redistribution up based on political domination of financial oligarchy.  Significant vulnerabilities  within the shadow banking system and derivatives are plain vanilla socially destructive. Yet they persist due to inevitable political power grab by financial oligarchy  (Quiet coup).

Again, I would like to stress that this problem of the oversized financial sector which produces one devastating crisis after another   is closely related to the problem of a positive feedback loops. And the society in which banks are given free hand inevitably degrades into "socialism for banks"  or "casino capitalism" -- a type of neoliberalism with huge inequality and huge criminality of top banking officers.  

Whether we can do without private banks is unclear, but there is sound evidence that unlike growth of manufacturing, private financial sector growth is dangerous for the society health and perverts society goals.  Like cult groups the financial world does a terrific job of "shunning" the principled individuals and suppressing dissent (by capturing and cultivating neoliberal stooges in all major university departments and press),  so self-destructing tendencies after they arise can't be stopped within the framework of neoliberalism. In a way financial firm is like sociopath inevitable produces its  trail of victims (and sociopaths might be useful in battles exactly due to the qualities such as ability to remain cool in dangerous situation, that make them dangerous in the normal course of events).

This tendency of society with unregulated or lightly regulated financial sector toward self-destruction was first formulated as "Minsky instability hypothesis" -- and outstanding intellectual achievement of American economic Hyman Minsky (September 23, 1919 – October 24, 1996). Who BTW was pretty much underappreciated (if not suppressed) during his lifetime because his views were different from  orthodox (and false) neoclassic economic theory which dominates US universities, Like flat Earth theory was enforce by Catholic church before, it is fiercely enforced by an army of well paid neoliberal economics, those Jesuits of modern era. Who prosecute heretics who question flat Earth theory even more efficiently then their medieval counterparts; the only difference is that they do not burn the literally, only figuratively ;-)

Minsky financial instability hypothesis

Former Washington University in St. Louis economics professor Hyman P. Minsky had predicted the Great Recession decades before it happened.  Hyman Minsky was a real student of the Great Depression, while Bernanke who widely is viewed as a scholar who studied the Great Depression, in reality was a charlatan, who just tried to explain the Great Depression from the positions of neo-classical economy. That's a big difference.

Minsky instability hypothesis ("stability is destabilizing" under capitalism) that emerged from his analysis of the Great Depression was based on intellectual heritage of three great thinkers in economics (my presentation is partially based on an outstanding lecture by Steve Keen Lecture 6 on Minsky, Financial Instability, the Great Depression & the Global Financial Crisis). We can talk about three source of influence, there authors writing of which touched the same subject from similar positions and were the base of Hyman Minsky great advance in understanding of mechanics of development of financial crisis under capitalism and the critical role of financial system in it (neoclassical economics ignores the existence of financial system in its analysis): 

  1. Karl Marx influence
  2. Irving Fisher influence
  3. Joseph Schumpeter influence

Karl Marx influence

Minsky didn't follow the conventional version of Marxism  . And it was dangerous for him to do so due to McCarthysm. Even mentioning of Marx might lead to strakism fromthe academy those years.  McCarthy and his followers in academy did not understand the difference between Marx great analysis of capitalism and his utopian vision of the future. Impliedly this witch hunt helped to establish hegemony of neoclassical economy in economic departments in the USA.

While Minsky did not cited Marx in his writings and did use Marx's Labor Theory of Value his thinking was definitely influenced by Marx’s critique of  finance. We now know that he read and admired the Capital. And that not accidental due to the fact that his parents were Mensheviks -- a suppressed after Bolshevik revolution more moderate wing of Russian Social Democratic Party that rejected the idea of launching the socialist revolution in Russia --  in their opinion Russia needed first to became a capitalist country and get rid of remnants of feudalism. They escaped from Soviet Russia when Mensheviks started to be prosecuted by Bolsheviks.

And probably the main influence on Minsky was not Marx's discussion  of finance in Volume I of Capital with a "commodity" model of money, but critical remarks scattered in   Volumes II & III (which were not edited by Marx by compiled posthumously by Engels), where he was really critical of big banks as well as Marx's earlier works (Grundrisse, Theories of Surplus Value) where Marx was scathing about finance:

"A high rate of interest can also indicate, as it did in 1857, that the country is undermined by the roving cavaliers of credit who can afford to pay a high interest because they pay it out of other people's pocket* (whereby, however, they help to determine the rate of interest  for all) and meanwhile they live in grand style on anticipated profits. 

Irving Fisher influence

The second source on which Minsky based his insights was Irving Fisher. Irving Fisher’s reputation destroyed by wrong predictions on stock market prices. In aftermath, developed theory to explain the crash and published it in his book  "The Debt Deflation Theory of Great Depressions". His main points are:

According to Fisher two key disequilibrium forces that push economic into the next economic crisis are debt and subsequent deflation

Joseph Schumpeter influence

Joseph Schumpeter was Joseph Schumpeter has more positive view of capitalism than the other two. He authored the theory of creative destruction as a path by which capitalism achieves higher and higher productivity. He capitalism as necessarily unstable, but for him this was a positive feature -- instability of capitalism the source of its creativity. His view of capitalism was highly dynamic and somewhat resembles the view of Marx (who also thought that capitalism destroys all previous order and create a new one):

Unlike Marx, who thought that the periodic crisis of overproduction  is the source of instability (as well as  gradual absolute impoverishment of workers), Minsky assumed that the key source of that instability of capitalist system is connected with the cycles of business borrowing and fractional bank lending, when "good times" lead to excessive borrowing leading to high leverage and overproduction and thus to eventual debt crisis (The Alternative To Neoliberalism ):

Minsky on capitalism:

The idea of Minsky moment is related to the fact that the fractional reserve banking periodically causes credit collapse when the leveraged credit expansion goes into reverse. And mainstream economists do not want to talk about the fact that increasing confidence breeds increased leverage. So financial stability breeds instability and subsequent financial crisis. All actions to guarantee a market rise, ultimately guarantee it's destruction because greed will always take advantage of a "sure thing" and push it beyond reasonable boundaries.  In other words, marker players are no rational and assume that it would be foolish not to maximize leverage in a market which is going up. So the fractional reserve banking mechanisms ultimately and ironically lead to over lending and guarantee the subsequent crisis and the market's destruction. Stability breed instability.

That means that fractional reserve banking based economic system with private players (aka capitalism) is inherently unstable. And first of all because  fractional reserve banking is debt based. In order to have growth it must create debt. Eventually the pyramid of debt crushes and crisis hit. When the credit expansion fuels asset price bubbles, the dangers for the financial sector and the real economy are substantial because this way the credit boom bubble is inflated which eventually burst. The damage done to the economy by the bursting of credit boom bubbles is significant and long lasting.

Blissex said...

«When credit growth fuels asset price bubbles, the dangers for the financial sector and the real economy are much more substantial.»

So M Minsky 50 years ago and M Pettis 15 years ago (in his "The volatility machine") had it right? Who could have imagined! :-)

«In the past decades, central banks typically have taken a hands-off approach to asset price bubbles and credit booms.»

If only! They have been feeding credit-based asset price bubbles by at the same time weakening regulations to push up allowed capital-leverage ratios, and boosting the quantity of credit as high as possible, but specifically most for leveraged speculation on assets, by allowing vast-overvaluations on those assets.

Central banks have worked hard in most Anglo-American countries to redistribute income and wealth from "inflationary" worker incomes to "non-inflationary" rentier incomes via hyper-subsidizing with endless cheap credit the excesses of financial speculation in driving up asset prices.

Not very hands-off at all.

Steve Keen is probably the most well know researcher who tried to creates model of capitalist economy based on Minsky work (  http://www.debtdeflation.com/blogs/manifesto/ )

John Kay in his January 5 2010 FT column very aptly explained the systemic instability of financial sector hypothesis: 

The credit crunch of 2007-08 was the third phase of a larger and longer financial crisis. The first phase was the emerging market defaults of the 1990s. The second was the new economy boom and bust at the turn of the century. The third was the collapse of markets for structured debt products, which had grown so rapidly in the five years up to 2007.

The manifestation of the problem in each phase was different – first emerging markets, then stock markets, then debt. But the mechanics were essentially the same. Financial institutions identified a genuine economic change – the assimilation of some poor countries into the global economy, the opportunities offered to business by new information technology, and the development of opportunities to manage risk and maturity mismatch more effectively through markets. Competition to sell products led to wild exaggeration of the pace and scope of these trends. The resulting herd enthusiasm led to mispricing – particularly in asset markets, which yielded large, and largely illusory, profits, of which a substantial fraction was paid to employees.

Eventually, at the end of each phase, reality impinged. The activities that once seemed so profitable – funding the financial systems of emerging economies, promoting start-up internet businesses, trading in structured debt products – turned out, in fact, to have been a source of losses. Lenders had to make write-offs, most of the new economy stocks proved valueless and many structured products became unmarketable. Governments, and particularly the US government, reacted on each occasion by pumping money into the financial system in the hope of staving off wider collapse, with some degree of success. At the end of each phase, regulators and financial institutions declared that lessons had been learnt. While measures were implemented which, if they had been introduced five years earlier, might have prevented the most recent crisis from taking the particular form it did, these responses addressed the particular problem that had just occurred, rather than the underlying generic problems of skewed incentives and dysfunctional institutional structures.

The public support of markets provided on each occasion the fuel needed to stoke the next crisis. Each boom and bust is larger than the last. Since the alleviating action is also larger, the pattern is one of cycles of increasing amplitude.

I do not know what the epicenter of the next crisis will be, except that it is unlikely to involve structured debt products. I do know that unless human nature changes or there is fundamental change in the structure of the financial services industry – equally improbable – there will be another manifestation once again based on naive extrapolation and collective magical thinking. The recent crisis taxed to the full – the word tax is used deliberately – the resources of world governments and their citizens. Even if there is will to respond to the next crisis, the capacity to do so may not be there.

The citizens of that most placid of countries, Iceland, now backed by their president, have found a characteristically polite and restrained way of disputing an obligation to stump up large sums of cash to pay for the arrogance and greed of other people. They are right. We should listen to them before the same message is conveyed in much more violent form, in another place and at another time. But it seems unlikely that we will.

We made a mistake in the closing decades of the 20th century. We removed restrictions that had imposed functional separation on financial institutions. This led to businesses riddled with conflicts of interest and culture, controlled by warring groups of their own senior employees. The scale of resources such businesses commanded enabled them to wield influence to create a – for them – virtuous circle of growing economic and political power. That mistake will not be easily remedied, and that is why I view the new decade with great apprehension. In the name of free markets, we created a monster that threatens to destroy the very free markets we extol.

While Hyman Minsky was the first clearly formulate the financial instability hypothesis, Keynes also understood this dynamic pretty well. He postulated that a world with a large financial sector and an excessive emphasis on the production of investment products creates instability both in terms of output and prices. In other words it automatically tends to generate credit and asset bubbles.  The key driver is the fact that financial professionals generally risk other people’s money and due to this fact have asymmetrical incentives:

This asymmetry is not a new observation of this systemic problem. Andrew Jackson noted it in much more polemic way long ago:

“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out.”

This asymmetrical incentives ensure that the financial system is structurally biased toward taking on more risk than what should be taken. In other words it naturally tend to slide to the casino model, the with omnipresent reckless gambling as the primary and the most profitable mode of operation while an opportunities last.  The only way to counter this is to throw sand into the wheels of financial mechanism:  enforce strict regulations, limit money supplies and periodically jail too enthusiastic bankers. The latter is as important or even more important as the other two because bankers tend to abuse "limited liability" status like no other sector.

Asset inflation over the past 10 years and the subsequent catastrophe incurred is a way classic behavior of dynamic system with strong positive feedback loop.  Such behavior does not depends of personalities of bankers or policymakers, but is an immanent property of this class of dynamic systems. And the main driving force here was deregulation. So its important that new regulation has safety feature which make removal of it more complicated and requiring bigger majority like is the case with constitutional issues.

Another fact was the fact that due to perverted incentives, accounting in the banks was fraudulent from the very beginning and it was fraudulent on purpose.  Essentially accounting in banks automatically become as bad as law enforcement permits. This is a classic case of control fraud and from prevention standpoint is make sense to establish huge penalties for auditors, which might hurt healthy institutions but help to ensure that the most fraudulent institution lose these bank charter before affecting the whole system.  With the anti-regulatory zeal of Bush II administration the level of auditing became too superficial, almost non-existent. I remember perverted dances with Sarbanes–Oxley when it was clear from the very beginning that the real goal is not to strengthen accounting but to earn fees and to create as much profitable red tape as possible, in perfect Soviet bureaucracy style.

Deregulation also increases systemic risk by influencing the real goals of financial organizations. At some point of deregulation process the goal of higher remuneration for the top brass becomes self-sustainable trend  and replaces all other goals of the financial organization. This is the essence of  Martin Taylor’s, the former chief executive of Barclays,  article FT.com - Innumerate bankers were ripe for a reckoning in the Financial Times (Dec 15, 2009), which is worth reading in its entirety:

City people have always been paid well relative to others, but megabonuses are quite new. From my own experience, in the mid-1990s no more than four or five employees of Barclays’ then investment bank were paid more than £1m, and no one got near £2m. Around the turn of the millennium across the market things began to take off, and accelerated rapidly – after a pause in 2001-03 – so that exceptionally high remuneration, not just individually, but in total, was paid out between 2004 and 2007.

Observers of financial services saw unbelievable prosperity and apparently immense value added. Yet two years later the whole industry was bankrupt. A simple reason underlies this: any industry that pays out in cash colossal accounting profits that are largely imaginary will go bust quickly. Not only has the industry – and by extension societies that depend on it – been spending money that is no longer there, it has been giving away money that it only imagined it had in the first place. Worse, it seems to want to do it all again.

What were the sources of this imaginary wealth?

In the last two of these the bank was not receiving any income, merely “booking revenues”. How could they pay this non-existent wealth out in cash to their employees? Because they had no measure of cash flow to tell them they were idiots, and because everyone else was doing it. Paying out 50 per cent of revenues to staff had become the rule, even when the “revenues” did not actually consist of money.

In the next phase instability is amplified by the way governments and central banks respond to crises caused by credit bubble: the state has powerful means to end a recession, but the policies it uses give rise to the next phase of instability, the next bubble…. When money is virtually free – or, at least, at 0.5 per cent – traders feel stupid if they don’t leverage up to the hilt. Thus previous bubble and crash become a dress rehearsal for the next.

Resulting self-sustaining "boom-bust" cycle is very close how electronic systems with positive feedback loop behave and   cannot be explained by neo-classical macroeconomic models. Like with electronic devices the financial institution in this mode are unable to provide the services that are needed.

As Minsky noted long ago (sited from Stephen Mihm  Why capitalism fails Boston Globe):

Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse.

...our whole financial system contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of capitalism.”

Minsky’s vision might have been dark, but he was not a fatalist; he believed it was possible to craft policies that could blunt the collateral damage caused by financial crises. But with a growing number of economists eager to declare the recession over, and the crisis itself apparently behind us, these policies may prove as discomforting as the theories that prompted them in the first place. Indeed, as economists re-embrace Minsky’s prophetic insights, it is far from clear that they’re ready to reckon with the full implications of what he saw.

And he understood the roots of the current credit bubble much better that neoclassical economists like Bernanke: 
As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled by the rise of far riskier borrowers - what [Minsky] called speculative borrowers, those whose income would cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose income could cover neither, and could only pay their bills by borrowing still further.

As these latter categories grew, the overall economy would shift from a conservative but profitable environment to a much more freewheeling system dominated by players whose survival depended not on sound business plans, but on borrowed money and freely available credit.

Minsky’s financial instability hypothesis suggests that when optimism is high and ample funds are available for investment, investors tend to migrate from the safe hedge end of the Minsky spectrum to the risky speculative and Ponzi end. Indeed, in the current crisis, investors tried to raise returns by increasing leverage and switching to financing via short-term—sometimes overnight— borrowing (Too late to learn?):

In the church of Friedman, inflation was the ol' devil tempting the good folk; the 1980s seemed to prove that, let loose, it would cause untold havoc on the populace. But, as Barbera notes:

The last five major global cyclical events were the early 1990s recession - largely occasioned by the US Savings & Loan crisis, the collapse of Japan Inc after the stock market crash of 1990, the Asian crisis of the mid-1990s, the fabulous technology boom/bust cycle at the turn of the millennium, and the unprecedented rise and then collapse for US residential real estate in 2007-2008. All five episodes delivered recessions, either global or regional. In no case was there a significant prior acceleration of wages and general prices. In each case, an investment boom and an associated asset market ran to improbable heights and then collapsed. From 1945 to 1985, there was no recession caused by the instability of investment prompted by financial speculation - and since 1985 there has been no recession that has not been caused by these factors.
Thus, meet the devil in Minsky's paradise - "an investment boom and an associated asset market [that] ran to improbable heights and then collapsed".

According the Barbera, "Minsky's financial instability hypothesis depends critically on what amounts to a sociological insight. People change their minds about taking risks. They don't make a one-time rational judgment about debt use and stock market exposure and stick to it. Instead, they change their minds over time. And history is quite clear about how they change their minds. The longer the good times endure, the more people begin to see wisdom in risky strategies."

Current economy state can be called following Paul McCulley a "stable disequilibrium" very similar to a state  a sand pile.  All this pile of  stocks, debt instruments, derivatives, credit default swaps and God know corresponds to a  pile of sand that is on the verse of losing stability. Each financial player works hard to maximize their own personal outcome but the "invisible hand" effect in adding sand to the pile that is increasing systemic instability. According to Minsky, the longer such situation continues the more likely and violent an "avalanche".

The late Hunt Taylor wrote, in 2006:

"Let us start with what we know. First, these markets look nothing like anything I've ever encountered before. Their stunning complexity, the staggering number of tradable instruments and their interconnectedness, the light-speed at which information moves, the degree to which the movement of one instrument triggers nonlinear reactions along chains of related derivatives, and the requisite level of mathematics necessary to price them speak to the reality that we are now sailing in uncharted waters.

"... I've had 30-plus years of learning experiences in markets, all of which tell me that technology and telecommunications will not do away with human greed and ignorance. I think we will drive the car faster and faster until something bad happens. And I think it will come, like a comet, from that part of the night sky where we least expect it."

This is a gold age for bankers as Simon Johnson wrote in New Republic (The Next Financial Crisis ):

Banking was once a dangerous profession. In Britain, for instance, bankers faced “unlimited liability”--that is, if you ran a bank, and the bank couldn’t repay depositors or other creditors, those people had the right to confiscate all your personal assets and income until you repaid. It wasn’t until the second half of the nineteenth century that Britain established limited liability for bank owners. From that point on, British bankers no longer assumed much financial risk themselves.

In the United States, there was great experimentation with banking during the 1800s, but those involved in the enterprise typically made a substantial commitment of their own capital. For example, there was a well-established tradition of “double liability,” in which stockholders were responsible for twice the original value of their shares in a bank. This encouraged stockholders to carefully monitor bank executives and employees. And, in turn, it placed a lot of pressure on those who managed banks. If they fared poorly, they typically faced personal and professional ruin. The idea that a bank executive would retain wealth and social status in the event of a self-induced calamity would have struck everyone--including bank executives themselves--as ludicrous.

Enter, in the early part of the twentieth century, the Federal Reserve. The Fed was founded in 1913, but discussion about whether to create a central bank had swirled for years. “No one can carefully study the experience of the other great commercial nations,” argued Republican Senator Nelson Aldrich in an influential 1909 speech, “without being convinced that disastrous results of recurring financial crises have been successfully prevented by a proper organization of capital and by the adoption of wise methods of banking and of currency”--in other words, a central bank. In November 1910, Aldrich and a small group of top financiers met on an isolated island off the coast of Georgia. There, they hammered out a draft plan to create a strong central bank that would be owned by banks themselves.

What these bankers essentially wanted was a bailout mechanism for the aftermath of speculative crashes -- something more durable than J.P. Morgan, who saved the day in the Panic of 1907 but couldn’t be counted on to live forever. While they sought informal government backing and substantial government financial support for their new venture, the bankers also wanted it to remain free of government interference, oversight, or control.

Another destabilizing fact is so called myth of invisible hand which is closely related to the myth about market self-regulation. The misunderstood argument of Adam Smith [1776], the founder of modern economics, that free markets led to efficient outcomes, “as if by an invisible hand” has played a central role in these debates: it suggested that we could, by and large, rely on markets without government intervention. About "invisible hand" deification, see The Invisible Hand, Trumped by Darwin - NYTimes.com.

The concept of Minsky moment

The moment in the financial system when the quantity of debt turns into quality and produces yet another financial crisis is called Minsky moment. In other words the “Minsky moment” is the time when an unsustainable financial boom turns into uncontrollable collapse of financial markets (aka financial crash). The existence of Minsky moments is one of the most important counterargument against financial market self-regulation.  It also expose free market fundamentalists such as "former Maestro" Greenspan as charlatans. Greenspan actually implicitly admitted that he is and that it was he, who was the "machinist"  who helped to bring the USA economic train off the rails in 2008 via deregulation  and dismantling the New Deal installed safeguards. 

Here how it is explained by Stephen Mihm in Boston Globe in 2009 in the after math of 2008 financial crisis:

“Minsky” was shorthand for Hyman Minsky, an American macroeconomist who died over a decade ago.  He predicted almost exactly the kind of meltdown that recently hammered the global economy. He believed in capitalism, but also believed it had almost a genetic weakness. Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse.

In other words, the one person who foresaw the crisis also believed that our whole financial system contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of capitalism.”

Minsky believed it was possible to craft policies that could blunt the collateral damage caused by financial crises. As economists re-embrace Minsky’s prophetic insights, it is far from clear that they’re ready to reckon with the full implications of what he saw.

Minsky theory was not well received due to powerful orthodoxy, born in the years after World War II, known as the neoclassical synthesis. The older belief in a self-regulating, self-stabilizing free market had selectively absorbed a few insights from John Maynard Keynes, the great economist of the 1930s who wrote extensively of the ways that capitalism might fail to maintain full employment. Most economists still believed that free-market capitalism was a fundamentally stable basis for an economy, though thanks to Keynes, some now acknowledged that government might under certain circumstances play a role in keeping the economy - and employment - on an even keel.

Economists like Paul Samuelson became the public face of the new establishment; he and others at a handful of top universities became deeply influential in Washington. In theory, Minsky could have been an academic star in this new establishment: Like Samuelson, he earned his doctorate in economics at Harvard University, where he studied with legendary Austrian economist Joseph Schumpeter, as well as future Nobel laureate Wassily Leontief.

But Minsky was cut from different cloth than many of the other big names. The descendent of immigrants from Minsk, in modern-day Belarus, Minsky was a red-diaper baby, the son of Menshevik socialists. While most economists spent the 1950s and 1960s toiling over mathematical models, Minsky pursued research on poverty, hardly the hottest subfield of economics. With long, wild, white hair, Minsky was closer to the counterculture than to mainstream economics. He was, recalls the economist L. Randall Wray, a former student, a “character.”

So while his colleagues from graduate school went on to win Nobel prizes and rise to the top of academia, Minsky languished. He drifted from Brown to Berkeley and eventually to Washington University. Indeed, many economists weren’t even aware of his work. One assessment of Minsky published in 1997 simply noted that his “work has not had a major influence in the macroeconomic discussions of the last thirty years.”

