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# Financial skeptic

### Notes on "neoliberalism enforced" cruise to Frugality Island for 401K Lemmings

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“When the capital development of a country becomes a by-product
of the activities of a casino, the job is likely to be ill-done.”

John Maynard Keynes

"Life is a school of probabilities."

Walter Bagehot

Neoliberal economics (aka casino capitalism) function from one crash to another. Risk is pervasively underpriced under neoliberal system, resulting in bubbles small and large which hit the economy periodically. The problem are not strictly economical or political. They are ideological. Like a country which adopted a certain religion follows a certain path, The USA behaviour after adoption of neoliberalism somewhat correlate with the behaviour of alcoholic who decided to booze himself to death. The difference is that debt is used instead of booze.

Hypertrophied role of financial sector under neoliberalism introduces strong positive feedback look into the economic system making the whole system unstable. Any attempts to put some sand into the wheels in the form of increasing transaction costs or jailing some overzealous bankers or hedge fund managers are blocked by political power of financial oligarchy, which is the actual ruling class under neoliberalism for ordinary investor (who are dragged into stock market by his/her 401K) this in for a very bumpy ride. I managed to observe just two two financial crashed under liberalism (in 2000 and 2008) out of probably four (Savings and loan crisis was probably the first neoliberal crisis). The next crash is given, taking into account that hypertrophied role of financial sector did not changes neither after dot-com crisis of 200-2002 not after 2008 crisis (it is unclear when and if it ended; in any case it was long getting the name of "Great Recession").

Timing of the next crisis is anybody's guess but it might well be closer then we assume. As Mark Twain aptly observed: "A thing long expected takes the form of the unexpected when at last it comes" ;-):

This morning that meant a stream of thoughts triggered by Paul Krugman’s most recent op-ed, particularly this:

Most of all, the vast riches being earned — or maybe that should be “earned” — in our bloated financial industry undermined our sense of reality and degraded our judgment.

Think of the way almost everyone important missed the warning signs of an impending crisis. How was that possible? How, for example, could Alan Greenspan have declared, just a few years ago, that “the financial system as a whole has become more resilient” — thanks to derivatives, no less? The answer, I believe, is that there’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing.

As most 401K investors are brainwashing into being "over bullish", this page is strongly bearish in "perma-bear" fashion in order to serve as an antidote to "Barrons" style cheerleading. Funny, but this page is accessed mostly during periods of economic uncertainty. At least this was the case during the last two financial crisis(2000 and 2008). No so much during good times: the number of visits drops to below 1K a month.

Still I hope it plays a small but important role: to warn about excessive risk taking by 401K investors in neoliberal economic system. It designed to serve as a warning sign and inject a skeptical note into MSM coverage. There are not many such sites, so a warning about danger of taking excessive risk in 401K accounts under neoliberalism has definite value. The following cartoon from 2008 illustrated this point nicely

As far as I know lot of 401K investors are 100% or almost 100% invested at stocks. Including many of my friends. I came across a very relevant to this situation joke which nicely illustrated the ideas of this page:

Seven habits that help produce the anything-but-efficient markets that rule the world by Paul Krugman in Fortune.

1. Think short term.
2. Be greedy.
3. Believe in the greater fool
4. Run with the herd.
5. Overgeneralize
6. Be trendy
7. Play with other people's money

I would like to stress again that it is very difficult to "guess" when the next wave of crisis stikes us: "A thing long expected takes the form of the unexpected when at last it comes".

But mispricing of risk in 401K accounts is systemic for "overbullish" 401 investors, who expect that they will be able to jusp of the train in time, before the crash. Usually such expectations are false. And to sell in the market that can lose 10% in one day is not easy psychologically. I remember my feelings in 2001-2002 and again 2008-2009. That's why many people who planned to "jump" stay put and can temporarily lose 30 to 50% of value of their 401k account in a very short period of time (and if you think that S&P500 can't return to 1000, think again; its all depends on FED). At this point some freak out and sell their holdings making paper losses permanent.

Even for those who weathered the storm and held to their stock holdings, it is important to understand that paper losses were eliminated mostly by Fed money printing. As such risks remains as at one point FED might find itself out of ammunition. The fact that S&P500 recovered very nicely it does not diminish the risk of such behavior. There is no guarantee that the third crisis will behave like previous two.

Next crash will have a new key determinant: the attitude toward the US government (and here I mean the current government of Barack Obama) and Wall Street after 2008 is the lack of trust. That means that you need to hope for the best but prepare for the worst. Injection on so much money into financial system was a novel experiment which is not ended yet. So how it will end is anybody's guess. We are now in uncharted waters. I think when Putin called Bernanke a hooligan, he meant exactly this. Since Bernanke was printing money out of thin air to buy financial paper, his action were tantamount to shoplifting. In some way this probably is more similar to running meth labs inside Fed building. The system was injected with narcotics. Everybody felt better, but the mechanism behind it was not healthy.

The complexity of modern financial system is tremendous and how all those new financial instruments will behave under a new stress is unknown. At the same time in the Internet age we, the great unwashed masses, can't be keep in complete obscurity like in good old time. Many now know ( or at least suspect ) that the neoliberal "show must goes on" after 2008 is actually going strongly at their expense. And while open rebellion is impossible, that results in lack of trust which represents a problem for financial oligarchy which rules the country. The poor working slobs are told be grateful for Walmart's low (poverty-subsidized) prices. Middle class is told that their declining standard of living is a natural result of their lack of competitiveness in the market place. Classic "bread and circuses" policy still works but for how long it will continue to work it is unclear.

But nothing is really new under the sun. To more and more people it is now clear that today the US is trying to stave off the inevitable decline by resorting to all kinds of financial manipulations like previous empires; yesterday, it was the British Empire and if you go further back, you get the USSR, Hapsburg empire, Imperial Russia, Spanish empire, Venetian empire, Byzantium and Roman empire. The current "Secretary of Imperial Wars" (aka Secretary of Defense) Ashton Baldwin Carter is pretty open about this:

“We already see countries in the region trying to carve up these markets…forging many separate trade agreements in recent years, some based on pressure and special arrangements…. Agreements that…..leave us on the sidelines. That risks America’s access to these growing markets. We must all decide if we are going to let that happen. If we’re going to help boost our exports and our economy…and cement our influence and leadership in the fastest-growing region in the world; or if, instead, we’re going to take ourselves out of the game.”

For the US elite it might be a time to rethink its neocon stance due to which the US is exposing ourselves to the enmity of the rising economic powers, and blowing serious cash to maintain it hegemony via maintaining huge military budget, financing wars and color revolutions in distant countries. In a way the US foreign policy became a financial racket, and racket can't last forever because it incite strong opposition from other countries.

Neoliberalism (aka casino capitalism) as a social system entered the state of decline after 2008. Like communism before it stopped to be attractive to people. But unlike communism it proved to have greater staying power, surviving in zombie state as finanfial institutions preserved political power and in some cases even enhanced it. It is unclear how long it will say in this state. Much depends on the availability of "cheap oil" on which neoliberal globalization is based.

But the plausible hypothesis is that this social system like socialism in xUSSR space before entered down slope and might well be on its way to the cliff. Attempts to neo-colonize other states by the West became less successful and more costly (Compare Ukraine, Libya and Iraq with previous instances of color revolutions). Some became close to XIX century colonial conquests with a lot of bloodshed (from half million to over a million of Iraqis, by different estimates, died ). As always this is mainly the blood of locals, which is cheap.

Libya and Ukraine are two recent examples. Both countries are now destroyed (which might be the plan). In Ukraine population is thrown in object poverty with income of less that $5 a day for the majority of population. And there is no other way to expand markets but to try to "neo-colonize" new countries by putting them into ominous level of debt while exporting goods to the population on credit. That is not a long term strategy as Greece, Bulgaria, and now Spain and Portugal had shown. With shrinking markets stability of capitalism in general and neoliberalism in particular might decrease. Several researchers points to increased importance Central banks now play in maintaining of the stability of the banking system. That's already a reversal of neoliberal dogma about free (read "unregulated") markets. Actually the tale about "free markets", as far as the USA is concerned, actually was from the very beginning mainly the product designed for export (read about Washington consensus). See also  Top updates Your browser does not support iframes. Softpanorama Switchboard Softpanorama Search ## NEWS CONTENTS ## Old News ;-)  2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 #### [Feb 15, 2017] Contrary to What Robert Samuelson Says We Did Bail Out the Bankers and Did Not Prevent a Second Great Depression ##### Notable quotes: ##### "... As far as the folks with uninsured loans that would have lost, well, many of these people were hedge-fund types and other financial institutions. They would have paid a price for not being very competent. The bailout ensured that they would not be left to suffer the consequences of their actions. ..." ##### "... As far as the top executives of the banks, while some were shown the door, many of these people continue to earn paychecks in the millions or tens of millions as the financial sector remains hugely bloated. We had an opportunity to downsize the financial sector in one fell swoop, eliminating this enormous albatross which sucks money out of the economy and hands it to the very rich. ..." ##### "... The narrow securities and commodities trading sector is now close to 2.5 percent of GDP ($470 billion a year). In the seventies, it was around 0.5 percent of GDP. Does anyone believe that capital is being allocated more effectively today than forty years ago or that our savings are safer? ..."
###### Feb 15, 2017 | economistsview.typepad.com
Contrary to What Robert Samuelson Says We Did Bail Out the Bankers and Did Not Prevent a Second Great Depression

Dean Baker
13 February 2017

Robert Samuelson is unhappy that people continue to believe something that is true - that we bailed out the bankers - and happy that people still believe something that is not true - that we prevented a second Great Depression. In his column Samuelson complains:

"The real Dodd-Frank scandal is that this misinterpretation of events, widely embraced by both parties, has been allowed to stand. In many bailouts, banks' shareholders suffered huge losses or were wiped out; similarly, top managers lost their jobs. The point was not to protect them but to prevent a collapse of the financial system."

Okay, let's imagine the counterfactual. We decide to take the free market seriously and let it work its magic on Citigroup, Bank of America, Goldman Sachs and the rest of the high rollers. These huge banks all go into bankruptcy with the commercial banking parts of the operations taken over by the FDIC. All insured deposits are fully protected, with the FDIC and Fed having the option to raise the limits to protect smaller savers.

The shareholders of these banks are out of luck. They have zero. Samuelson is right that share prices were depressed during the crisis, but that is different than going to zero. Furthermore, operating with the protection of Treasury Secretary Timothy Geithner's promise of "no more Lehmans," the share prices soon bounced back.

As far as the folks with uninsured loans that would have lost, well, many of these people were hedge-fund types and other financial institutions. They would have paid a price for not being very competent. The bailout ensured that they would not be left to suffer the consequences of their actions.

As far as the top executives of the banks, while some were shown the door, many of these people continue to earn paychecks in the millions or tens of millions as the financial sector remains hugely bloated. We had an opportunity to downsize the financial sector in one fell swoop, eliminating this enormous albatross which sucks money out of the economy and hands it to the very rich.

The narrow securities and commodities trading sector is now close to 2.5 percent of GDP ($470 billion a year). In the seventies, it was around 0.5 percent of GDP. Does anyone believe that capital is being allocated more effectively today than forty years ago or that our savings are safer? The additional money spent operating this sector is a huge waste from an economic standpoint, which also plays a large role in the upward redistribution of the last four decades. In terms of preventing a second Great Depression, this is a nice children's story that the elite like to tell. (And, they get very mad and call people names if they don't agree - we are supposed to take name-calling by the elites very seriously.) We know how to get out of a depression, we learned that lesson in the last one. It's called "spending money." The claim that we would have suffered a decade of double-digit unemployment if we had not bailed out the banks is premised on a political claim, not an economic one, that we would never have spent the money needed to boost the economy out of a prolonged slump. This claim is not only that any initial stimulus would have been shot down, but even after two, three, or five years of double-digit unemployment the president and congress would not have agreed to a serious stimulus. This is a pretty strong claim since even tax cuts would serve to provide stimulus, albeit less than spending. (Anyone ever meet a Republican that didn't like tax cuts?) Remember, the first stimulus occurred with George W. Bush in the White House and a 4.7 percent unemployment rate. Those making the claim that in the counterfactual the politicians in Washington never would have done anything to boost the economy has a really low opinion of these folks intelligence and/or honesty. That would be a good topic for a column, if someone really believed it. #### [Feb 15, 2017] Shiller Ten Year Cyclically Adjusted Price Earnings Ratio is almost 29 while the average is around 17 ###### Feb 15, 2017 | economistsview.typepad.com http://www.multpl.com/shiller-pe/ Ten Year Cyclically Adjusted Price Earnings Ratio, 1881-2017 (Standard and Poors Composite Stock Index) February 14, 2017 - PE Ratio ( 28.97) Annual Mean ( 16.72) Annual Median ( 16.09) -- Robert Shiller Reply Wednesday, #### [Feb 15, 2017] Mankiw's Ten Principles of Economics, Translated ###### Feb 15, 2017 | www.improbable.com by Yoram Bauman [1] University of Washington, Seattle, Washington The cornerstone of Harvard professor N. Gregory Mankiw's introductory economics textbook, Principles of Economics, is a synthesis of economic thought into Ten Principles of Economics (listed in the first table below). A quick perusal of these will likely affirm the reader's suspicions that synthesizing economic thought into Ten Principles is no easy task, and may even lead the reader to suspect that the subtlety and concision required are not to be found in the pen of N. Gregory Mankiw. I have taken it upon myself to remedy this unfortunate situation. The second table below summarizes my attempt to translate Mankiw's Ten Principles into plain English, and in doing so to provide the uninitiated with an invaluable glimpse of the economic mind at work. Explanations and details can be found in the pages that follow, but the average reader is advised to simply cut out the table below and carry it around for assistance in the (hereafter unlikely) event of confusion about the basic Principles of Economics. ------------------------------------------------------------ Mankiw's Principles #1. People face tradeoffs. #2. The cost of something is what you give up to get it. #3. Rational people think at the margin. #4. People respond to incentives. #5. Trade can make everyone better off. #6. Markets are usually a good way to organize economic activity. #7. Governments can sometimes improve market outcomes. #8. A country's standard of living depends on its ability to produce goods and services. #9. Prices rise when the government prints too much money. #10. Society faces a short-run tradeoff between inflation and unemployment. ------------------------------------------------------------ Yoram's Translations #1. Choices are bad. #2. Choices are really bad. #3. People are stupid. #4. People aren't that stupid. #5. Trade can make everyone worse off. #6. Governments are stupid. #7. Governments aren't that stupid. #8. Blah blah blah. #9. Blah blah blah. #10. Blah blah blah. ------------------------------------------------------------ Explanations and Details At first glance, the reader cannot but be impressed by the translation's simplicity and clarity. Accessibility, however, should not be mistaken for shallowness: further study will reveal hidden depths and subtleties that will richly reward the attentive student. Indeed, a moment's reflection will identify any number of puzzles and mysteries. Chief among them is probably this: Why do Principles #8, #9, and #10 have identical translations? The immediately obvious explanation is that these are macro-economic principles, and that I, as a micro-economist, am ill equipped to understand them, let alone translate them.[2] As is often the case in this complex world we live in, this immediately obvious explanation is also wrong. The true reason I have provided identical translations of "Blah blah blah" for Principles #8, #9, and #10 is that these principles say exactly the same thing, namely, "Blah blah blah." Sometime when you've got a few hours to spare, go and ask an economist -- preferably a macro-economist -- what he or she really means by "standard of living" or "goods and services" or "inflation" or "unemployment" or "short-run" or even "too much." You will soon realize that there is a vast difference between, say, what Principle #10 says -- "Society faces a short-run tradeoff between inflation and unemployment" -- and what Principle #10 means: "Society faces blah between blah and blah." My translations are simply concise renderings of these underlying meanings. Having cleared up that issue, let us go back to Mankiw's PRINCIPLE #1 People face tradeoffs. TRANSLATION: Choices are bad. The reasoning behind this translation is obvious. For example, imagine that somebody comes up to you and offers you a choice between a Snickers bar and some M&Ms. You now have a tradeoff, meaning that you have to choose one or the other. And having to trade one thing off against another is bad; President Truman supposedly asked for a one-armed economics advisor because his two-armed economics advisors were always saying, "On the one hand...but on the other hand..." People who have not received any economics education might be tempted to think that choices are good. They aren't. The (mistaken) idea that choices are good perhaps stems from the (equally mistaken) idea that lack of choices is bad. This is simply not true, as Mancur Olson points out in his book, The Logic of Collective Action: "To say a situation is 'lost' or hopeless is in one sense equivalent to saying it is perfect, for in both cases efforts at improvement can bring no positive results." Hence my translation of Mankiw's first principle of economics: Choices are bad. This concept can be a little difficult to grasp -- nobody ever said economics was easy -- but the troubled reader will undoubtedly gain clarity from Mankiw's PRINCIPLE #2 The cost of something is what you give up to get it. TRANSLATION: Choices are really bad. Beyond transforming Mankiw's semantic deathtrap into simplicity itself, this translation has the advantage of establishing a connection between Principle #1 (Choices are bad) and Principle #2 (Choices are really bad). To continue to deepen the reader's understanding of why choices are bad -- really bad -- let's return to our previous example, in which somebody offers you a choice between a Snickers bar and a package of M&Ms. Suppose, for the sake of argument, that you take the M&Ms. According to Mankiw, the cost of those M&Ms is the Snickers bar that you had to give up to get the M&Ms. Your gain from this situation -- what economists call "economic profit" -- is therefore the difference between the value you gain from getting the M&Ms (say,$.75) and the value you lose from giving up the Snickers bar (say, $.40). In other words, your economic profit is only$.35. Although you value the M&Ms at $.75, having the choice of the Snickers bar reduces your gain by$.40. Hence Principle #2: Choices are really bad.

Indeed, the more choices you have, the worse off you are. The worst situation of all would be somebody coming up to you and offering you a choice between two identical packages of M&Ms. Since choosing one package (which you value at $.75) means giving up the other package (which you also value at$.75), your economic profit is exactly zero! So being offered a choice between two identical packages of M&Ms is in fact equivalent to being offered nothing.

Now, a lay person might be forgiven for thinking that being offered a choice between two identical packages of M&Ms is in fact equivalent to being offered a single package of M&Ms. But economists know better. Being offered a single package of M&M effectively means having to choose between a package of M&Ms (which you value at $.75) and nothing (which you value at$0). Choosing the M&Ms gives you an economic profit of $.75, which is$.75 more than your economic profit when you are offered a choice between two identical packages of M&Ms.

At this point it is worth acknowledging that (1) there may be readers who have failed to grasp the above subtleties in their entirety, and (2) such readers may well be beginning to wonder whether they are, in a word, stupid. Any lingering doubts should be eliminated by the Mankiw's

PRINCIPLE #3
Rational people think at the margin.
TRANSLATION: People are stupid.