Yet he was busy. In addition to poverty, Minsky began to delve into the field of finance, which despite its seeming importance had no place in the theories formulated by Samuelson and others. He also began to ask a simple, if disturbing question: “Can ‘it’ happen again?” - where “it” was, like Harry Potter’s nemesis Voldemort, the thing that could not be named: the Great Depression.

In his writings, Minsky looked to his intellectual hero, Keynes, arguably the greatest economist of the 20th century. But where most economists drew a single, simplistic lesson from Keynes - that government could step in and micromanage the economy, smooth out the business cycle, and keep things on an even keel - Minsky had no interest in what he and a handful of other dissident economists came to call “bastard Keynesianism.”

Instead, Minsky drew his own, far darker, lessons from Keynes’s landmark writings, which dealt not only with the problem of unemployment, but with money and banking. Although Keynes had never stated this explicitly, Minsky argued that Keynes’s collective work amounted to a powerful argument that capitalism was by its very nature unstable and prone to collapse. Far from trending toward some magical state of equilibrium, capitalism would inevitably do the opposite. It would lurch over a cliff.

This insight bore the stamp of his advisor Joseph Schumpeter, the noted Austrian economist now famous for documenting capitalism’s ceaseless process of “creative destruction.” But Minsky spent more time thinking about destruction than creation. In doing so, he formulated an intriguing theory: not only was capitalism prone to collapse, he argued, it was precisely its periods of economic stability that would set the stage for monumental crises.

Minsky called his idea the “Financial Instability Hypothesis.” In the wake of a depression, he noted, financial institutions are extraordinarily conservative, as are businesses. With the borrowers and the lenders who fuel the economy all steering clear of high-risk deals, things go smoothly: loans are almost always paid on time, businesses generally succeed, and everyone does well. That success, however, inevitably encourages borrowers and lenders to take on more risk in the reasonable hope of making more money. As Minsky observed, “Success breeds a disregard of the possibility of failure.”

As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled by the rise of far riskier borrowers - what he called speculative borrowers, those whose income would cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose income could cover neither, and could only pay their bills by borrowing still further. As these latter categories grew, the overall economy would shift from a conservative but profitable environment to a much more freewheeling system dominated by players whose survival depended not on sound business plans, but on borrowed money and freely available credit.

Once that kind of economy had developed, any panic could wreck the market. The failure of a single firm, for example, or the revelation of a staggering fraud could trigger fear and a sudden, economy-wide attempt to shed debt. This watershed moment - what was later dubbed the “Minsky moment” - would create an environment deeply inhospitable to all borrowers. The speculators and Ponzi borrowers would collapse first, as they lost access to the credit they needed to survive. Even the more stable players might find themselves unable to pay their debt without selling off assets; their forced sales would send asset prices spiraling downward, and inevitably, the entire rickety financial edifice would start to collapse. Businesses would falter, and the crisis would spill over to the “real” economy that depended on the now-collapsing financial system.

From the 1960s onward, Minsky elaborated on this hypothesis. At the time he believed that this shift was already underway: postwar stability, financial innovation, and the receding memory of the Great Depression were gradually setting the stage for a crisis of epic proportions. Most of what he had to say fell on deaf ears. The 1960s were an era of solid growth, and although the economic stagnation of the 1970s was a blow to mainstream neo-Keynesian economics, it did not send policymakers scurrying to Minsky. Instead, a new free market fundamentalism took root: government was the problem, not the solution.

Moreover, the new dogma coincided with a remarkable era of stability. The period from the late 1980s onward has been dubbed the “Great Moderation,” a time of shallow recessions and great resilience among most major industrial economies. Things had never been more stable. The likelihood that “it” could happen again now seemed laughable.

Yet throughout this period, the financial system - not the economy, but finance as an industry - was growing by leaps and bounds. Minsky spent the last years of his life, in the early 1990s, warning of the dangers of securitization and other forms of financial innovation, but few economists listened. Nor did they pay attention to consumers’ and companies’ growing dependence on debt, and the growing use of leverage within the financial system.

By the end of the 20th century, the financial system that Minsky had warned about had materialized, complete with speculative borrowers, Ponzi borrowers, and precious few of the conservative borrowers who were the bedrock of a truly stable economy. Over decades, we really had forgotten the meaning of risk. When storied financial firms started to fall, sending shockwaves through the “real” economy, his predictions started to look a lot like a road map.

“This wasn’t a Minsky moment,” explains Randall Wray. “It was a Minsky half-century.”

Minsky is now all the rage. A year ago, an influential Financial Times columnist confided to readers that rereading Minsky’s 1986 “masterpiece” - “Stabilizing an Unstable Economy” - “helped clear my mind on this crisis.” Others joined the chorus. Earlier this year, two economic heavyweights - Paul Krugman and Brad DeLong - both tipped their hats to him in public forums. Indeed, the Nobel Prize-winning Krugman titled one of the Robbins lectures at the London School of Economics “The Night They Re-read Minsky.”

Today most economists, it’s safe to say, are probably reading Minsky for the first time, trying to fit his unconventional insights into the theoretical scaffolding of their profession. If Minsky were alive today, he would no doubt applaud this belated acknowledgment, even if it has come at a terrible cost. As he once wryly observed, “There is nothing wrong with macroeconomics that another depression [won’t] cure.”

But does Minsky’s work offer us any practical help? If capitalism is inherently self-destructive and unstable - never mind that it produces inequality and unemployment, as Keynes had observed - now what?

After spending his life warning of the perils of the complacency that comes with stability - and having it fall on deaf ears - Minsky was understandably pessimistic about the ability to short-circuit the tragic cycle of boom and bust. But he did believe that much could be done to ameliorate the damage.

To prevent the Minsky moment from becoming a national calamity, part of his solution (which was shared with other economists) was to have the Federal Reserve - what he liked to call the “Big Bank” - step into the breach and act as a lender of last resort to firms under siege. By throwing lines of liquidity to foundering firms, the Federal Reserve could break the cycle and stabilize the financial system. It failed to do so during the Great Depression, when it stood by and let a banking crisis spiral out of control. This time, under the leadership of Ben Bernanke - like Minsky, a scholar of the Depression - it took a very different approach, becoming a lender of last resort to everything from hedge funds to investment banks to money market funds.

Minsky’s other solution, however, was considerably more radical and less palatable politically. The preferred mainstream tactic for pulling the economy out of a crisis was - and is - based on the Keynesian notion of “priming the pump” by sending money that will employ lots of high-skilled, unionized labor - by building a new high-speed train line, for example.

Minsky, however, argued for a “bubble-up” approach, sending money to the poor and unskilled first. The government - or what he liked to call “Big Government” - should become the “employer of last resort,” he said, offering a job to anyone who wanted one at a set minimum wage. It would be paid to workers who would supply child care, clean streets, and provide services that would give taxpayers a visible return on their dollars. In being available to everyone, it would be even more ambitious than the New Deal, sharply reducing the welfare rolls by guaranteeing a job for anyone who was able to work. Such a program would not only help the poor and unskilled, he believed, but would put a floor beneath everyone else’s wages too, preventing salaries of more skilled workers from falling too precipitously, and sending benefits up the socioeconomic ladder.

While economists may be acknowledging some of Minsky’s points on financial instability, it’s safe to say that even liberal policymakers are still a long way from thinking about such an expanded role for the American government. If nothing else, an expensive full-employment program would veer far too close to socialism for the comfort of politicians. For his part, Wray thinks that the critics are apt to misunderstand Minsky. “He saw these ideas as perfectly consistent with capitalism,” says Wray. “They would make capitalism better.”

But not perfect. Indeed, if there’s anything to be drawn from Minsky’s collected work, it’s that perfection, like stability and equilibrium, are mirages. Minsky did not share his profession’s quaint belief that everything could be reduced to a tidy model, or a pat theory. His was a kind of existential economics: capitalism, like life itself, is difficult, even tragic. “There is no simple answer to the problems of our capitalism,” wrote Minsky. “There is no solution that can be transformed into a catchy phrase and carried on banners.”

It’s a sentiment that may limit the extent to which Minsky becomes part of any new orthodoxy. But that’s probably how he would have preferred it, believes liberal economist James Galbraith. “I think he would resist being domesticated,” says Galbraith. “He spent his career in professional isolation.”

Stephen Mihm is a history professor at the University of Georgia and author of “A Nation of Counterfeiters” (Harvard, 2007). © Copyright 2009 Globe Newspaper Company.

 

Some important albeit random (and overlapping) points about instability of financial system

The first thing to understand is that attempt to weaken positive feedback looks via regulation, approach that can be called  “regulation as a Swiss knife” does not work without law enforcement and criminal liability for bankers, as there is an obvious problem of corruption of regulators. In this sense the mechanism of purges might be the only one that realistically can work.

In other words it’s unclear who and how can prevents the capture of regulators as financial sector by definition has means to undermine any such efforts. One way this influence work is via lobbing for appointment of pro-financial sector people in key positions. If such "finance-sector-selected" Fed chairman does not like part of Fed mandate related to regulation it can simply ignore it as long as he is sure that he will be reappointed. That happened with Greenspan.  After such process started it became irreversible and only after a significant, dramatic shock to the system any meaningful changes can be instituted and as soon as the lessons are forgotten work on undermining them resumes.

In essence, the Fed is a political organization and Fed Chairman is as close to a real vice-president of the USA as one can get.  As such Fed Chairman serves the elite which rules that country, whether you call them financial oligarchy or some other name. Actually Fed Chairman is the most powerful unelected official in the USA. If you compare this position to the role of the Chairman of the Politburo  in the USSR you’ll might find some interesting similarities.

In other words it is impossible to prevent appointment of another Greenspan by another Reagan without changes in political power balance.  And the transition to banana republic that follows such appointment is irreversible even if the next administration water boards former Fed Chairman to help him to write his memoirs.  That means that you need to far-reaching reform of political system to be able to regulate financial industry and you need to understand that the measures adopted need vigilant protection as soon as the current crisis is a distant history.

Additional reading

Several other source of financial instability were pointed out by others:

There are some outstanding lectures and presentation on YouTube on this topic. Among them:

See an expended list at Webliography of heterodox economists

Dr. Nikolai Bezroukov


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[Apr 21, 2017] Elizabeth Warren on Big Banks and Their (Cozy Bedmate) Regulators - The New York Times

Apr 21, 2017 | www.nytimes.com

Wells Fargo 's board and management are scheduled to meet shareholders at the company's annual meeting Tuesday in Ponte Vedra Beach, Fla. With the phony account-opening scandal still making headlines , and the company's stock underperforming its peers, it's a good bet the bank's brass will have some explaining to do.

How could such pernicious practices at the bank be allowed for so long? Why didn't the board do more to stop the scheme or the incentive programs that encouraged it? And where, oh where, were the regulators?

Wells Fargo's management has conceded making multiple mistakes over many years; it also says it has learned from them. In a meeting this week with reporters at The New York Times, Timothy J. Sloan, Wells Fargo's chief executive, said the bank had made substantive changes to its structure and culture to ensure that dubious practices won't take hold again.

But there's a deeper explanation for why Wells Fargo's corrosive sales practices came about and continued for years. And it has everything to do with the bank-friendly regulatory regime in Washington and the immense sway that institutions like Wells Fargo have there. This poisonous combination contributes to a sense among giant banking institutions that they answer to no one.

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The capture of our regulatory and political system by big and powerful corporations is real. And it is a central and disturbing theme in the new book by Senator Elizabeth Warren , Democrat of Massachusetts.

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"This Fight Is Our Fight" contains juicy but depressing anecdotes about how our most trusted institutions have let us down. It also shows why, years after the financial crisis, big banks are still large, in charge and, basically, unaccountable for their actions.

"In too many of these organizations, there are rewards for cheating and punishments for calling out the cheaters," Ms. Warren said in an interview Wednesday. "As long as that's the case, the biggest financial institutions will continue to put their customers and the economy at risk."

Ms. Warren's no-nonsense views are bracing. But they are also informed by a thorough understanding of how dysfunctional Washington now is. This failure has cost Main Street dearly, she said, but has benefited the powerful.

Wells Fargo got a lot of criticism from Ms. Warren, both in her book and in my interview - and on live television during the Senate Banking Committee hearing on the account-opening mess in September. She was among the harshest cross-examiners encountered by John G. Stumpf, who was Wells Fargo's chief executive at the time. "You should resign," she told him , "and you should be criminally investigated." (Mr. Stumpf retired the next month.)

This week, Ms. Warren called for the ouster of the company's directors and a criminal inquiry into the bank.

"Yes, the board should be removed, but that's not enough," she told me. "There still needs to be a criminal investigation. The expertise is in the regulatory agencies, but the power to prosecute lies mostly with the Justice Department, and if they don't have either the energy or the talent - or the backbone - to go after the big banks, then there will never be any real accountability."

Banks are not the only targets in Ms. Warren's book. Others include Wal-Mart, for its treatment of employees; for-profit education companies, for the way they pile debt on unsuspecting students; the Chamber of Commerce, for battling Main Street; and prestigious think tanks, for their undisclosed conflicts of interest.

My favorite moments in the book involve the phenomenon of regulatory capture: the pernicious condition in which institutions that are supposed to police the nation's financial behemoths actually come to view them as clients or pals.

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One telling moment took place in 2005, when Ms. Warren, then a Harvard law professor, was invited to address the staff at the Office of the Comptroller of the Currency, a top regulator charged with monitoring the activities of big banks.

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She was thrilled by the invitation, she recalled in the book. After years of tracking various problems consumers experienced with their banks - predatory lending, sky-high interest rates and dubious fees - Ms. Warren felt that, finally, she'd be able to persuade the regulators to crack down.

Her host for the meeting was Julie L. Williams, then the acting comptroller of the currency. In a conference room filled with economists and bank supervisors, Ms. Warren presented her findings: Banks were tricking and cheating their consumers.

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After the meeting ended and Ms. Williams was escorting her guest to the elevator, she told Ms. Warren that she had made a "compelling case," Ms. Warren writes. When she pushed Ms. Williams to have her agency do something about the dubious practices, the regulator balked.

"No, we just can't do that," Ms. Williams said, according to the book. "The banks wouldn't like it."

Ms. Warren was not invited back.

Ms. Williams left the agency in 2012 and is a managing director at Promontory , a regulatory-compliance consulting firm specializing in the financial services industry. When I asked about her conversation with Ms. Warren, she said she had a different recollection.

"I told her I agreed with her concerns," Ms. Williams wrote in an email, "but when I said, 'We just can't do that,' I explained that was because the Comptroller's office did not have jurisdiction to adopt rules to ban the practice. I told her this was the Federal Reserve Board's purview."

Interestingly, though, Ms. Warren's take on regulatory capture at the agency was substantiated in a damning report on its supervision of Wells Fargo, published by a unit of the Office of the Comptroller of the Currency on Wednesday.

The report cited a raft of agency oversight breakdowns regarding Wells Fargo. Among them was its failure to follow up on a slew of consumer and employee complaints beginning in early 2010. There was no evidence, the report said, that agency examiners "required the bank to provide an analysis of the risks and controls, or investigated these issues further to identify the root cause and the appropriate supervisory actions needed."

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Neither did the agency document the bank's resolution of whistle-blower complaints, the report said, or conduct in-depth reviews and tests of the bank's controls in this area "at least from 2011 through 2014." ( The agency recently removed its top Wells Fargo examiner, Bradley Linskens, from his job running a staff of 60 overseeing the bank.)

"Regulatory failure has been built into the system," Ms. Warren said in our interview. "The regulators routinely hear from the banks. They hear from those who have billions of dollars at stake. But they don't hear from the millions of people across this country who will be deeply affected by the decisions they make."

This is why the Consumer Financial Protection Bureau plays such a crucial role, she said. The agency allows consumers to sound off about their financial experiences, and their complaints provide a heat map for regulators to identify and pursue wrongdoing.

But this setup has also made the bureau a target for evisceration by bank-centric politicians.

"There was a time when everything that went through Washington got measured by whether it created more opportunities for the middle class," Ms. Warren said. "Now, the people with money and power have figured out how to invest millions of dollars in Washington and get rules that yield billions of dollars for themselves."

"Government," she added, "increasingly works for those at the top."

[Apr 21, 2017] The Reason Behind The Sales-Surge For Nuclear-Proof Bunkers Zero Hedge

Notable quotes:
"... On April 17 th , Scott Humor, the Research Director at the geostrategic site "The Saker," headlined "Trump has lost control over the Pentagon" , and he listed (and linked-to) the following signs that Trump is following through with his promise to allow the Pentagon to control U.S. international relations: ..."
"... March 14 th , the US National Nuclear Security Administration field tested the modernized B61-12 gravity nuclear bomb in Nevada . ..."
"... April 7, Liberty Passion, loaded with US military vehicles, moored at Aqaba Main Port, Jordan ..."
"... On April 7 th the Pentagon US bombed Syria's main command center in fight against terrorists ..."
"... April 10, United States Deploying Forces At Syrian-Jordanian Border ..."
"... April 11, The US Air Force might start forcing pilots to stay in the service against their will, according to the chief of the military unit's Air Mobility Command. ..."
"... April 12, President Donald Trump has signed the US approval for Montenegro to join NATO ..."
"... April 13, NATO chief Jens Stoltenberg announced the alliance's increased deployment in Eastern Europe ..."
"... On April 13 th , the Pentagon bombed Afghanistan. The US military has bombed Afghanistan with its GBU-43/B Massive Ordnance Air Blast Bomb (MOAB) ..."
"... April 13, the US-led coalition bombed the IS munitions and chemical weapons depot in Deir ez-Zo r killing hundreds of people ..."
"... April 14, The Arleigh Burke-class, guided-missile destroyer USS Stethem (DDG 63) has been deployed to the South China Sea ..."
"... April 14, the US sent F-35 jets to Europe ..."
"... April 14, Washington failed to attend the latest international conference hosted by Moscow, where 11 nations discussed ways of bringing peace to Afghanistan . The US branded it a "unilateral Russian attempt to assert influence in the region". ..."
"... April14, the US has positioned two destroyers armed with Tomahawk cruise missiles close enough to the North Korean nuclear test site to act preemptively ..."
"... On April 16 th , the US army makes largest deployment of troops to Somalia since the 90s. ..."
"... or there will be WW III. ..."
Apr 15, 2017 | www.zerohedge.com
> Authored by Eric Zuesse via The Strategic Culture Foundation,

On April 15th, Zero Hedge bannered "Doomsday Bunker Sales Soar After Trump's Military Strikes", but this growth in the market for nuclear-proof bunkers is hardly new; it started during the Obama Administration, in Obama's second term, specifically after the Russia-friendly government of Ukraine, next-door to Russia, got taken over in 2014 by a rabidly anti-Russian government that's backed by the U.S. government.

This boom in nuclear-bunker sales is only increasing now, as the new U.S. President, Donald Trump, tries to out-do his predecessor in demonstrating his hostility toward the other nuclear superpower, Russia, and displaying his determination to overthrow the leader of any nation (such as Syria and Iran) that is at all friendly toward Russia. For earlier examples of feature-articles on this booming market for homes that allegedly would enable buyers to survive the first blast effects, and the most immediate nuclear contaminations, of a Third World War, see here, and here, and here, and here, and here, and here, and here, and here, and here, and here.

This surging demand for nuclear bunkers started right after the U.S. government arranged a coup in Ukraine that replaced the existing Moscow-friendly democratically elected President by installing a rabidly anti-Russian Prime Minister and national-security appointees from Ukraine's two nazi Parties, the Right Sector Party, and the former Social Nationalist Party of Ukraine (which the CIA renamed "Svoboda" meaning "Freedom" so as to enable it to be acceptable to the American public). Then, the intensifying U.S. effort to replace the secular pro-Russian Syrian leader Bashar al-Assad by a sectarian jihadist government that would be dependent upon the Saudi-Qatari-UAE-Turkish-U.S. alliance, has only intensified further the demand for these types of "second homes".

Whereas all of the purchasers of these bunkers are being kept secret, the U.S. federal government provides, free-of-charge, to top officials, nuclear bunkers, so as to allow the then-dictatorship (continuation of America's current dictatorship) to function, in order, supposedly, to serve their country, which they'd already have destroyed (along with destroying the rest of the world) by their determination to conquer Russia. No one knows what the reality would actually be in such a post-WW-III world, except that there would be no functioning electrical grid, nights would be totally dark for anyone whose sole reliance is on the grid, and all rivers and other water-sources would be intensely radioactive from the fallout, so that groundwater soon would also be unusable - and, of course, the air itself would also be toxic; so, lifespans would be enormously shortened, and excruciating, not to say extremely depressing.

No one has published a computer-model of a U.S.-Russia nuclear war, because doing that would be unacceptable to the "military-industrial complex" including the U.S. government, but in 2014 a "limited, regional nuclear war between India and Pakistan" was computer-modeled and projected to produce global ozone-depletion and "the coldest average surface temperatures in the last 1000 years", which "could trigger a global nuclear famine". But such a war would be only 50 bombs instead of the 10,000+ that would be used in a WW III scenario; and, so, everyone who is paying money in order to survive WW III is simply wasting money.

But, somehow, there are people who either want a Russia-U.S. war, or else whose preparations for it are directed at surviving in such a world, instead of at ending the current grip on political power in the United States, on the part of the people who are working to bring about this type of (end to the) world. At least the owners of the major U.S. armaments-firms, such as Raytheon Corporation, would have an explosive financial boost during the build-up toward that war, but buying bunkers in order to survive it, would seem to be a dubious follow-up to such an investment-plan. On the other hand, it might appeal to some thrill-seekers who don't even feel the need for a good computer-simulation of a post-WW-III world; maybe they've got money to burn and a craving to experience 'the ultimate thrill', and don't want unpleasant knowledge to spoil the thrill.

After President Trump threw out his National Security Advisor Michael Flynn and replaced him with the rabidly anti-Russian H.R. McMaster, and then lobbed 59 cruise missiles against the Syrian government (which is protected by the Russian government), the cacophony of press that had been calling for President Trump to be impeached and replaced by his rabidly anti-Russian Vice President Mike Pence, considerably quieted down; and, so, the Obama-Trump market for nuclear bunkers seems now to be established on very sound foundations, for the foreseeable immediate future. And, if anyone in the U.S. federal government has been planning to prepare the U.S. for a post-WW-III world, that has not been publicly announced, and no newsmedia have even been inquiring about it - so, nothing can yet be said about it.

The general message, thus far, is that, after World War III, everyone will be on his or her own, but that the dictators will (supposedly) be in a far better position than will anyone outside that ruling group. However, if the survivors end up merely envying the dead, it will be no laughing matter, regardless of how silly those nuclear bunkers are. It would be nothing funny at all.

On April 17th, Scott Humor, the Research Director at the geostrategic site "The Saker," headlined "Trump has lost control over the Pentagon", and he listed (and linked-to) the following signs that Trump is following through with his promise to allow the Pentagon to control U.S. international relations:

March 14th, the US National Nuclear Security Administration field tested the modernized B61-12 gravity nuclear bomb in Nevada.

April 7, Liberty Passion, loaded with US military vehicles, moored at Aqaba Main Port, Jordan

On April 7th the Pentagon US bombed Syria's main command center in fight against terrorists

April 10, United States Deploying Forces At Syrian-Jordanian Border

April 11, The US Air Force might start forcing pilots to stay in the service against their will, according to the chief of the military unit's Air Mobility Command.

April 12, President Donald Trump has signed the US approval for Montenegro to join NATO

April 13, NATO chief Jens Stoltenberg announced the alliance's increased deployment in Eastern Europe

On April 13th, the Pentagon bombed Afghanistan. The US military has bombed Afghanistan with its GBU-43/B Massive Ordnance Air Blast Bomb (MOAB)

April 13, the US-led coalition bombed the IS munitions and chemical weapons depot in Deir ez-Zor killing hundreds of people

April 14, The Arleigh Burke-class, guided-missile destroyer USS Stethem (DDG 63) has been deployed to the South China Sea

April 14, the US sent F-35 jets to Europe

April 14, Washington failed to attend the latest international conference hosted by Moscow, where 11 nations discussed ways of bringing peace to Afghanistan. The US branded it a "unilateral Russian attempt to assert influence in the region".

April14, the US has positioned two destroyers armed with Tomahawk cruise missiles close enough to the North Korean nuclear test site to act preemptively

On April 16th, the US army makes largest deployment of troops to Somalia since the 90s.

Mr. Humor drew attention to an article that had been published in "The Daily Beast" a year ago, on 8 April 2016, "CALL OF DUTY: The Secret Movement to Draft General James Mattis for President. Gen. James Mattis doesn't necessarily want to be president-but that's not stopping a group of billionaire donors from hatching a plan to get him there". Though none of the alleged "billionaires" were named there, one prominent voice backing Mattis for the Presidency, in that article, was Bill Kristol, the Rupert Murdoch agent who co-founded the Project for a New American Century, which was the first influential group pushing the "regime-change in Iraq" idea during the late 1990s, and which also advocated for the foreign policies that George W. Bush, Barack Obama, Hillary Clinton, and Donald Trump, have since been pursuing, each in his own way. It seems that whomever those "billionaires" were, they've now gotten their wish, with a figurehead Donald Trump as President, and James Mattis actually running foreign policy. Humor also noted that Mattis wants to boost the budget of the Pentagon by far more than the 9% that Trump has proposed. Perhaps Trump knew that even to get a 9% Pentagon increase passed this year would be almost impossible to achieve. First, the unleashed Pentagon needs to place the military into an 'emergency' situation, so as to persuade the public to clamor for a major invasion. That 'emergency' might be the immediate goal, toward which the March-April timeline of events that Humor documented is aiming.

As regards the military comparisons of the personnel and equipment on both sides of a U.S.-Russia war, the key consideration would actually be not the 7,000 nuclear warheads that Russia has versus the 6,800 nuclear warheads that the U.S. has, but the chief motivation on each of the respective sides: conquest on the part of the U.S. aristocracy, defense on the part of the Russian aristocracy. (Obviously, the U.S. having continued its NATO military alliance after the Soviet Union's Warsaw Pact military alliance ended in 1991, indicates America's aggressive intent against Russia. That became a hyper-aggressive intent when NATO absorbed Russia's former Warsaw Pact allies. NATO even brought in some parts of the former USSR itself, when in 2004, Estonia, Latvia, and Lithuania, entered NATO, and in 2014 U.S. President Obama tried to get Ukraine into NATO, and these five countries hadn't even been Warsaw Pacters, but had instead been parts of the USSR itself. It was as if Russia had grabbed not only America's allies, but some states in the U.S. itself. This constituted extreme aggression, and shows the U.S. aristocracy's obsessive intent for global empire - to include Russia.)

Any limited war between the two powers would become a nuclear war once the side that's losing this limited war becomes faced with the choice of either surrendering that limited territory (now likely Syria) or else going nuclear. On Russia's side, allowing such military conquest of an ally would be unacceptable; the war would then expand with the U.S. and its allies invading Russian territory for Russia's continuing refusal to accept the U.S.-Saudi and other allies' grabbing of Syria (on 'humanitarian grounds', of course - as if, for example, the Sauds aren't far more brutal than Assad). After the traditional-forces' invasion of Russia, Russia's yielding its sovereignty over its own land has never been part of Russia's culture: If Russia were to be invaded by allies of the U.S., then launching all of Russia's nuclear weapons against the U.S. and America's invasion-allies, would be a reasonably expected result. Here's how it would develop: On America's side, which (very unlike Russia) has no record of any foreign invasion against its own mainland (other than the Sauds' own 9/11 'false flag' attacks), the likely response in the event of Russia's crushing its invaders would be for the U.S. President to seek to negotiate a face-saving end to that limited war, just as the American President Richard Nixon did regarding America's invasion and occupation of Vietnam.

However, a reasonable question can be raised as to whether, in such a situation, Russia would accept anything less than America's total surrender, much as Franklin Delano Roosevelt in WW II was determined to accept nothing less than Germany's total surrender, at the end of that war. If Trump wants to play Hitler, then Putin (acting in accord with Russian tradition) would probably play both FDR and Stalin, even if it meant the end of the world. For Russia to be conquered, especially by such intense evil as those invaders would be representing, would probably be viewed by Russians as being even worse than ending everything, and this would probably be Putin's view as well. If America did not simply capitulate, Putin would probably nuclear-blitz-attack the U.S. and its allies, rather than give Trump (or Pence) the opportunity to blitz-attack Russia and to sacrifice all of the U.S. side's invading troops in Russia so as to 'win' the overall war and finally conquer Russia. It would be like WW II, except with nuclear weapons - and thus an entirely different type of historical outcome after the war.

Consequently, either the U.S. will cease its designs on Russia, or there will be WW III. Russia's sovereignty will never be yielded, especially not to the thuggish gang who have come to rule the U.S. (both as "Republicans" and as "Democrats"). The bipartisan neoconservative dream of America's aristocrats (world-conquest) will never be achieved. Russia will never accept it. If America's rulers continue to press it, the result will be even worse than when the Nazis tried. It's just an ugly pipe-dream, but any attempt to make it real would be even uglier. And nobody who buys a 'nuclear-proof bunker' will get what he or she thinks is being bought - safety in such a world as that. It won't exist.

Shemp 4 Victory -> Crash Overide , Apr 20, 2017 10:56 PM

Fred Reed knocks one out of the park:

First Transgender President: Trump Becomes Hillary http://www.unz.com/freed/first-transgender-president-trump-becomes-hillary/

Luc X. Ifer -> Shemp 4 Victory , Apr 20, 2017 11:24 PM

False. We have a simulation, and it is far worse than people can even imagine.

[...

  • Even humans living in shelters equipped with many years worth of food, water, energy, and medical supplies would probably not survive in the hostile post-war environment.

    ...]

    http://www.nucleardarkness.org/warconsequences/hundredfiftytonessmoke/

  • Luc X. Ifer -> Luc X. Ifer , Apr 20, 2017 11:41 PM

    Another reason why USSA is in hurry to have the war with Russia ASAP is that they know that very soon - if not even now in the present, USSA ICBM defense is outdated and 100% ineficient against the newest Russian ICBMs, if by any bad chance Russia launches the 1st strike Disney Land USSA is Bye Felicia without even a chance to retaliate.

    https://www.rt.com/news/340588-hypersonic-warhead-sarmat-tested/

    winged -> Luc X. Ifer , Apr 20, 2017 11:41 PM

    If that time truly comes, make sure you know who's really responsible.

    http://biblicisminstitute.wordpress.com/2015/03/17/the-truth-about-the-c...

    [Apr 21, 2017] President Trump dropped the biggest bomb

    Apr 21, 2017 | economistsview.typepad.com

    Fred C. Dobbs , April 20, 2017 at 04:30 AM

    Mother of All Bombs https://nyti.ms/2pFwhOS
    NYT - ALI M. LATIFIAPRIL 20, 2017

    A journey to the Afghan village where
    President Trump dropped the biggest bomb.

    ACHIN, AFGHANISTAN - I spent the evening of April 13 with a cousin and two aunts in the upscale Wazir Akbar Khan neighborhood in Kabul, Afghanistan. My aunts mostly talked about their relaxed, liberal early youth in the 1960s among the Kabul elite. As we waited in the driveway for our car, my cousin told me about an explosion in Nangarhar, the eastern province of Afghanistan, where our family comes from. We scrolled through our phones. As we drove out, it became clear it wasn't the beginning of the Taliban's so-called Spring Offensive.

    Around 8 p.m. Afghan time, the United States had dropped a 21,600-pound, $16 million bomb on Asadkhel, a tiny village nestled between two forested hills, to attack a decades-old tunnel system that was being used by fighters claiming allegiance to the Iraq- and Syria-based Islamic State.

    Afghanistan has been at war for almost four decades now. Our people lived through the Soviet occupation and the war the mujahedeen fought against the Soviets with the support of the United States; freedom from the Soviet occupation was stained by a brutal civil war between mujahedeen factions (warlords had ruled large parts of the country and exacted a terrible human cost).

    The Taliban rule followed. We watched them being bombed into submission and escape after Sept. 11, celebrated a few years of relative calm, and saw the Taliban return to strength and wage a long, bloody insurgency that continues to this day. We watched the world tire of our forever war and forget us.

    Throughout the years of war, we had come to make lists of many firsts in Afghanistan - horrors, military victories, defeats, weapons used, atrocities committed, improbable lives saved. The explosion of the "mother of all bombs" on April 13 was a striking addition to the list of "firsts."

    (So...)

    I set out for Nangarhar. Leaving Kabul can be a dangerous affair. If you travel south of the city, every mile on the road is living with the prospect of an encounter with the Taliban, the possibility of a tire rolling over a lethal roadside bomb.

    I was, fortunately, driving east to Jalalabad, one of the largest Afghan cities. I drove for three hours through tunnels carved into the mountainside, past streams flowing beside forested mountains, and arrived in Jalalabad in the afternoon. The bombing site was two hours away. The city did not betray any anxiety. Rickshaws whizzed from roundabout to roundabout; kebab stands on sidewalks did brisk business; men and women filled the bazaars, shopping before the Friday prayer.

    Some Afghan officials from Jalalabad took a group of journalists to Achin district, about 40 miles south. We drove through Bati Kot and Shinwar, two districts in between, where the Islamic State had established a significant presence in 2014. Thousands of residents had fled and sought refuge in Jalalabad and Kabul, among other places. Most of them were yet to return, but people carried on with their lives in village bazaars.

    We passed an unfinished luxury-housing complex named for Amanullah Khan, the beloved former king of Afghanistan. We passed the site of a proposed university. As we approached Achin, white and purple poppy plants popped up in the green grass fields.

    A few miles before Asadkhel, the bombed village, the road turned into a mountainous stretch of rock, dirt and gravel. A market of about 200 stores lay abandoned; the stores had been destroyed in weekslong military operations against the Islamic State fighters. Crumbling foundations, caved-in roofs and some tattered pieces of cloth were all that remained.

    Not far from the ruined market, I met two boys: 11-year-old Safiullah and 13-year-old Wajed. They described the explosion as "very loud" but insisted that it did not scare them. Safiullah held on to his unruly goat that he was walking home. "I am used to it," he said. "I have heard so many bombings."

    Wajed, who had come to bring water to the police, agreed. They said they were glad that the Islamic State fighters were gone. Safiullah had interacted a little with Islamic State fighters as he took his goat for grazing. They told him, "Don't grow poppy and don't shave your beard."

    We finally reached a hilltop overlooking a green valley besides Asadkhel. A small cluster of mud houses stood along the hill. Every now and then a child would pass by. We saw no adults.

    Two hills obstructed view of the bombed area. American helicopters flew overhead. Three hours passed but we weren't allowed to proceed further. Officials spoke cheerfully of resounding success and precision of the operation.

    Yet every time we sought permission to visit the bombed area, they found excuses to keep us away: "The operation is ongoing!" "There are still Daesh" - Islamic State - "fighters on the loose!" "There are land mines!" and finally, "The area is being cleared!" "No civilians were hurt!"

    We weren't allowed anywhere near the bombed village. We were simply told that about 94 Islamic State fighters had been killed.

    In the end, "Madar-e Bamb-Ha" became the star of a grotesque reality television show. We know how much it weighs, what it costs, its impact, its model number and its code name. We know nothing about the people it killed except they are supposed to be nameless, faceless, cave-dwelling Islamic State fighters. It was a loud blast, followed by a loud silence. It is yet another bomb to fall on Afghan soil, and the future of my homeland remains as uncertain as ever.

    Related: The 'Mother of All Bombs' blast site is still
    off-limits, but here's who it may have killed http://read.bi/2pCdkiN via @Business Insider

    ... In a move reminiscent of Vietnam-era body-count assessments, Afghan officials have released estimates of the number of ISIS fighters killed in the MOAB strike, upping the total from 36 to 96 over the last six days. ...

    ilsm -> Fred C. Dobbs... , April 20, 2017 at 03:18 PM
    body count worked so well in Vietnam and for the Russians in Kabul.........

    Imagine if the winds were not compensated for.....

    Let no one in, like Idbil, then the story is safe.

    [Apr 21, 2017] West does not want to investigate incident in Idlib, Russian diplomat says

    Apr 21, 2017 | economistsview.typepad.com
    RGC , April 20, 2017 at 05:36 AM
    West does not want to investigate incident in Idlib, Russian diplomat says

    Russian Politics & Diplomacy April 20, 8:28 UTC+3


    "We guess that Americans probably have something to hide, since they persistently want to take the Shayrat airport out of the investigation," the diplomat said


    THE HAGUE, April 20. /TASS/ Western countries do not want to properly investigate the incident with the possible use of chemical weapons in the Syrian province of Idlib, Alexander Shulgin, Permanent Representative of the Russian Federation to the Organization for the Prohibition of Chemical Weapons (OPCW) told TASS.

    On Wednesday, the meeting of the OPCW Executive Council took place. During that meeting Russia and Iran submitted a revised draft proposal for the investigation of the incident in the Syrian province of Idlib.

    However, the United States opposed the visit of the Syrian Chemical Weapons Detection Mission to the Shayrat airfield, since it "has nothing to do with the situation," the diplomat said.


    The US delegation "spoke out against the involvement of any national experts in the work of the mission, they accused Russia of trying to "mix tracks and lead the investigation to a dead end."

    "But the connection between the incident in Idlib and the airfield of Shayrat was established by the Americans themselves, who stated that the Syrian planes had flown from this airfield," the Permanent Representative stressed. "Therefore, it is absolutely necessary to determine if sarin or other chemical munitions were stored there or not," he stressed.

    "Our view is that the Western countries are acting extremely inconsistently," the Russian diplomat said.

    "We guess that Americans probably have something to hide, since they persistently want to take the Shayrat airport out of the investigation. Maybe they knew from the start there was no chemical weapons there, and all this was used only as an excuse?" he added.


    On April 7, US President Donald Trump ordered a strike on Syria's Shayrat military air base located in the Homs Governorate. The attack, involving 59 Tomahawk Land Attack Missiles (TLAM), came as a response to the alleged use of chemical weapons in the Idlib Governorate on April 4. The US authorities believe that the airstrike on Idlib was launched from the Shayrat air base.

    http://tass.com/politics/942237

    pgl -> RGC... , April 20, 2017 at 05:51 AM
    TASS is the Russian News Agency. Somehow I do not find them all that credible.
    RGC -> pgl... , April 20, 2017 at 06:01 AM
    When the New York Times and Washington Post offer you fake news or no news, you might want to see what other sources say.

    It might be wise to check one against the other and then decide which is the more credible.

    pgl -> RGC... , April 20, 2017 at 06:08 AM
    Does other news sources include Faux News and Billo? Oh wait - Billo just got canned.

    BTW - we know sarin gas was used on the citizens of Syria. I guess you want to blame the French or something.

    RGC -> pgl... , April 20, 2017 at 06:24 AM
    People other than Russians have questioned the story.

    Like a prof at MIT:

    The Nerve Agent Attack that Did Not Occur:

    Analysis of the Times and Locations of Critical Events in the Alleged Nerve Agent Attack at 7 AM on April 4, 2017 in Khan Sheikhoun, Syria

    By Theodore A. Postol, professor emeritus of science, technology, and national security policy at MIT.

    http://www.washingtonsblog.com/2017/04/67102.html

    pgl -> RGC... , April 20, 2017 at 06:32 AM
    Read more carefully:

    "The conclusion of this summary of data is obvious – the nerve agent attack described in the WHR did not occur as claimed. There may well have been mass casualties from some kind of poisoning event, but that event was not the one described by the WHR."

    He is not saying attack did not occur. He is only saying the way the White House reported it was not entirely accurate. Yuuuge difference. Like Sean Spicer gets the details right every time - not.

    RGC -> pgl... , April 20, 2017 at 06:42 AM
    "This means that the allegedly "high confidence" White House intelligence assessment issued on April 11 that led to the conclusion that the Syrian government was responsible for the attack is not correct.

    For such a report to be so egregiously in error, it could not possibly have followed the most simple and proven intelligence methodologies to determine the veracity of its findings.

    Since the United States justified attacking a Syrian airfield on April 7, four days before the flawed National Security Council intelligence report was released to the Congress and the public, the conclusion that follows is that the United States took military actions without the intelligence to support its decision."

    RGC -> pgl... , April 20, 2017 at 06:27 AM
    NYT Mocks Skepticism on Syria-Sarin Claims
    April 18, 2017

    Exclusive: The New York Times and other major media have ruled out any further skepticism toward the U.S. government's claim that Syrian President Assad dropped a sarin bomb on a town in Idlib province, reports Robert Parry.
    ................
    Today, however, particularly on foreign policy issues, the major U.S. news outlets, such as The New York Times and The Washington Post, apparently believe there is only one side to a story, the one espoused by the U.S. government or more generically the Establishment.
    .....................
    https://consortiumnews.com/2017/04/18/nyt-mocks-skepticism-on-syria-sarin-claims/

    pgl -> RGC... , April 20, 2017 at 06:35 AM
    Facts on the ground in Assad's brutal regime are confusing? Stop the presses. I blame Assad. And no - I still do not trust the Russians.
    RGC -> pgl... , April 20, 2017 at 06:44 AM
    And I would never trust your judgement.
    pgl -> RGC... , April 20, 2017 at 06:48 AM
    Likewise! BTW it is judgment (only 1 e).
    RGC -> pgl... , April 20, 2017 at 07:02 AM
    This source says G_d is on my side:

    "judgement is the form sanctioned in the Revised Version of the Bible, & the OED prefers the older & more reasonable spelling. Judgement is therefore here recommended –Fowler p. 310."

    http://www.dailywritingtips.com/judgement-or-judgment/

    RGC -> RGC... , April 20, 2017 at 02:29 PM
    And of course, that means the devil is on your side.

    Just as I suspected.

    JohnH -> pgl... , April 20, 2017 at 07:02 AM
    What facts on the ground? There has been no investigation...only assertions made by the usual suspects.

    A nice summary of the story:
    https://youtu.be/rkj9UCHO0Tc

    As in economics, pgl is a staunch supporter of the dominant narrative and the conventional wisdom...one of those who believed that Saddam had WMDs.

    pgl -> JohnH... , April 20, 2017 at 07:29 AM
    The dominant narrative in Moscow is TASS. I guess you work for them now. BTW - I was doubting the Saddam WMD tale back in 2002. So take your usual lies somewhere else troll.
    JohnH -> pgl... , April 20, 2017 at 08:08 AM
    The dominant narrative among NY elites is the NY Times, whose reporting they swallow hook, line and sinker.

    Yet you won't see any mention Theodore Postol's critique of Trump's allegations about the Syrian chemical attack. When it comes to foreign affairs, the NY Times salutes and follows the party line...as do virtually all American news outlets.
    http://fair.org/home/out-of-46-major-editorials-on-trumps-syria-strikes-only-one-opposed/

    pgl is happy to join into the groupthink no questions asked...

    pgl -> JohnH... , April 20, 2017 at 07:35 AM
    Did you check your source here? The James Corbett Report? Featured here at American Loons:

    http://americanloons.blogspot.com/2013/06/584-james-corbett.html

    Even The Onion would not go here.

    JohnH -> pgl... , April 20, 2017 at 08:10 AM
    Question is, what facts in the Corbett Report were wrong? Seems to me that they pretty much nailed the contradictions and hypocrisy of the trumped up charges against Syria.
    pgl -> JohnH... , April 20, 2017 at 08:36 AM
    See below. The news today sort of debunks your apologist attitude toward Assad the Butcher.
    JohnH -> pgl... , April 20, 2017 at 12:26 PM
    Well, now we have the room and may have the weapon. But who done it? Colonel Mustard, Professor Plum, or Miss Scarlet?

    It is well known that the Syrian rebels also use chemical weapons.
    http://www.telegraph.co.uk/news/worldnews/middleeast/syria/10039672/UN-accuses-Syrian-rebels-of-chemical-weapons-use.html

    But that doesn't dissuade pgl from believing everything that Trump the compulsive liar says! Until Trump bombed Syria, libruls like pgl didn't believe a word Trump said. Now they'll believe anything!!!

    After a lifetime of watching the US start pointless and futile wars under false pretenses (Vietnam, Iraq, Libya, etc.), pgl has no hesitation about gulping down the kool aid as fast as he can! In fact, libruls like pgl seem absolutely delighted when money that could be used for socially useful purposes like education and healthcare get diverted to fight phantom enemies abroad.

    anne -> pgl... , April 20, 2017 at 06:33 AM
    http://economistsview.typepad.com/economistsview/2017/04/krugman-elizabeth-warren-lays-out-the-reasons-democrats-should-keep-fighting.html#comment-6a00d83451b33869e201bb09927277970d

    April 19, 2017

    "Bernie Sanders was of course a civil rights activist in the 1960s..."

    A couple of marches does not make on Martin Luther King or John Lewis. I spent more time in the trenches than Sanders did back then...

    http://economistsview.typepad.com/economistsview/2017/04/links-for-04-20-17.html#comment-6a00d83451b33869e201b8d279eb0e970c

    April 20, 2017

    I guess you want to blame the French or something....

    ilsm -> pgl... , April 20, 2017 at 03:24 PM
    Like VOA which had a long agitprop piece today.

    Do you think the Sarin was stored near the planes that could get to Idlib? Or maybe those cruise missiles damaged a Sarin site?

    Why not find the igloo that help the Sarin?

    Or do you want to believe the staged vids and pix?

    OPCW said to was Sarin...... or such!

    And French are selling the US' tale like they sold killing Qaddafi and that unneeded involvement in Europe 100 years ago.