One point that is immediately obvious to the most casual observer with the meanest intelligence is that most people do not think at the margin. For example, most people who buy oranges at the grocery store think like this: "Hmmm, oranges are $.25 each. I think I'll buy half a dozen." They do not think like this: "Hmmm, oranges are$.25 each. I'm going to buy one, because my marginal value exceeds the market price. Now I'm going to buy a second one, because my marginal value still exceeds the market price..." We know most people don't think like this because most people don't fill their shopping baskets one orange at a time!

But we are now led inexorably toward a most unhappy conclusion. If -- as Mankiw says -- rational people think at the margin, and if -- as we all know -- most people do not think at the margin, then most people are not rational. Most people, in other words, are stupid. Hence my translation of the third principle of economics: People are stupid.

Before sinking into despair for the fate of the human race, however, the reader would be wise to consider Mankiw's

PRINCIPLE #4
People respond to incentives.
TRANSLATION: People aren't that stupid.

The dictionary says that incentive, n., is 1. Something that influences to action; stimulus; encouragement. SYN. see motive.

So what Mankiw is saying here is that people are motivated by motives, or that people are influenced to action by things that influence to action. Now, this may seem to be a bit like saying that tautologies are tautological -- the reader may be thinking that people would have to be pretty stupid to be unmotivated by motives, or to be inactive in response to something that influences to action. But remember Principle #3: People are stupid. Hence the need for Principle #4, to clarify that people aren't that stupid.

Only truly stupid people can fail to understand my translation of Mankiw's

PRINCIPLE #5
Trade can make everyone better off.
TRANSLATION: Trade can make everyone worse off.

But, the reader may well be asking, isn't the translation of the fifth principle the exact opposite of the principle itself? Of course not.

To see why, first note that "trade can make everyone better off" is patently obviously: if I have a Snickers bar and want M&Ms and you have M&Ms and want a Snickers bar, we can trade and we will both be better off. Surely Mankiw is getting at something deeper than this? Indeed, I believe he is. To see what it is, compare the following phrases:

A: Trade can make everyone better off.
B: Trade will make everyone better off.

Now, Statement B is clearly superior to Statement A. Why, then, does Mankiw use Statement A? It can only be because Statement B is false. By saying that trade can make everyone better off, Mankiw is conveying one of the subtleties of economics: trade can also not make everyone better off. It is a short hop from here to my translation, "Trade can make everybody worse off." (A numerical example can be found in Note #3, below.)

The subtlety evident in Principle #5 is even more clearly visible in the next two principles.

PRINCIPLE #6
Markets are usually a good way to organize economic activity.
TRANSLATION: Governments are stupid.

and

PRINCIPLE #7
Governments can sometimes improve market outcomes.
TRANSLATION: Governments aren't that stupid.

To see the key role that Principle #5 plays in both of these statements, note that the original phrasing of Principle #5 ("Trade can make everyone better off") leads to Principle #6 ("Governments are stupid"). After all, if trade can make everyone better off, what do we need government for? But the translation of Principle #5 ("Trade can make everyone worse off") leads to Principle #7 ("Governments aren't that stupid"). After all, if trade can make everyone worse off, we better have a government around to stop people from trading!

Like the first five principles, Principles #6 and #7 demonstrate the fine distinctions inherent in the economic way of thinking. People are stupid, but not that stupid; trade can make everyone better off, but it can also make everyone worse off; governments are stupid, but not that stupid. Exploring, refining, and delineating these distinctions is the subject matter of upper-level economics classes, doctoral dissertations in economics, and the vast majority of papers in the American Economic Review and other scholarly journals. Should the reader decide to follow this path, the fundamental principles described on the first page of this article will provide invaluable guidance.

Acknowledgement

Thank you to Ivars Skuja for assistance in taking and preparing the photographs[4] that accompany this article.

Notes

1. My own microeconomics text, Quantum Microeconomics, can be found online at <http://www.smallparty.org/quantum>.

2. The exact meanings of the terms "micro" and "macro" may be lost on the reader -- or, more likely, may never have been found in the first place. This should not be cause for concern: absence of these terms from Mankiw's Ten Principles indicates that they are not of fundamental economic importance.

3. Many non-economists (and some economists) are intimidated by numerical examples. To make it easier for those people to recognize that the following is a numerical example, it is formatted in very small type.

Consider a small town with three families. It just so happens that Family #1 needs a snowblower, Family #2 needs a leafblower, and Family #3 needs a lawnmower; each family values their particular need at $200. Fortune appears to be smiling on this town, because it also just so happens that Family #1 owns a leafblower, Family #2 owns a lawnmower, and Family #3 owns a snowblower. These sit unused in their respective garages; each family has no use for its current piece of equipment, and therefore values it at$0.

The situation appears ripe for gains from trade: Family #1 could buy a snowblower from Family #3 for $100, Family #2 could buy a leafblower from Family #1 for$100, and Family #3 could buy a lawnmower from Family #2 for $100. Each family would be$200 better off.

Unfortunately, life in this small town is not so simple; the town is located in a valley that is susceptible to severe air pollution problems. Blowers and mowers emit large quantities of air pollutants, and in fact each blower or mower that is used will make air pollution so bad that hospital bills (for asthma, etc.) will increase by $80 for each family. Three additional blowers and mowers will therefore increase each family's bills by$240.

Two results follow. First, the trades will still take place. For example, Family #1 and Family #3 will both be better off by $100 -$80 = $20 if Family #3 sells Family #1 its snowblower for$100. Second, the three trades together make everyone worse off: each family gains $200 from buying and selling, but loses$240 in hospital bills, for a net loss of $40. 4. To accommodate schools that teach micro and macro separately, Mankiw's Principles of Economics is also published in separate pieces; the accompanying photographs are of the micro piece, Principles of Microeconomics. Note that the same Ten Principles of Economics (some micro, some macro) appear in all versions of the book. © Copyright 2003 Annals of Improbable Research (AIR) #### [Feb 15, 2017] Lysenkoism in the US economics: Mainstream economists who get paid well for their services are not that diverse ##### Notable quotes: ##### "... Yes economists are diverse as a group, but the opinions of the majority of that group might be described as having moved to the right since 1970. ..." ###### Feb 15, 2017 | economistsview.typepad.com sanjait -> Jerry Brown... , February 15, 2017 at 10:38 AM Economists are enormously diverse as a group. Any piece that explicitly or implicitly describes them as being homogeneous is being reductionist at best. But Noah makes good points. Though it's probably worth emphasizing that if there exists a problem of communication between professionals and the public, there is probably mutual blame to be assigned. Economists should talk better to the general public, but as citizens we don't serve ourselves well when we expect the world to cater to our lack of knowledge and interest in complex but important issues. DrDick -> sanjait... , February 15, 2017 at 10:51 AM I have to disagree. It is the professionals who need to do a better job of educating the public. It is ridiculous to assume that the general public has the time or resources to discover this for themselves. Peter K. -> sanjait... , February 15, 2017 at 11:19 AM "Economists are enormously diverse as a group. Mainstream economists who get paid well for their services are not that diverse. For one thing, most are white males. That was Hillary's one good idea about the Fed. One. Peter K. -> sanjait... , February 15, 2017 at 11:20 AM "there is probably mutual blame to be assigned." What a masochist. Stockholm syndrome. Jerry Brown -> sanjait... , February 15, 2017 at 11:31 AM Yes economists are diverse as a group, but the opinions of the majority of that group might be described as having moved to the right since 1970. And often certain types of economists are described as fringe and there is a reluctance to discuss their ideas. That is somewhat understandable because any one economist has only so much time, but it seems to go deeper than that very often. Trade has been one of those areas, and I am happy to see many economists doing some re-evaluation of the free trade mantra, among other things. I would include Paul Krugman in that group. As far as being a knowledge lacking citizen- well we all are. Ain't no economist got it all completely figured out as far as I know. That's how I read Noah Smith's article, as a call to re-examine some previously sacred ideas with maybe a goal of keeping in mind their effects on different segments of society. And economists or anyone else who wants to impact public policy in a democracy certainly should expect to cater somewhat to those who are less knowledgeable about their theories. #### [Feb 15, 2017] Science advances one funeral at a time ###### Feb 15, 2017 | economistsview.typepad.com Peter K. -> Jerry Brown... , February 15, 2017 at 05:42 AM I have come around to the idea to the idea that the people and the left have been ill-served by economists. Whether on trade or on other issues, they are used for their supposed expertise to argue against "populist" solutions. "Populist" solutions aren't efficient. Most center-left economists attacked Sanders for being unserious. People no longer trust them after being played. Krugman and others want it just to be about the blue time versus the red team, Keynesianism versus neoclassical. That's the acceptable frame of debate. But as the election of Trump has shown, it's more complicated than that. The left needs better economists. It's nice to see Piketty join the campaign of France's Bernie Sanders, who just beat their center-left Hillary in the Socialist primary. He knows things need to change. If he had joined Bernie Sanders campaign he would have been attacked by the center-left economists as "unserious" and "populist." Economists mostly argue from authority and people no longer trust their authority. Smith is suggesting they can fall back on empirics and science to boost their legitimacy only if their science backs the truth. Unfortunately economics is too political. Mike S -> Peter K.... , February 15, 2017 at 06:01 AM "The left needs better economists." Really? Offhand, I can think of Dr Krugman and Joe Stiglitz having won Nobel prizes. How many right wing economists have won a nobel in, say the last 25 years? Tom aka Rusty -> Mike S... , February 15, 2017 at 06:14 AM Krugman was wrong on the impact of trade on US blue collar workers, a more than minor error. But who cares about blue collar workers (except on voting day)? pgl -> Tom aka Rusty... , February 15, 2017 at 06:18 AM Care to provide a link to where Krugman declared no one would be hurt by a movement to free trade? Peter K. -> pgl... , February 15, 2017 at 07:10 AM Krugman made his career by bashing leftwing "populists" over trade and industrial policy. Rustbucket is right. BenIsNotYoda -> Peter K.... , February 15, 2017 at 07:15 AM Peter K is absolutely correct here in his criticism. Krugman made the transition in the 90s with the Clinton/Rubin economic regime. Their day is over. Obama embraced the same and we are all paying the price. By shooting down Bernie, they killed their chances in the election. We need a change. and yes, I agree with Noah. Economists should hold their head in shame. Not for not predicting the crisis. But for doing little afterwards than boosting asset prices. Repeat after me - High stock prices do NOT cure cancer. pgl -> BenIsNotYoda... , February 15, 2017 at 07:27 AM "Krugman made the transition in the 90s with the Clinton/Rubin economic regime." Check again - Krugman did not serve in the Clinton White House. Tom aka Rusty -> pgl... , February 15, 2017 at 07:45 AM Such clever use of language, of course he did not say that exact thing. You and I both have Rodrik's 1997 both, you know where the exceprt is, so don't be a #$%^.

pgl -> Tom aka Rusty ... , February 15, 2017 at 08:16 AM
I do have Rodrik's excellent book. Might you tell us which page this alleged statement is?
JohnH -> pgl... , February 15, 2017 at 10:33 AM
pgl's usual denial: "Care to provide a link to where Krugman declared no one would be hurt by a movement to free trade?"

pgl intentionally ignores the link I posed many times wherein Krugman stated that labor would benefit from China's accession to WTO...3 million jobs lost later, Krugman finally started to rethink his full throated embrace of 'free' trade, but not pgl!

All too often, economists posing as leftists, like PK, champion investor friendly policies, claiming that they will help labor. And then, when people finally start to catch onto the bait and switch, they wonder why people don't trust economists!

pgl -> JohnH... , February 15, 2017 at 11:04 AM
You provided a link? Really? Where is it?
Mike S -> Tom aka Rusty... , February 15, 2017 at 06:24 AM
Don't remember when this occurred; maybe you could provide a link. Lots of economists get things wrong occasionally, left and right wingers alike.

But, being wrong occasionally doesn't support your reply. Dr Krugman is still a Nobel laureate.

sanjait -> Tom aka Rusty... , February 15, 2017 at 10:42 AM
Tom has no idea how much of the loss of blue collar labor demand in recent decades was due to trade policy vs non-policy related trade trends vs technology shifts.

Further, he has no interest in even beginning to attempt to assess the issue.

So I don't think he has any room to talk about who was "wrong" about the impact of trade on workers.

And he is far from alone in this failing.

DrDick -> Tom aka Rusty... , February 15, 2017 at 10:49 AM
To the extent that he actually was wrong (he did minimize distributional effects in much of his earlier work), he has admitted it and changed his ways.
Peter K. -> Mike S... , February 15, 2017 at 07:12 AM
Stiglitz is good but he didn't stick his neck out and back Bernie Sanders.

Krugman is bad in many ways. As I said in my comment, it's not just about Donkeys versus Republicans.

kthomas -> Peter K.... , February 15, 2017 at 07:29 AM
(yawn)
RC AKA Darryl, Ron -> Mike S... , February 15, 2017 at 09:13 AM
"...How many right wing economists have won a nobel in, say the last 25 years?"

[Economists don't designate conservative or liberal when they hand up their shingle, so one must use supply side, Austrian School, and neoclassical orientations as a proxy for conservative ideology. New Keynesian is a little on the fence, say centrist.]

Ronald Coase - 1991

Gary Becker - 1992

Robert Fogel (jointly with Douglass North, but North can only be definitively classified as eclectic with a whiff of neoclassical general equilibrium) -1993

John Harsanyi, John Nash, and Reinhard Selten won jointly in 1994. They were the game theory guys, which along with their theory of non-cooperative games made considerable contributions to utilitarian ethics, which do no always lead to happy endings for broadly shared social welfare. They were NOT conservatives themselves by any stretch of the imagination, but they were not notably liberals either. Crazy people in search of impossible perfection but willing to cut off a few limbs to get there is my impression.

Robert Lucas - 1995 ('nuff said)

Praise the lord, holy Jesus in 1996 William Vickrey and James Mirrlees who ARE actual liberals were award the Nobel "for their fundamental contributions to the economic theory of incentives under asymmetric information," a topic of great interest to conservatives.

Robert Merton (a social scientist) and Myron Sholes (a financial economist) won in 1997 "for a new method to determine the value of derivatives."

I almost had a heart attack when I got to this one. Amartya Sen won in 1998 "for his contributions to welfare economics." Of course he is from India.

Robert Mundell won in 1999 "for his analysis of monetary and fiscal policy under different exchange rate regimes and his analysis of optimum currency areas." Yep, this is the supply sider that gave the world the EU crisis.

James Heckman "for his development of theory and methods for analyzing selective samples" and Daniel McFadden "for his development of theory and methods for analyzing discrete choice" won jointly in 2000, another case of two liberals getting awarded for research that was of interest to conservatives while being almost entirely unrelated to their own major contributions.

Similarly in 2001, George Akerlof, Michael Spence, and Joseph Stiglitz won jointly "for their analyses of markets with asymmetric information." This one actually had liberal application, but my guess is they got it because conservatives were scratching their heads about where they went wrong with the dot-com bubble.

OK, I got other stuff to do now, but you can take the link and figure it out for yourself. Clearly winning a Nobel still does not make an economists a champion of the liberal political cause. Still to go is Ed Prescott in 2004 if you get my drift.

There is actually a book that discusses this in far greater detail that I only discovered well into my own analysis with Google and Wikipedia, but where I looked the experts that wrote the book had the same judgements and misgivings as I did.

RGC -> Mike S... , February 15, 2017 at 09:36 AM
I agree with Peter K.
...........
The "Nobel prize" was established as 'The Swedish National Bank's Prize in Economic Sciences in Memory of Alfred Nobel".

Some critics argue that the prestige of the Prize in Economics derives in part from its association with the Nobel Prizes, an association that has often been a source of controversy.

Among them is the Swedish human rights lawyer Peter Nobel, a great-grandson of Ludvig Nobel.[27] Nobel criticizes the awarding institution of misusing his family's name, and states that no member of the Nobel family has ever had the intention of establishing a prize in economics.[28]

According to Samuel Brittan of the Financial Times, both of the former Swedish ministers of finance, Kjell-Olof Feldt and Gunnar Myrdal, wanted the prize abolished, saying, "Myrdal rather less graciously wanted the prize abolished because it had been given to such reactionaries as Hayek (and afterwards Milton Friedman)."[25]

Avner Offer's and Gabriel Söderberg's The Nobel factor: the prize in economics, social democracy, and the market turn (Princeton University Press 2016) argues that there has been a dramatic shift in the dominant macroeconomic theories among the academia, and that the creation of the Nobel in 1969 was the cause of this, as it enhanced the prestige of free market ideology and conferred upon it the status of science.

https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Economic_Sciences
...........
As for right wing winners, check out all the U of Chicago recipients.

The 'Nobel" prize was established by a bank to promote the objectives of banks.

And btw, Krugman is no leftwing economist.

RC AKA Darryl, Ron -> RGC... , February 15, 2017 at 09:42 AM
Excellent! THANKS!
Peter K. -> RGC... , February 15, 2017 at 10:18 AM
"I agree with Peter K."

"Science advances one funeral at a time."
- Max Planck

#### [Feb 14, 2017] Ancient Chinese curse: May you live in interesting times!

##### "... Flynn's sin was inferring to the Russian ambassador that senselessly pushing Russia into a corner for Vicky Nuland might end. ..."
###### Feb 14, 2017 | economistsview.typepad.com
There's that notorious ancient Chinese curse: 'May you live in interesting times!'

Sadly, according to Wikipedia:

Despite being widely attributed as a Chinese curse, there is no equivalent expression in Chinese. The nearest related Chinese expression is "寧為太平犬，莫做亂離人" (nìng wéi tàipíng quǎn, mò zuò luàn lí rén), which is usually translated as "Better to be a dog in a peaceful time, than to be a human in a chaotic (warring) period."

ilsm -> Fred C. Dobbs... , February 14, 2017 at 07:00 PM
It s reputed the Chinese kangji for crisis is: two words 'opportunity and danger'.
Fred C. Dobbs -> im1dc... , February 14, 2017 at 04:41 PM
"May you live in interesting times" is an English expression purporting to be a translation of a traditional Chinese curse. Despite being so common in English as to be known as "the Chinese curse", the saying is apocryphal and no actual Chinese source has ever been produced. ...

Evidence that the phrase was in use as early as 1936 is provided in a memoir written by Hughe Knatchbull-Hugessen, the British Ambassador to China in 1936 and 1937, and published in 1949. He mentions that before he left England for China in 1936 a friend told him of a Chinese curse, "May you live in interesting times". ...

(I'm sure all remember Sir
Hughe Knatchbull-Hugessen.)

ilsm -> im1dc... , February 14, 2017 at 07:06 PM
There is a lot of pity party nitpicking going on.