    [Apr 21, 2017] Petty bourgeois class is not the same thing as middle income: source of income matters hugely

    Notable quotes:
    "... Petty rentiers live off others above the compensation for inflation and retireds are not earning wages anymore. Even if they live on social security and pensions ..."
    "... Income ranking regardless of source is a muddle ..."
    "... Most people are in the job class, not the asset owning / one percent class. "High taxes and redistribution do the job nicely, just ask Norway." Not a sufficient answer to issues Marxism raises, just a facile one. ..."
    "... I don't have a problem with class warfare. I don't have a problem with Democrats either. I have a problem with losing. ..."
    "... I agree with above on workers now retired. However their solidarity with the still active workers is not a sure thing ..."
    "... Yep. Further proof that the rich are parasites killing their host. ..."
    "... Torturing, not killing is how they get their satisfaction. ..."
    "... Yes, but their lack of restraint is killing the host. ..."
    Apr 21, 2017 | economistsview.typepad.com
    paine -> paine... April 20, 2017 at 06:09 AM
    Bourgeois (petty) class is not the same thing as middle income: source of income matters hugely

    Petty rentiers live off others above the compensation for inflation and retireds are not earning wages anymore. Even if they live on social security and pensions

    Income ranking regardless of source is a muddle

    RC AKA Darryl, Ron -> paine... , April 20, 2017 at 06:44 AM

    Easy on those retireds. Prefer to think of them as former wage class living off their social dividend for past services rendered. In any case, retirement is still the best job that I have ever had. Got to go cut the grass now, first time this season and way too tall. We were in a drought for a time, but it broke last weekend.
    reason -> RC AKA Darryl, Ron... , April 20, 2017 at 08:33 AM
    Good thanks. I just think that paine's world view is dated. I don't like class war of either type (down or up) it is too costly for the bystanders (just like any war). Today most people don't fit cleanly into one class (workers) or the other (capitalists) -- actually they never did women and children are a majority not to mention the increasing ranks of the retired. We live in a world where most people are both workers and owners - that is almost the definition of a middle class society. And many rely on "rents" from their hard won qualifications. Marxism is just too simple a view of world, and as it turns out unnecessary. High taxes and redistribution do the job nicely, just ask Norway.
    Peter K. -> reason ... , April 20, 2017 at 08:49 AM
    Most people are in the job class, not the asset owning / one percent class. "High taxes and redistribution do the job nicely, just ask Norway." Not a sufficient answer to issues Marxism raises, just a facile one.
    RC AKA Darryl, Ron -> reason ... , April 21, 2017 at 03:49 AM
    I don't have a problem with class warfare. I don't have a problem with Democrats either. I have a problem with losing.

    I also have a problem with winning and then just flubbing the replacement. I am mostly for just letting future generations work this out however they can once given the tools of a more democratic political system.

    paine -> RC AKA Darryl, Ron... , April 20, 2017 at 09:00 AM
    I agree with above on workers now retired. However their solidarity with the still active workers is not a sure thing
    ilsm -> paine... , April 20, 2017 at 03:13 PM
    instead of make it easier poor make it frequent to escape poor
    RC AKA Darryl, Ron -> ilsm... , April 21, 2017 at 03:50 AM
    Yep.
    DrDick -> reason ... , April 20, 2017 at 06:45 AM
    Yep. Further proof that the rich are parasites killing their host.
    RC AKA Darryl, Ron -> DrDick... , April 20, 2017 at 07:21 AM
    Torturing, not killing is how they get their satisfaction.
    DrDick -> RC AKA Darryl, Ron... , April 20, 2017 at 08:34 AM
    Yes, but their lack of restraint is killing the host.

    [Apr 21, 2017] Since Obama appointed Derugulating Larry , Tax-evading Timmy and Too-big-to-jail Eric , maybe those appointments were not that good

    Apr 21, 2017 | economistsview.typepad.com
    reason , April 20, 2017 at 02:31 AM
    It seems Paul Krugman isn't the economist who doesn't necessarily agree with Sanders all the time.

    http://conversableeconomist.blogspot.de/2017/04/personnel-is-policy-presidential.html

    Still, all this really shows is how incredibly dysfunctional the ancient US system is. Time for a constitutional renewal process.

    Fred C. Dobbs -> reason ... , April 20, 2017 at 03:54 AM
    (Shocking stuff, no?)

    'For example, late in the Obama administration the board that is supposed to oversee the US Postal Service had zero members out of the nine possible appointments. The reported reason is that Senator Bernie Sanders put a hold on all possible appointees, as a show of solidarity with postal workers. If it isn't obvious to you how Sanders preventing President Obama from appointing new board members would influence the US Postal Service in the directions that Sanders would prefer, given that President Trump could presumably appoint all nine members of the board, you are not alone.'

    Timothy Taylor
    conversableeconomist@gmail.com

    RGC -> Fred C. Dobbs... , April 20, 2017 at 07:25 AM
    Since Obama appointed "Derugulatin' Larry", "Tax-evadin' Timmy" and "Too-big-to-jail Eric", maybe those appointments weren't very good.

    [Apr 19, 2017] Trump folded. The purple revolution against him succeeded. He was unable withstand the pressure of anti-Russian attacks and Trump as a Russian agent smear. Few

    Notable quotes:
    "... One thing worth reiterating: Trump has largely shown himself to be no different than standard Republicans on budget issues, and his core supporters still love him. It's as though they actually care little about economic issues ..."
    Apr 19, 2017 | economistsview.typepad.com
    Sanjait, April 19, 2017 at 08:32 AM
    Bernstein on garbage duty.

    One thing worth reiterating: Trump has largely shown himself to be no different than standard Republicans on budget issues, and his core supporters still love him. It's as though they actually care little about economic issues and just want a guy who acts terribly towards minorities and foreigners.

    jonny bakho -> Sanjait... , April 19, 2017 at 08:57 AM
    The southern rednecks who control the GOP believe in the Plantation Economy. The Plantation owner exploits the slave and white trash labor and then hires the privileged white guys with the money he extorts. White guys get ahead by brown nosing the wealthy plantation owner.

    The alternative economy that is thriving is entrepreneurial and many people find it easy to suck up to a rich white guy than to go on their own. It is a failing economic model but the only one some people know.

    libezkova -> Sanjait... , April 19, 2017 at 10:14 AM
    "his core supporters still love him"

    I am not so sure. Trump folded. The "purple" revolution against him succeeded. He was unable withstand the pressure of anti-Russian attacks and "Trump as a Russian agent" smear. Few people love turncoats.

    Now he is within just sex change operation difference from Hillary Clinton on foreign policy issues. In other words he betrayed anti-war right -- an important part of his base. He also lost paleoconservatives, another less important, but still a sizable part of his former base.

    Out of his domestic promise the only part that still stands is the Trump Wall -- "building the wall on the border with Mexico" project :-)

    Also, on domestic issues he proved to be so incompetent, that I am not sure that any of his supporters are exited about him. His dealing with Obamacare issues were not only disastrously incompetent and also did not correspond to his election promises. And that was noted.

    He promised to "drain the swamp" but instead he became a part of the swamp himself.

    Politically he is Obama II -- a Republican version of Obama: another king of "bait and switch".

    "Agent Orange" now wants to use jingoism to artificially propel hid approval ratings, but his attack on Syrian airbase is not just a war crime. It is much worse. It was a blunder.

    In other words large part of his supporters see that "the king is naked."

    libezkova -> pgl... , April 19, 2017 at 10:24 AM
    Actually analogy with Obama is deeper than the "king of bait and switch" characterization.

    Like Obama before him, he played the role of a "tabula rasa" -- an empty board on which the frustrated Americans could project their desire for the change ("change we can believe in"), but who, in reality, was just another sell-out.

    [Apr 19, 2017] Paul Krugman Gets Retail Wrong: They are Not Very Good Jobs

    Apr 19, 2017 | economistsview.typepad.com
    anne , April 17, 2017 at 05:55 AM
    http://cepr.net/blogs/beat-the-press/paul-krugman-gets-retail-wrong-they-are-not-very-good-jobs

    April 17, 2017

    Paul Krugman Gets Retail Wrong: They are Not Very Good Jobs

    Paul Krugman used his column * this morning to ask why we don't pay as much attention to the loss of jobs in retail as we do to jobs lost in mining and manufacturing. His answer is that in large part the former jobs tend to be more white and male than the latter. While this is true, although African Americans have historically been over-represented in manufacturing, there is another simpler explanation: retail jobs tend to not be very good jobs.

    The basic story is that jobs in mining and manufacturing tend to offer higher pay and are far more likely to come with health care and pension benefits than retail jobs. A worker who loses a job in these sectors is unlikely to find a comparable job elsewhere. In retail, the odds are that a person who loses a job will be able to find one with similar pay and benefits.

    A quick look at average weekly wages ** can make this point. In mining the average weekly wage is $1,450, in manufacturing it is $1,070, by comparison in retail it is just $555. It is worth mentioning that much of this difference is in hours worked, not the hourly pay. There is nothing wrong with working shorter workweeks (in fact, I think it is a very good idea), but for those who need a 40 hour plus workweek to make ends meet, a 30-hour a week job will not fit the bill.

    This difference in job quality is apparent in the difference in separation rates by industry. (This is the percentage of workers who lose or leave their job every month.) It was 2.4 percent for the most recent month in manufacturing. By comparison, it was 4.7 percent in retail, almost twice as high. (It was 5.2 percent in mining and logging. My guess is that this is driven by logging, but I will leave that one for folks who know the industry better.)

    Anyhow, it shouldn't be a mystery that we tend to be more concerned about the loss of good jobs than the loss of jobs that are not very good. If we want to ask a deeper question, as to why retail jobs are not very good, then the demographics almost certainly play a big role.

    Since only a small segment of the workforce is going to be employed in manufacturing regardless of what we do on trade (even the Baker dream policy will add at most 2 million jobs), we should be focused on making retail and other service sector jobs good jobs. The full agenda for making this transformation is a long one (higher minimum wages and unions would be a big part of the picture, along with universal health care insurance and a national pension system), but there is one immediate item on the agenda.

    All right minded people should be yelling about the Federal Reserve Board's interest rate hikes. The point of these hikes is to slow the economy and reduce the rate of job creation. The Fed's concern is that the labor market is getting too tight. In a tighter labor market workers, especially those at the bottom of the pecking order, are able to get larger wage increases. The Fed is ostensibly worried that this can lead to higher inflation, which can get us to a wage price spiral like we saw in the 70s.

    As I and others have argued, *** there is little basis for thinking that we are anywhere close to a 1970s type inflation, with inflation consistently running below the Fed's 2.0 percent target, (which many of us think is too low anyhow). I'd love to see Krugman pushing the cause of full employment here. We should call out racism and sexism where we see it, but this is a case where there is a concrete policy that can do something to address it. Come on Paul, we need your voice.

    * https://www.nytimes.com/2017/04/17/opinion/why-dont-all-jobs-matter.html

    ** https://www.bls.gov/news.release/empsit.t19.htm

    *** http://cepr.net/blogs/beat-the-press/overall-and-core-cpi-fall-in-march

    -- Dean Baker

    Fred C. Dobbs -> anne... , April 17, 2017 at 06:17 AM
    PK: Consider what has happened to department stores. Even as Mr. Trump was boasting about saving a few hundred jobs in manufacturing here and there, Macy's announced plans to close 68 stores and lay off 10,000 workers. Sears, another iconic institution, has expressed "substantial doubt" about its ability to stay in business.

    Overall, department stores employ a third fewer people now than they did in 2001. That's half a million traditional jobs gone - about eighteen times as many jobs as were lost in coal mining over the same period.

    And retailing isn't the only service industry that has been hit hard by changing technology. Another prime example is newspaper publishing, where employment has declined by 270,000, almost two-thirds of the work force, since 2000. ...

    (To those that had them, they were probably
    pretty decent jobs, albeit much less 'gritty'
    than mining or manufacturing.)

    BenIsNotYoda -> anne... , April 17, 2017 at 06:42 AM
    Dean is correct. Krugman just wants to play the racism card or tell people those who wish their communities were gutted that they are stupid.
    JohnH -> BenIsNotYoda... , April 17, 2017 at 06:48 AM
    Elite experts are totally flummoxed...how can they pontificate solutions when they are clueless?

    Roger Cohen had a very long piece about France and it discontents in the Times Sunday Review yesterday. He could not make heads or tails of the problem. Not worth the read.
    https://www.nytimes.com/2017/04/14/opinion/sunday/france-in-the-end-of-days.html?rref=collection%2Fcolumn%2Froger-cohen&action=click&contentCollection=opinion&region=stream&module=stream_unit&version=latest&contentPlacement=2&pgtype=collection&_r=0

    And experts wonder why nobody listens to them any more? Priceless!!!

    BenIsNotYoda -> JohnH... , April 17, 2017 at 07:34 AM
    clueless experts/academics. well said.
    paine -> anne... , April 17, 2017 at 08:27 AM
    Exactly dean
    Tom aka Rusty -> anne... , April 17, 2017 at 07:39 AM
    Krugman is an arrogant elitist who thinks people who disagree with him tend to be ignorant yahoos.

    Sort of a Larry Summers with a little better manners.

    anne -> Tom aka Rusty... , April 17, 2017 at 08:18 AM
    Krugman is an arrogant elitist who thinks people who disagree with him tend to be ignorant yahoos.

    [ This is a harsh but fair criticism, and even the apology of Paul Krugman was conditional and showed no thought to the other workers insulted. ]

    cm -> Tom aka Rusty... , April 17, 2017 at 08:11 AM
    There is a lot of elitism to go around. People will be much more reluctant to express publicly the same as in private (or pseudonymously on the internet?). But looking down on other people and their work is pretty widespread (and in either case there is a lot of assumption about the nature of the work and the personal attributes of the people doing it - usually of a derogatory type in both cases).

    I find it plausible that Krugman was referring those widespread stereotypes about job categories that (traditionally?) have not required a college degree, or have been relatively at the low end of the esteem scale in a given industry (e.g. in "tech" and manufacturing, QA/testing related work).

    It must be possible to comment on such stereotypes, but there is of course always the risk of being thought to hold them oneself, or indeed being complicit in perpetuating them.

    As a thought experiment, I suggest reviewing what you yourself think about occupations not held by yourself, good friends, and family members and acquaintainces you like/respect (these qualifications are deliberate). For example, you seem to think not very highly of maids.

    Of course, being an RN requires significantly more training than being a maid, and not just once when you start in your career. But at some level of abstraction, anybody who does work where their autonomy is quite limited (i.e. they are not setting objectives at any level of the organization) is "just a worker". That's the very stereotype we are discussing, isn't it?

    anne -> cm... , April 17, 2017 at 08:26 AM
    Nicely explained.
    paine -> anne... , April 17, 2017 at 08:40 AM
    Yes
    anne -> Tom aka Rusty... , April 17, 2017 at 08:24 AM
    Krugman thinks nurses are the equivalent of maids...

    [ The problem is that Paul Krugman dismissed the work of nurses and maids and gardeners as "menial." I find no evidence that Krugman understands that even after conditionally apologizing to nurses. ]

    paine -> anne... , April 17, 2017 at 08:42 AM
    Even if there are millions of mcjobs
    out there
    none are filled by mcpeople

    [Apr 17, 2017] High Cost of Our Finance Sectors

    Notable quotes:
    "... US finance sector is a net drag on their economy ..."
    "... Overcharged: The High Cost of High Finance ..."
    "... Download the mp3 to listen offline anytime on your computer, mobile/cell phone or handheld device by right clicking here and selecting "save link as." ..."
    angrybearblog.com

    April 16, 2017

    Via www.truth-out.org/news/item/40002-taxcast-staggering-numbers-on-the-high-cost-of-our-finance-sectors

    Published on Mar 23, 2017

    In the March 2017 Taxcast: the high price we're paying for our finance sectors – we look at staggering statistics showing how the US finance sector is a net drag on their economy.

    www.youtube.com/embed/E7oOiJl1n1I

    John Christensen and Alex Cobham of the Tax Justice Network, and Professor of Economics Gerald Epstein of the University of Masachusetts Amhurst. Produced and presented by Naomi Fowler for the Tax Justice Network.

    In our March 2017 Taxcast: the high price we're paying for our finance sectors -- we look at staggering statistics showing how the US finance sector is a net drag on their economy.

    Also, as the British government initiates Brexit divorce negotiations to leave the EU, we discuss something they ought to know, but obviously don't -- they're actually in a very weak position. Could it mean the beginning of the end of the finance curse gripping the UK economy?

    Featuring: John Christensen and Alex Cobham of the Tax Justice Network, and Professor of Economics Gerald Epstein of the University of Masachusetts Amhurst, author of Overcharged: The High Cost of High Finance. Produced and presented by Naomi Fowler for the Tax Justice Network.

    "If you look at particular finance centres, say London and New York, the problem is that the net cost of this system is quite significant, it imposes a cost not only on people who use finance but for the whole economy. So, what we need to think about is what are the more productive activities that ought to be substituted for these excessive aspects of finance?"-Professor Gerald Epstein

    "We might be seeing the start of the end of Britain's grip by the Finance Curse"-John Christensen, Tax Justice Network on Britain's weak position in Brexit negotiations

    Download the mp3 to listen offline anytime on your computer, mobile/cell phone or handheld device by right clicking here and selecting "save link as."

    [Apr 17, 2017] Microsoft says users are protected from alleged NSA malware

    Notable quotes:
    "... In a blog post , Microsoft Corp. security manager Phillip Misner said that the software giant had already built defenses against nine of the 12 tools disclosed by TheShadowBrokers, a mysterious group that has repeatedly published NSA code . The three others affected old, unsupported products. ..."
    "... "Most of the exploits are already patched," Misner said. ..."
    "... The post knocked back warnings from some researchers that the digital espionage toolkit made public by TheShadowBrokers took advantage of undisclosed vulnerabilities in Microsoft's code. That would have been a potentially damaging development because such tools could swiftly be repurposed to strike across the company's massive customer base. ..."
    Apr 17, 2017 | economistsview.typepad.com
    im1dc, April 16, 2017 at 09:52 AM
    Good to Know & Need to Know Data Security Information

    "Microsoft says users are protected from alleged NSA malware"

    http://abcnews.go.com/Technology/wireStory/microsoft-users-protected-alleged-nsa-malware-46815251

    "Microsoft says users are protected from alleged NSA malware"

    By Raphael Satter, AP Cybersecurity writer...PARIS...Apr 15, 2017

    "Up-to-date Microsoft customers are safe from the purported National Security Agency spying tools dumped online, the software company said Saturday, tamping down fears that the digital arsenal was poised to wreak havoc across the internet.

    In a blog post , Microsoft Corp. security manager Phillip Misner said that the software giant had already built defenses against nine of the 12 tools disclosed by TheShadowBrokers, a mysterious group that has repeatedly published NSA code . The three others affected old, unsupported products.

    "Most of the exploits are already patched," Misner said.

    The post knocked back warnings from some researchers that the digital espionage toolkit made public by TheShadowBrokers took advantage of undisclosed vulnerabilities in Microsoft's code. That would have been a potentially damaging development because such tools could swiftly be repurposed to strike across the company's massive customer base.

    Those fears appear to have been prompted by experts using even slightly out-of-date versions of Windows in their labs. One of Microsoft's fixes, also called a patch, was only released last month .

    "I missed the patch," said British security architect Kevin Beaumont, jokingly adding, "I'm thinking about going to live in the woods now."

    Beaumont wasn't alone. Matthew Hickey, of cybersecurity firm Hacker House, also ran the code against earlier versions of Windows on Friday. But he noted that many organizations put patches off, meaning "many servers will still be affected by these flaws."

    Everyone involved recommended keeping up with software updates.

    "We encourage customers to ensure their computers are up-to-date," Misner said."

    ---

    "Online:

    Raphael Satter is reachable on: http://raphaelsatter.com"

    [Apr 17, 2017] In teams, an individuals marginal product is beyond his control

    Notable quotes:
    "... Secondly, in football there's a high ratio of noise to signal: performances are due in part to luck. This is true not just in football. ..."
    "... Thirdly, imagine a top goalkeeper were playing for a better side than Sunderland. His performances would then make a difference to his team's points: a couple of great saves per game would convert losses to draws or wins, rather than 4-0 defeats into 2-0 ones. His marginal product would be higher. ..."
    "... This tells us that, in teams, an individual's marginal product is beyond his control: if Pickford had better colleagues, his marginal product would be higher. A similar problem arises in many large firms. As the late Herbert Scarf wrote: ..."
    Apr 17, 2017 | economistsview.typepad.com
    Peter K. , April 16, 2017 at 08:52 AM
    For fans of football/soccer and leftist economics.

    http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2017/04/against-marginal-product.html

    April 16, 2017

    AGAINST MARGINAL PRODUCT
    by Chris Dillow

    David Moyes says Jordan Pickford has been a better player than Dele Alli this season. This set me wondering about marginal productivity theory.

    To see my point, think about how we'd test Moyes' claim. We could look at what the two teams did in games which Alli and Pickford missed. But there are too few of these to draw robust inferences, and doing so would be impossible for a player who hadn't missed any games*. Instead, we could compare how Sunderland would have done if Pickford were replaced with a next-best alternative to how S***s would have done with a next-best replacement for Alli. In effect, we're asking: what are their marginal products?

    I suspect that Pickford's marginal product consists in converting heavy defeats into narrower ones: this still leaves Sunderland relegated, only with a lesser goal difference. Alli, by contrast, has converted draws or losses into wins. That's a bigger difference.

    This, I think, highlights three problems with marginal productivity analysis.

    The first is that marginal product is the result of a hypothetical question. For example, in considering my own marginal product, I ask: how would the IC do without me? That's a hypothetical to which we cannot give a precise answer. This is true of much of neoclassical economics. As Noah says:

    Demand curves aren't actually directly observable. They're hypotheticals - "If the price were X, how much would you buy?"

    In this, he's echoing Sraffa:

    The marginal approach requires attention to be focused on change, for without change either in the scale of an industry or in the 'proportions of the factors of production' there can be neither marginal product nor marginal cost. In a system in which, day after day, production continued unchanged in those respects, the marginal product of a factor (or alternatively the marginal cost of a product) would not merely be hard to find - it just would not be there to be found. (Production of Commodities by Means of Commodities, pv)

    Secondly, in football there's a high ratio of noise to signal: performances are due in part to luck. This is true not just in football.

    Consider two men of equal ability who become CFOs of start-ups. One start-up becomes massive, the other struggles. The man who joined the former will be many times richer than the latter. But that's more to do with fortune than with human capital or marginal product: firms don't usually grow big because they've got a slightly better CFO than the firm down the road. Anyone who's mind isn't befuddled by Randian nonsense will know that our lives and incomes are the product of luck. But we know that people are terrible at distinguishing luck from skill – in part because they suffer from the outcome bias.

    Thirdly, imagine a top goalkeeper were playing for a better side than Sunderland. His performances would then make a difference to his team's points: a couple of great saves per game would convert losses to draws or wins, rather than 4-0 defeats into 2-0 ones. His marginal product would be higher.

    This tells us that, in teams, an individual's marginal product is beyond his control: if Pickford had better colleagues, his marginal product would be higher. A similar problem arises in many large firms. As the late Herbert Scarf wrote:

    If economists are to study economies of scale, and the division of labor in the large firm, the first step is to take our trusty derivatives, pack them up carefully in mothballs and put them away respectfully; they have served us well for many a year. But derivatives are prices, and in the presence of indivisibilities in production, prices simply don't do the jobs that they were meant to do. They do not detect optimality; they aren't useful in comparative statics; and they tell us very little about the organized complexity of the large firm.

    For me, flaws such as these mean that marginal product theory doesn't make much sense as an explanation of wage levels. We should abandon it as a mental model in favour of bargaining (pdf) models. In these, matches between workers and jobs lead to surpluses, and the surplus is divided according to the balance of power.

    In such models, human capital raises wages insofar as it generates surplus and gives its holders outside options which enhance their bargaining power. But human capital and "marginal product" aren't the whole story. All the things that affect bargaining power, such as technology and unions, also matter. Such models are consistent with the theory that inequality is due to the rise of superstar firms (pdf). They're also consistent with the fact that minimum wages don't destroy many jobs. And they help explain rising CEO pay better than marginal product theory.

    What I'm appealing for here is for economists to abandon unscientific just-so stories and to think instead about the real world. In this world, wages are determined not by unobservable entities such as marginal product but by – among other things – power (pdf).

    * S***s did well during Harry Kane's injury. Few would say this is evidence that Kane is a poor player, and not should they.

    Peter K. -> Peter K.... , April 16, 2017 at 08:56 AM
    See Denis Drew. I guess Keynes was in favor of trade unions but Keynesian economists never discuss them. Neither do bloviating, blowhards like EMichael.

    PGL used to brag about how Hillary supported striking Verizon workers during the election but that was just a photo-op, like how all of the building trade unions hob-nobbed with Trump. It's BS. Unions have collapsed under the watch of New Democrats. They've done nothing.

    In his final speech Obama said we have to beware of automatization. There's no evidence of it. It's an excuse. No, the Democrats have sold us out. So what that they raised taxes on the rich a little. The rich have never had is so good.

    Peter K. -> Peter K.... , April 16, 2017 at 09:01 AM
    "The first is that marginal product is the result of a hypothetical question. For example, in considering my own marginal product, I ask: how would the IC do without me? That's a hypothetical to which we cannot give a precise answer. This is true of much of neoclassical economics. As Noah says:

    Demand curves aren't actually directly observable. They're hypotheticals - "If the price were X, how much would you buy?"

    In this, he's echoing Sraffa:

    The marginal approach requires attention to be focused on change, for without change either in the scale of an industry or in the 'proportions of the factors of production' there can be neither marginal product nor marginal cost. In a system in which, day after day, production continued unchanged in those respects, the marginal product of a factor (or alternatively the marginal cost of a product) would not merely be hard to find - it just would not be there to be found. (Production of Commodities by Means of Commodities, pv)"

    Is this related to the price of airline tickets?

    http://www.interfluidity.com/v2/6846.html

    Steve Randy Waldman

    ...

    It's a cliché that the government builds "bridges to nowhere" that the private sector never would build. That's true. And it's a credit to the public sector. Bridges to nowhere are what turn nowheres into somewheres. We need many, many more bridges to nowhere.

    Finally, I want to express my annoyance at a trope in punditry about air travel that is as common as it is mistaken. Here is Kevin Drum:

    So flying sucks because we, the customers, have made it clear that we don't care. We love to gripe, but we just flatly aren't willing to pay more for a better experience. Certain individuals (i.e., the 10 percent of the population over six feet tall) are willing to pay for legroom. Some are willing to pay more for extra baggage. Some are willing to pay more for a window seat. But most of us aren't. If the ticket price on We Care Airlines is $10 more, we click the link for Suck It Up Airlines. We did the same thing before the web too. As usual, the fault lies not in the stars, but in ourselves.

    Here is Megan McArdle, in a piece titled (by somebody) "Hate Flying? It's Your Fault":

    Ultimately, the reason airlines cram us into tiny seats and upcharge for everything is that we're out there on Expedia and Kayak, shopping on exactly one dimension: the price of the flight. To win business, airlines have to deliver the absolute lowest fare. And the way to do that is . . . to cram us into tiny seats and upcharge for everything. If American consumers were willing to pay more for a better experience, they'd deliver it. We're not, and they don't.

    cm -> Peter K.... , April 16, 2017 at 06:35 PM
    So it is my fault that for my travel needs, I have very few choices of carriers, if I have a strong preference for few stopovers? As soon as I accept 1-2 additional stops than minimally necessary (and the corresponding doubling or more of travel time, nevermind increased risk of missing flights, delays, etc.), I can find more connections.

    My problem, if I pay for the trip, is flight availability. It is usually not an option to pay even twice as much for flying when or how I want or need to.

    I know absolutely nothing about the economics of air travel (any experts here?), but how about airport gates and airport passenger/flight processing capacity as bottlenecks, and long-distance flights favoring if not requiring larger aircraft (which cannot use every airport for regular flights). With larger aircraft you have the problem of selling all seats on all flights, which would seem to favor multi-hop trips via major routes, with all the multiple de/boardings, security checks, and as we have recently seen increased chances of "re-accommodation".

    cm -> cm... , April 16, 2017 at 06:50 PM
    When I travel for business, my choices are further restricted by "appropriate" departure and arrival times. Then it also becomes a multivariate problem - arriving one day earlier leads to one more hotel stay, car rental day, etc.

    In my current situation I could "save" the company around a hundred bucks by using a cheaper carrier that has a direct flight from where I am to where I need to go, and for returning, there is a multi-hop flight that takes ~3 hours longer to get home than the hundred bucks more expensive competition (arriving not in the late evening but after midnight), because the first leg of the flight is in the opposite direction of where I need to go. No thanks, if I can avoid it! I take the more "expensive" carrier which has direct flights in both directions.

    cm -> cm... , April 16, 2017 at 06:59 PM
    It seems to me it may be a similar problem as the debate over public transit experience vs. driving. In public transit, unless your travel endpoints are close to a single route, it is usually the line changes and distance between end stations and the actual destinations that make up half the total time or more.

    The problem can be "addressed" by more N-to-N routes, but then the transit agency has a problem with getting enough ridership on every route (and where to store all the transit vessels outside of peak traffic hours, and fleet operation/maintenance overheads, etc.).

    reason -> cm... , April 17, 2017 at 08:27 AM
    Which is where driverless cars (as taxi alternative) could come in. That is the real potential revolution.

    [Apr 17, 2017] Washington Post Gets It Wrong: An $800 Billion Stimulus Following the Collapse of the Housing Bubble Was Not Big

    Notable quotes:
    "... In fact, it wasn't even $800 billion, but the Washington Post has never been very good with numbers. The issue came up in a column by Paul Kane telling Republicans that they don't have to just focus on really big items. ..."
    "... The stimulus was actually closer to $700 billion since around $70 billion of the "stimulus" involved extensions of tax breaks that would have been extended in almost any circumstances. This was actually a very small response to the collapse of a housing bubble that cost the economy close to $1,200 billion dollars in annual demand (6-7 percent of GDP). ..."
    Apr 17, 2017 | economistsview.typepad.com
    anne , April 16, 2017 at 09:11 AM
    http://cepr.net/blogs/beat-the-press/wapo-gets-it-wrong-an-800-billion-stimulus-following-the-collapse-of-the-housing-bubble-was-not-big

    April 16, 2017

    Washington Post Gets It Wrong: An $800 Billion Stimulus Following the Collapse of the Housing Bubble Was Not "Big"

    In fact, it wasn't even $800 billion, but the Washington Post has never been very good with numbers. The issue came up in a column by Paul Kane telling Republicans that they don't have to just focus on really big items. The second paragraph refers to the Democrat's big agenda after President Obama took office:

    "Everyone knows the big agenda they pursued - an $800 billion economic stimulus, a sweeping health-care law and an overhaul of Wall Street regulations."

    The stimulus was actually closer to $700 billion since around $70 billion of the "stimulus" involved extensions of tax breaks that would have been extended in almost any circumstances. This was actually a very small response to the collapse of a housing bubble that cost the economy close to $1,200 billion dollars in annual demand (6-7 percent of GDP).

    The Obama administration tried to counteract this huge loss of demand with a stimulus that was roughly 2 percent of GDP for two years and then trailed off to almost nothing. This was way too small as some of us argued at the time. **

    The country has paid an enormous price for this inadequate stimulus with the economy now more than 10 percent below the level that had been projected by the Congressional Budget Office for 2017 before the crash. This gap is close to $2 trillion a year or $6,000 for every person in the country. This is known as the "austerity tax," the cost the country pays because folks like Peter Peterson and the Washington Post (both the opinion and news section) endlessly yelled about debt and deficits at a time when they clearly we not a problem.

    It is also worth noting that the overhaul of Wall Street was not especially ambitious. It left the big banks largely in tack and did not involve prosecuting any Wall Street executives for crimes they may have committed during the bubble years, such as knowingly passing on fraudulent mortgages in mortgage backed securities.

    * https://www.washingtonpost.com/powerpost/republicans-may-be-making-a-mistake-by-swinging-only-for-the-fences/2017/04/15/b82da176-21e8-11e7-a0a7-8b2a45e3dc84_story.html

    ** http://cepr.net/documents/publications/housing-crash-recession-2009-03.pdf

    -- Dean Baker

    [Apr 17, 2017] If you put the two trends together-increased individual income inequality and increased corporate savings-what were witnessing then is increasing private control over the social surplus

    Notable quotes:
    "... Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares. ..."
    "... Any proposals to decrease tax rates for wealthy individuals and corporations will only increase that private control. ..."
    Apr 17, 2017 | economistsview.typepad.com
    RGC , April 16, 2017 at 07:23 AM
    Why is it anyone would want to save such an economic system?

    April 11, 2017

    from David Ruccio

    "If you put the two trends together-increased individual income inequality and increased corporate savings -- what we're witnessing then is increasing private control over the social surplus.

    Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares.

    Any proposals to decrease tax rates for wealthy individuals and corporations will only increase that private control.

    Why is it anyone would want to save such an economic system?"

    https://rwer.wordpress.com/2017/04/11/why-is-it-anyone-would-want-to-save-such-an-economic-system/#more-28993

    [ Tie that to the private banking system ]

    anne -> RGC... , April 16, 2017 at 07:40 AM
    Possibly I do not understand the matter, but I can find no evidence that corporate "saving" as a share of GDP in the United States is increasing. Actually, the reverse.
    RGC -> anne... , April 16, 2017 at 07:50 AM
    http://voxeu.org/article/global-corporate-saving-glut
    anne -> RGC... , April 16, 2017 at 08:00 AM
    https://fred.stlouisfed.org/graph/?g=dnZ6

    January 30, 2017

    Net Corporate Saving * as a share of Gross Domestic Product, 1948-2016

    * Undistributed profits

    https://fred.stlouisfed.org/graph/?g=dnYR

    January 30, 2017

    Net Corporate Saving * as a share of Gross Domestic Product, 1980-2016

    * Undistributed profits

    anne -> anne... , April 16, 2017 at 06:12 PM
    Again, I was and am right.

    I can find no evidence that corporate "saving" as a share of GDP in the United States is increasing. Actually, the reverse:

    https://fred.stlouisfed.org/graph/?g=dnZ6

    anne -> RGC... , April 16, 2017 at 08:03 AM
    http://voxeu.org/article/global-corporate-saving-glut

    April 5, 2017

    The global corporate saving glut: Long-term evidence

    By Peter Chen, Loukas Karabarbounis, and Brent Neiman

    Corporate saving has increased relative to GDP and corporate investment across the world over the past three decades, reflecting how the global decline in the labour has led to increased corporate profits. This column characterises these trends using national income accounts and firm-level data, and relates them to firm characteristics and the accumulation of financial assets. In response to declines in the components of the cost of capital, a model with capital market imperfections generates an increase in corporate saving similar to that found in the data.

    [ I am grateful for the reference, but I had already read the paper carefully and found no reason to agree with the assertion that there is long term evidence of a corporate saving glut. ]

    RGC -> anne... , April 16, 2017 at 02:55 PM

    2.2 National Accounts Structure and Identities

    National accounts data include sector accounts that divide the economy into the corporate sector, the government sector, and the household and non-profit sector.

    For most economies, the corporate sector can be further disaggregated into financial and non-financial corporations and the household sector can be distinguished from the non-profit sector.

    National accounts data also include industry accounts that divide activity according to the International Standard Industrial
    Classification, Rev. 4 (SIC).

    A set of accounting identities that hold in the aggregate as well as at the sector or industry
    level serve as the backbone for the national accounts.

    In these accounts, the value of final
    production (i.e. production net of intermediate goods) is called gross value added (GVA). When
    aggregated to the economy level, GVA equals GDP less net taxes on products. GVA is detailed
    in the generation of income account and equals the sum of income paid to capital, labor, and
    taxes:


    GVA = Gross Operating Surplus (GOS) + Compensation to Labor
    + Net Taxes on Production.


    GOS captures the income available to corporations and other producing entities after paying for labor services and after subtracting taxes (and adding subsidies) associated with production.


    The distribution of income account splits GOS into gross saving, dividends, and other payments to capital such as taxes on profits, interest payments, reinvested foreign earnings, and other transfers:


    GOS = Gross Saving (GS) + Net Dividends | {z } Accounting Profits
    + Taxes on Profits + Interest
    − Reinvested Earnings on Foreign Direct Investment + Other Transfers.


    Net dividends equal dividends paid less dividends received from subsidiaries or partially-owned entities. Other transfers include social contributions and rental payments on land.

    In our analyses, we define (accounting) profits as the sum of gross saving and net dividends.


    The capital account connects the flow of saving to the flow of investment as follows:

    GS = Net Lending + Gross Fixed Capital Formation + Changes in Inventories + Changes in Other Non-Financial Produced Assets.

    The net lending position is defined as the excess of gross saving over investment spending.

    https://minneapolisfed.org/research/wp/wp736.pdf

    RGC -> RGC... , April 16, 2017 at 03:22 PM
    GOS = Gross Saving (GS) + Net Dividends + Taxes on Profits + Interest − Reinvested Earnings on Foreign Direct Investment + Other Transfers.
    reason -> RGC... , April 16, 2017 at 07:51 AM
    "Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares."

    Or in the case of say Bill Gates in deciding which causes get assistance and which not rather than people voting on it (not that I think Bill Gates is necessarily doing harm - but why should he get to decide?).

    RC AKA Darryl, Ron -> reason... , April 16, 2017 at 09:33 AM
    $democracy
    RGC -> reason... , April 16, 2017 at 03:25 PM
    Right. And private banks get to do it routinely.

    [Apr 17, 2017] The two party system is THE PROBLEM.

    Notable quotes:
    "... A big chunk of Trump's voters voted for him in spite of their dislike. ..."
    "... European neoliberalism in many ways created the conditions that the far right has recently exploited to convince people that their problems are caused by immigrants. Does what's going on in Finland with the decline in the far-right parties and the increasing success of left parties point to a way out throughout Europe (and maybe here as well)? ..."
    "... The big difference is that in the US the "R&D" are so dominant that in combination with how the election system is structured, they are basically the only two national parties. The option of jumping between "significant fringe" parties that influence policy through coalition forming simply doesn't exist. ..."
    "... US presidential, senatorial, and congressional candidates basically run not with a platform, but with a party. This is also how Sanders got outmaneuvered - he couldn't run as a non-Democrat. ..."
    Apr 17, 2017 | economistsview.typepad.com
    EMichael, April 16, 2017 at 07:55 AM
    "Liberals now looking to commune with the Trump base should check out the conscientious effort to do exactly that by the Berkeley sociologist Arlie Russell Hochschild. As we learn in her election-year best seller, Strangers in Their Own Land: Anger and Mourning on the American Right, she poured her compassion, her anthropological sensibility, and five years of her life into "a journey to the heart of the American right." Determined to burst out of her own "political bubble," Hochschild uprooted herself to the red enclave of Lake Charles, Louisiana, where, as she reports, there are no color-coded recycling bins or gluten-free restaurant entrées. There she befriended and chronicled tea-party members who would all end up voting for Trump. Hochschild liked the people she met, who in turn reciprocated with a "teasing, good-hearted acceptance of a stranger from Berkeley." And lest liberal readers fear that she was making nice with bigots in the thrall of their notorious neighbor David Duke, she offers reassurances that her tea-partyers "were generally silent about blacks." (Around her, anyway.)

    Hochschild's mission was inspired by Thomas Frank's What's the Matter With Kansas? She wanted "to scale the empathy wall" and "unlock the door to the Great Paradox" of why working-class voters cast ballots for politicians actively opposed to their interests. Louisiana is America's ground zero for industrial pollution and toxic waste; the stretch of oil and petrochemical plants along the Mississippi between New Orleans and Baton Rouge is not known as "cancer alley" for nothing. Nonetheless, the kindly natives befriended by Hochschild not only turned out for Trump but have consistently voted for local politicians like Steve Scalise (No. 3 in Paul Ryan's current House leadership), former senator David Vitter, and former governor Bobby Jindal, who rewarded poison-spewing corporations with tax breaks and deregulation even as Louisiana's starved public institutions struggled to elevate the health and education of a populace that ranks near the bottom in both among the 50 states. Hochschild's newfound friends, some of them in dire health, have no explanation for this paradox, only lame, don't–wanna–rock–Big Oil's–tanker excuses. Similarly unpersuasive is their rationale for hating the federal government, given that it foots the bill for 44 percent of their state's budget. Everyone who takes these handouts is a freeloader except them, it seems; the government should stop favoring those other moochers (none dare call them black) who, in their view, "cut the line." Never mind that these white voters who complain about "line cutters" are themselves guilty of cutting the most important line of all - the polling-place line - since they are not subjected to the voter-suppression efforts being inflicted on minorities by GOP state legislatures, the Roberts Supreme Court, and now the Jeff Sessions–led Department of Justice.

    In "What So Many People Don't Get About the U.S. Working Class," a postelection postmortem published to much op-ed attention by the Harvard Business Review (and soon to be published in expanded form as what will undoubtedly be another best-selling book), the University of California law professor Joan C. Williams proposes that other liberals do in essence what Hochschild did. "The best advice I've seen so far for Democrats is the recommendation that hipsters move to Iowa," Williams writes - or to any other location in the American plains where "shockingly high numbers of working-class men are unemployed or on disability, fueling a wave of despair deaths in the form of the opioid epidemic." She further urges liberals to discard "the dorky arrogance and smugness of the professional elite" (epitomized in her view by Hillary Clinton) that leads them to condescend to disaffected working-class whites and "write off blue-collar resentment as racism."

    Hochschild anticipated that Williams directive, too. She's never smug. But for all her fond acceptance of her new Louisiana pals, and for all her generosity in portraying them as virtually untainted by racism, it's not clear what such noble efforts yielded beyond a book, many happy memories of cultural tourism, and confirmation that nothing will change anytime soon. Her Louisianans will keep voting for candidates who will sabotage their health and their children's education; they will not be deterred by an empathic Berkeley visitor, let alone Democratic politicians."

    http://nymag.com/daily/intelligencer/2017/03/frank-rich-no-sympathy-for-the-hillbilly.html

    Peter K. -> EMichael... , April 16, 2017 at 08:41 AM
    http://talkingpointsmemo.com/edblog/the-fight-in-the-borderlands

    The Fight in the Borderlands by Josh Marshall

    "We hear people constantly saying 'Nothing will change his supporters' minds. They're with him no matter what.' First of all this is enervating defeatism which is demoralizing and loserish. But it also misses the point. It is factually wrong. For the supporters those people have in mind, they're right.

    They're true believers, authoritarians who are energized by Trump's destructive behavior. But there are not that many of those people. A big chunk of Trump's voters voted for him in spite of their dislike. Those people can be carved away. But Democrats will regain power by winning it in what amount to our 21st century internal American borderlands, not in the big cities or rural areas mainly but in between. So what's happening now to lay that groundwork for 2018?"

    Peter K. -> Peter K.... , April 16, 2017 at 08:45 AM
    interview with Matthew Brueing

    https://www.jacobinmag.com/2017/04/trump-health-obamacare-welfare-medicaid-racism-republicans-democrats/

    DD: European neoliberalism in many ways created the conditions that the far right has recently exploited to convince people that their problems are caused by immigrants. Does what's going on in Finland with the decline in the far-right parties and the increasing success of left parties point to a way out throughout Europe (and maybe here as well)?

    MB: The Finland situation is very promising from a leftist view. Finland's political system is mostly dominated by six parties: the Green Party, similar to the Greens here; a Social Democratic Party. which is like the Labor Party; the Left Alliance, which is the communists and socialists. This is the Left.

    On the other side, you have the Centre Party, which was like the Farmers' Party but doesn't really have an economic definition, so sometimes they join coalitions with left-wing or right-wing parties; you have the National Coalition Party, the right-wing business party; then, lately, you have the Finns Party - which used to be called the True Finns, which kind of gives you a hint of what they're about. They're like an ethno-nationalist party, though they will deny that.

    In 2015, the top three parties in Finland were conservative: in order was the Centre Party, the National Coalition Party, and then the Finns. They came together and formed the center-right Bourgeois Government (which is what they actually call their governments). Combined, the three parties have about 60 percent of the public behind them.

    The Finns join the center-right party that's mostly interested in austerity of various sorts - trimming down wages and benefits, increasing competitiveness of exports, which also means trimming down labor costs and making people work longer and cutting vacations.

    When the Finns join that government, their support just collapses. It goes from over 20 percent to less than 10 percent over a year or two. If you read the Finnish newspapers, the consensus is that they are basically supported by blue-collar people who are also racists. But ultimately, they don't want a party that comes in and cuts their wages and benefits even if the party is racist and satisfies their anti-immigrant tendencies.

    Their support base looks at the Finns Party and says, "You're a traitor to the working class - to hell with you." Only left parties picked up voters as the ethno-nationalist party declined.

    This shows that even people who are have very bad views on immigration and diversity - if they get screwed on just basic pocketbook issues, they jump ship and go back over to their old homes in the Left.

    That's a good sign for the American context, especially because Trump and the Republicans are not going to run a government that benefits working-class people. His base is going to get disillusioned and be open to supporting a Bernie-style candidate or someone like that who speaks to their issues and actually intends to follow through with them, instead of just using them rhetorically and then abandoning them once they get into office. So it's promising.

    cm -> Peter K.... , April 16, 2017 at 05:48 PM
    The big difference is that in the US the "R&D" are so dominant that in combination with how the election system is structured, they are basically the only two national parties. The option of jumping between "significant fringe" parties that influence policy through coalition forming simply doesn't exist.

    US presidential, senatorial, and congressional candidates basically run not with a platform, but with a party. This is also how Sanders got outmaneuvered - he couldn't run as a non-Democrat.

    reason -> cm... , April 17, 2017 at 03:06 AM
    Yep.

    The two party system is THE PROBLEM.

    [Apr 17, 2017] News became propaganda when alternative viewpoints are not fairly represented or worse, supressed

    This is how the US MSM covered Niki Haley demise by Bolivian representative. " Nikki Haley forces public UN meeting to put Assad's defenders in 'full public view '"
    Apr 17, 2017 | economistsview.typepad.com
    reason

    I made a comment that was swallowed?

    I think Simon Wren-Lewis When journalism becomes propaganda - mainly macro
    missed the main point here.

    Propaganda is when:

    1. Alternative viewpoints are not fairly represented

    2. News and opinion are not clearly delinearated (as Dean Baker tirelessly points out).

    We need a good discussion of how to de-propagandize and de-polarize society. Getting rid of winner-take-all politics would sure help.