When Trump gets the peace prize and talks about starting wars to stop unjust peace and nation build with no success.....

Flynn's sin was inferring to the Russian ambassador that senselessly pushing Russia into a corner for Vicky Nuland might end.

Why the Russians are doing the new GLCMs is perfectly reasonable from their perspective. It is called looking out for your country, which US is doing with blood all over but US is the exceptional shining city on the hill.

And if Trump is a war criminal W. and Obama better look out for the Haig coming after them.

#### [Feb 13, 2017] John Kenneth Galbraith on Monetary Policy:

##### "... And it operated with discriminatory and punishing effect against, not surprisingly, those industries that depend on borrowed money, of which housing is the leading case. To argue that it was a success may well be beyond even the considerable skills of its defenders. Only the enemies of capitalism will hope that, in the future, this small, perverse and unpredictable lever will be a major instrument in economic management. ..."
###### Feb 13, 2017 | economistsview.typepad.com
RGC : February 13, 2017 at 06:13 AM , 2017 at 06:13 AM
John Kenneth Galbraith on Monetary Policy:

"If the near future is an extension of the near and more distant past, there are six imperatives that will shape or control monetary policy and the larger economic policy of which it is now a lesser part. these are:

(1) The perverse unusefullness of monetary policy and the frustrations and danger from relying on it. This is perhaps the clearest lesson of the recent past. The management of money is no longer a policy but an occupation. Though it rewards those so occupied, its record of achievement in this century has been patently disastrous.

It worsened both the boom and the depression after World War 1. It facilitated the great bull market of the 1920s. It failed as an instrument for expanding the economy during the Great depression. When it was relegated to a minor role during World War 11 and the good years thereafter, economic performance was, by common consent, much better. Its revival as a major instrument of economic management in the late '60s and early '70s served to combine massive inflation with serious recession.

And it operated with discriminatory and punishing effect against, not surprisingly, those industries that depend on borrowed money, of which housing is the leading case. To argue that it was a success may well be beyond even the considerable skills of its defenders. Only the enemies of capitalism will hope that, in the future, this small, perverse and unpredictable lever will be a major instrument in economic management.

The central bank remains important for useful tasks - the clearing of checks, the replacement of worn and dirty banknotes, as a loan source of last resort. These tasks it performs well. With other public agencies in the United States, it also supervises the subordinate commercial banks. This is a job which it can do well and needs to do better. In recent years the regulatory agencies, including the Federal reserve, have relaxed somewhat their vigilence. At the same time numerous of the banks have been involved in another of the age-old spasms of optimism and feckless expansion. The result could be a new round of failures. It is to such matters that the Federal Reserve needs to give its attention.

These tasks apart, the reputation of central bankers will be the greater, the less responsibility they assume. Perhaps they can lean against the wind - resist a little and increase rates when the demand for loans is persistently great, reverse themselves when the reverse situation holds.

But, in the main, control must be - as it was in the United States during the war years and the good years following - over the forces which cause firms and persons to seek loans and not over whether they are given or not given the loans.

-From "Money: Whence it came, Where it went" 1975 - pgs 305,6.

anne -> RGC... , February 13, 2017 at 08:19 AM
https://www.amazon.com/Money-Whence-Came-Where-Went/dp/0735100705

1975

Money: Whence it came, Where it went
By John Kenneth Galbraith

RC AKA Darryl, Ron said in reply to RGC... , -1
Excellent! THANKS!

#### [Feb 13, 2017] Of course, powerful forces don't want gummit meddling' in their business and support a lot of propaganda to prevent that. They like the idea of an 'independent Fed that stays away from industrial policy. And they can spend a lot of cash to promote their message in media and with politicians and experts .

##### "... My alternative would be to quit pretending that the Fed could manage the economy. I think fiscal policy is much more determinant. I would like to see a general understanding by the public that the president is responsible for economic results and should be held accountable. ..."
###### Feb 13, 2017 | economistsview.typepad.com
RGC :, February 13, 2017 at 08:02 AM
The Fed is part of a system run by private banks. That means policy is dictated by those possessing collaterable assets. Who wins and who loses that game?
kthomas -> RGC... , February 13, 2017 at 08:09 AM
Trump has no clue. He will recommend either a complete idiot or somebody from his friends at Sachs. All they seem to talk about is raising rates. Once the economy starts to sputter, it will transform into lowering the rates.

The real issue is what Thoma mention: Independence. The Fed has no meaning and no purpose without it.

RGC -> kthomas... , February 13, 2017 at 08:24 AM
Independence from those possessing collaterable assets or independence from the electorate?

The Fed has already started raising rates.

kthomas -> RGC... , February 13, 2017 at 08:41 AM
Now you're trolling, comrade.
Peter K. -> kthomas... , February 13, 2017 at 08:45 AM
No you're trolling. The "independent" Fed recently gave us the worst recovery on record.

8 years of 1.7 percent growth? No wonder Trump won.

You stupid troll.

Mike S -> Peter K.... , February 13, 2017 at 09:24 AM
"8 years of 1.7 percent growth? No wonder Trump won."

IMO, that's due more to (the lack of) Fiscal policy than monetary policy. If the (do nothing) republican congress was interested in things like rebuilding infrastructure while the black guy was president, we could have had a higher GDP rate.

But rather than do what was in the best interest of the country, they'd rather see mediocre growth than give Obama a victory.

RGC -> kthomas... , February 13, 2017 at 09:17 AM
Just trying to state my views. I think the Fed is undemocratic and I like to say so now and again.
Mike S -> RGC... , February 13, 2017 at 09:33 AM
Undemocratic? Well, probably, but there are lots of things in our government which are undemocratic. The FTC, for example, exists of people appointed by the president. Is that democratic?

To me, it's analogous to the Winston Churchill quote, "Democracy is the worst form of government, except for all the others."

I'd be interested in an alternative proposal.

Mike S -> Mike S... , February 13, 2017 at 09:34 AM
And, just for the record, I am not a troll. It just happens that I live under a bridge. ;)
pgl -> Mike S... , February 13, 2017 at 09:53 AM
Now that is funny!
Peter K. -> pgl... , February 13, 2017 at 01:21 PM
What's funny is that you think the Fed did a better job from 1980 to the present day than it did from 1949-1979.

People can look things up on the Internet.

You can't just lie all of the time about everything.

RGC -> Mike S... , February 13, 2017 at 11:02 AM
Yes, there are others and separation of powers makes it difficult to assess blame.

My alternative would be to quit pretending that the Fed could manage the economy. I think fiscal policy is much more determinant. I would like to see a general understanding by the public that the president is responsible for economic results and should be held accountable.

Of course, powerful forces don't want "gummit meddling' in "their business" and support a lot of propaganda to prevent that. They like the idea of an 'independent" Fed that stays away from industrial policy. And they can spend a lot of cash to promote their message in media and with politicians and "experts".

I would like to see John Kenneth Galbraith raised from the dead and pontificating again, or his substitute (see John Kenneth Galbraith on Monetary Policy above)

#### [Feb 13, 2017] Under Maestro Greenspan Fed as an institution became this sense not so dissimilar to such post WWII financial institutions as IMF and World Bank (which became the key instruments for implementing Washington consensus ). It became a very effective enforcer of the neoliberalization of the country.

###### Feb 13, 2017 | economistsview.typepad.com
llisa2u2, February 13, 2017 at 10:34 AM
Just finished reading a great little book, THE ECONOMIC PINCH, by C.A.Lindbergh, SR. Here's a link to it: https://archive.org/stream/nkooan_yahoo_Lind/Lind#page/n1/mode/2up

Yes, the writing style is a bit dated, but it gives the bottom-line in really clear, well-written English.

It's a GREAT little book, should be required reading with proof by some book report written by each economist, before their being allowed any public discussion about the FEDERAL RESERVE.

It's probably more relevant today for all U.S. citizens than it was back in the early 1900's.

Sanjait, February 13, 2017 at 11:10 AM
The Great Moderation era Fed has some good aspects but has fundamentally failed to understand how its obsession with keeping inflation from ever even thinking abut going up has suppressed wages and caused labor hysteresis.

I think they assume that all those problems just equilibriate away across the cycle but the reality is not that.

So definitely it could and should be better.

But .. that doesn't make every proposal to change it a good one, or even a coherent one. Nor does it justify the attitude that we should just blow everything up and hope something better happens. Those bad arguments are what got us Trump, and at no point should reasonable people pander to such bad arguments, or confuse the fact that bad arguments are widely held with the notion that they aren't bad.

libezkova : February 13, 2017 at 03:07 PM , 2017 at 03:07 PM
Fed independence was always a convenient fiction. This is an independence limited to implementing neoliberal policies.

http://www.levyinstitute.org/pubs/wp_625.pdf

Which was done under "Maestro" Greenspan. This Ann Rand follower and staunch believer in unrestrained "free market" (which means the law of jungles) subverted the institution and pressured the Presidents who deviated from the "Party line" (and one time Bill Clinton tried). This is the extent he was a Maestro. Later, after 2008, Maestro turned into cornered rat, but this is quite another story.

Under Maestro Greenspan Fed as an institution became not so dissimilar to such post WWII financial institutions as IMF and World Bank (which became the key instruments for implementing "Washington consensus"). It became a very effective enforcer of the neoliberalization of the country.

#### [Feb 13, 2017] The report by the Hills Group claims to rely on thermodynamics arguments to predict oil's price-volume trajectory going forward. If does not stand up to scrutiny.

###### Feb 13, 2017 | peakoilbarrel.com
Seppo Korpela says: 02/10/2017 at 8:33 pm
The report by the Hills Group claims to rely on thermodynamics arguments to predict oil's price-volume trajectory going forward. If does not stand up to scrutiny.

Thermodynamic analysis of engineering systems is typically based on the first law of thermodynamics together with mass balances.
The second law of thermodynamics introduces the entropy as a thermodynamic property and the related concepts of reversible processes and reversible heat transfer.
Irreversibilities in real processes are taken into account by assigning a value of experimentally determined efficiency to equipment such as pumps, compressors and turbines and
this way the reversible processes are related to the actual ones.

A relatively recent development has been to develop a systematic use of an exergy balance to examine where in a complex energy system irreversibilities
take place. Exergy is defined as the maximum theoretical work that can be obtained from a system and its environment as the system comes to equilibrium
with its environment. By combining the first and second laws of thermodynamics an exergy balance can be written down.

Rudimentary exergy analysis can be found in the 1941 book Thermodynamics by Joseph Keenan. It was called availability analysis at that time. The most systematic development of the exergy analysis is in the textbook Fundamentals of Engineering Thermodynamics by M. Moran, H. Shapiro, D. Boettner and M. Bailey, 7th ed. John Wiley, 2011.

Although the entropy balance equation can be used (although typically only for steady state systems) to determine the entropy production, to carry it out requires that sufficient number of thermodynamic properties and interactions are known at the system boundaries. Since such a calculation needs to be carried out after the thermodynamic analysis has been completed, it is seldom carried out in engineering practice because the knowledge of the same properties allows the efficiency of the machine or system be determined.

The advocates of exergy accounting claim that knowing where the exergy destruction takes place in a system is a good way of allocating development money to improve it.
This kind of analysis has not taken hold in industry either, simply because, manufacturer, say of turbines know that the irreversibilities are quantified by measuring the efficiency of the turbine, and they direct their efforts toward understanding how the blades of the turbine can be shaped in order to reduce the irreversibilities. Such a task is based on aerodynamic calculations. Compressors and pump are by the nature of the flow through them machines with lower efficiency and their improvement requires again experts with fluid dynamic knowledge to improve them. Similarly improving the heat transfer in a heat exchanger is carried out by making improvements in the heat exchanger surfaces and reducing pressure losses.

If these improve the heat transfer, the entropy production is reduced. Here the expertise of a heat transfer specialist rather than a thermodynamicists is needed.

One interesting application of exergy analysis is to calculate the second law efficiency. A high second law efficiency means that the source of energy is well matched with the application.

Thus heating shower water with a thermal solar heater is a good match as unfocused solar energy raises the water temperature high enough to serve as shower water, but not nearly so high as to create superheated steam to power a steam turbine. Thus the most important insight to be obtained is to match the source of energy to the application, and once this insight is internalized, calculation of the second law efficiency adds only marginally to understanding. For this reason it is seldom used in industry. To be sure, optimization of a system's second law efficiency is still worth while, but using other metrics this can be done with topics based on heat transfer, fluid dynamics, stress analysis and the like.

Where thermodynamic analysis is helpful is in seeing how a thermodynamic efficiency of a system such as a coal or nuclear power plant can be improved by increasing the maximum steam temperature of the plant in which the turbine is but one component. This requires that blades are made of materials that withstand the stresses generated at these temperatures. Such developments have increased the maximum temperature of these power plants to about 1000 F, but further improvements have now stalled over the last half a century. For gas fired power plants combustion temperature is higher and and turbine designers implement both cooling technology for the blades and use high temperature materials, that today are made of single crystals, that withstand the hot combustion gases. Interestingly exergy analysis shows that most of the exergy
destruction takes place in the combustion of the fuel, but there is not much one can do to reduce this destruction. For this reason a naive application of exergy analysis may lead the poor allocation of development funds.

The report by the Hills Group proposes to use the second law of thermodynamics as the starting point. The unsteady entropy balance for a control volume with one exit and no inlet is given as

dS_cv/dt= Q^dot_j/T_j – m^dot_e s_e = \sigma^dot_cv

###### Feb 13, 2017 | peakoilbarrel.com
Ves says: 02/10/2017 at 4:16 pm
Steve,
Oil industry, and particularly Shale & Oil Sands part, lives in hope for the last 3 years. And that is not reality, because hope means dream. Unless someone's live in reality, here and now, they are dreaming. They are dead weight, and tomorrow which will fulfill all their hopes is never to come.

Shale and Oil Sands are mostly North American origin of production with 5-6 mbd. where we have the most consumption per capita in the entire world.

For the past eight years we were fed the constant stream of stories of mythical economic "recovery" and all the wealth created in this period from the bankers and economist. And as a result of all that illusory "wealth" retail sector was able to sell goods to consumers with empty wallets and maxed credit cards only by smashing prices to the bone – leaving almost nothing for the profit.

Imagine the state of economy without this extra unconventional 5-6 mbd and $100 per barrel as a consequence. #### [Feb 13, 2017] There is strong evidence that the US economy can survive only oil prices below 100 dollars per barrel without sliding into recession ###### Feb 13, 2017 | peakoilbarrel.com Dennis Coyne says: 02/10/2017 at 9:10 am Hi Likbez. I disagree that it implies subsidies. What is implied is that when oil is scarce, the price of oil will increase and more of the expensive oil will be profitable to produce. Eventually the high oil price will lead to greater efficiency in the use of oil (as measured by real World GDP per barrel of oil consumed) and also some substitution of natural gas, and electricity for oil in the transportation sector and after 10 to 20 years demand for oil might fall below the supply of oil and lead to lower prices. My main point is that the supply of oil depends on profits, not on net energy or exergy of the oil produced. Profits will depend on revenue minus costs and revenue will be determined by the oil price which is a function of both supply and demand for oil. likbez says: 02/12/2017 at 10:43 pm There is strong evidence that the US economy can survive only oil prices below$100 per barrel without sliding into recession. Some researchers put this magic "perma-stagnation" oil price as low as $60 per barrel. I think understanding of this fact is partially behind this prolonged "oil price crush". So it might well be that we do not have the freedom of "arbitrary" oil prices in the US economy. and in worst case scenario we have oil prices already close to the celling, unless the economy is restructured. That's why your line of thinking about this problem might be wrong. In other words, this is a very serious situation for the USA. "The long emergency" as James Howard Kunstler aptly called it (not that I agree with his line of thinking or endorse his book). Meanwhile the US is wasting time and money on the wars of neoliberal expansion, which partially is "brut force" way of securing privileged access to remaining oil deposits. Around 5 trillion was spent so far, or 167 millions of Toyota Priuses at$30K per car, or half of the US passenger fleet (there were 260 million registered passenger vehicles in the United States in 2014)

So instead on concentrating on this fundamental problem that nation is facing, the USA is just "waiving dead chicken" with the military force. If we add the possibility of Seneca cliff that situation might be even worse then I described. The nation does need radically cut the amount of oil spend on personal transportation. Using all ways for this that are technologically feasible. Because this is the lowest hanging fruit. But very little was done in this direction on both federal and state levels.

Meanwhile we expanded the fleet of SUVs for personal transportation - this is now the most popular "form factor" for personal car, which overtook sedans. Growth of the fleet of hybrid cars is unacceptably slow (over 4 million units sold through April 2016; Japan, a much smaller and compact nation, sold 5 millions).

Even such a symbolic act as switching of all personal government cars to hybrids was not done by Obama administration, which preferred only talk about the problem and opened spigot for shale junk bond. The only their "real" achievement was "Iran deal" which probably was instrumental in crashing oil prices. Which probably helped Obama much more than it helped the USA economy as whole, but we should not inspect the teeth of the horse that was given as a gift, as old saying goes.

Also attempts to lessen huge traffic jams in large cities like NY and SF are feeble, despite the fact that the technology is available both to reroute the cars and to optimize traffic lights.

Converting existing roads network into "one way" network is almost unheard outside the city center, even when two more or less adequate parallel roads exists with the short distance of each other.

Variation of the number of lines each way is practiced very rarely, in some city centers and selected bridges.

Green wave for traffic using Wifi connections between traffic lights and cameras is in a very rudimentary stage.

The only progress that I noticed is that more and more traffic lights at night autodetect the presence of the car on intersection and switch to green light if there is not traffic in "main" direction.

#### [Feb 12, 2017] Trump is now assigned to be as designated scapegoat for all blunders of three previous neoliberal administrations by three Deep State wholly-owned subsidiaries: Bloomberg, NYT and Wapo

##### "... I understand that Trump is now assigned to be as designated scapegoat for all blunders of three previous neoliberal administrations. ..."
###### Feb 12, 2017 | economistsview.typepad.com
The Tax stuff is maybe, this is happening now

"America's Biggest Creditors Dump Treasuries in Warning to Trump"

by Brian Chappatta...February 12, 2017...5:00 PM EST

> Japanese investors cull U.S. government debt by most since '13

> Currency-hedged returns were worst on record last quarter

"In the age of Trump, America's biggest foreign creditors are suddenly having second thoughts about financing the U.S. government.

In Japan, the largest holder of Treasuries, investors culled their stakes in December by the most in almost four years, the Ministry of Finance's most recent figures show. What's striking is the selling has persisted at a time when going abroad has rarely been so attractive. And it's not just the Japanese. Across the world, foreigners are pulling back from U.S. debt like never before.

From Tokyo to Beijing and London, the consensus is clear: few overseas investors want to step into the $13.9 trillion U.S. Treasury market right now. Whether it's the prospect of bigger deficits and more inflation under President Donald Trump or higher interest rates from the Federal Reserve, the world's safest debt market seems less of a sure thing -- particularly after the upswing in yields since November. And then there is Trump's penchant for saber rattling, which has made staying home that much easier. "It may be more difficult than usual for Japanese to invest in Treasuries and the dollar this year because of political uncertainty," said Kenta Inoue, chief strategist for overseas bond investments at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. "Treasury yields may rise rapidly again in the near future, which will continue to discourage them from buying aggressively." Nobody is saying that foreigners will abandon Treasuries altogether. After all, they still hold$5.94 trillion, or roughly 43 percent of the U.S. government debt market. (Though that's down from 56 percent in 2008.) A significant drawdown can harm major holders like Japan and China as much as it does the U.S.

And, of course, homegrown demand has of late been able to absorb the pickup in overseas selling..."

libezkova -> im1dc...
im1dc,

Bloomberg, like WaPo and NYT, is "a wholly-owned subsidiary of the Deep State"

Thank God they stopped their Putin-did-it nonsense. Now they have found something new along the lines Trump-did-it. Both those attempts to control the narrative are false and dishonest.

I understand that Trump is now assigned to be as designated scapegoat for all blunders of three previous neoliberal administrations.

But can you please ask yourself two very simple questions:

1. Who and how accumulated that much debt?
2. Who did run the wars of neoliberal empire expansion to the tune of five trillion dollars?

Was it Trump?

I would greatly appreciated if you can answer them in the reply to this post. Or, even better, make some pause in posting neoliberal propaganda.

#### [Feb 12, 2017] Half of US finance is parasitic

##### "... Inflation is offered to the proles as a substitute for tax relief to the impoverished. Do you see how it works? ..."
###### Feb 12, 2017 | economistsview.typepad.com

Choco Bell -> Ed Brown... February 12, 2017 at 07:50 AM , 2017 at 07:50 AM

asymmetric information, and the recent illuminating example of Wells Fargo's excellence in pushing products that customers did not want nor need.

BY: Some financial "innovation" is faddish. It does not create value.

GR: Approximately 9 percent of U.S. GDP is finance. Some economists argue that probably 3-5 percent is useful for allocating capital, storing value, smoothing consumptions, and creating competition, and the rest is preying on asymmetric information
"
~~Guy Roinik~

Do you see how this asymmetric information plays out?

It is the retail vendor who keeps better information than the retail customer. It is the vendor's expectations of disinflation vs inflation rather than the customer's expectations that control the change in M2V. Got it?

When vendor expects deflation he dumps inventory, but when he expects inflation he holds on to inventory as he waits for higher profit margins to arrive. He holds onto merchandise by simply raising prices. But why do economists advertise the reverse mechanism? Why does the status quo have a need for distorting truth?

Inflation is offered to the proles as a substitute for tax relief to the impoverished. Do you see how it works?

" Tax relief for the wealthy will give you delicious inflation. Now jump for it! " ~~The Yea Sayers~

Jump, Fools, Jump

#### [Feb 12, 2017] When worldwide spare capacity is gone, this is the time when we have the true oil peak.

###### Feb 12, 2017 | peakoilbarrel.com
Heinrich Leopold says: 02/11/2017 at 6:55 am
SRSRocco,

Thanks for your interesting post. In my view the US oil and gas industry plays a very important role for the US economy. As long as US oil and gas production is high, the USD stays strong through a lower current account deficit. The costs of a weak dollar (and lower US production) would be manifold higher (higher interest rates) than the current losses of the oil and gas industry. And the losses are made for private shareholders – who do not care as long as dividends stay the same. So, who cares?

However, how long can companies sustain this torrid pace? My guess is the industry wants to sit out the cycle until any spare (net export) capacity is out of the market (see below chart). So, if OPEC does not have any surplus capacity left, the oil price will rise as then OPEC has no chance to increase oil production and anybody can produce as much as he wants. OPEC has cut its production, yet I have no doubt that they want to bring its spare capacity to the market. With the current cut OPEC has just bought time to do this at a higher price. But if the spare capacity is gone, even OPEC will have no interest in keeping prices stable. When worldwide spare capacity is gone, this is the time when we have the true oil peak.

As a high USD slows down oil demand, it will take time until the last drop of spare capacity has gone, yet then it will be a dramatic rise of the oil price.

texas tea says: 02/12/2017 at 8:22 am
Heinrich Leopold you are a rare diamond among a pile of pea gravel in your analysis. As for the article, when the answer to every problem is to buy gold and silver I don't give the author that much credit. While he admits he does not understand the oil and gas business, this article shows he also does not have any real historic context for his conclusions.
Heinrich Leopold says: 02/12/2017 at 2:17 pm
texas tea,

Thanks for your comments. The current situation is at least very interesting as we will soon see how much substance is behind the claims of the industry and OPEC.

Saudi Arabia has probably not as much spare capacity as they claim as the current cut was probably not as much voluntarily as published. On the other side, the recent quarterly report fom ExxonMobil http://cdn.exxonmobil.com/~/media/Global/Files/Earnings/2016/news_supp_earnings_4q16_2.pdf reveals the Exxon had a five time higher loss on its US operations than in 4q2015, despite higher prices received. This is a hint that there are enormous cost pressures in US operations. So, the US industry has probably not so much time just to sit out the whole situation.

In any case it is a fascinating poker game.

#### [Feb 12, 2017] Selling assets to pay down dividends and buy back stocks is liquidation

###### Feb 12, 2017 | peakoilbarrel.com
Rune Likvern says: 02/11/2017 at 4:31 pm
From what I have seen it is generally accepted that EROEI for FF has been and will continue (lots of peer reviewed papers documenting this) to be in a downward trend. Then it is open for projections how fast this downward trend will develop and its consequences.

What matters is net affordable energy that will be made available for societies.
In the short term it is about flows, longer term; size and quality of remaining stocks.

Selling assets to pay down dividends/buy back stocks is liquidation.

Further up in this post Nathanel shared some great insights;

"Personally, from my background in general financial analysis, the two really big metrics I've been watching lately: Dividends in excess of current earnings mean a company in decline. Borrowing money to pay the dividend means a company which is in unmanaged, uncontrolled decline. (Managed decline would involve liquidating assets to pay dividends, and *paying off* debt.) "

"Look at what they do and not what they say."

Several big oil companies have used money for stock buy backs, but another trend I found interesting is also how they move into renewable (solar and wind). This should be an indicator about what these companies find profitable.
Just to be clear, I think renewables are great, but we also need to recognize the dominant role of FF.

AlexS says: 02/11/2017 at 9:43 pm
"The oil majors were not spending on CAPEX and were selling assets to pay dividends to their shareholders."

They are spending on capex (although they cut spending in 2015-16) and they are buying assets, not only selling.

#### [Feb 12, 2017] Austerity The History of a Dangerous Idea

##### See also Mark Blyth--"Liberalisms' great trick has been to naturalize very difficult political contests."
###### Feb 12, 2017 | www.amazon.com

Selected as a Financial Times Best Book of 2013

Governments today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts--austerity--to solve the financial crisis. We are told that we have all lived beyond our means and now need to tighten our belts. This view conveniently forgets where all that debt came from. Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer.

That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. In the worst case, austerity policies worsened the Great Depression and created the conditions for seizures of power by the forces responsible for the Second World War: the Nazis and the Japanese military establishment. As Blyth amply demonstrates, the arguments for austerity are tenuous and the evidence thin. Rather than expanding growth and opportunity, the repeated revival of this dead economic idea has almost always led to low growth along with increases in wealth and income inequality. Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we austerity for what it is, and what it costs us.

Metallurgist TOP 1000 REVIEWER on April 20, 2013 Format: Hardcover Vine Customer Review of Free Product ( What's this? )

An interesting Keynesian view of the current EU austerity programs

" I found this to be a very interesting and thought provoking book. The author makes his viewpoint very clear with the book's subtitle "The History of a Dangerous Idea". The essence of the author's argument is that austerity is unfair because it makes workers pay for the mistakes of banks, and even more importantly, dangerous because it does not lead to prosperity, but only to decreased economic growth and increased unemployment. This thesis is backed up by an analysis of the banking crisis of 2008, how it spread from the US to the EU, why the single currency Euro has made the problem worse for the EU and why using austerity to solve the problems will not work. It also discusses the history of the idea of austerity, both in terms of the economic theory that promotes it and the economic history that does not. Conservatives, who find Keynesian economics to be not only wrong, but also the road to economic ruin, will likely be turned off by the book's subtitle and many of the arguments that Professor Blyth utilizes. However, there is a lot of data in this book that they should look at, if only to criticize it. I found this book very enlightening and while I do not agree with all of Professor Blyth's ideas (particularly those of the last chapter), I learned a lot, so for me it was 5-stars.

What is in the book?
The book is divided into 7 chapters, which cover the following:

Chapter 1 - A Primer on Austerity. This is a short chapter that summarizes the main thesis of the book (mentioned above), and sets the stage for the more detailed discussions in subsequent chapters.

Chapter 2 - America: To Big to Fail? This is an excellent chapter that summarizes the origins and unfolding of the 2008-banking crisis in the US. This is a very complicated story, which Professor Blyth tells in a clear manner. The story revolves around repurchase agreements (Repos), mortgage backed securities (MBS), collateralized debt obligations (CDO), credit default swaps (CDS), and how all these interacted in a climate of deregulation to produce the crisis. Professor Blyth does a good job of explaining these terms and how the interaction worked.

Chapter 3 - Europe: Too Big to Bail? This is another very illuminating chapter. It shows how Europe, which first believed it was not going to be affected by the US banking crisis, became a major casualty of it and their own internal banking problems. All these factors were compounded by the single currency Euro, which has removed devaluation as a solution to the crisis, instead fostering the idea that governmental austerity was the only way to correct a problem produced by the private banking sector.

Chapter 4 - Intellectual History of a Dangerous Idea 1692-1942. This chapter goes back to the writings of John Locke, David Hume and Adam Smith to see how the idea of austerity developed. It also covers the idea in the early 20th century and the development of anti-austerity Keynesian economic theory. It is a nice primer on classical economic ideas.

Chapter 5 - Intellectual History of a Dangerous Idea 1942-2012. This chapter carries the story of the idea of austerity into the present time. It shows how the idea of austerity, discredited by the Great Depression and the success of the Keynesian solution (although conservatives would argue these successes were illusory and set the stage for future economic problems), has been resurrected by economists writing in the latter part of the 20th century and early 21st.

Chapter 6. Austerity's Natural History 1914-2012. Blyth presents a lot of data that shows that, contrary to the theories presented in the previous chapter, austerity has not worked in practice. Much of the chapter is spent it refuting the writings of several economists that say that the recent historical data does support the idea. Blyth contends that in general it does not and if is does in a few cases it either does not when all the data is considered, or worked only marginally under a very limited set of conditions.

Chapter 7 - The End of Banking, New Tales and a Taxing Time Ahead. This is a very short eleven-page chapter, but perhaps the most controversial on in the book. Blyth, initially a supporter of bank bailouts as absolutely necessary to prevent a complete collapse of the banking system and with it the whole capitalist economic system and with it democratic society as a whole, now questions whether in might not have been better to let the banks fail. He cites the case of Iceland where the banks were allowed to fail and society has recovered. This was done by making the bank's creditors bear the cost of failure, instead of all of Iceland's citizens. He notes that most of this loss was borne by foreign creditors of a very small country, whose banking system was an immense part of the country's economy, but was small compared to the economies of the US or the EU. Unfortunately, he fails to say how a banking collapse in the US or EU could be handled when the systems are huge compared to Iceland's and where the creditors are largely internal. He does not explain how the failure of these huge banking systems, with their internal creditors, would not result in the scenario he originally envisioned. I found this analysis to be poor and not in keeping with the thoroughness of the rest of the book. Blyth also floats the idea of huge tax increases, either through a one-time tax on assets or a very large increase in higher bracket tax rates. Conservatives, and many not quite so conservative, will likely blanch at these ideas. There is no discussion of the political difficulties of doing this or very much development of the idea, which is contained in only the last four pages of the book.

David Lindsay on September 25, 2016 Format: Paperback Verified Purchase
Brilliant Overview

" Mark Blyth is a professor at Brown University and he explains why austerity doesn't work. He points out that whenever austerity has been tried in the past it has usually proven to be disastrous. What its supporters often seem to forget is that one person's spending is another's income and demand in the economy would collapse if everyone stopped spending. The book is a sobering read because Blyth is not optimistic about the future. However, the book is well written and is often funny.

Blyth shows that the case for austerity does not add up. The US did not pursue austerity during the recession and its economy has been growing. US GDP is 10% higher than it was in 2007. The EU has pursued austerity with vigor, but GDP in the euro zone is still lower than it was in 2007. Blyth shows that countries that cut the most have had lower rates of growth. Blyth claims that all the countries that cut public spending in response to the financial crises had significantly more debt in 2012 than when they started. For example, Ireland's debt to GDP ratio more than quadrupled, from 24.8% in 2007 to 106.4% in 2012. The other problem is that austerity increased unemployment. Throughout southern Europe, unemployment has been at levels not seen since the Great Depression. It is still over 20% in Spain and Greece. As a result of cutting public expenditure Greece's GDP dropped by 30% in four years. There is no evidence that austerity improves growth.

Blyth spends a lot of time trashing the pro-austerity thinking that took place in Europe. Germany is driving economic policy for the euro zone and they have never believed in Keynesian economics. Keynes advised that austerity was a bad idea during a recession. German politicians seem to believe that all nations could have trade surpluses if only they tried hard enough, despite the fact that it is impossible for all countries to have a surplus. Only one European country can be Germany. The Germans have often advocated the sort of solutions that failed in the 1930s. They argue that budget deficits and government debt have to be kept under strict control. The Maastricht Treaty, which established the EU, required that national debt should not exceed 60% of GDP and the deficit should not exceed 3.0%. Entry to the euro also requires a budget deficit of 3.0%.

Blyth points out that when you have a deficit, you can either raise taxes or cut spending to fill the gap. The British government of David Cameron favored the latter in 2010. The British deficit had reached 10% in 2010. However, UK government debt went up, not down, despite the cuts, from 52.3% of GDP in 2009 to 90.7% in 2013. The same pattern was repeated throughout the euro zone. Cutting public expenditure shrank the underlying economy.

The German argument is that running large deficits increases the risk of high inflation. Blyth points out that the Germans have selective amnesia about their past. It was the Wall Street Crash in 1929 not hyper-inflation in 1924 that led to Hitler. Before the crash, 1.25 million people were unemployed in Germany. Hitler was an accidental Keynesian and by 1937 German unemployment had fallen from six million to one million. Unfortunately, much of his spending involved preparing for war. Blyth argues that Germany's continuing insistence on austerity is the biggest threat to the euro zone.

According to Blyth, the current version of the austerity argument was created by a group of Italian economists, originating from Bocconi University, in Milan. He explains why their arguments are deeply flawed. Blyth argues that, apart from Greece, public sector debt in the euro zone countries was not out of control before the financial crises. Blyth rubbishes the theory of "expansionary austerity," that cutting spending will lead to higher economic growth. The "austerians" believed that large spending cuts would be followed by expansion rather than contraction. The reason, they suggested, was that decisive fiscal austerity created confidence in the private sector. Keynesians agreed that insufficient private spending was the cause of the problem, but only governments could stimulate demand on the scale needed. Austerity failed to stimulate demand in Europe. Blyth also argues that everybody cannot cut their way to growth at the same time. The IMF once went along with austerity but it has recently concluded that austerity has had major adverse economic effects.

Blyth is worried that inequality could become a serious problem in the US. The 400 richest Americans own more assets than the poorest 150 million. He argues that both major parties have written off the bottom 30% of society. He claims that the American working class has not had a pay rise since 1979, and globalization has failed them. He believes this explains the anger behind the Trump phenomenon. Blyth points out that rich Americans and the country's biggest companies are reluctant to pay tax, so government borrowing has had to go up. Blyth claims that he pays more tax than GE.

Blyth is critical of Republicans who advocated austerity. Republicans in the US also favored balancing the budget and cutting taxes. Keynesians, like Paul Krugman, argued that this is what Herbert Hoover tried to do in the early 1930s and the result was a 25% unemployment rate. Obama inherited an 11.4% budget deficit in 2009. The Republicans wanted to cut government expenditure but Blyth argues the reason the US has recovered faster than Europe is because it cut less. He makes it clear that it is poorer people who usually rely on government services to make ends meet that are the hardest hit when public expenditure is cut. He believes that the rich and corporate America need to start paying more tax. He also argues that the US government should probably have let its banks go bankrupt – as the Icelandic government did – rather than bail them out.

Blyth reminds us that 2008 was a private sector crisis. The debts of the banks landed on the balance sheet of the public sector through bank bailouts and quantitative easing. In other words, taxpayers bailed out the bankers. He calls this the "greatest bait-and-switch in modern history." The EU is imposing austerity on southern Europe and dismantling the welfare state in Greece in order to protect German banks that made stupid decisions.

Blyth in recent interviews has argued that the EU may have a sinister agenda and it really wants to drag wages in Western Europe down to East European levels so that it can better compete with China. I assumed this must be an exaggeration but it might not be. The Guardian mapped labor costs across the euro zone from 1999 to 2013. What they found is that German workers have barely seen wages rise for that 14-year stretch, despite Germany having massive trade surpluses. We could be in for real trouble.

Fang on September 27, 2016 Format: Paperback Verified Purchase
The Richness of Austerity

" Mark Blyth tries to convey a simple message: austerity simply does not work. Defining austerity as "voluntary deflation in which the economy adjusts through the reduction of wages, prices and public spending to restore competitiveness .best achieved by cutting the state's budget, debts and deficits" (p.2), Blyth argued that austerity's fallacies lies in the impossibility of having everybody to be thrift at the same time and the cyclical nature of debt (pp.7 and 12).

Blyth also suggests that austerity efforts unevenly hurt the lower strata of societies (p.8), and conflates debt and financialization problems in private sector (primarily referring to bank and financial institutions) into state (sovereign) issues (p.6 and p.23). In the first three chapters, Blyth strives to demonstrate that the financial and economic turmoil since 2008 is largely a crisis of financialization, lack of regulation, slow growth and imbalance between monetary policy and final creditor of printing press (in the case of Europe), not that of austerity (save the marginal case of Greece). Blyth argues that it is a mentality of treating these crises as endogenous and private actors as "rational" that underlay the bad policy choices in America and Europe (pp.91-93).