    [Apr 15, 2017] Man made political and economic institutions underlie economic success or lack of it

    Notable quotes:
    "... The World Economic Forum has called for "reimagining" and "reforming" capitalism. To what extent is this need for reform the result of disruption brought by technological change, globalization, and immigration and to what extent is it the effect of rent-seeking and regulatory capture? ..."
    "... "Martin Hellwig and I discuss "global competitiveness" and THE PARTICULARLY HARMFUL SYMBIOSIS BETWEEN BANKS AND GOVERNMENTS in our book The Bankers' New Clothes: What's Wrong with Banking and What to Do about It." ..."
    "... Private/public arrangements are often a way for private parties to bleed wealth from society. Our current banking system is the most egregious example of this. ..."
    "... With the same idea that the "vanguard" recruited mainly from "Intelligentsia" will drive sheeple to the "bright future of all mankind" using bullets for encouragement, if needed. And this "bright future of all mankind" is the global neoliberal empire led by the USA. ..."
    "... Including full scale use of three letter agencies. Also like Bolshevism before, neoliberalism created its own "nomenklatura" -- the privileged class which exists outside the domain of capital owners, which along with high levels management and professionals include neoclassical economists. They are integral and important part of neoliberal nomenklatura and are remunerated accordingly. ..."
    "... Because you can't be half-pregnant -- it is difficult to try anything else when neoliberalism still dominates globally and try to enforce its will via global financial institutions. They do not hesitate to punish detractors for Washington consensus. ..."
    "... It is difficult to survive trying to find alternatives to neoliberalism on the continent with Uncle Sam and his extremely well financed three letter agencies which operate with impunity. And it does not cost too much money to implement more moderate variant of Chile Pinochet coup model -- create economic difficulties and then bring neoliberals back to power on the wave of dissatisfaction with the current government due to economic difficulties. ..."
    "... Difficulties of finding the right balance avoid sliding into opposite extreme -- "over-regulating" the economy. In view of sabotage experienced (and encouraged), which produces natural (and damaging) counteraction, this is almost impossible. Looks like a real trap -- the efforts of the USA to undermine the economy of countries with left wing governments produce a counteraction which helps to undermine the economy and pave the way for restoration of neoliberal regime ..."
    "... In this sense Trump is just Obama II -- neoliberal "bait and switch" artist, who capitalized on pre-existing discontent using fake slogans and then betrayed the electorate. ..."
    "... "Class dictatorship. Raw or refined" ..."
    "... My interpretation is that it's a class project, now masked by a lot of rhetoric about individual freedom, liberty, personal responsibility, privatisation and the free market. ..."
    "... That rhetoric was a means towards the restoration and consolidation of class power, and that neoliberal project has been fairly successful ..."
    Apr 15, 2017 | economistsview.typepad.com
    From a ProMarket interview with Anat Admati:
    ... Q: The World Economic Forum has called for "reimagining" and "reforming" capitalism. To what extent is this need for reform the result of disruption brought by technological change, globalization, and immigration and to what extent is it the effect of rent-seeking and regulatory capture?

    Acemoglu and Robinson argued in Why Nations Fail: The Origins of Power, Prosperity, and Poverty that "man-made political and economic institutions underlie economic success (or lack of it)." Technological developments have highlighted the immense power associated with controlling information. The business of investigative reporting is in a crisis. Corporations often play off governments, shopping jurisdictions and making bargains. For capitalism to work, the relevant institutions must work effectively and avoid excessive rent extraction. The governance challenge of the global economy is daunting.

    RGC said...

    "Martin Hellwig and I discuss "global competitiveness" and THE PARTICULARLY HARMFUL SYMBIOSIS BETWEEN BANKS AND GOVERNMENTS in our book The Bankers' New Clothes: What's Wrong with Banking and What to Do about It."

    [Private/public arrangements are often a way for private parties to bleed wealth from society. Our current banking system is the most egregious example of this.]

    libezkova , April 15, 2017 at 01:53 PM

    "Acemoglu and Robinson argued in Why Nations Fail: The Origins of Power, Prosperity, and Poverty that "man-made political and economic institutions underlie economic success (or lack of it)."

    Neoliberalism is the second after Marxism social system that was "invented" by a group of intellectuals (although there was no any single dominant individual among them) and implemented via coup d'état. From above. Much like Bolshevism.

    Looks like it is more resilient then Marxism based economic systems and it demonstrated staying power even after 2008 -- when the ideology itself was completely discredited and became a joke.

    Neoliberalism survived the demise of neoliberal ideology and entered zombie stage. Much like many sects with discredited predictions like the Second Coming.

    Neoliberalism borrowed quite a lot from Marxism. Actually analogies with Marxism are too numerous to list. But one is very important: neoliberalism replaced "Dictatorship of proletariat" with the dictatorship of "free markets" and proletariat itself with so called "creative class".

    With the same idea that the "vanguard" recruited mainly from "Intelligentsia" will drive sheeple to the "bright future of all mankind" using bullets for encouragement, if needed. And this "bright future of all mankind" is the global neoliberal empire led by the USA.

    They also demonstrated the same ruthlessness in the best style of "end justifies means". Killed are mainly "brown people" (is we do not count ten thousand Ukrainians)

    In short, neoliberalism is a kind of "Trotskyism for rich." Gore Vidal once famously said that the neoliberal economic system is "free enterprise for the poor and socialism for the rich." As unforgettable Bush II said "I'm a free market guy. But I'm not gonna let this economy crater in order to preserve the free market system" – George W. Bush, December 17, 2008, William Simon, President Nixon's Treasury Secretary, once famously observed of those who preach free markets typically are simultaneously rushing to the public treasury: "I watched with incredulity as businessmen ran to the government in every crisis, whining for handouts or protection from the very competition that has made this system so productive always, such gentlemen proclaimed their devotion to free enterprise and their opposition to the arbitrary intervention into our economic life by the state. Except, of course, for their own case, which was always unique and which was justified by their immense concern for the public interest."

    And neoliberalism uses the same repressive tactics including dominance in MSM and the control of the university education to get and stay in power, which were invented by Bolsheviks/Trotskyites.

    Including full scale use of three letter agencies. Also like Bolshevism before, neoliberalism created its own "nomenklatura" -- the privileged class which exists outside the domain of capital owners, which along with high levels management and professionals include neoclassical economists. They are integral and important part of neoliberal nomenklatura and are remunerated accordingly.

    That fact the deification of markets is a "fools gold" was know from the Great Recession (and Karl Polanyi famous book), but when 50 years passed and generation changed they manage to shove it down throat. Because the generation which experienced horrors of the Great Depression at this point was gone (and that include cadre of higher level management which still have some level of solidarity with workers against capital owners). The new generation switched camps and allied with capital owners against the working class.

    When the old generation was replaced with HBS and WBS graduates -- ready made neoliberals -- quite coup (in Simon Johnson terms) naturally followed ( https://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/307364/ ) and we have hat we have.

    In this sense the ascendance of neoliberalism and Managerialism ( https://en.wikipedia.org/wiki/Managerialism ) are closely related.

    Both treat the country the same way as bacteria treat a squirrel carcass.

    Typically, these countries are in a desperate economic situation for one simple reason-the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit-and, most of the time, genteel-oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon-correctly, in most cases-that their political connections will allow them to push onto the government any substantial problems that arise.

    As Paine noted neoliberalism in zombie state (which it entered after 2008) remains dangerous and is able to counterattack -- the US sponsored efforts of replacement of left regimes in LA with right wing neoliberal regimes were by-and-large successful.

    Among them are two key LA countries -- Brazil and Argentina. That happened despite that this phase of neoliberal era has been marked by slower growth, greater trade imbalances, and deteriorating social conditions. In Latin America the average growth rate was lower by 3 percent per annum in the 1990s than in the 1970s, while trade deficits as a proportion of GDP are much the same.

    Contrary to neoliberal propaganda the past 25 years (1980–2005) have also characterized by slower rate of improvement of key social indicators for the vast majority of low- and middle-income population of LA countries [compared with the prior two decades ]

    In an effort to keep growing trade and current account deficits manageable, third world states, often pressured by the IMF and World Bank, used austerity measures (especially draconian cuts in social programs) to slow economic growth (and imports). They also deregulated capital markets, privatized economic activity, and relaxed foreign investment regulatory regimes in an effort to attract the financing needed to offset the existing deficits. While devastating to working people and national development possibilities, these policies were, as intended, responsive to the interests of transnational capital in general and a small but influential sector of third world capital. This is the reality of neoliberalism.

    As for the question "Why?" there might be several reasons.

    1. Because you can't be half-pregnant -- it is difficult to try anything else when neoliberalism still dominates globally and try to enforce its will via global financial institutions. They do not hesitate to punish detractors for Washington consensus.
    2. This is LA specific part. It is difficult to survive trying to find alternatives to neoliberalism on the continent with Uncle Sam and his extremely well financed three letter agencies which operate with impunity. And it does not cost too much money to implement more moderate variant of Chile Pinochet coup model -- create economic difficulties and then bring neoliberals back to power on the wave of dissatisfaction with the current government due to economic difficulties.
    3. Difficulties of finding the right balance avoid sliding into opposite extreme -- "over-regulating" the economy. In view of sabotage experienced (and encouraged), which produces natural (and damaging) counteraction, this is almost impossible. Looks like a real trap -- the efforts of the USA to undermine the economy of countries with left wing governments produce a counteraction which helps to undermine the economy and pave the way for restoration of neoliberal regime.

    My impression is that before the next oil crisis (defined as oil price crossing $150 mark or so) attempts to displace financial oligarchy are bound to fail.

    So, in some "mutated" form, like Trump's "bastard neoliberalism" ( aka neoliberalism without globalization, limited to a single country) it will stay put.

    In this sense Trump is just Obama II -- neoliberal "bait and switch" artist, who capitalized on pre-existing discontent using fake slogans and then betrayed the electorate.

    paine -> libezkova... April 15, 2017 at 06:17 PM

    Class dictatorship

    Raw or refined .

    libezkova -> paine... April 16, 2017 at 06:08 PM

    "Class dictatorship. Raw or refined"

    That's David Harvey's view:

    http://www.redpepper.org.uk/Their-crisis-our-challenge

    "Does this crisis signal the end of neoliberalism? My answer is that it depends what you mean by neoliberalism. My interpretation is that it's a class project, now masked by a lot of rhetoric about individual freedom, liberty, personal responsibility, privatisation and the free market.

    That rhetoric was a means towards the restoration and consolidation of class power, and that neoliberal project has been fairly successful."

    [Apr 15, 2017] Populist regimes in Latin America are either out or under siege

    Notable quotes:
    "... Once again the opportunity to transform society down there has come apart ..."
    Apr 15, 2017 | economistsview.typepad.com
    paine -> anne... , April 14, 2017 at 09:55 AM
    Related

    Populist regimes in Latin America are either out or under siege

    Once again the opportunity to transform society down there has come apart

    Policy choices must be examined
    post mo

    anne -> anne... , April 14, 2017 at 10:23 AM
    Where in 1980 real per capita Gross Domestic product in China was a mere 6.4% that of Brazil, in 2016 per capita GDP in China was larger than that of Brazil or 101.4% that of Brazil.

    [Apr 15, 2017] Trumpism as bastard neoliberalism

    Dec 27, 2016 | economistsview.typepad.com

    likbez -> likbez... December 26, 2016 at 08:08 PM

    I would define Trumpism as "bastard neoliberalism" which tries to combine domestic "100% pure" neoliberalism with the rejection of neoliberal globalization as well as partial rejection of expensive effort for expansion of US led neoliberal empire via color revolutions and military invasions, especially in the Middle East.

    That's what seems to be the key difference of Trumpism from "classic neoliberalism" or as Sklar called it "corporate liberalism".

    From Reagan to Obama all US governments pray to the altar of classic neoliberalism. Now we have a slight deviation.

    That makes screams of "soft neoliberals" from Democratic Party at "hard neoliberals" at Republican Party really funny indeed. Both are essentially "latter-day Trotskyites", yet they scream at each other, especially Obama/Clinton supporters ;-)

    In this sense Krugman recent writings are really pathetic and signify his complete detachment from reality, or more correctly attempt to create an "artificial reality" in which bad wolf Trump is going to eat Democratic sheeple. And in which media, FBI, and Putin are responsible entirely for Hillary's loss.

    But in reality Democratic sheeple are just a different type of wolfs -- wolfs in sheep clothing. And Hillary was an old, worn "classic neoliberal" shoe, which nobody really wants to wear.

    Trump does not intend to change the neoliberal consensus of what government should do domestically, and what should be the relationship between US government and business community.

    But the far right movement that he created and led has different ideas.

    So it might be an interesting period to watch.

    [Apr 15, 2017] The Sense That the System Is Rigged Relates Directly to Governments Failure to Address Inequality and Concentration

    Notable quotes:
    "... For example, the CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed's emergency lending programs. ..."
    "... To Sanders, the conclusion is simple. "No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed's board of directors or be employed by the Fed," he said. ..."
    "... The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans." ..."
    "... Despite the GAO's finding of crony capitalism--A THE PARTICULARLY HARMFUL SYMBIOSIS BETWEEN BANKS AND GOVERNMENT--it's rare to find a 'librul' economist, particularly among the commenters here, who has an unkind word about how the Fed does its business. The ONLY criticism of the Fed typically has to do with a certain peevishness that arises when the Fed threatens to take away the ultra-low interest rates that commenters here covet. ..."
    Apr 15, 2017 | economistsview.typepad.com
    From a ProMarket interview with Anat Admati :

    ... Q: The World Economic Forum has called for "reimagining" and "reforming" capitalism. To what extent is this need for reform the result of disruption brought by technological change, globalization, and immigration and to what extent is it the effect of rent-seeking and regulatory capture?

    The impact of technological change, globalization, and immigration on society depends on how the relevant institutions manage these developments. Capitalism has worked poorly in recent years because governments mishandled the challenges of technological change and globalization, and that failure is related to rent-seeking and regulatory capture. The elites who engage with each other through the World Economic Forum and elsewhere can become out of touch and blind to reality; you can see the problem from Steve Schwarzman of Blackstone saying in Davos in 2016 that he found public anger "astonishing."

    Acemoglu and Robinson argued in Why Nations Fail: The Origins of Power, Prosperity, and Poverty that "man-made political and economic institutions underlie economic success (or lack of it)." Technological developments have highlighted the immense power associated with controlling information. The business of investigative reporting is in a crisis. Corporations often play off governments, shopping jurisdictions and making bargains. For capitalism to work, the relevant institutions must work effectively and avoid excessive rent extraction. The governance challenge of the global economy is daunting.

    Here are a few examples...

    Q: Some people describe Donald Trump's economic policies as "corporatism." Are you more worried by Trump's interference in the market economy or by companies' ability to subvert markets' rules? ...

    RGC April 15, 2017 at 05:55 AM

    "Martin Hellwig and I discuss "global competitiveness" and THE PARTICULARLY HARMFUL SYMBIOSIS BETWEEN BANKS AND GOVERNMENTS in our book The Bankers' New Clothes: What's Wrong with Banking and What to Do about It."

    [Private/public arrangements are often a way for private parties to bleed wealth from society. Our current banking system is the most egregious example of this.]

    JohnH -> RGC... , April 15, 2017 at 06:48 AM

    Nicholas Gruen: "every bank is part of a larger public–private partnership and that at the apex of that system we already have a people's bank. Right now it might be owned by the people, but it's captured by the private banks."

    https://www.thesaturdaypaper.com.au/opinion/topic/2017/04/15/making-the-reserve-bank-peoples-bank/14921784004504

    With the internet, the central bank could just as easily lend to individuals. Instead of having the banking cartel ration credit and set interest rates, direct lending to borrowers could eliminate the unnecessary margins and fees charged by the cartel...and create competition where there is now collusion and crony capitalism.

    JohnH -> RGC... , April 15, 2017 at 04:12 PM
    The audit of the Fed that Bernie got the GAO to do: "The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

    For example, the CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed's emergency lending programs.

    In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.

    To Sanders, the conclusion is simple. "No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed's board of directors or be employed by the Fed," he said.

    The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans."

    https://www.sanders.senate.gov/newsroom/press-releases/the-fed-audit

    Despite the GAO's finding of crony capitalism--A THE PARTICULARLY HARMFUL SYMBIOSIS BETWEEN BANKS AND GOVERNMENT--it's rare to find a 'librul' economist, particularly among the commenters here, who has an unkind word about how the Fed does its business. The ONLY criticism of the Fed typically has to do with a certain peevishness that arises when the Fed threatens to take away the ultra-low interest rates that commenters here covet.

    [Apr 15, 2017] There has never been anything except crony capitalism, and, as Adam Smith observed, the first thing successful business men buy is the politicians.

    Apr 15, 2017 | economistsview.typepad.com
    ken melvin , April 15, 2017 at 06:05 AM
    'Capitalism has worked poorly in recent years because governments mishandled the challenges of technological change and globalization, and that failure is related to rent-seeking and regulatory capture. '

    Wondrous leap of logic.

    Barry -> ken melvin... , April 15, 2017 at 06:43 AM
    Ken, your observation is correct. The failure is in politics, not in capitalism, as outlined in the article.
    DrDick -> Barry... , April 15, 2017 at 06:52 AM
    I want some of what both of you are smoking. This is inherent in capitalism and goes back to its origins. There has never been anything except "crony" capitalism, and, as Adam Smith observed, the first thing successful business men buy is the politicians.
    Barry -> DrDick... , April 15, 2017 at 07:00 AM
    Dear DrD, so wrong. There is plenty of capitalism well removed from politics. Rather, politics becomes a problem when institutions are not robust enough to control the avarice of the politician.
    By far the majority of capitalists are doing their best to earn a living by providing wanted goods and services. The same can be sad for some politicians, but not for those who are for sale.
    Barry -> Barry... , April 15, 2017 at 07:05 AM
    correction: can't be said
    ken melvin -> DrDick... , April 15, 2017 at 07:11 AM
    We're not in disagreement. The leap of reference was in fault to government.
    DrDick -> ken melvin... , April 15, 2017 at 11:35 AM
    I would argue that this is exactly how government is "supposed" to work under capitalism (see Adam Smith).
    Julio -> DrDick... , April 15, 2017 at 09:04 AM
    I'm not sure where if anywhere you disagree with each other.
    The way I see it these are inherent flaws of capitalism, as Dr. Dick says, and it requires a solution "from outside", i.e. from the political realm, as Barry says.

    Going back to the quote, "capitalism" is not "working poorly" by the self-referential measures commonly applied to it. The rich are still getting richer, albeit more slowly in the last several years. GDP, aka "the economy" is the only measure used widely, and over the last 40 years has done fine.

    By any measure that include metrics "from outside" such as how well people are faring, however, it's not doing well. Societies that derive their social arrangements entirely from capitalism are in trouble.

    [Apr 15, 2017] What's missing in each and every case above -- at least in the USA! -- is countervailing power.

    Apr 15, 2017 | economistsview.typepad.com
    Denis Drew , April 15, 2017 at 06:58 AM
    What's missing in each and every case above -- at least in the USA! -- is countervailing power. 6% labor union density in private business is equivalent to 20/10 blood pressure in the human body: it starves every other healthy process.

    It is not just labor market bargaining power that has gone missing, it is not only the lost political muscle for the average person (equal campaign financing, almost all the votes), it is also the lack of machinery to deal with day-to-day outrages on a day-to-day basis (that's called lobbying).

    Late dean of the Washington press corps David Broder told a young reporter that when he came to DC fifty years ago (then), all the lobbyists were union. Big pharma's biggest rip-offs, for profit school scams, all the stuff you hear about for one day on the news but no action is ever taken -- that's because there is no (LABOR UNION) mechanism to stay on top of all (or any) of it (LOBBYISTS).

    cm -> Denis Drew ... , April 15, 2017 at 12:16 PM
    It is a chicken and egg problem. Before large scale automation and globalization, unions "negotiated" themselves their power, which was based on employers having much fewer other choices. Any union power that was ever legislated was legislated as a *result* of union leverage, not to enable the latter (and most of what was legislated amounts to limiting employer interference with unions).

    It is a basic feature of human individual and group relations that when you are needed you will be treated well, and when you are not needed you will be treated badly (or at best you will be ignored if that's less effort overall). And by needed I mean needed as a specific individual or narrowly described group.

    What automation and globalization have done is created a glut of labor - specifically an oversupply of most skill sets relative to all the work that has to be done according to socially mediated decision processes (a different set of work than what "everybody" would like to happen as long as they don't have to pay for it, taking away from other necessary or desired expenditure of money, effort, or other resources).

    Maybe when the boomers age out and become physically too old to work, the balance will tip again.

    Peter K. -> cm... , April 15, 2017 at 12:18 PM
    "What automation and globalization have done is created a glut of labor - "

    No it's been policy and politics. Automation and globalization are red herrings. They've been used to enrich the rich and stick it to everyone else.

    They don't have to be used that way.

    There is nothing natural or inherent about it. It's all politics and class war and the wrong side is winning.

    cm -> Peter K.... , April 15, 2017 at 01:32 PM
    OK - they have *enabled* it. The agency is always on the human side. But at the same time, you cannot wish or postulate away human greed.
    cm -> Peter K.... , April 15, 2017 at 01:44 PM
    Same thing with the internet - it has been hailed as a democratizing force, but instead it has mostly (though not wholly) amplified the existing power differentials and motivation structures.

    Anecdotally, a lot of companies and institutions are either restricting internal internet access or disconnecting parts of their organizations from the internet altogether, and disabling I/O channels like USB sticks, encrypting disks, locking out "untrusted" boot methods, etc. The official narrative is security and preventing leaks of confidential information, but the latter is clearly also aimed in part at whistleblowers disclosing illegal or unethical practices. Of course that a number of employees illegitimately "steal" data for personal and not to uncover injustices doesn't really help.

    Denis Drew -> cm... , April 15, 2017 at 03:19 PM
    Surely there is a huge difference between the labor market here and the labor market in continental Europe -- though labor there faces the same squeezing forces it faces here. Think of German auto assembly line workers making $60 an hour counting benefits.

    Think Teamster Union UPS drivers -- and pity the poor, lately hired (if they are even hired) Amazon drivers -- maybe renting vans.

    The Teamsters have the only example here of what is standard in continental Europe: centralized bargaining (aka sector wide labor agreements): the Master National Freight Agreement: wherein everybody doing the same job in the same locale (entire nation for long distance truckers) works under one common contract (in French Canada too).

    Imagine centralized bargaining for airlines. A few years ago Northwest squeezed a billion dollars in give backs out of its pilots -- next year gave a billion dollars in bonuses to a thousand execs. Couldn't happen under centralized bargaining -- wouldn't even give the company any competitive advantage.

    [Apr 15, 2017] Th eobly countervailing force, unions, were deliberately destroyed. Neoliberalism needs to atomize work force to function properly and destroys any solidarity among workers. Unions are anathema for neoliberalism, because they prevent isolation and suppression of workers.

    Apr 15, 2017 | economistsview.typepad.com
    Denis Drew

    , April 15, 2017 at 06:58 AM
    What's missing in each and every case above -- at least in the USA! -- is countervailing power. 6% labor union density in private business is equivalent to 20/10 blood pressure in the human body: it starves every other healthy process.

    It is not just labor market bargaining power that has gone missing, it is not only the lost political muscle for the average person (equal campaign financing, almost all the votes), it is also the lack of machinery to deal with day-to-day outrages on a day-to-day basis (that's called lobbying).

    Late dean of the Washington press corps David Broder told a young reporter that when he came to DC fifty years ago (then), all the lobbyists were union. Big pharma's biggest rip-offs, for profit school scams, all the stuff you hear about for one day on the news but no action is ever taken -- that's because there is no (LABOR UNION) mechanism to stay on top of all (or any) of it (LOBBYISTS).

    cm -> Denis Drew ... , April 15, 2017 at 12:16 PM
    It is a chicken and egg problem. Before large scale automation and globalization, unions "negotiated" themselves their power, which was based on employers having much fewer other choices. Any union power that was ever legislated was legislated as a *result* of union leverage, not to enable the latter (and most of what was legislated amounts to limiting employer interference with unions).