In chapters 4 through 6, Blyth provides an intellectual and practical history of austerity. It is suggested that a spirit of thrift and aversion towards state and state spending runs through the vein of economic liberalism, ranging from classical liberalism to neoclassical economics and to the Austrian school. In more contemporary era, it is public choice theory, neoliberalism and Milton Friedman's monetarism that carries this tradition forward to construct a pro-market and private-sector-favoring package that turns public spending into a corporate calculation of costs and benefits. Blyth goes on to illustrate the history of austerity in practice, arguing that it is usually the Keynesian expansionary policies that couple austerity that reinvigorated economy amid crises; austerity, carried out on its own, constitutes massive redistribution consequences.

Blyth obviously attempts to engage as wide an audience as possible in the public intellectual realm. As much as he is successful in his empirical chapters, Blyth appears to fight a deflationary economic policy with his own inflationary writing strategy. From chapters 4 to 5, he constantly conflates the moral teaching of thrift and financial prudence from Adam Smith to avoidance of debt, the Ordoliberalism's quest for order and proper state function to aversion of democratic politics, the methodological insights of public choice to a general fear of bureaucracy and government, and so on. These inflations, while sometimes credited, are bound to subject to scrutiny and questions.

Moreover, by glossing over the details of this rich intellectual history, Blyth dodges some key questions that his empirical chapters also fail to articulate: what is the distinction between private and public debt, and personal thrift and public austerity, when we talk about austerity, and how significant is it? How does this distinction play out in more classical economic philosophy?

And amid crisis, who should be considered the "ultimate creditor" or "final guarantor" of debt (and money)? There questions certainly exceeds the scope and intention of Blyth's book, but they should be instrumental in deepening our understanding of austerity.

#### [Feb 12, 2017] The CIA as Organized Crime How Illegal Operations Corrupt America and the World

##### "... Want to know why the DEA is losing the war on drugs, how torture has become policy? Want to know why the government no longer represents your interests? Look no further. ..."
###### Feb 12, 2017 | www.amazon.com
Alan Dale on November 27, 2016

Of the extraordinarily valuable and informative works for which Mr. Valentine is responsible, his latest, CIA As Organized Crime, may prove to be the best choice as an introduction to the dark realm of America's hidden corruptions and their consequences at home and around the world. This new volume begins with the unlikely but irrevocable framework by which Mr. Valentine's path led to unprecedented access to key Agency personnel whose witting participation is summarized by the chapter title: "How William Colby Gave Me the Keys to the CIA Kingdom."

By illuminating CIA programs and systems of surveillance, control, and assassination utilized against the civilian population of South Vietnam, we are presented with parallels with operations and practices at work today in America's seemingly perpetual war against terror.

Through the policies of covert infiltration and manipulations, illegal alliances, and "brute force" interventions that wreak havoc on designated enemy states, destroy progress and infrastructure under the claim of liberation, degrade the standards of living for people in the perceived hostile nations, "...America's ruling elite empowers itself while claiming it has ensured the safety and prestige of the American people. Sometimes it is even able to convince the public that its criminal actions are 'humanitarian' and designed to liberate the people in nations it destroys."

Mr. Valentine has presented us with a major body of work which includes: The Strength of the Wolf; The Strength of the Pack; The Pheonix Program, to which we may now add The CIA as Organized Crime, and for which we are profoundly indebted.

felixnola on December 6, 2016

If you want the inside scoop on the CIA and it's criminal past; this is the book. Additionally, why the Phoenix Program is pertinent for our own times. This book connects the dots.

If you have been wondering why Homeland Security has fusion centers; why the USA Anti-Patriot Act, NDAA and Rex 84 have been passed by Congress; you will get your answer here.

A book every intelligent American needs to read and place in a prominent place in their library. Oh, and don't forget after you read it; spread the word !!! (this book is based upon actual face to face interviews and documents)

Jay Trout on January 2, 2017

Run, don't walk, and get yourself a copy of this book. The author has been warning us for decades about the clear and present danger that is the CIA. I was unaware of Valentine's work for most of those years, perhaps because our media outlets (even the "anti-establishment" ones like Democracy Now and The Intercept) have been compromised. Valentine's work has been suppressed since his ground-breaking book on the Phoenix Program.

Not that I didn't know anything about the sordid history. I knew about MK-Ultra, some of the agency's drug running and empire-building exploits. This work goes much deeper and paints a much bigger picture. The extent of the agency's influence is much greater than I had imagined.

This is not another history book about dirty tricks. It is not just about our insane foreign policy and empire building. The cancer of corruption, of outright crime, has metastasized into every agency of the government right here in the US itself. Those dirty tricks and crimes have become domestic policy- in fusion centers and Homeland Security, in the militarization of local police and in Congress, from Wall Street to Main Street. Border Patrol, the DEA, Justice and State have all been compromised.

Want to know why the DEA is losing the war on drugs, how torture has become policy? Want to know why the government no longer represents your interests? Look no further.

The problem is now. We are the new targets.

Read it and weep, but for God's sake, please read it.
A highly informative and comprehensive book, and a scathing, fearless indictment of government corruption.
I cannot overstate it's importance.

Andrew E. Belshaw on December 6, 2016

Disguising Obama's Dirty War Chapter 22

I just picked up this book and have not read it yet--but I am writing this to CORRECT THE RECORD regarding very basic information.

There are 446 PAGES (not 286, as listed above). 160 Pages is a big difference--obviously, QUALITY is more important than quantity--but I do feel the listing needs be corrected.

The "Inside Look" feature is also cutting off the last 9 chapters of the book, which are as follows:

Chapter 16: Major General Bruce Lawlor: From CIA Officer in Vietnam to Homeland Security Honcho

Chapter 17: Homeland Security: The Phoenix Comes Home to Roost

PART IV: MANUFACTURING COMPLICITY: SHAPING THE AMERICAN WORLDVIEW

Chapter 18: Fragging Bob Kerrey: The CIA and the Need for a War Crimes Tribunal

Chapter 19: Top Secret America Shadow Reward System

Chapter 20: How Government Tries to Mess with Your Mind

Chapter 21: Disguising Obama's Dirty War

Chapter 22: Parallels of Conquest, Past and Present

Chapter 23: Propaganda as Terrorism

Chapter 24: The War on Terror as the Greatest Covert Op Ever

John C. Landon on January 2, 2017

This is a devastating and must-read study of the social and political calamity created by the CIA over the last sixty years. The portrait shows the criminal character of the agency and finally of the government it is said to serve. The portrait is a double shock because it shows not just a sordid corruption but a malevolent 'dark side' mafia-style corruption of american civilization and government. That the CIA controls the drug trade is not the least of the stunning revelations of this history.

#### [Feb 12, 2017] It was said that the average commute in a car, starting from the time one turns the key until it's parked only achieves (roughly) 25 mph effective speed.

##### "... That calculation is similar to one I heard about the use of a bicycle. It was said that the average commute in a car, starting from the time one turns the key until it's parked only achieves (roughly) 25 mph effective speed. The driver must then work (again, roughly) 1 hour to pay for every hour of automobile travel, so the real effective speed is only 12.5 mph . ..."
###### Feb 12, 2017 | peakoilbarrel.com
Caelan MacIntyre says: 02/07/2017 at 5:28 pm
I had posted it over at The Oil Drum .

Here's one of the responses:

"That calculation is similar to one I heard about the use of a bicycle. It was said that the average commute in a car, starting from the time one turns the key until it's parked only achieves (roughly) 25 mph effective speed. The driver must then work (again, roughly) 1 hour to pay for every hour of automobile travel, so the real effective speed is only 12.5 mph .

A bicycle ridden over relatively mild terrain can easily produce this speed and the rider gets added benefits from the exercise. Of course, this only works over short commutes with good roads and tolerable weather, but it shows how much more efficient transport systems can be

#### [Feb 12, 2017] What The Jobs Report DIDNT Tell You Last Week

##### "... But perhaps even more important is the extremely disappointing update on the average hourly earnings ('AHE') . The AHE increase fell to just 0.1% in January on a month/month comparison, but the real catch is in the details. ..."
###### Feb 12, 2017 | www.zerohedge.com

Ever since the gold report was published, the gold price moved up. This caught several investors by surprise, as some of them even continued to dump gold, scared by what appeared to be a good jobs report.

'Appeared to be', because?

Yes, 227,000 new jobs were created , and we can't deny that's a positive evolution. However, the increased job number is also the only positive thing in the jobs report, and there are two other issues that haven't really been highlighted.

Two issues that could, and probably will, have an impact on the interest rate decisions later this year.

First of all, the unemployment rate in the USA actually increased from 4.7% to 4.8%, despite the job growth.

How is that possible?

Simply put, due to the way the Bureau of Labour Statistics is gathering its data, almost 700,000 people have been 'removed' from the civilian population. The total size of the civilian population is rebalanced on a yearly basis, in January.

Source: Bureau of Labor Statistics

The smaller size of the civilian population caused the labor force participation rate to increase by 0.2%, and this by itself caused the unemployment rate to increase as well, despite the job creation number.

And as the unemployment rate is one of the key factors the Federal Reserve is looking at to determine whether or not a rate hike is appropriate, this small increase could have an impact on the decision making process. And keep in mind this is the second consecutive increase in the unemployment rate as the December unemployment rate also came in higher than the unemployment rate in November (and this did not include any population rebalancing exercise).

But perhaps even more important is the extremely disappointing update on the average hourly earnings ('AHE') . The AHE increase fell to just 0.1% in January on a month/month comparison, but the real catch is in the details.

Exactly because the 0.1% increase is focusing on a monthly update, the revision of the wage increase in December is actually telling you something more serious is going on. The December wages have been revised down by 0.2%, so if that would NOT have happened, the average hourly wage would have DECREASED in January.

... ... ...

#### [Feb 12, 2017] People think LTO development in America will have a never ending source of funding, regardless of price, demand,

##### "... No, of course not. You're buried in normalcy confirmation bias that believes QE creation of 25% of GDP over about 6 years is completely consistent with markets operating in laissez faire fashion. When did you, oh hell, when did anyone last hear the phrase moral hazard? Think about that when you next posture yourself offended. ..."
###### Feb 12, 2017 | peakoilbarrel.com
Mike: 02/08/2017 at 11:29 am
Rune, thank you for this. People here I believe had been asking for it, now, unfortunately, it seems to have gone over most peoples heads. There is a fundamental detachment from reality here; people think LTO development in America will have a never ending source of funding, regardless of price, demand, http://oilprice.com/Latest-Energy-News/World-News/EIA-Slashes-Crude-Oil-Demand-Forecast.html or the economic/financial woes of the industry itself. I can't say that I understand that myself.
Rune Likvern: 02/08/2017 at 1:05 pm
Mike, thanks!

I did not expect my post would unleash an avalanche with unsubstantiated claims about central banks making bond holders/creditors whole for losses incurred by shale companies.

Several companies have already been through bankruptcy proceedings (Chapter 11 primarily) and affected bondholders accepted a haircut.
Integrated companies have recognized impairments to their balance sheets. So if only those who makes/supports these claims could come up with documentation of the conduits by which the bondholders/creditors are made whole by central banks it would be helpful.

The losses/haircuts/impairments will be spread over several years (perhaps decades) and in relative terms the amounts involved do not pose a systemic risk.

Ifcentral banks got involved it would be much easier (and better) to manipulate the oil price higher.

Watcher: 02/09/2017 at 3:27 am
Oh I didn't know this was still alive.

Dood what substantiation do you need for the claim that if global systemic risk exists financially from growing shale debt they will be bailed out? You got a problem with that claim? Where were you in 2008 when nominal and gross credit default swaps were measured in trillions? Know anyone at the ISDA or even the DTCC?

No, of course not. You're buried in normalcy confirmation bias that believes QE creation of 25% of GDP over about 6 years is completely consistent with markets operating in laissez faire fashion. When did you, oh hell, when did anyone last hear the phrase moral hazard? Think about that when you next posture yourself offended.

Normalcy is gone. It's not coming back. Oil scarcity is relentless and is the likely cause. I can offer you help in re-evaluating what is and isn't normal:. Have a look at the German 10 year Bund. 0.3%. German inflation? About 1.2%.

#### [Feb 12, 2017] It would be an understatement to say that Dems adopted the neoliberal ideology of their opposition

##### "... "some of them have bought the neoliberal ideology of their opposition." i like the understatement. ..."
###### Feb 12, 2017 | economistsview.typepad.com
yuan -> DeDude... , February 10, 2017 at 09:49 AM
"The real question is how much support he has a year from now when most of his voters realize that the majority of what he directly or implicitly promised them, turns out to be a lie."

I'm sure that people in Kansas were telling themselves this 7 years ago.

DeDude -> yuan... , February 10, 2017 at 12:52 PM
Yep - and they were right. The democrats lost the next midterm election. The midterm blowback is that of both an energized opposition and of a lot of disappointed followers.
ilsm -> DeDude... , February 10, 2017 at 04:04 PM
If the libruls think Obama's multinational collateral damage from senseless bombing by drone and expensive aircraft is not worth protesting, then rallies and faux moral indignation against a travel ban are incongruous to reason.
sanjait -> Estate Agent - Emily ... , February 10, 2017 at 10:31 AM
"It's not quite that bad."

We can only hope.

But we have an administration that is unconstrained by conscience and logic and a GOP majority in both houses of Congress that shows scant willingness to stand against the administration on anything.

The only remaining check between now and 2018 is the fear Congresspersons might have of losing their seats, and the judiciary.

The former is very weak though, because rapid Trump supporters make up the majority of the GOP voting base, so GOP congressmen are going to stay in line to avoid primary challenges. Their party is almost completely captured by the wingnut wing.

Also, few at-risk GOP Senators are even up for re-election in 2018.

The latter is our only real hope, and even that is tenuous. Judges can be fickle and peculiar, but most GOP judges were selected for their partisan loyalty. Most will go along with almost anything the GOP wants, and as time passes, Trump is going to add more judges, and he will be damn sure to pick ones that go along with anything he wants.

We're hoping for judges' consciences, and loyalty to country over party, and common sense, to save us. But when the GOP picks judges they select against those traits.

ilsm -> sanjait... , February 10, 2017 at 04:08 PM
"administration that is unconstrained by conscience and logic", we have had that continuously since 1980.

You get worked up over a travel ban but not Obama's US bombing wedding parties. Or taking out 14 non combatants and losing n MV 22 to get a few smart phones.

Do you have stock in both refugee referral companies and Lockheed?

ilsm : , February 10, 2017 at 04:09 AM
poor pk has grabbed the alt right's the concession over cognitive bias, false analogy and cherry picked faux facts.
Benedict@large -> ilsm... , February 10, 2017 at 05:04 AM
Does anyone take this guy seriously anymore? This is Chicken Little, Sky-Is-Falling nonsense from a PhD Nobelist? Certainly the guy has lost his marbles, and someone needs to put him in a padded room. At least be kind, and retire him.
RC AKA Darryl, Ron -> Benedict@large... , February 10, 2017 at 05:30 AM
You certainly cannot expect Krugman to criticize the constitutional political system of dollar democracy that gave us a choice between Trump and Hillary through first past the post elections and party caucuses any more than you can expect him to criticize lifetime congressional seats and a SCOTUS unanswerable to the people.

I believe even Krugman will criticize gerrymandering, which is a safe target since it is implemented at the state rather than federal level.

pgl -> RC AKA Darryl, Ron... , February 10, 2017 at 05:59 AM
DeLong is - at least when it comes to the Electoral College. This system is sort of telling the folks in California that they really do not matter.
ilsm -> pgl... , February 10, 2017 at 06:10 AM
Electoral college exists until "they" gut/get rid of states rule on amendments in the US constitution.

Democracy is one thing within toen lesser in states........ the rest is republic the 'burgs' not wanting to be run from Morningside Hts.

RC AKA Darryl, Ron said in reply to pgl... , February 10, 2017 at 06:12 AM
The electoral college although problematic is not the best place to start. Campaign finance, gerrymandering, legislative term limits, and an alternative to first past the post voting are all state to state neutral, allowing a large and powerful electoral consensus to form without undue obstacles except for elite authority itself.

These are all assessable solidarity issues. The fear of reversal for Roe V. Wade makes petition and referendum to overturn SCOTUS decisions more difficult first time around, but not impossible since Citizens United. Liberals on the fence only need consider the polling numbers comparing those two SCOTUS decisions to see that petition and referendum to overturn SCOTUS would not threaten Roe V. Wade, but rather end the threat to Roe V. Wade. OTOH, the electoral college is a state by state issue and small states are not going to give it up. New York and California will need to subdivide into a bunch of small states to ever change that.

The constitutional ratification procedure can be hijacked by a solidarity electoral movement only so long as the solidarity is large and cohesive.

yuan -> RC AKA Darryl, Ron... , February 10, 2017 at 08:39 AM
And, IMO, you are not seeing the forest for the trees. The republican party is laser focused on voter suppression. And they will not waste a crisis or supreme court judge slot.

"A review of these documents shows that North Carolina GOP leaders launched a meticulous and coordinated effort to deter black voters, who overwhelmingly vote for Democrats."

When the Supreme court becomes un-deadlocked Jim Crow will destroy opposition to Trumpism.

RC AKA Darryl, Ron -> yuan... , February 10, 2017 at 09:27 AM
You are certainly correct in their intent and if the South less Virginia, which was purple enough to go for Hillary in 2016, were the entire country then you would be correct in the impending reality.

The reality is uncertain though because many of the Trump voters were racists and misogynists, but then many of the Trump voters were just reacting to an opportunity to strike back at the corporatist hegemony in control of the political establishment. The corporatist controlled dollar democracy has dominated the conversation about the advantages of trade regardless of trade deficits for over thirty years now. A rebellion is long overdue. The US Constitution provides sufficient political tools to the electorate to stage a revolution using electoral means, but not by just choosing between establishment political parties without providing an electoral agenda of its own along with solidarity in imposing bipartisan anti-incumbency sanctions for failure to perform.

yuan -> RC AKA Darryl, Ron... , February 10, 2017 at 09:42 AM
"The US Constitution provides sufficient political tools to the electorate to stage a revolution using electoral means"

And I see a mostly corrupt legal system that has already proven willing to overturn the will of the people.

sanjait -> RC AKA Darryl, Ron... , February 10, 2017 at 10:39 AM
Great. While Trump tries to tear down democracy, the supposed representatives of "the people" will keep talking about shit like how much they hate NAFTA.
ilsm -> sanjait... , February 10, 2017 at 04:16 PM
I won't type much here:

The opening rif is cool.

Monster, Steppenwolf

I need to play this once a week!

libezkova said in reply to yuan... , February 10, 2017 at 07:57 PM
"And, IMO, you are not seeing the forest for the trees. The republican party is laser focused on voter suppression."

With all due respect, I do not believe that.