    It is a basic feature of human individual and group relations that when you are needed you will be treated well, and when you are not needed you will be treated badly (or at best you will be ignored if that's less effort overall). And by needed I mean needed as a specific individual or narrowly described group.

    What automation and globalization have done is created a glut of labor - specifically an oversupply of most skill sets relative to all the work that has to be done according to socially mediated decision processes (a different set of work than what "everybody" would like to happen as long as they don't have to pay for it, taking away from other necessary or desired expenditure of money, effort, or other resources).

    Maybe when the boomers age out and become physically too old to work, the balance will tip again.

    Peter K. -> cm... , April 15, 2017 at 12:18 PM
    "What automation and globalization have done is created a glut of labor - "

    No it's been policy and politics. Automation and globalization are red herrings. They've been used to enrich the rich and stick it to everyone else.

    They don't have to be used that way.

    There is nothing natural or inherent about it. It's all politics and class war and the wrong side is winning.

    cm -> Peter K.... , April 15, 2017 at 01:32 PM
    OK - they have *enabled* it. The agency is always on the human side. But at the same time, you cannot wish or postulate away human greed.
    cm -> Peter K.... , April 15, 2017 at 01:44 PM
    Same thing with the internet - it has been hailed as a democratizing force, but instead it has mostly (though not wholly) amplified the existing power differentials and motivation structures.

    Anecdotally, a lot of companies and institutions are either restricting internal internet access or disconnecting parts of their organizations from the internet altogether, and disabling I/O channels like USB sticks, encrypting disks, locking out "untrusted" boot methods, etc. The official narrative is security and preventing leaks of confidential information, but the latter is clearly also aimed in part at whistleblowers disclosing illegal or unethical practices. Of course that a number of employees illegitimately "steal" data for personal and not to uncover injustices doesn't really help.

    Denis Drew -> cm... , April 15, 2017 at 03:19 PM
    Surely there is a huge difference between the labor market here and the labor market in continental Europe -- though labor there faces the same squeezing forces it faces here. Think of German auto assembly line workers making $60 an hour counting benefits.

    Think Teamster Union UPS drivers -- and pity the poor, lately hired (if they are even hired) Amazon drivers -- maybe renting vans.

    The Teamsters have the only example here of what is standard in continental Europe: centralized bargaining (aka sector wide labor agreements): the Master National Freight Agreement: wherein everybody doing the same job in the same locale (entire nation for long distance truckers) works under one common contract (in French Canada too).

    Imagine centralized bargaining for airlines. A few years ago Northwest squeezed a billion dollars in give backs out of its pilots -- next year gave a billion dollars in bonuses to a thousand execs. Couldn't happen under centralized bargaining -- wouldn't even give the company any competitive advantage.

    libezkova -> Denis Drew ... , April 15, 2017 at 04:14 PM
    "What's missing in each and every case above -- at least in the USA! -- is countervailing power."

    It was deliberately destroyed. Neoliberalism needs to "atomize" work force to function properly and destroys any solidarity among workers. Unions are anathema for neoliberalism, because they prevent isolation and suppression of workers.

    Amazon and Uber are good examples. Both should be prosecuted under RICO act. Wall-Mart in nor far from them.

    Rising fatalities from heart disease and stroke, diabetes, drug overdoses, accidents and other conditions caused the lower life expectancy revealed in a report by the National Center for Health Statistics .

    http://www.cdc.gov/nchs/products/databriefs/db267.htm

    http://economistsview.typepad.com/economistsview/2017/03/paul-krugman-the-scammers-the-scammed-and-americas-fate.html#comment-6a00d83451b33869e201b7c8e3c7c6970b

    == quote ==
    Anne Case and Angus Deaton garnered national headlines in 2015 when they reported that the death rate of midlife non-Hispanic white Americans had risen steadily since 1999 in contrast with the death rates of blacks, Hispanics and Europeans. Their new study extends the data by two years and shows that whatever is driving the mortality spike is not easing up.
    ... ... ..

    Offering what they call a tentative but "plausible" explanation, they write that less-educated white Americans who struggle in the job market in early adulthood are likely to experience a "cumulative disadvantage" over time, with health and personal problems that often lead to drug overdoses, alcohol-related liver disease and suicide.

    == end of quote ==

    Greed is toxic. As anger tends to accumulate, and then explode, at some point neoliberals might be up to a huge surprise. Trump was the first swan.

    Everybody bet on Hillary victory. And then...

    [Apr 15, 2017] The first researcher that has shown that Turing test can be faked was Joseph Weizenbaum from MIT.

    Apr 15, 2017 | economistsview.typepad.com
    anne -> anne... , April 14, 2017 at 11:47 AM
    https://plato.stanford.edu/entries/chinese-room/

    April 9, 2014

    The Chinese Room Argument

    The argument and thought-experiment now generally known as the Chinese Room Argument was first published in a paper * in 1980 by American philosopher John Searle (1932- ). It has become one of the best-known arguments in recent philosophy. Searle imagines himself alone in a room following a computer program for responding to Chinese characters slipped under the door. Searle understands nothing of Chinese, and yet, by following the program for manipulating symbols and numerals just as a computer does, he produces appropriate strings of Chinese characters that fool those outside into thinking there is a Chinese speaker in the room. The narrow conclusion of the argument is that programming a digital computer may make it appear to understand language but does not produce real understanding. Hence the "Turing Test" ** is inadequate. Searle argues that the thought experiment underscores the fact that computers merely use syntactic rules to manipulate symbol strings, but have no understanding of meaning or semantics. The broader conclusion of the argument is that the theory that human minds are computer-like computational or information processing systems is refuted. Instead minds must result from biological processes; computers can at best simulate these biological processes. Thus the argument has large implications for semantics, philosophy of language and mind, theories of consciousness, computer science and cognitive science generally. As a result, there have been many critical replies to the argument.

    * http://cogprints.org/7150/1/10.1.1.83.5248.pdf

    ** https://en.wikipedia.org/wiki/Turing_test

    The Turing Test is a test, developed by Alan Turing in 1950, of a machine's ability to exhibit intelligent behaviour equivalent to, or indistinguishable from, that of a human.

    libezkova -> anne... , April 14, 2017 at 07:22 PM
    Anne,

    This guy is 50 years late

    The first researcher who has shown that Turing test can be faked was Joseph Weizenbaum from MIT.

    In 1964-1966 he wrote his famous ELIZA program
    ( https://en.wikipedia.org/wiki/ELIZA ) which simulated a Rogerian psychotherapist and used rules, dictated in the script, to respond with non-directional questions to user inputs.

    As such, ELIZA was one of the first chatterbots, but was also regarded as one of the first programs capable of passing the Turing Test.

    In general humans are unique in the ability to construct new languages and rules of manipulating objects in those languages.

    Computers so far can only manipulate with objects in a given language using preprogrammed rules. although with neural networks recognition of visual images this is more complex then that.

    Amazing achievements of computers in chess and natural language recognition, including the spoken one, are mostly due to huge storage and multiprocessing. A regular desktop for $8K-$10K can now have 64 cores (2 x 32) and 128 GB or even 1TB of memory. This was a supercomputer just 15 years ago.

    In chess computers are also able to work in parallel to explore deterministically positions from a given one for the larger amount of "half-moves" them human do. That's why computers became competitive with humans in chess and Blue Gene managed to beat Kasparov in 1996 ( https://en.wikipedia.org/wiki/Deep_Blue_versus_Garry_Kasparov ) That's has nothing to do with the ability to think.

    Winning in Jeopardy is more involved and impressive fit, but I believe IBM cheated.

    http://www.cbsnews.com/news/jeopardy-winning-computer-now-using-its-brain-for-science/

    IBM after Louis Gerstner Jr, destroyed it became a completely financially driven company capable to perform all kind of dirty tricks.

    But to outsider such programs are definitely looking "intelligent".

    Clark third law states "Any sufficiently advanced technology is indistinguishable from magic."

    That's what we are currently observing with computers.

    Note: BTW the quality of translation from one language to another remains so dismal that any bilingual human can do better then the best computer program. Although recent experiments with recognizing spoken language translating it to another and verbalizing it in the second language are nothing short of amazing.

    [Apr 15, 2017] Statistical Significance Is Overrated - Noah Smith

    Apr 15, 2017 | economistsview.typepad.com
    Gerald Scorse , April 14, 2017 at 06:20 AM
    Statistical Significance Is Overrated - Noah Smith

    "[R]emember that statistical significance is only part of what you need to know. How strong an effect is, and how important it is in the real world, might matter even more."

    I try to learn something new every day. This is it for Friday, April 14, 2017. Thanks Noah.

    Chris G -> Gerald Scorse... , April 14, 2017 at 07:29 AM
    I thought Smith's column was quite good. (I don't write that very often.) "We know what the effect accurately and precisely. It's really small and doesn't matter." is important if/when that's the case. You want to know when you can get away with ignoring something when you're creating your (approximate) model of how the world works. Conversely, "We know what the effect is pretty accurately but not super precisely. We know enough that we can say that it's a big deal but we're still figuring out precisely how big a deal." is also critical information. Knowledge re the former effect may be more statistically significant than the latter while at the same time being less materially significant. That can be a fairly subtle point to a non-technical audience. Heck, it can be a subtle point to technically-oriented audience.
    libezkova said in reply to Chris G ... , April 14, 2017 at 04:11 PM
    I think that requirement of the normal (or Gaussian) distribution that is behind most statistical metrics is the weakest part.

    Normal distribution is the distribution with the maximum entropy for a specified mean and variance. As such it is poorly suited as the distribution of the data reflecting economic or social processes (fat tails problems).

    [Apr 15, 2017] Oil Production Cuts OPEC Saudis Want $60 Price

    Apr 15, 2017 | finance.yahoo.com

    As the Wall Street Journal's Benoit Faucon and Summer Said report: "Saudi Arabia, Iraq and Kuwait believe $60 a barrel will lift their economies and allow for more energy-industry investment, the officials said, without jump starting too much American shale output, which can be ramped up and down with prices more easily than most oil production. Saudi Arabia, Iraq and other members of the 13-nation cartel have signaled they will push to extend those cuts for another six months on May 25, when they meet in Vienna." Crude prices are influenced by a hard to predict group of variables, from Chinese demand and supply disruptions in the Middle East to the amount of crude U.S. frackers pull out of the ground. Oil prices hit $100 a barrel in 2014 before the market collapsed.

    Read more Barrons.com

    [Apr 15, 2017] IMF claims that technology and global integration explain close to 75 percent of the decline in labor shares in Germany and Italy, and close to 50 percent in the United States.

    Anything that IMF claim should be taken with a grain of salt. IMF is a quintessential neoliberal institutions that will support neoliberalism to the bitter end.
    Apr 15, 2017 | economistsview.typepad.com

    point, April 14, 2017 at 05:06 AM

    https://blogs.imf.org/2017/04/12/drivers-of-declining-labor-share-of-income/

    "In advanced economies, about half of the decline in labor shares can be traced to the impact of technology."

    Searching, searching for the policy variable in the regression.

    anne -> point... , April 14, 2017 at 08:09 AM
    https://blogs.imf.org/2017/04/12/drivers-of-declining-labor-share-of-income/

    April 12, 2017

    Drivers of Declining Labor Share of Income
    By Mai Chi Dao, Mitali Das, Zsoka Koczan, and Weicheng Lian

    Technology: a key driver in advanced economies

    In advanced economies, about half of the decline in labor shares can be traced to the impact of technology. The decline was driven by a combination of rapid progress in information and telecommunication technology, and a high share of occupations that could be easily be automated.

    Global integration-as captured by trends in final goods trade, participation in global value chains, and foreign direct investment-also played a role. Its contribution is estimated at about half that of technology. Because participation in global value chains typically implies offshoring of labor-intensive tasks, the effect of integration is to lower labor shares in tradable sectors.

    Admittedly, it is difficult to cleanly separate the impact of technology from global integration, or from policies and reforms. Yet the results for advanced economies is compelling. Taken together, technology and global integration explain close to 75 percent of the decline in labor shares in Germany and Italy, and close to 50 percent in the United States.

    paine -> anne... , April 14, 2017 at 08:49 AM
    Again this is about changing the wage structure

    Total hours is macro management. Mobilizing potential job hours to the max is undaunted by technical progress

    Recall industrial jobs required unions to become well paid

    We need a CIO for services logistics and commerce

    [Apr 14, 2017] If the Federal Reserve can create trillions of dollars with a single keystroke, and the Fed is the governments bank, then why does President Obama claim weve run out of money?

    Apr 14, 2017 | economistsview.typepad.com
    RGC , April 14, 2017 at 05:48 AM
    So ask yourself this question:

    If the Federal Reserve can create trillions of dollars with a single keystroke, and the Fed is the government's bank, then why does President Obama claim we've "run out" of money?

    Why have Democrats and so-called progressives supported job-killing budget cuts in the name of "shared sacrifice"? Why are we throwing away the equivalent of $9.8 billion in lost output every single day? Why don't we do something about our $2.2 trillion infrastructure deficit, 25 million underemployed and unemployed Americans, 100 million Americans in or very near poverty, and so on?

    The answer is simple. Most of us don't understand the monetary system. Instead of deciding how the government should wield its power over the dollar, we live in fear of the ratings agencies, the Chinese, the bond market vigilantes and other imaginary evils. And this holds all of us back. Unused resources abound, human needs go unmet, and the vast majority of Americans believe that 'There Is No Alternative' (TINA). Or, as Warren Mosler says, "Because we fear becoming the next Greece, we're turning ourselves into the next Japan."

    There is an alternative. And it begins with an understanding of the monetary system. The cat is already out of the bag. Chairman Bernanke confirms it. Money is no object.

    http://neweconomicperspectives.org/2012/03/where-did-the-federal-reserve-get-all-that-money.html

    RGC -> RGC... , April 14, 2017 at 05:51 AM
    Prominent C20th Economist Explains How the Lie is for Our Own Good

    Posted on 2 January 2014

    Infamous footage of Paul Samuelson, posted by Mike Norman, explaining why we can't be trusted with the truth.

    Just believe the scary bedtime story about the big bad Budget Deficit and stay asleep now. There's a good child.

    http://heteconomist.com/prominent-c20th-economist-explains-how-the-lie-is-for-our-own-good/

    BenIsNotYoda -> RGC... , April 14, 2017 at 06:59 AM
    RGC,
    the people here have been brainwashed and can not think for themselves. If it has not been approved by their favorite academic, it is a crank theory. they'd rather believe in fairy tales like NGDP level targeting - the fed will wish it into reality. Rather than pay attention to the MMT that you and I subscribe to.
    BenIsNotYoda -> BenIsNotYoda... , April 14, 2017 at 07:04 AM
    Moreover it is logical for them to stick to the "the Fed is omnipotent" as it bids up asset prices and maintains the status quo. It vests more power in the institutions that benefit the people you see here.

    Blame the right, blame the deregulators, blame the tax cutters, blame the liberatarians, etc. that is the how they maintain the status quo. And Mosler is right on - Bernanke turned us into Japan trying to save us from that fate. And he is sliding down the rabbit hole - "I should have doubled down on my failed strategy"
    why? because he was able to bid up the stock market? I bet you everyone of the Fed worshippers here benefit personally from the asset price binges that the stupid Fed has gotten us addicted to.

    RGC -> BenIsNotYoda... , April 14, 2017 at 07:40 AM
    There has been a major propaganda element in economics for a long time.

    People have to dig deep to discover the truth and many don't have the time.

    There is a lot of money behind the propaganda on the neoclassical/neoliberal side so it gets a lot more publicity.

    As that side sinks the society deeper and deeper into malfunction, hopefully more people will take the time to understand.

    JohnH -> RGC... , April 14, 2017 at 09:13 AM
    Yep! "There has been a major propaganda element in economics for a long time."

    Robert Rubin had an opinion piece at the Council on Foreign Relations, another propaganda rag: "Don't Politicize the Federal Reserve"
    http://www.cfr.org/monetary-policy/dont-politicize-federal-reserve/p39037

    Per Rubin and his cronies in the Wall Street banking cartel, the Fed is fine as it is...serving the interests of the Wall Street banking cartel. The cartel has a good think going...why disrupt it by taking into account the public good?

    Has Rubin ever done anything in the interest of the public?

    [Apr 14, 2017] Looks like Trump was just another Obama: a tabula rasa on which a frustrated American public could project their desires, but who in reality was just another sell-out.

    Apr 14, 2017 | economistsview.typepad.com
    EMichael -> B.T.... , April 14, 2017 at 05:24 PM
    And I'd argue that there is not one single trump voter in the whole world that voted for his economic policies.

    And that this populism bs has been swallowed by way, way too many people.

    It wasn't the bringing back the lost jobs in coal country(which even the single most stupid human being in West Va knew was a crock), it was that the coal jobs lost in West Va were taken by people of color and socialistically minded dems.

    Peter K. -> EMichael... , April 14, 2017 at 07:41 PM
    Josh Marshall isn't a Susan Sarandon/Ralph Nader type:

    "We hear people constantly saying 'Nothing will change his supporters' minds. They're with him no matter what.' First of all this is enervating defeatism which is demoralizing and loserish. But it also misses the point. It is factually wrong. For the supporters those people have in mind, they're right. They're true believers, authoritarians who are energized by Trump's destructive behavior. But there are not that many of those people. A big chunk of Trump's voters voted for him in spite of their dislike. Those people can be carved away. But Democrats will regain power by winning it in what amount to our 21st century internal American borderlands, not in the big cities or rural areas mainly but in between. So what's happening now to lay that groundwork for 2018?"

    http://talkingpointsmemo.com/edblog/the-fight-in-the-borderlands

    libezkova -> EMichael... , April 14, 2017 at 08:17 PM
    "And I'd argue that there is not one single trump voter in the whole world that voted for his economic policies. "

    Looks like Trump was just another Obama: a tabula rasa on which a frustrated American public could project their desires, but who in reality was just another sell-out.

    Worked beautifully.

    [Apr 14, 2017] Neoliberals try to deny their responsibility for electing Trump

    Apr 14, 2017 | economistsview.typepad.com
    BenIsNotYoda -> sanjait... , April 14, 2017 at 09:17 AM
    you would rather rely on some "free lunch" fairy tale tools like NGDP targeting because the simpler version, QE, has worked so well that we have Trump in the white house.
    libezkova -> BenIsNotYoda... , April 14, 2017 at 07:59 PM
    "QE, has worked so well that we have Trump in the white house."

    That's good !. Sounds like a plausible explanation what has happened to me. Obama was the key to Trump election.

    Looks like Trump was just another Obama: a tabula rasa on which a frustrated American public could project their desires, but who in reality was just another sell-out.

    Worked beautifully.

    libezkova -> libezkova... , April 14, 2017 at 08:01 PM
    Neoliberals will always try to deny their responsibility in electing Trump.

    That's the nature of the beast.

    DataDrivenFP -> RGC... , April 14, 2017 at 06:56 PM
    Is this from some alternate reality where Obama was elected to a third term? Can I go there too?

    And the issue is not being able to create reserves on the monetary side, but being able to actually stimulate the economy by increased federal spending on the fiscal side. At the ZLB, there's no demand, so more money supply...ho, hum!

    Tax cuts don't cut it because they send money to people who will speculate with it instead of spending it to stimulate production and get a financial multiplier going.

    And this business of "run out" of money is some conflation of GOP fantasy with the federal borrrowing 'limit' which may have no force in law anyway. Obama didn't force the issue, though I think he should have. In any case, it'll be interesting to watch the GOP self-immolation over the so-called 'debt limit'. The big question-to bring popcorn or marshmallows?

    Peter K. , April 14, 2017 at 06:56 PM
    Bernanke comes out for NGDP targeting after previously dismissing the idea when Christina Romer called for a regime change during his tenure.

    [Apr 14, 2017] Democrats still represent a class but that class is not the working class. It's not the middle class. It's the professional class - affluent, white-collar elites.

    Apr 14, 2017 | economistsview.typepad.com
    RGC

    Thursday 13 April 2017 11.28 EDT

    Since losing the presidency to a Cheeto-hued reality TV host, the Democratic party's leadership has made it clear that it would rather keep losing than entertain even the slightest whiff of New Deal style social democracy.

    The Bernie Sanders wing might bring grassroots energy and – if the polls are to be believed – popular ideas, but their redistributive policies pose too much of a threat to the party's big donors to ever be allowed on the agenda.

    https://www.theguardian.com/commentisfree/2017/apr/13/progressive-democratic-candidates-james-thompson-loss Reply Friday, April 14, 2017 at 06:05 AM RGC -> RGC... , April 14, 2017 at 06:10 AM

    Official Dems Abandon Sanders Ally in Key Kansas Race, and Dems Lose

    By Bob Dreyfuss | April 11, 2017

    UPDATE II: Politico notes, in reporting on the race that the GOP won by single digits: "The DCCC did not spend a dime in this race. Again: Trump won this district by 27 points." Outside progressive groups did mobilize for Thompson, but the official Democratic Party did squat. So, Mr. Tom "50 State Strategy" Perez,

    http://thepopulist.buzz/

    RGC -> RGC... , April 14, 2017 at 06:25 AM
    The Democratic Party represents a class.

    "It is a class party, and they act on that class's behalf and they act in that class's interests and they serve that class. And they have adopted all the tastes and manners and ideology...

    It's just that class is not the working class. It's not the middle class. It's the professional class - affluent, white-collar elites.

    They can't see what they're doing. This is invisible to them, because it's who they are."
    ............
    Writer Thomas Frank shifts through the wreckage of the Democratic Party in the Trump Era, and finds a group of failed politicians unable to see the deep unpopularity of their own policies, or a path beyond serving the narrow interests of the elite professional class they've served since the Clinton years - with a generation of disastrous results.

    https://thisishell.com/interviews/947-thomas-frank

    Peter K. -> RGC... , April 14, 2017 at 06:44 AM
    They want to be the party of business, not the job class.

    That's why Hillary spends her time giving speeches to Goldman Sachs and Larry Summers gives talks to Mexican bankers and investors not Mexican union workers or activists.

    paine -> RGC... , April 14, 2017 at 11:06 AM
    The merit class

    I recall obama and geithner hit it off
    Pouring
    Poison in the porches of barrys ear

    [Apr 14, 2017] Dysfunctional corporate media regurgitate corporate slandering and BS rather than reporting the outrageous and illegal abuse of a human by corporate and public thugs:

    Apr 14, 2017 | economistsview.typepad.com
    DeDude , April 14, 2017 at 02:40 PM
    Dysfunctional corporate media regurgitate corporate slandering and BS rather than reporting the outrageous and illegal abuse of a human by corporate and public thugs:

    http://www.nakedcapitalism.com/2017/04/united-passenger-removal-reporting-management-fail.html

    It is sad how easy it is for big corporations to insert their narratives into reported news. Is this another case of misapplied "two-sides-ism" or is it worse than that?

    DeDude -> DeDude... ,
    One very good point towards the end is that when you push down salaries you lose some of the more competent people. There were at least a handful of "stop points" where competent employees could have prevented this from ever occurring. However, when everything is understaffed and/or outsourced to the lowest bidder, and companies continuously mistreat their employees - you end up with incompetent employees that couldn't care less.