Why republicans should be focused on voter suppression, if Democrats are working relentlessly to move blue collar workers and lower middle class voters to far right ?

ilsm -> RC AKA Darryl, Ron... , February 10, 2017 at 04:13 PM
'dollar democracy' is deeper than that.

it is 99% the system

but you got to do the right system

or the left one

trouble is like tamany

cannot see the system to fix

ken melvin : , February 10, 2017 at 05:22 AM
Paul Krugman didn't give us Trump, the progressives who can't stand dems, demonized Hillary, either didn't vote or voted for Trump gave us Trump. Idee fixe and big picture are not the same.
Peter K. -> ken melvin... , February 10, 2017 at 05:38 AM
Wrong. Progressive neoliberals helped give us Trump. Nobody forced Hillary to give speeches to Goldman Sachs or to give Bush a blank check for war.

"We're re-learning today what we should have learned in the 30s ... economic stagnation breeds reaction and intolerance"

Blaming the few who didn't vote Hillary. What about the many who stayed home? You're an example of learned helplessness. Like the wife who won't leave her abusive husband.

yuan -> Peter K.... , February 10, 2017 at 08:56 AM
"Wrong. Progressive neoliberals helped give us Trump. Nobody forced Hillary to give speeches to Goldman Sachs or to give Bush a blank check for war."

How many Goldman Sachs banksters does Trump have in his administration? I lost count.

The best predictor of a Trump vote was a tendency towards sexism and racism. And Trump voters were generally well-off middle class whites, not the underclass who either stayed home or predominantly voted for Clinton.

Peter K. -> yuan... , February 10, 2017 at 09:09 AM
"The best predictor of a Trump vote was a tendency towards sexism and racism. And Trump voters were generally well-off middle class whites, not the underclass who either stayed home or predominantly voted for Clinton."

Trump won the uneducated vote. Many of those people ain't middle class.

"How many Goldman Sachs banksters does Trump have in his administration? I lost count."

Yeah they own both parties. Democrats need to be for the people, not corporations. You are pretty naive for being leftwing. Probably you just get off on being argumentative.

yuan -> Peter K.... , February 10, 2017 at 09:38 AM
"Trump won the uneducated vote. Many of those people ain't middle class." I see you are pimping Trump's faux-populist mythology again. Clinton won the majority of votes of those earning less the $50,000 and Trump won the majority of votes for those who earn more than$50,000.

http://www.cnn.com/election/results/exit-polls

Peter K. -> yuan... , February 10, 2017 at 11:55 AM

high school or less [18 percent of total]

Clinton 46 %
Trump 51 %

some college [32% of total]

Clinton 43%
Trump 51%

Clinton 49%
Trump 44%

Clinton 58%
Trump 37%

yuan -> Peter K.... , February 10, 2017 at 05:49 PM
has it ever occurred to you that older white voters can be middle/upper class without having a college degree?

it's ironic that many of these same people oppose unions, social insurance (e.g. pensions), and free education (GI bill) despite having benefited from these socialist programs.
FYIGM

libezkova said in reply to Peter K.... , February 10, 2017 at 08:05 PM
If Trump got 37% of votes of people with postgraduate degree that's tell you something about Democratic Party. That only can means that Democratic Party smells so badly that most people can not stand it, not matter what is the alternative. As in "you should burn in hell".

It's kind of reversal of voting for "lesser evil" on which Bill Clinton counted when he betrayed the working class and lower middle class. Worked OK for a while but then it stopped working as he essentially pushed people into embraces of far right.

RC AKA Darryl, Ron said in reply to pgl... , February 10, 2017 at 06:16 AM
My wife says Liz Warren will run in 2020 and win. I am hoping that it will be someone off radar now that gets elected as the youngest POTUS in history. We need a sea change with full millennial backing.
Jay -> RC AKA Darryl, Ron... , February 10, 2017 at 06:32 AM
You're wife's prediction for next president will keep DeVos.

"A taxpayer-funded voucher that paid the entire cost of educating a child (not just a partial subsidy) would open a range of opportunities to all children. . . . Fully funded vouchers would relieve parents from the terrible choice of leaving their kids in lousy schools or bankrupting themselves to escape those schools.

the public-versus-private competition misses the central point. The problem is not vouchers; the problem is parental choice. Under current voucher schemes, children who do not use the vouchers are still assigned to public schools based on their zip codes. This means that in the overwhelming majority of cases, a bureaucrat picks the child's school, not a parent. The only way for parents to exercise any choice is to buy a different home-which is exactly how the bidding wars started.

Under a public school voucher program, parents, not bureaucrats, would have the power to pick schools for their children-and to choose which schools would get their children's vouchers."

Remember which side of the debate is pro-choice and which side of the debate is pro teacher's union.

RC AKA Darryl, Ron said in reply to Jay... , February 10, 2017 at 09:38 AM
I am not for either side. My wife's mother was a teacher as was her older sister. I am not sure what she thinks of the teacher's union.

The pedagogical system is so oriented to a system of establishment indoctrination that the average private school is just as bad as the average public school and even the worst public schools are no worse than the worst private schools. Only the best private schools stand out along with a few of the charter schools as better than their public school counterparts and even then not by a great margin. The problem is the pedagogical approach itself. It is also a matter of who taught the teachers? We have developed a system that aspires to mold us all into obedient followers and it works very well. It is also self-replicating.

ilsm -> RC AKA Darryl, Ron... , February 10, 2017 at 04:26 PM
Putting up "competition" against public education which as evolved since the Northwest Ordinance is a crusade for the tea party.

But they would trip WW III, war to keep Russia from breaking up the Frankensteins of East Europe!

The system is: who makes money.

yuan -> Jay... , February 10, 2017 at 10:02 AM
"Remember which side of the debate is pro-choice and which side of the debate is pro teacher's union."

Who needs labor and civil rights when we have capitalist billionaires who will give us "school choice vouchers", "right to work laws", and "deregulation"!

sanjait -> RC AKA Darryl, Ron... , February 10, 2017 at 10:47 AM
Complaining about the electoral college being screwed up is like complaining that human nature is screwed up.

It's true, but almost pointless, because it won't change in the foreseeable future.

libezkova said in reply to RC AKA Darryl, Ron... , February 10, 2017 at 08:11 PM
I doubt that Trump is a political cycle outlier. He is a sign of the crisis of neoliberal political system, which pushes authoritarian figures as "Hail Mary Pass", when Hillarius politicans are proved to be un-electable.

And despite his "bastard liberalism" he is the symbol of rejection of liberalism, especially outsourcing/offshoring and neoliberal globalization. Or more correctly his voters are.

Peter K. -> The People's Pawn... , February 10, 2017 at 06:19 AM
Trump said the Iraq war was a disaster. He bragged about being against the war before it started. He used the Iraq war against Jeb Bush and Hillary as an example of the corrupt elite's incompetence.

This infuriates thoughtless partisans like Krugman to no end.

The appellate court ruled against Trump's Muslim band even more strongly than the lower court judge.

sanjait -> Peter K.... , February 10, 2017 at 10:55 AM
"Trump said the Iraq war was a disaster. He bragged about being against the war before it started."

That is a very sneaky way of talking around the fact that Trump never said anywhere on record before the war that he was against it.

wally : , February 10, 2017 at 06:20 AM
"America as we know it will soon be gone." Don't you think that much of it is already gone? We did not see ourselves as a nation of cowards years ago, but that's what we now appear to be.
yuan -> wally... , February 10, 2017 at 09:13 AM
"We did not see ourselves as a nation of cowards years ago, but that's what we now appear to be." USAnians have been cowards for generations. The transition from corporatist dyarchy to one-party authoritarianism is and was inevitable.
ilsm -> wally... , February 10, 2017 at 04:36 PM
poor pk's [whatever it is] America is not my [or a lot of peoples'] America. America like freedom is a perspective thing!
point : , February 10, 2017 at 06:41 AM
It seems we live in a system where two parties fight to a draw and then volatility in the system acts as a coin toss and we get new leadership. The people line up approximately half and half for the two.

I'm having a hard time understanding why if half support the new leadership established by the operations of the system, that we should worry this a threat to the system itself.

For if that's what we think, it seems we have far bigger problems than simple disagreement to worry about. It seems those among us who think that way should be planning as revolutionaries to change this doomed system that except for luck has not yet careened over the edge into whatever.

yuan -> point... , February 10, 2017 at 09:33 AM
Where do you see a draw? The republicans control the house, the senate, the executive branch, the majority of state legislatures, the majority of state governorships, and will soon control the supreme court.
Julio -> point... , February 10, 2017 at 10:41 AM
The Republicans have embraced the idea that this is a battle, and that their 50% need to win and keep their heels on the neck of the other 50%. The Democrats seem more conflicted about this fight, partly because some of them have bought the neoliberal ideology of their opposition.
yuan -> Julio ... , February 10, 2017 at 12:23 P
"some of them have bought the neoliberal ideology of their opposition." i like the understatement.

#### [Feb 12, 2017] T he british welfare state, the war on poverty/great society policy era, and the scandinavian social model are not replacements for capitalism. They are forms of capitalism

###### Feb 12, 2017 | economistsview.typepad.com
yuan -> Jim Harrison ... , February 10, 2017 at 12:34 PM
"Does anybody around here have anything useful to suggest"
both demonstration and general strikes are powerful ways to express popular outrage. one is planned on for the 17th (too soon) and another more organized one is being planned for march.

http://f17strike.com/

"but you have no more of an idea of a global replacement for capitalism"

so the british welfare state, the war on poverty/great society policy era, and the scandinavian social model are unpossible pipe dreams because...

Jim Harrison -> yuan... , February 10, 2017 at 01:46 PM
"the british welfare state, the war on poverty/great society policy era, and the scandinavian social model are" not replacements for capitalism. They are forms of capitalism. And the sorts of policies that go with these versions of conventional social democracy are...pretty much the platform articles that Clinton ran on. Which is the serious reason the American right despised Hillary. They, at least, didn't have any trouble telling the candidates apart.

There are two problems with storming the Winter Palace. First, you won't have a decisive majority of Americans behind you. Second, you have no idea what you'd do if somehow did seize the Winter Palace. You could conceivably solve the first problem by going balls out demagogue a la Hugo Chavez; but, like Chavez, you'd have to dispense with democracy to keep power because you have no solution to the second problem. For my money, a decent social democracy-universal healthy care, more progressive taxes, a higher minimum wage, more affordable college education, etc.- is plenty hard enough to secure.

yuan -> Jim Harrison ... , February 10, 2017 at 04:50 PM
"They are forms of capitalism."

Before the long-decline began in the 70s, a large fraction of the UK's economic activity was chartered, regulated, and/or managed for the people. That's not capitalism, by definition. (Socialism was a market/trade-based system at its inception. The tendencies with alternative economic models came later.)

Some history:
https://en.wikipedia.org/wiki/Clause_IV

And Corbyn has returned labor to its socialist roots: http://www.independent.co.uk/news/uk/politics/jeremy-corbyn-to-bring-back-clause-four-contender-pledges-to-bury-new-labour-with-commitment-to-10446982.html

"And the sorts of policies that go with these versions of conventional social democracy are...pretty much the platform articles that Clinton ran on."

I guess I missed Clinton advocating for the nationalization of health care, education, energy production, and transportation.

And the "welfare state" has little to do with "social democracy" (whatever that recent nonsense phrase means), all of them were developed by socialist movements.

#### [Feb 12, 2017] US Budgetary Costs of Wars through 2016 are close to five trillioins

###### Feb 12, 2017 | economistsview.typepad.com
ken melvin : , February 10, 2017 at 07:43 AM

The FBI overheard The over reaction to 9/11, greatly abetted by the media, marked the beginning of this slide into Stasi-land. The associated paranoia has led to the likes of Trump and this goofy arsed Congress. We now have governance based not on reality, but on paranoia; on evidence free facts, on convenient facts, on alternative facts, to each of us our own facts. I've seen no accounting of the economic and social costs of this paranoia, but am certain they exceed the damage of 9/11 by orders of many magnitude.

Are these symptoms of America's undeniable demise? How do we turn the ship of state around? This precedent set by the election of Trump, how does the nation remove the stain? Can we avoid the continuance into despotism, authoritarianism?

anne -> anne... , February 10, 2017 at 08:29 AM
http://watson.brown.edu/costsofwar/files/cow/imce/papers/2016/Costs%20of%20War%20through%202016%20FINAL%20final%20v2.pdf

September, 2016

US Budgetary Costs of Wars through 2016: $4.79 Trillion and Counting Summary of Costs of the US Wars in Iraq, Syria, Afghanistan and Pakistan and Homeland Security By Neta C. Crawford Summary Wars cost money before, during and after they occur - as governments prepare for, wage, and recover from them by replacing equipment, caring for the wounded and repairing the infrastructure destroyed in the fighting. Although it is rare to have a precise accounting of the costs of war - especially of long wars - one can get a sense of the rough scale of the costs by surveying the major categories of spending. As of August 2016, the US has already appropriated, spent, or taken on obligations to spend more than$3.6 trillion in current dollars on the wars in Iraq, Afghanistan, Pakistan and Syria and on Homeland Security (2001 through fiscal year 2016). To this total should be added the approximately $65 billion in dedicated war spending the Department of Defense and State Department have requested for the next fiscal year, 2017, along with an additional nearly$32 billion requested for the Department of Homeland Security in 2017, and estimated spending on veterans in future years. When those are included, the total US budgetary cost of the wars reaches $4.79 trillion.... ilsm -> anne... , February 10, 2017 at 04:52 PM The pentagon and congress are spending the US to disarmament. While congress spent$4.8T directly on the wars they spent at least 9T more on the usual stuff for the military industry complex troughers. pk's observation about a shoot out with a small PLA Navy unit made me laugh. In one of those China would be in complete control! anne -> anne... , February 10, 2017 at 08:39 AM America has been continually at war since 2001, at war under 2 presidents, at war in a range of countries that were in no way connected to the attack on America and did not threaten America. Tensions were building even with Russia and China. We have now the possibility of ending our warring or working to mutual advantage with China and Russia, which will be to the advantage of many countries. China and America have just moved to the forming of a new mutually beneficial partnership. I find reason to be hopeful. #### [Feb 12, 2017] Instead of the endless perception management or strategic communication or psychological operations or whatever the new code words are, you could open up the files regarding key turning-point moments and share the facts with the citizens ##### Notable quotes: ##### "... This bizarre feature of Trump's executive order shows how deep Official Washington's dysfunction goes. Trump has picked a major constitutional battle over a travel ban that targets the wrong countries. ..." ##### "... But there's a reason for this dysfunction: No one in Official Washington can speak the truth about terrorism without suffering severe political damage or getting blacklisted by the mainstream media. Since the truth puts Israel and especially Saudi Arabia in an uncomfortable position, the truth cannot be spoken. ..." ##### "... There was some hope that President Trump – for all his irascibility and unpredictability – might break from the absurd "Iran is the principal source of terrorism" mantra. But so far he has not. Nor has Trump moved to throw open the files on the Syrian and Ukraine conflicts so Americans can assess how the Obama administration sought to manipulate them into supporting these "regime change" adventures. ..." ##### "... But Trump has resisted intense pressure to again entrust U.S. foreign policy to the neoconservatives, a number of whom lost their jobs when President Obama left office, perhaps most significantly Assistant Secretary of State for European Affairs Victoria Nuland, who helped orchestrate the violent overthrow of Ukraine's elected president and is an architect of the New Cold War with Russia. ..." ##### "... Other neocons who angled for jobs in the new administration, including John Bolton and James Woolsey, have failed to land them. Currently, there is pressure to ensconce Elliott Abrams, a top neocon dating back to the Reagan administration, in the key post of Deputy Secretary of State but that idea, too, has met resistance. ..." ##### "... The neocon threat to Trump's stated intent of restoring some geopolitical realism to U.S. foreign policy is that the neocons operate almost as an ideological cabal linked often in a subterranean fashion – or as I. Lewis Libby, Vice President Dick Cheney's neocon chief of staff, once wrote in a cryptic letter to neocon journalist Judith Miller that aspen trees "turn in clusters, because their roots connect them." ..." ##### "... What is less clear is whether Trump, Tillerson and his fledgling State Department team have the intellectual heft to understand why U.S. foreign policy has drifted into the chaos and conflicts that now surround it – and whether they have the skill to navigate a route toward a safe harbor. ..." ##### "... My first concern, however, is the USA predilection for 'regime change" wars - and for that I blame the neocons. ..." ###### Feb 12, 2017 | economistsview.typepad.com RGC : February 10, 2017 at 06:44 AM If you wanted to bring sanity to a U.S. foreign policy that has spun crazily out of control, there would be some immediate steps that you – or, say, Secretary of State Rex Tillerson – could take, starting with a renewed commitment to tell the truth to the American people. Instead of the endless "perception management" or "strategic communication" or "psychological operations" or whatever the new code words are, you could open up the files regarding key turning-point moments and share the facts with the citizens – the "We the People" – who are supposed to be America's true sovereigns. For instance, you could release what the U.S. government actually knows about the Aug. 21, 2013 sarin gas attack in Syria; what the files show about the origins of the Feb. 22, 2014 coup in Ukraine; what U.S. intelligence analysts have compiled about the July 17, 2014 shoot-down of Malaysia Airlines Flight 17 over eastern Ukraine. And those are just three examples of cases where U.S. government propagandists have sold a dubious bill of goods to the American and world publics in the "information warfare" campaign against the Syrian and Russian governments. If you wanted to base U.S. foreign policy on the firm foundation of reality, you also could let the American people in on who is actually the principal sponsor of the terrorism that they're concerned about: Al Qaeda, Islamic State, the Taliban – all Sunni-led outfits, none of which are backed by Shiite-ruled Iran. Yet, all we hear from Official Washington's political and media insiders is that Iran is the chief sponsor of terrorism. Of course, that is what Saudi Arabia, the Gulf states and Israel want you to believe because it serves their regional and sectarian interests, but it isn't true. Saudi Arabia and the Gulf states are the ones arming and financing Al Qaeda and Islamic State with Israel occasionally bombing Al Qaeda's military enemies inside Syria and providing medical support for Al Qaeda's Syrian affiliate operating near the Golan Heights. The reason for this unsavory network of alliances is that Israel, like Saudi Arabia and the Sunni-led Gulf states, sees Iran and the so-called "Shiite crescent" – from Tehran through Damascus to Beirut – as their principal problem. And because of the oil sheiks' financial wealth and Israel's political clout, they control how pretty much everyone in Official Washington's establishment views the Middle East. But the interests of Israel, Saudi Arabia and the Gulf states are not in line with the interests of the American people – nor the average European – who are not concerned about militant Shiites as much as militant Sunnis. After all, the worst terror attacks on Europe and the U.S. have come from Sunni extremists belonging to or inspired by Al Qaeda and Islamic State. This gap between the reality of Sunni-extremist terrorism and the fantasy of Official Washington's "group think" fingering Shiite-ruled Iran explains the cognitive dissonance over President Trump's travel ban on people from seven mostly Muslim countries. Beyond the offensive anti-Muslim prejudice, there is the fact that he ignored the countries that produced the terrorists who have attacked the U.S., including the 9/11 hijackers. This bizarre feature of Trump's executive order shows how deep Official Washington's dysfunction goes. Trump has picked a major constitutional battle over a travel ban that targets the wrong countries. But there's a reason for this dysfunction: No one in Official Washington can speak the truth about terrorism without suffering severe political damage or getting blacklisted by the mainstream media. Since the truth puts Israel and especially Saudi Arabia in an uncomfortable position, the truth cannot be spoken. There was some hope that President Trump – for all his irascibility and unpredictability – might break from the absurd "Iran is the principal source of terrorism" mantra. But so far he has not. Nor has Trump moved to throw open the files on the Syrian and Ukraine conflicts so Americans can assess how the Obama administration sought to manipulate them into supporting these "regime change" adventures. But Trump has resisted intense pressure to again entrust U.S. foreign policy to the neoconservatives, a number of whom lost their jobs when President Obama left office, perhaps most significantly Assistant Secretary of State for European Affairs Victoria Nuland, who helped orchestrate the violent overthrow of Ukraine's elected president and is an architect of the New Cold War with Russia. Other neocons who angled for jobs in the new administration, including John Bolton and James Woolsey, have failed to land them. Currently, there is pressure to ensconce Elliott Abrams, a top neocon dating back to the Reagan administration, in the key post of Deputy Secretary of State but that idea, too, has met resistance. The neocon threat to Trump's stated intent of restoring some geopolitical realism to U.S. foreign policy is that the neocons operate almost as an ideological cabal linked often in a subterranean fashion – or as I. Lewis Libby, Vice President Dick Cheney's neocon chief of staff, once wrote in a cryptic letter to neocon journalist Judith Miller that aspen trees "turn in clusters, because their roots connect them." In other words, if one neocon is given a key job, other neocons can be expected to follow. Then, any Trump deviation from neocon orthodoxy would be undermined in the classic Washington tradition of strategic leaking to powerful media and congressional allies. So far, the Trump inner circle has shown the administrative savvy to avoid bringing in ideologues who would dedicate their efforts to thwarting any significant change in U.S. geopolitical directions. What is less clear is whether Trump, Tillerson and his fledgling State Department team have the intellectual heft to understand why U.S. foreign policy has drifted into the chaos and conflicts that now surround it – and whether they have the skill to navigate a route toward a safe harbor. Julio -> RGC... , February 10, 2017 at 09:04 AM Very good analysis. The first and obvious question about the ban is "why isn't Saudi Arabia included"? As the article shows, this question unravels this (Trump's) current version of dysfunctional foreign policy based on misleading the public. RGC -> Julio ... , February 10, 2017 at 09:43 AM Yes, Trump seems to want to act directly but he also seems to often be off-target. My first concern, however, is the USA predilection for 'regime change" wars - and for that I blame the neocons. sanjait said in reply to RGC... , February 10, 2017 at 10:56 AM I am all for transparency but very strongly opposed to asinine conspiracy theories. RGC -> sanjait... , February 10, 2017 at 11:29 AM Why should anyone care? Maybe you should actually learn something about a topic before you comment on it. https://en.wikipedia.org/wiki/Project_for_the_New_American #### [Feb 12, 2017] Bill Gale of the Brookings Institution made this remarkable endorsement of the destination-based border-adjustment tax -- It essentially makes the government a shareholder in every corporation in America. The government shares all the losses, and it shares all the profits ###### Feb 12, 2017 | economistsview.typepad.com Peter K. -> pgl... February 11, 2017 at 06:52 PM , 2017 at 06:52 PM Liberals Can't Wait for Republicans to Adopt the Border-Adjusted Tax by VERONIQUE DE RUGY February 7, 2017 4:25 PM I have already expressed some of my objections with the border-adjusted tax included in the otherwise very good House Republican's Tax Blueprint. But I think it is important to revisit the utter enthusiasm of liberals at the prospect of a Republican Congress implementing a Destination Based Cash Flow Tax (DBCFT). Exhibit number 1: This article in the U.S. edition of The Independent called "Deluded Republicans are accidentally pushing for progressive corporation tax reform." It reads: "Indeed, we find ourselves in the paradoxical situation where a reform being presented by deluded right-wing American politicians as a way of sticking it to cheating foreigners actually represents the world's best chance for lancing the boil of rampant tax evasion by multinational companies. . . . But the great advantage of this reform is that it would eliminate the incentive for multinational firms to dodge their US corporate taxes through accounting tricks, such as registering profits at subsidiaries abroad and relocating their corporate headquarters to tax havens. No matter where they based their headquarters, multinationals would be liable for a hefty US tax bill if they sold plenty of products and services in America." This is correct. No matter how high the rate goes (as I we will see below under a Democratic Congress and White House, it could go high), companies will have nowhere to go and will lose their escape valves, i.e., they will be stuck with "a hefty US tax bill." That's what tax harmonization does. Dan Mitchell has a good speech here about how the DBCFT undermines tax competition. According to the author, the best part of the tax plan is that other governments will copy it and the bad system will be imposed everywhere. Tax competition gives you a virtuous cycle of countries adopting better and cheaper tax systems to compete with other countries. Under a destination-based border-adjustment regime, you instead get tax harmonization and a vicious cycle that spreads a bad system everywhere. He concludes: "Back to the paradox. Republicans care little about the iniquities of tax havens. They want firms to pay more in corporation tax in the same way that Donald Trump wants judges in Washington to influence immigration policy. And they seem terribly confused about the reform they are championing and about what it would entail, not least the progressive outcomes. Yet, for all that, what they have ended up pushing is the right thing, not just for the US but the world. Treason or not, we should wish them good speed on this one." Exhibit number 2: At a recent Tax Foundation event on the issue, Bill Gale of the Brookings Institution made this remarkable endorsement of the destination-based border-adjustment tax. He said (at the 43:40 mark): "It essentially makes the government a shareholder in every corporation in America. The government shares all the losses, and it shares all the profits." You can tell from the video that Douglas Holtz-Eakin is obviously uncomfortable with his comments. He even says something to the effect of "are you trying to kill it?" But then it gets better. Gale then reiterated his call for a much higher rate than the Republican plan's 20 percent. And as he said at the 45:33 mark, "If something is non-distortionary, you should tax the hell out of it." That has the merit of being honest and transparent. Now, never mind that a very likely less than perfect adjustment of our currency will actually create plenty of distortions in the form of, among other things, higher prices for consumers. And never mind that the adjustment of the currency itself will be painful and destroy a whole lot of wealth. But he is right that if there is no escape valve, then lawmakers are likely to try to tax the hell out of it. As I wrote last week: "When you think about it, it is not surprising that many, not all, liberals like the new tax idea." Republicans in Congress should think about this carefully. #### [Feb 12, 2017] Classicals vs Neoclassicals views on Tax and Rent ###### Feb 12, 2017 | economistsview.typepad.com RGC : Reply Sunday, February 12, 2017 at 08:08 AM , February 12, 2017 at 08:08 AM Classicals or Neoclassicals - who you got? ................... Classicals vs Neoclassicals: Tax and Rent Posted on 8 January 2011 At the university I attended, a few of the academics were strongly influenced by Classical Political Economy, especially that of Smith and Ricardo. Prior to my student days, one of them had published a paper in the Cambridge Journal of Economics entitled "On the origins of the term 'neoclassical'" (no free link available), which is quite well known in heterodox circles. In it, he argued that the 'classical' in the term 'neoclassical' is a misnomer and that neoclassical and classical economics actually have little in common, despite attempts by neoclassicals to claim Smith, in particular, as their forefather. The classical-influenced economists at my university happened to belong to the Sraffian School. This school attempts to synthesize Classical value and distribution with Keynesian output and employment determination, and is also known for its key role and victory in the Cambridge Capital Controversy. The school is named after Piero Sraffa, whose interpretation of Classical Political Economy, particularly Ricardo's work, has been highly influential. Sraffians are not the only modern-day economists influenced by Smith and Ricardo. Another prominent example is Michael Hudson. In a recent interview (h/t to Tom Hickey), Hudson discusses one big difference between the Classical economists and the neoclassicals: their analysis of taxation as applied to economic rent. Hudson touches on a number of noteworthy points during the interview. He draws attention to a historical correspondence that would probably surprise many, between high top tax rates and strong economic growth, and observes that the top rates were high in the period prior to WWII. Importantly, the focus of taxation in Classical Political Economy, which Hudson argues influenced US government policy in the late 1800s and much of the first half of the 1900s, was on confiscating economic rents. These rents include income that derives from ownership of assets that appreciate in value merely because of the growth in national income and/or improved public infrastructure, and not due to any participation in the production process (they arise especially in the real estate and financial sectors). It is not mentioned in the interview, but profit, of course, is also income that derives from the mere ownership of assets – the means of production. However, the classical economists were engaged in a class war with rentiers, not capitalists. It was Marx who drew this reasoning out to its logical conclusion, and this probably goes a long way to explaining why neoclassical theory, rather than being a continuation of classical economics (as was often claimed once it was established), was an escape into a different conceptualization of a capitalist economy that sought to reframe the distribution of income as the result of marginal contributions (an attempt that failed and was the chief target and theoretical casualty of the Cambridge Capital Controversy). Even so, there does remain a significant distinction between profit, which relates to assets employed in the production process, and economic rents. For this reason, Marx also distinguished between these two categories of income and spent a great deal of space in volume 3 of Capital analyzing the various forms of surplus value, including different types of rent. Hudson goes on to stress that the taxation imposed in the late 1800s and first half of the 1900s was highly progressive. Initially only the top 1 percent of income earners were required to submit tax returns. The purpose of this was to keep taxes on wages and profit low to promote price competitiveness against lower wage countries. This can be contrasted with neo-liberal policies of today which seem to be designed almost with the opposite intent: to tax wage and profit income (and also consumption) but provide loopholes or tax breaks for the recipients of economic rents. Above all, Hudson distinguishes between what the classical economists meant by the term "free market" and what that term has come to mean in the neo-liberal period. Hudson emphasizes that, for the classical economists, "free market" meant a market unencumbered by rent-based claims on income that would draw economic activity away from income production and toward speculation. The aim of the classical economists was to incentivize production. This is a very different notion than the neo-liberal one of labor-market "deregulation" (meaning regulation in favor of employers over employees), which is really just code for union smashing and an attack on real wages, or the neo-liberal deregulation of financial markets, which is a euphemism for enabling financial parasitism. Hudson makes another observation in passing. The observation is not central to his argument in the interview, but is relevant to current debates over deficits and public debt, and consistent with MMT. He notes that immediately prior to the commencement of the only extended period of high capitalist growth (WWII until the late 1960s), the US population was not in debt, and in fact had pent up savings from the war that it was waiting to spend. By little or no debt, Hudson clarifies that he means little or no private debt. There was, of course, a large public debt – larger as a percentage of GDP than the current US government "debt". This public debt did not matter, in spite of the familiar opposition to deficits and public debt, the echoes of which can be heard today, simply because the budget deficit shrinks endogenously once private-sector activity and income growth resume. This is precisely what happened in the immediate postwar period. Today, with the US government the monopoly issuer of its own flexible exchange-rate fiat currency, public "debt" is – or rather should be – even less of an issue. Unlike in the immediate postwar period, the government is not subject to the constraints of Bretton Woods or a similar commodity-backed money system. It is free to utilize its fiscal capacity to the extent necessary to restore full employment. Government "debt" is nothing other than the accumulated net financial wealth of the non-government. Once the non-government is ready to spend, income growth will deliver stronger revenues, reducing the deficit. But the private sector needs to have its debt under control before it will resume spending at levels sufficient to sustain strong economic growth. In addition to the absence of significant private debt at the end of WWII, there were other factors that contributed to the strong growth of the immediate postwar period, including Keynesian demand-management policies, a progressive tax system, and significant financial regulation. All these beneficial features of the economy were gradually undermined, and then exposed to outright attack from the 1970s onwards. Hudson discusses how, over time, much of the progressivity in the tax system was removed, paving the way for the construction of the inequitable and anti-productive monster of today. Keynesian demand-management policies were also largely eschewed throughout the neo-liberal era on the basis of an opportunistic misinterpretation of the stagflation of the 1970s. All this took place alongside deregulation of the financial sector and an aggressive dismantling of worker employment protections. The result of this neo-liberal policy mix was an increasing financialization and "rentification" of the economy, widening income inequality, and an adherence to fiscal austerity that directly corresponded, as a matter of accounting, to an unsustainable build up in the only US debt that matters – private debt – and culminated in the Global Financial Crisis and Great Recession. If the aim is to restore sustainable growth under capitalism (which is not my preferred social system, but presumably the one commanding the allegience of policymakers), the insights obtained from the classical economists in conjunction with the lessons of the postwar period would seem to suggest some combination of the following policy responses: tighter regulations of speculative activities; a more steeply progressive tax system targeted at the confiscation of economic rents and the incentivization of production and consumption; stronger worker protections; and the abandonment of the faulty construct of a 'government budget constraint' and a return to deficit expenditure sufficient to underpin non-government net saving and full employment. But the actual policy response has instead been to manipulate financial markets to engineer a massive transfer of wealth to the rentiers and exacerbate income and wealth inequality; to continue with the approach of taxing wage and profit income along with consumption rather than economic rents; and possibly even to revert foolishly to austerity while the private sector remains deeply indebted. RGC -> RGC... , February 12, 2017 at 08:55 AM If you favor the neoclassicals, you also favor Paul Samuelson and the neo/new Keynesians- and today's mainstream economists. #### [Feb 12, 2017] VAT can be made less regressive by excluding essentials like non-prepared food bought at grocery stores and provide fixed rebate for lower income people ###### Feb 12, 2017 | economistsview.typepad.com Jay -> Peter K.... February 12, 2017 at 10:25 AM Corporate income tax is an inefficient way to generate tax revenues. A) Large corps can avoid it and B) the incidence matters and I'm not sure we are always taxing who left-wingers think we are taxing (it is not who pays the tax but who bears the incidence of the tax that matters). VAT is much smarter and can be made less regressive A) exclude essentials like non-prepared food bought at grocery stores B) provide fixed rebate across the board. And at the end of the day even if VAT is on net "regressive" on the tax inflow side, remember that the benefits are "regressive" too, that is to say the people at the bottom of the income scale receive benefits that as a percentage of income are much much much higher than the well to do. Important note: I am all for cutting our military spending by say 50% (I know arbitrary number but it will certainly be Yuge). Bring the troops home and stop playing world police men. We shouldn't be militarily picking sides in Yemen or Syria. Offer humanitarian aid at a fraction of the cost. #### [Feb 12, 2017] Neoliberal economists themselves were largely responsible for the unpleasant political consequences typified by Trump and Brexit due to their efforts to promote globalization as stooges of financial oligarchy, who pays them ###### Feb 12, 2017 | economistsview.typepad.com Floxo : February 11, 2017 at 01:11 PM , 2017 at 01:11 PM I originally tried to post this comment on Mainly Macro. It is in reply to some critical comments I received when I posted a comment suggesting economists themselves were largely responsible for the unpleasant political consequences typified by Trump and Brexit. I argued there has been a failure to properly communicate the serious distributional implications of trade and globalization. This has led people to become disillusioned with stagnant living standards and growing inequality. For some reason, my reply was disallowed, making it appear as though I had no answer to my critics. As my reply addresses issues of concern here I am hoping it will be published . Thankyou for your replies to my comment. Stéphane, I did not say trade gain arises from price convergence; neither do trade gains arise from differences in opportunity costs (I think that is what you meant). Trade gain can arise from several sources, these include relative differences in productive efficiency (Ricardian comparative advantage), differences in relative factor abundance (HO theory), from tradeable goods where production exhibits increasing returns to scale and from monopolistic competition (Krugman). When trade gain is exhausted it is possible to derive further gains from factor mobility. For example, shifting capital from a capital abundant region to a capital poor region will typically result in further gains. An example of this process is off-shoring, where a firm shifts production to another country where wages are lower and rent (the return on capital invested) is higher. So why are potential gains from globalization a problem? The challenge is the sheer size of the population industrializing from a very low capital base. Economically big regions with abundant labour and scarce capital mean low wages and high rents extending into the long term. For a developed economy, adopting a policy of free trade without capital controls with these regions will have two significant consequences: 1. There is a trade induced shift to more capital intensive production driven by the factor advantage of having a relative abundance of capital. This lowers the domestic labour share of GDP. 2. Capital abundance implies a capital drain as domestic saving is increasingly used to finance foreign investment in productive capacity, driven by the higher foreign return. This correspondingly lowers domestic investment which also slows growth. Labour now has less capital applied to it, reducing labour productivity and also wages. What are called "magnification effects" virtually guarantee wage earners are big losers in these scenarios, whereas, capital owners are big winners; hence the rise in inequality. The theoretical support for this view is very robust. I became interested in the debate when such effects showed up strongly in the numerical trade models I develop. Economists, generally, have not supported this basic theoretical perspective, preferring a grab bag of miscellaneous empirically based models. Rapid technological change, too little technological change, skills biased technological change, union demise, banks unwilling to lend, demographics, austerity, labour hoarding, financialization, shift in consumer preference to services and on and on. Personally, I prefer basic economic theory and regard all of these thought bubbles as garbage. In answer to Anonymous, it is true; many economists assert automation is the principle cause of our economic woes. This is theoretically baseless. I cannot describe a model of how technological improvement is supposed to give rise to the above effects, because no such model exists. Improved technology means we get more goods and services from the same resources of capital and labour, boosting growth and wages and rents. anne -> Floxo... , February 11, 2017 at 01:23 PM Where is the precise reference? Mainlymacro must however be separate as "mainly" and Macro" in posting the link. Floxo -> anne... , February 11, 2017 at 05:09 PM Thankyou Anne, here is the reference you requested. anne -> Floxo... , February 12, 2017 at 04:59 AM https://mainlymacro.blogspot.com.au/2017/01/why-voting-for-article-50-may-ruin-mps.html January 29, 2017 Why voting for Article 50 * may ruin an MP's career The last time I did something like this was to urge Labour party members to vote for Smith rather than Corbyn, knowing full well that Corbyn was almost certain to win. Being proved right on that occasion is no consolation, because I would rather have been wrong. This is even more futile, but now as then I feel a decision is about to be made that is both disastrous and irreversible. I also want to say something about the longer term interests of MPs that I have not seen said elsewhere. There are so many principled reasons for MPs to vote against triggering Article 50. Let me summarise what I see as the main ones here, but this is far from comprehensive.... Article 50 of the Treaty on European Union is a part of European Union law that sets out the process by which member states may withdraw from the European Union. -- Simon Wren-Lewis anne -> anne... , February 12, 2017 at 05:01 AM Correcting: Mainlymacro can now be linked to directly. There is no need to separate "mainly" and "macro" in posting a link. anne -> Floxo... , -1 Interesting response to an interesting argument. I am grateful for this post. libezkova -> anne... , February 12, 2017 at 10:34 AM I do not share your enthusiasm. A couple of points 1. Neoliberal economists are stooges of financial oligarchy (much like Soviet economists were stooges of Communist Party) and if they do not promote Washington consensus on trade and globalization they would be ostracized and replaced by other no less talented puppets. They all are replaceable and they understand that perfectly well and behave accordingly. Being puppets they have no degrees of freedom to express the discontent with neoliberalism. 2. The author himself is still in completely under the spell of neoclassical economic framework. that's why his critique is so superficial. As in "There is a trade induced shift to more capital intensive production driven by the factor advantage of having a relative abundance of capital. This lowers the domestic labour share of GDP. " What a "neoliberal speak." Reminds me 1984 Newspeak. That was a political decision to shift capital to developing countries in order to destroy union power and decimate "trade unionism" as political force opposing to neoliberalism. As simple as that. #### [Feb 12, 2017] Democratic Party Sugar High ###### Feb 12, 2017 | economistsview.typepad.com Peter K. : February 11, 2017 at 07:05 AM , 2017 at 07:05 AM https://www.nytimes.com/2017/02/10/opinion/democratic-party-sugar-high.html Democratic Party Sugar High by Timothy Egan FEB. 10, 2017 These are giddy times for the forces of reason and light. A surge of resistance to a bumbling and unstable president has sent millions of people into the streets, into the faces of politicians, and into bookstores to make best sellers again of authoritarian nightmare stories. And all of that hasn't changed the fact that Democrats, the opposition party, are more removed from power than at almost any point in history. Republicans control everything in Washington, two-thirds of state legislative chambers and 33 governor's mansions. Every day brings some fresh affront to decency, some assault on progress, some blow to the truth. The people who run the White House can't spell, can't govern, can't get through a news cycle without insulting an ally or defaming a cherished institution. Republicans just shrug and move on, in lock step with a leader who wants to set the country back a century. From their view, things are going swimmingly. Outraged about the ban on people from Muslim-majority nations? So what. About half of the nation, and a majority of Republicans, are in favor of it. Upset over the return of Wall Street pirates to power? President Trump's supporters aren't. Democrats haven't been able to stop a single one of Trump's gallery of ill-qualified, ethically challenged and backward-thinking cabinet appointees. His pick for labor secretary, Andrew Puzder, doesn't believe people should be paid a living wage to stir a milkshake, and he hired an undocumented immigrant to clean his house. He'll fit right in. Millions of reasonable people are appalled that a madman is in charge of the country. But tell that to Mitch McConnell when he cuts off the right of a fellow senator to speak. Or tell it to Paul Ryan when he can't find his copy of the Constitution he has sworn to uphold. These invertebrate leaders don't care if Trump's residence is a house of lies. They don't care that their president is a sexual predator, or that his family is using the office to enrich themselves. All they care about is the R stitched to his jersey. When Adlai Stevenson was told that all thinking people were with him in his race for president, he famously responded: "That's not enough. I need a majority." And so, too, do the Democrats. This week, the powerless party went into their winter cave for an annual retreat - three days of soul-searching and strategizing. "This is our moment in history," the House minority leader, Nancy Pelosi, told her fellow Ds. "This man in the White House is incoherent, incompetent and dangerous. And we have to protect children and other living things from him." Feels good, right? Sorry. The Democrats shouldn't mistake a sugar high for nutrition. They're still getting their butts kicked. Being Not Trump gained them only a net of six seats in the House in November's election, and will not be enough to win a majority in 2018. Reliance on identity politics and media-cushioned affirmation, and a blind spot to the genuine pain of the white working class, is precisely what produced a President Trump. For the next year, Democrats should filter their policy initiatives through the eyes of the person Trump claims to speak for - the forgotten American. Of course, Trump's phrase was lifted from somewhere else. Franklin Roosevelt first rode to victory in 1932 by urging fellow citizens to put faith in "the forgotten man at the bottom of the economic pyramid." Roosevelt actually did something for that overlooked American - Social Security, minimum wage, building roads, bridges and dams - and was rewarded with a majority coalition that carried the United States to new heights. Therein lies the way back to power for Democrats. When Democrats lost the South - for multiple generations, as it turned out - it put them in a deep hole, forcing them to rely on a surge of young and Latino voters to turn the demographic tide, or candidates with broad appeal beyond the party strongholds on the coasts. President Obama left office with soaring approval numbers and a great legacy. But Democrats also lost 1,034 state and federal offices in his time. Whites are still 70 percent of the vote. If Democrats continue to hemorrhage voters among the working class, they will never see the presidency, or even expect to govern in one house, for a long time. The way out is not that difficult. Yes, they should engage in hand-to-hand combat in the capital. And certainly, Democrats must turn to the courts when the rule of law is broken. But they have to be for something, as well - a master policy narrative, promoting things that help average Americans. The old Broadway adage was how it will play in Peoria. For Democrats, they should think of Joe Biden's Scranton, Pa., every time they take to a podium. Julio -> Peter K.... , February 11, 2017 at 03:22 PM "This man in the White House is incoherent, incompetent and dangerous. And we have to protect children and other living things from him." Yes, Ms. Pelosi. Unfortunately, we knew this before the election. Which you and your party lost. Chris G -> Julio ... , February 12, 2017 at 05:52 AM The follow-up to Pelosi's statement is "No [kidding]. What actions are you taking to protect said children and living things?" What's the plan for supporting Water Protectors and DAPL protesters? What's the plan for shutting down the Senate after McConnell and co exercise the nuclear option to force a vote on Gorsuch? What's the plan for preventing a vote on Gorsuch? How about CBP personnel who ignore court orders? Not an unreasonable expectation that some will - what to do about them? Expressions of outrage are easily ignored if there's no follow-up action. Perpetrators' lives need to be made difficult. Julio -> Chris G ... , February 12, 2017 at 09:35 AM Yep. No specifics. If I hear another vacuous statement about how they will "fight" for children, minorities etc. I will puke. #### [Feb 12, 2017] Brexit and maybe even Trump's victory say something about the arrogance of the neoliberal elite. ###### Feb 12, 2017 | economistsview.typepad.com Ed Brown -> Jerry Brown... February 11, 2017 at 08:00 AM , 2017 at 08:00 AM Personally, I found the ProMarket link ( We Are Arrogant - We hold On to Our Old Beliefs on Trade"- ProMarket ) to be more interesting than the Noah Smith article ( Still Seeking Growth From Tax Cuts and Union Busting - Noah Smith ). At least the last few paragraphs of the ProMarket link were worth reading. I expected to see some good discussion on this part today: BY: Right. Brexit and maybe even Trump's victory say something about the arrogance of the elite. Bankers say that free trade should prevail. Even we, academics-how many of us are actually looking into distribution and redistribution? Few. We're still spending time on writing dynamic models to talk about the gains of trade. Even if old-fashioned free trade is correct, the speed of adjustment is very important. We know that rapid adjustment is no good. How many of us ask ourselves what should be the adjustment in trade? We rarely talk about that. The world may have changed. I gave you my conjecture. But we are also arrogant. We hold on to our old beliefs on the gains of trade. ---- Very Dani Rodrick, I thought. Interesting stuff. Ed Brown -> Ed Brown... , February 11, 2017 at 08:12 AM Also, this is something that I think you'll like. I have not read all of it yet but here is the link and an excerpt: http://evonomics.com/time-new-economic-thinking-based-best-science-available-not-ideology/ "Some will cling on to the idea that the consensus can be revived. They will say we just need to defend it more vigorously, the facts will eventually prevail, the populist wave is exaggerated, it's really just about immigration, Brexit will be a compromise, Clinton won more votes than Trump, and so on. But this is wishful thinking. Large swathes of the electorate have lost faith in the neoliberal consensus, the political parties that backed it, and the institutions that promoted it. This has created an ideological vacuum being filled by bad old ideas, most notably a revival of nationalism in the US and a number of European countries, as well as a revival of the hard socialist left in some countries." I think Peter K has been making similar points for a long time now. Interesting stuff. Chris Lowery -> Ed Brown... , February 11, 2017 at 09:02 AM Consensus among whom? The economic-political elite? Maybe; but certainly not among the general electorate. Most voters were voting for parties out of habit, or on cultural issues (for or against diversity and civil rights), or bread & butter economic issues ("the Republicans will cut my taxes and the regulation of my business" versus "the Democrats will preserve my Medicare and Social Security"). I don't think most voters had/have any clue of what neoliberalism is. Ed Brown -> Chris Lowery ... , February 11, 2017 at 09:58 AM Well, you raise an excellent point. I don't have a solid rejoinder but I will note that if even 5% of the electorate changes its mind an election result can flip one way or the other. But, yes, I agree with you that most voters are not selecting a candidate based on which candidate's economic philosophy is most closely aligned with theirs. Still, especially in the primaries, where the voters are a different population than the general, it could make a difference. I would argue that it was just this difference that made Sanders surprisingly popular among the Democratic primary voters. Chris Lowery -> Ed Brown... , February 11, 2017 at 10:22 AM Agreed. Sent from my iPad Peter K. -> Chris Lowery ... , February 11, 2017 at 10:14 AM doesn't explain the primaries where Trump beat Jeb and Cruz and where Sanders, a fringe candidate did so well. Most people don't bother to vote. Chris Lowery -> Peter K.... , February 11, 2017 at 10:43 AM The question is to what extent people were voting FOR a candidate, as AGAINST a candidate or the status quo. That's the only point I was trying to make. Most voters have neither the time, energy, inclination, or knowledge base to delve into the issues to make an informed decision on which candidate/platform most reflects their values and aspirations. They subcontract out that vetting of individual candidates to parties that they believe are broadly reflective of their views. This past general election, and its preceding primaries, was the result of a broad revolt against the candidates anointed by the parties' elites, indicating deep dissatisfaction with the status quo. Just my two cents... RC AKA Darryl, Ron -> Chris Lowery ... , February 11, 2017 at 01:48 PM Totally. And I still concur with those dissatisfied voters' sentiments, but not the veracity of their results. Peter K. -> Ed Brown... , February 11, 2017 at 09:23 AM "I think Peter K has been making similar points for a long time now. Interesting stuff." Yes I liked the as well. Luigi Zingales is a member of the editorial board for Pro Market and he had some piece published in the New York Times about economics and politics (specifically Italian I think). He was the first I read who compared Trump with Silvio Berlusconi. Zingales discussed how Berlusconi was brought down, by being treated as an ordinary conservative politician. Perhaps the same will work with Trump. Peter K. -> Peter K.... , February 11, 2017 at 09:23 AM "Yes I liked the link as well." Jerry Brown -> Ed Brown... , February 11, 2017 at 11:38 AM Yes, I had read the evonomics piece and thought it was good. Thanks. Eric Beinhocker makes some good points. I liked his optimism as far as some forms of populism were concerned, and had a slight hope that Donald Trump might turn into a Theodore Roosevelt type of populist. That hope has disappeared completely and now we face the realization that we are truly completely screwed. Peter K. -> Jerry Brown... , February 11, 2017 at 01:06 PM I didn't have any hope that Trump would be a good populist. Jerry Brown -> Peter K.... , February 11, 2017 at 01:14 PM Well I try to be an optimist but that has not worked out. You were correct of course. Choco Bell -> Ed Brown... , February 12, 2017 at 07:50 AM asymmetric information, and the recent illuminating example of Wells Fargo's excellence in pushing products that customers did not want nor need. BY: Some financial "innovation" is faddish. It does not create value. GR: Approximately 9 percent of U.S. GDP is finance. Some economists argue that probably 3-5 percent is useful for allocating capital, storing value, smoothing consumptions, and creating competition, and the rest is preying on asymmetric information " ~~Guy Roinik~ Do you see how this asymmetric information plays out? It is the retail vendor who keeps better information than the retail customer. It is the vendor's expectations of disinflation vs inflation rather than the customer's expectations that control the change in M2V. Got it? When vendor expects deflation he dumps inventory, but when he expects inflation he holds on to inventory as he waits for higher profit margins to arrive. He holds onto merchandise by simply raising prices. But why do economists advertise the reverse mechanism? Why does the status quo have a need for distorting truth? Inflation is offered to the proles as a substitute for tax relief to the impoverished. Do you see how it works? " Tax relief for the wealthy will give you delicious inflation. Now jump for it! " ~~The Yea Sayers~ Jump, Fools, Jump ! Soul Super Bad -> Jerry Brown... , February 11, 2017 at 10:02 AM union busting, tax cutting, supply side type state policies don't result in better " unions will push a country into the "middle income trap". Is that the push we are now gettting from 45th President's administration? Time should soon tell ! #### [Feb 12, 2017] NAFTA Has Harmed Mexico a Lot More than Any Wall Could Do ###### Feb 12, 2017 | economistsview.typepad.com anne : February 11, 2017 at 06:58 AM , 2017 at 06:58 AM http://cepr.net/publications/op-eds-columns/nafta-has-harmed-mexico-a-lot-more-than-any-wall-could-do February 9, 2017 NAFTA Has Harmed Mexico a Lot More than Any Wall Could Do By Mark Weisbrot President Trump is unlikely to fulfill his dream of forcing Mexico to pay for his proposed wall along the United States' southern border. If it is built, it would almost certainly be US taxpayers footing the bill, with some estimates as high as50 billion. But it's worth taking a step back to look at the economics of US-Mexican relations, to see how immigration from Mexico even became an issue in US politics that someone like Trump could try to use to his advantage.