    [Apr 14, 2017] DeLong statement Thus the remedy for the boom is not a higher rate of interest but a lower rate of interest! For that may enable the so-called boom to last. is very questionable, but typical for dyed-in-the-wool neoliberals

    With oversized financial system crashes are inevitable; in a way oversize financial system is enough for producing financial crash: swine will always find the dirt.
    Notable quotes:
    "... Major Malinvestments Do Not Have to Produce Large Depressions by Brad DeLong ..."
    "... I asked the typical macro question: who are the twenty biggest suppliers of securitization products, and who are the twenty biggest buyers. I got a paper, and they were both the same set of institutions. When I was at this meeting--and I really should have been at these meetings earlier--I was talking to the banks, and I said: "It looks to me that since the buyers and the sellers are the same institutions, as a system they have not diversified" ..."
    "... That was one of the things that struck me: that the industry was not aware at the time that while its treasury department was reporting that it bought all these products its credit department was reporting that it had sold off all the risk because they had securitized them. ..."
    "... Indeed, John Maynard Keynes had a good deal to say about this in Notes on the Trade Cycle: ..."
    "... "The preceding analysis may appear to be in conformity with the view of those who hold that over-investment is the characteristic of the boom, that the avoidance of this over-investment is the only possible remedy for the ensuing slump, and that, whilst for the reasons given above the slump cannot be prevented by a low rate of interest, nevertheless the boom can be avoided by a high rate of interest. There is, indeed, force in the argument that a high rate of interest is much more effective against a boom than a low rate of interest against a slump. ..."
    "... It's not malinvestment that played decisive role. It's leverage which gradually increased during boom until it reached the level at which it necessarily caused the crash. Dot-com boom crash came at the levels of leverage far less then subprime. Generally financial firms only get appetite for exorbitant leverage at this time. So there were no Lehman Brother event during dot-com crash. ..."
    "... Also subprime bubble was facilitated by the Fed as a remedy for dot-com bubble. From this point of view it was just the second stage of dot-com bubble. ..."
    "... In reality when finance reached Ponzi stage nothing can prevent the crash and the longer the boom is artificially prolonged be deeper will be the crash and subsequent recession. So Fed efforts to mitigate dot-com bubble played a huge role of making the Great Recession as painful as it was. ..."
    Mar 18, 2017 | economistsview.typepad.com
    Peter K. : March 18, 2017 at 09:29 AM
    http://www.bradford-delong.com/2017/02/the-united-states-had-an-immense-boom-in-the-1990s-that-was-in-the-end-financial-disappointing-for-those-who-invested-in-it.html

    Major Malinvestments Do Not Have to Produce Large Depressions by Brad DeLong

    February 22, 2017 at 06:06 AM

    The United States had an immense boom in the 1990s. That was in the end financial disappointing for those who invested in it, but not because the technologies they were investing in did not pan out as technologies, not because the technologies deliver enormous amounts of well-being to humans, but because it turned out to be devil's own task to monetize any portion of the consumer surplus generated by the provision of information goods.

    Huge investments in high tech and communications. Huge amounts of utility generated. Little financial return. $4 trillion of investors' wealth destroyed as assets were revalued. That is something like 8 times the fundamental losses we saw in subprime mortgages and home equity loans made on houses in the desert between Los Angeles and Albuquerque from mid 2006-mid 2008.

    A 1.5%-point rise in the unemployment rate after 2000 is not nothing--it is a bad thing. But it is not a 7%-point rise. And it is not a failure to close any of the gap vis-a-vis the pre-crisis trend of potential thereafter and a dark shadow over economic growth for a generation thereafter. Yet the fundamental shock from dot-com looks to me 8 times as large as the fundamental shock from subprime.

    That tells me that we can deal with such shocks to private sector credit that go wrong: Have them be to equity wealth in the first place, or rapidly transform all the financial asset claims affected into equity on the fly as the crisis hits. Easy to say. Hard to do. We make sure they are diversified. And we do not, not, not, not, not, not let the people in Basle get too clever with their ideas of what reserves and capital structure look like, and allow core reserves to be placed in assets that are not AAA--even if some ratings agency whose revenues depend on pleasing investment banks has labeled them as AAA.

    Axel Weber tells this story:

    "In Davos, I was invited to a group of banks--now Deutsche Bundesbank is frequently mixed up in invitations with Deutsche Bank. I was the only central banker sitting on the panel. It was all banks. It was about securitizations. I asked my people to prepare. I asked the typical macro question: who are the twenty biggest suppliers of securitization products, and who are the twenty biggest buyers. I got a paper, and they were both the same set of institutions. When I was at this meeting--and I really should have been at these meetings earlier--I was talking to the banks, and I said: "It looks to me that since the buyers and the sellers are the same institutions, as a system they have not diversified" .

    That was one of the things that struck me: that the industry was not aware at the time that while its treasury department was reporting that it bought all these products its credit department was reporting that it had sold off all the risk because they had securitized them.

    What was missing--and I think that is important for the view of what could be learned in economics--is that finance and banking was too-much viewed as a microeconomic issue that could be analyzed by writing a lot of books about the details of microeconomic banking. And there was too little systemic views of banking and what the system as a whole would develop like. The whole view of a systemic crisis was just basically locked out of the discussions and textbooks..."

    Eichengreen, Alan Taylor, and Kevin O'Rourke think that, once the run on the shadow banking system was underway, this was the largest shock relative to the size of the market financial markets have ever experienced. We could have avoided this. If we had done our surveillance sufficiently deeper, we would have seen that this might be coming...

    But, even so there was nothing baked in the cake of the housing bubble that in any sense required what the world economy has gone through in the past decade.

    Indeed, John Maynard Keynes had a good deal to say about this in Notes on the Trade Cycle:

    "The preceding analysis may appear to be in conformity with the view of those who hold that over-investment is the characteristic of the boom, that the avoidance of this over-investment is the only possible remedy for the ensuing slump, and that, whilst for the reasons given above the slump cannot be prevented by a low rate of interest, nevertheless the boom can be avoided by a high rate of interest. There is, indeed, force in the argument that a high rate of interest is much more effective against a boom than a low rate of interest against a slump.

    To infer these conclusions from the above would, however, misinterpret my analysis; and would, according to my way of thinking, involve serious error. For the term over-investment is ambiguous. It may refer to investments which are destined to disappoint the expectations which prompted them or for which there is no use in conditions of severe unemployment, or it may indicate a state of affairs where every kind of capital-goods is so abundant that there is no new investment which is expected, even in conditions of full employment, to earn in the course of its life more than its replacement cost. It is only the latter state of affairs which is one of over-investment, strictly speaking, in the sense that any further investment would be a sheer waste of resources.[4] Moreover, even if over-investment in this sense was a normal characteristic of the boom, the remedy would not lie in clapping on a high rate of interest which would probably deter some useful investments and might further diminish the propensity to consume, but in taking drastic steps, by redistributing incomes or otherwise, to stimulate the propensity to consume.

    According to my analysis, however, it is only in the former sense that the boom can be said to be characterised by over-investment. The situation, which I am indicating as typical, is not one in which capital is so abundant that the community as a whole has no reasonable use for any more, but where investment is being made in conditions which are unstable and cannot endure, because it is prompted by expectations which are destined to disappointment.

    It may, of course, be the case - indeed it is likely to be - that the illusions of the boom cause particular types of capital-assets to be produced in such excessive abundance that some part of the output is, on any criterion, a waste of resources; - which sometimes happens, we may add, even when there is no boom. It leads, that is to say, to misdirected investment. But over and above this it is an essential characteristic of the boom that investments which will in fact yield, say, 2 per cent. in conditions of full employment are made in the expectation of a yield of, say, 6 per cent., and are valued accordingly. When the disillusion comes, this expectation is replaced by a contrary "error of pessimism", with the result that the investments, which would in fact yield 2 per cent. in conditions of full employment, are expected to yield less than nothing; and the resulting collapse of new investment then leads to a state of unemployment in which the investments, which would have yielded 2 per cent. in conditions of full employment, in fact yield less than nothing. We reach a condition where there is a shortage of houses, but where nevertheless no one can afford to live in the houses that there are.

    Thus the remedy for the boom is not a higher rate of interest but a lower rate of interest! For that may enable the so-called boom to last. The right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps and thus keeping us permanently in a quasi-boom..."

    Peter K. -> Peter K.... , March 18, 2017 at 09:31 AM
    http://jwmason.org/slackwire/links-and-thoughts-for-march-15-2017/

    by J.W. Mason

    Against malinvestment. Brad Delong has, I think, the decisive criticism* of malinvestment theories of the Great Recession and subsequent slow recovery. In terms of the volume of investment based on what turned out to be false expectations, and the subsequent loss of asset value, the dot-com bubble of the late 1990s was much bigger than the housing bubble. So why were the macroeconomic consequences so much milder?..

    * http://www.bradford-delong.com/2017/02/the-united-states-had-an-immense-boom-in-the-1990s-that-was-in-the-end-financial-disappointing-for-those-who-invested-in-it.html

    libezkova -> Peter K.... , March 18, 2017 at 07:11 PM
    It's not malinvestment that played decisive role. It's leverage which gradually increased during boom until it reached the level at which it necessarily caused the crash. Dot-com boom crash came at the levels of leverage far less then subprime. Generally financial firms only get appetite for exorbitant leverage at this time. So there were no Lehman Brother event during dot-com crash.

    Also subprime bubble was facilitated by the Fed as a remedy for dot-com bubble. From this point of view it was just the second stage of dot-com bubble.

    DeLong statement

    "Thus the remedy for the boom is not a higher rate of interest but a lower rate of interest! For that may enable the so-called boom to last."

    is very questionable, but typical for dyed-in-the-wool neoliberals. They are completely ahistoric.

    He does not understand Minsky because he can't.

    In reality when finance reached Ponzi stage nothing can prevent the crash and the longer the boom is artificially prolonged be deeper will be the crash and subsequent recession. So Fed efforts to mitigate dot-com bubble played a huge role of making the Great Recession as painful as it was.

    zzz:

    The benefit of liquidity insurance, however, is undermined if the option to withdraw funding is triggered en masse by fear instead of fundamentals. Indeed, the notion that psychological factors are responsible for triggering ?nancial crises has a long tradition in the history in economic thought. Diamond and Dybvig (1983) formalize this idea by demonstrating how simple bank deposit contracts can induce a coordination game exhibiting two equi librium outcomes. In the fundamental equilibrium, all depositors represent their liquidity needs truthfully, so that options are exercised for fundamental economic reasons only. In the bank panic equilibrium, depositors not in need of liquidity pretend that they are. In this case, options are exercised out of a fear that little will be left for latecomers if other depositors are similarly misrepresenting themselves. In this way, the mere expectation of widespread redemptions can become a self-ful?lling prophecy.

    While the notion of a panic-induced crisis has certain appeal, the phe- nomenon is di¢ cult to identify empirically. An alternative and equally plausible view asserts that ?nancial instability and its associated emotional trauma is merely symptomatic of deteriorating fundamentals experienced in the broader economy prior to an economic downturn; see Gorton (1988) and Allen and Gale (1998). While there is merit to this view, it is not inconsistent with the possibility that some crises are panic-driven. In particular, not all ?nancial crises are associated with recessions; see Capiro and Klingebiel (1997).

    Because it is difficult to discriminate empirically between panic-based and fundamental-based explanations of crises, policymakers should hedge their bets when designing ?nancial regulation.1 We think that the proper hedge in this case might be usefully informed by theoretical, as well as empirical, plausibility. Given the current state of theory, a case could be made for adjusting posterior odds in favor of fundamentals over panics. The basis for this assessment rests on the apparent di¢ culty of generating bank panics in model economies, at least for economies that permit an empirically plausible degree of contractual ?exibility.

    To explain what we mean by this, note that the seminal model of Dia- mond and Dybvig (1983) does not exhibit bank panics when banks adopt a simple suspension scheme,2 a device that was actually used? sometimes suuccessfully? to halt runs.

    We pose a theory in which bank panics that can arise easily and naturally whenever short-term debt is used to ?nance investments characterized by even a modest degree of increasing returns to scale. And, while our explanation does not require sequential service, it is certainly not compromised if sequential service is imposed. Our idea is based on the notion that many investments entail some ?xed costs. A large commercial development project, for example, requires a signi?cant outlay in capital and labor services, e.g., cranes and crane operators, that must be paid regardless of how much construction activity is actually taking place on site.

    [Apr 14, 2017] A group of Tesla Inc investors has urged the luxury electric car maker to add two new independent directors to its board, without ties to Chief Executive Elon Musk, to provide a critical check on possible dysfunctional group dynamics

    Tesla is new way to spell "dot-com bubble" in 2017...
    Apr 14, 2017 | economistsview.typepad.com
    libezkova, April 13, 2017 at 11:00 AM
    Tesla's Musk tells disgruntled shareholders: Buy Ford

    http://finance.yahoo.com/news/investors-push-changes-tesla-board-154557760--sector.html

    It might well be that troubles just started for Musk.

    == quote ==

    SAN FRANCISCO/DETROIT (Reuters) - A group of Tesla Inc investors has urged the luxury electric car maker to add two new independent directors to its board, without ties to Chief Executive Elon Musk, to "provide a critical check on possible dysfunctional group dynamics."

    [Apr 14, 2017] Declining consumption of electricity in the USA might mean that It might mean that GDP data are fudged

    Apr 14, 2017 | economistsview.typepad.com
    libezkova , April 13, 2017 at 08:51 AM
    Another face of secular stagnation and outsourcing of manufacturing:

    The De-Electrification of the U.S. Economy - Bloomberg View
    https://www.bloomberg.com/view/articles/2017-04-12/the-de-electrification-of-the-u-s-economy

    == quote ==
    In much of the world, of course, electricity demand is still growing. In China, per-capita electricity use has more than quadrupled since 1999. Still, most other developed countries have experienced a plateauing or decline in electricity use similar to that in the U.S. over the past decade. And while the phenomenon has been most pronounced in countries such as the U.K. where the economy has been especially weak, it's also apparent in Australia, which hasn't experienced a recession since 1991.
    == end of quote ==

    From comments:

    One interesting data point that should be within that "industrial" number: "U.S. aluminum production has gone from 2.5 million tons in 2005 to 1.6 million in 2015." http://www.seattletimes.com...

    Aluminum smelting uses a lot of electricity, and that's a 36% decline. I'm not sure of the total electricity use of the aluminum industry in the U.S. but it's conceivably big enough to make a difference in that last graph.

    anne -> libezkova... , April 13, 2017 at 09:16 AM
    The essay is surely interesting, but what "might" it mean?
    Fred C. Dobbs -> anne... , April 13, 2017 at 11:54 AM
    (Bloomberg)
    ... In an article published in the Electricity Journal in 2015, former Lawrence Berkeley energy researcher Jonathan G. Koomey, now a consultant and a lecturer at Stanford, and Virginia Tech historian of science Richard F. Hirsch offered five hypotheses for why electricity demand had decoupled from economic growth (which I've paraphrased here):

    In an article published in the Electricity Journal in 2015, former Lawrence Berkeley energy researcher Jonathan G. Koomey, now a consultant and a lecturer at Stanford, and Virginia Tech historian of science Richard F. Hirsch offered five hypotheses for why electricity demand had decoupled from economic growth (which I've paraphrased here):
    1.State and federal efficiency standards for buildings and appliances have enabled us to get by with less electricity.
    2.Increased use of information and communications technologies have also allowed people to conduct business and communicate more efficiently.
    3.Higher prices for electricity in some areas have depressed its use.
    4.Structural changes in the economy have reduced demand.
    5.Electricity use is being underestimated because of the lack of reliable data on how much energy is being produced by rooftop solar panels. ...

    https://law.stanford.edu/publications/electricity-consumption-and-economic-growth-a-new-relationship-with-significant-consequences/

    anne -> Fred C. Dobbs... , April 13, 2017 at 05:18 PM
    I appreciate these conjectures or hypotheses, which I had read initially and should have set down as well. The problem is there is no clear defining of the hypotheses, or provision for coming to a tentative conclusion as to the effect of any hypothesis.

    The matter is of course important, and I will welcome further consideration.

    libezkova -> anne... , April 13, 2017 at 04:28 PM
    "what "might" it mean?"

    It might mean that GDP data are fudged.

    [Apr 14, 2017] Automation as a way to depress wages

    Apr 14, 2017 | economistsview.typepad.com
    point , April 14, 2017 at 04:59 AM
    http://www.bradford-delong.com/2017/04/notes-working-earning-and-learning-in-the-age-of-intelligent-machines.html

    Brad said: Few things can turn a perceived threat into a graspable opportunity like a high-pressure economy with a tight job market and rising wages. Few things can turn a real opportunity into a phantom threat like a low-pressure economy, where jobs are scarce and wage stagnant because of the failure of macro economic policy.

    What is it that prevents a statement like this from succeeding at the level of policy?

    Peter K. -> point... , April 14, 2017 at 06:41 AM
    class war

    center-left economists like DeLong and Krugman going with neoliberal Hillary rather than Sanders.

    Sanders supports that statement, Hillary did not. Obama did not.

    PGL spent the primary unfairly attacking Sanders and the "Bernie Bros" on behalf of the center-left.

    [Apr 13, 2017] I hate the word manipulation in this context. China isn't doing anything in the dark of the night that we are trying to catch them at.

    Apr 13, 2017 | economistsview.typepad.com
    anne , April 13, 2017 at 07:44 AM
    http://cepr.net/blogs/beat-the-press/china-and-currency-values-fast-growing-countries-run-trade-deficits

    April 13, 2017

    China and Currency Values: Fast Growing Countries Run Trade Deficits

    I don't generally comment on pieces that reference me, but Jordan Weissman has given me such a beautiful teachable moment that I can't resist. Weissman wrote * about Donald Trump's reversal on his campaign pledge to declare China a currency manipulator. Weissman assures us that Trump was completely wrong in his campaign rhetoric and that China does not in fact try to depress the value of its currency.

    "It's pretty hard to argue with that. Far from devaluing its currency, China has actually spent more than $1 trillion of its vaunted foreign reserves over the past couple of years trying to prop up the value of the yuan as investors have funneled money overseas. There are some on the left, like economist Dean Baker, who will argue that Beijing is still effectively suppressing the redback's value by refusing to unwind its dollar reserves more quickly. But if China were really keeping its currency severely underpriced, you'd expect it to still have a big current account surplus, reminiscent of 10 years ago, which it doesn't anymore."

    Okay, to start with, I hate the word "manipulation" in this context. China isn't doing anything in the dark of the night that we are trying to catch them at. The country pretty explicitly manages the value of its currency against the dollar, that is why it holds more than $3 trillion in reserves. So let's just use the word "manage," in reference to its currency. It is more neutral and more accurate.

    It also allows us to get away from the idea that China is somehow a villain and that we here in the good old US of A are the victims. There are plenty of large U.S. corporations that hugely benefit from having an under-valued Chinese currency. For example Walmart has developed a low cost supply chain that depends largely on goods manufactured in China. It is not anxious for the price of the items it imports rise by 15-30 percent because of a rise in the value of the yuan against the dollar.

    The same applies to big manufacturers like GE that have moved much of their production to China and other developing countries. These companies do not "lose" because China is running a large trade surplus with the United States, they were in fact big winners.

    Okay, but getting back to the issue at hand, I'm going to throw the textbook at Weissman. It is not true that we should expect China "to still have big current account surplus" if it were deliberately keeping its currency below market levels.

    China is a developing country with an annual growth rate of close to 7.0 percent. The U.S. is a rich country with growth averaging less than 2.0 percent in last five years. Europe is growing at just a 1.0 percent rate, and Japan even more slowly. Contrary to what Weissman tells us, we should expect that capital would flow from slow growing rich countries to fast growing developing countries. This is because capital will generally get a better return in an economy growing at a 7.0 percent rate than the 1-2 percent rate in the rich countries.

    If capital flows from rich countries to poor countries, this means they are running current account surpluses. The capital flows are financing imports in developing countries. These imports allow developing countries to sustain the living standards of their populations even as they build up their infrastructure and capital stock. In other words, if China was not depressing the value of its currency we should it expect it to be running a large trade deficit.

    This is actually the way the world worked way back in the 1990s, a period apparently beyond the memory of most economics reporters. The countries of East Asia enjoyed extremely rapid growth, ** while running large trade deficits. This all changed following the East Asian financial crisis and the disastrous bailout arranged by Secretary of Treasury Robert Rubin and friends. *** Developing countries became huge exporters of capital as they held down the value of their currencies in order to run large trade surpluses and build up massive amounts of reserves.

    But Weissman is right that China is no longer buying up reserves, but the issue is its huge stock of reserves. As I explained in a blogpost **** a couple of days ago:

    "Porter is right that China is no longer buying reserves, but it still holds over $3 trillion in reserves. This figure goes to well over $4 trillion if we include its sovereign wealth fund. Is there a planet where we don't think this affects the value of the dollar relative to the yuan?

    "To help people's thought process, the Federal Reserve Board holds over $3 trillion in assets as a result of its quantitative easing program. I don't know an economist anywhere who doesn't think the Fed's holding of assets is still keeping interest rates down, as compared to a scenario in which it had a more typical $500 billion to $1 trillion in assets.

    "Currencies work the same way. If China offloaded $3 trillion in reserves and sovereign wealth holdings, it would increase the supply of dollars in the world. And, as Karl Marx says, when the supply of something increases, its price falls. In other words, if China had a more normal amount of reserve holdings, the value of the dollar would fall, increasing the competitiveness of U.S. goods and services, thereby reducing the trade deficit."

    So, there really are no mysteries here. China is holding down the value of its currency, which is making the U.S. trade deficit worse. It is often claimed that they want their currency to rise. That may well be true, which suggests an obvious opportunity for cooperation. If the U.S. and China announce a joint commitment to raise the value of the yuan over the next 2-3 years then we can be fairly certain of accomplishing this goal.

    This should be a very simple win-win for both countries. Walmart and GE might be unhappy, but almost everyone else would be big winners, especially if we told them not to worry about Pfizer's drug patent and Microsoft's copyright on Windows.

    * http://www.slate.com/blogs/moneybox/2017/04/12/trump_changes_his_mind_decides_china_isn_t_a_currency_manipulator_after.html

    ** http://www.imf.org/external/pubs/ft/weo/2016/02/weodata/weorept.aspx?pr.x=45&pr.y=7&sy=1990&ey=2000&scsm=1&ssd=1&sort=country&ds=.&br=1&c=522%2C924%2C536%2C578%2C548%2C582&s=NGDP_RPCH%2CBCA_NGDPD&grp=0&a=

    *** http://img.timeinc.net/time/magazine/archive/covers/1999/1101990215_400.jpg

    **** http://cepr.net/blogs/beat-the-press/trump-china-and-trade

    -- Dean Baker

    [Apr 13, 2017] The USA is teating Russia like romans treated Carnage

    Notable quotes:
    "... * A Carthaginian peace is the imposition of a very brutal 'peace' achieved by completely crushing the enemy. The term derives from the peace imposed on Carthage by Rome. After the Second Punic War, Carthage lost all its colonies, was forced to demilitarize and pay a constant tribute to Rome and could enter war only with Rome's permission. At the end of the Third Punic War, the Romans systematically burned Carthage to the ground and enslaved its population. ..."
    Apr 13, 2017 | economistsview.typepad.com
    Peter K. -> Peter K.... , April 13, 2017 at 06:51 AM
    there

    And these "mainstream" economists like Krugman and PGL claim to be followers of Keynes.

    Did they ever read the Economic Consequences of the Peace?

    https://en.wikipedia.o