NAFTA (the North American Free Trade Agreement) is a good starting point. While it has finally become more widely recognized that such misleadingly labelled "free trade" agreements have hurt millions of US workers, it is still common among both liberal and right-wing commentators to assume that NAFTA has been good for Mexico. This assumption is forcefully contradicted by the facts.

If we look at the most basic measure of economic progress, the growth of GDP, or income, per person, Mexico ranks fifteenth out of 20 Latin American countries since it joined NAFTA in 1994. Other measures show an even sadder picture. According to Mexico's latest national statistics, the poverty rate in 2014 was 55.1 percent ― actually higher than the 52.4 rate in 1994.

Wages tell a similar story: almost no growth in real (inflation-adjusted) wages since 1994 ― just about 4.1 percent over 21 years.

Why did Mexico fare so poorly under NAFTA? We must understand that NAFTA was a continuation of policies that began in the 1980s, under pressure from Washington and the International Monetary Fund, when Mexico was particularly vulnerable during a debt crisis and world recession. These policies included the deregulation and liberalization of manufacturing, foreign investment and ownership (70 percent of Mexico's banking system is now foreign owned). Mexico also moved away from the pro-development policies of the previous decades toward a new, neoliberal prescription that tied Mexico ever more closely to its northern neighbor and its questionable ideas about economic development.

The purpose of NAFTA was to lock in these changes and policies in an international treaty, so that they would be more difficult to reverse. It was also designed to add special privileges for transnational corporations, like the right to sue governments for regulations that reduced their potential profits ― even those dealing with public health or environmental safety. These lawsuits are decided by a tribunal of mostly corporate lawyers who are not bound by precedent or any national legal system.

About two million net jobs were lost in Mexican agriculture, with millions more displaced, as imported subsidized corn wiped out small farmers. From 1994–2000, immigration to the US from Mexico increased by 79 percent, before dropping off in the 2000s.

Now about that wall: if the Mexican economy had just continued to grow post-1980, as it did for the two decades prior, Mexicans would have an average income at European levels today. Extremely few Mexicans would take big risks to live or work in the US. But growth collapsed after 1980, under Washington's failed experiment. Even if we look just at the 23 years post-NAFTA ― the much better years ― GDP per person has grown by just 29 percent, a fraction of the 99 percent growth from 1960–1980.

The wall would cause significant environmental as well as economic damage, if it is ever built. But it is the long-term damage that Washington has helped visit upon the Mexican economy that has brought us to the point where a US president could even propose such a monstrosity.

anne -> anne... , February 11, 2017 at 07:34 AM
What is startling to me and little understood is that between 1992 and 2015 real per capita growth in Mexico was slower than in every country in South America other than Venezuela, slower than every country in Central America, slower than Canada or the United States in North America, slower than every country in the Caribbean other than Jamaica for which there is growth data.

Total factor productivity in Mexico actually declined after 1992 through 2014, with the productivity experience being poorer than in every country in South America other than Venezuela, poorer than in the 4 of 6 countries in Central America for which productivity is recorded, poorer than in Canada or the United States in North America, poorer than in every country in the Caribbean for which there is productivity data.

Remarkably when I looked at the growth and productivity experience of Mexico from 1992 on, relative to Spanish or Portuguese language countries apart from this hemisphere, the experience of Mexico was poorest of all. That means Spain, Portugal, the Philippines and Angola for growth, and Spain, Portugal and the Philippines for productivity.

Observer -> anne... , February 11, 2017 at 08:05 AM
Well, "monstrosity" might be a little strong, given its history of bi-partisan support.

"WASHINGTON - As a senator, Barack Obama once offered measured praise for the border control legislation that would become the basis for one of Donald Trump's first acts as president.

"The bill before us will certainly do some good," Obama said on the Senate floor in October 2006. He praised the legislation, saying it would provide "better fences and better security along our borders" and would "help stem some of the tide of illegal immigration in this country."

Obama was talking about the Secure Fence Act of 2006, legislation authorizing a barrier along the southern border passed into law with the support of 26 Democratic senators including party leaders like Hillary Clinton, Joe Biden, and Chuck Schumer."

In the House of Representatives, the Fence Act passed 283–138, and in the Senate 80–19. The bill was signed into law in October 2006.

anne : , February 11, 2017 at 07:05 AM

February, 2017

Decade of Reform: Ecuador's Macroeconomic Policies, Institutional Changes, and Results
By Mark Weisbrot, Jake Johnston, and Lara Merling

Executive Summary

This paper looks at some of the institutional, policy, and regulatory changes enacted by the government of Ecuador, as well as overall economic and social indicators, over the decade since the Rafael Correa government took office.

Among the highlights:

Indicators

Annual per capita GDP growth during the past decade (2006–2016) was 1.5 percent, as compared to 0.6 percent over the prior 26 years. This is a significant improvement, despite the fact that the economy was hit by major external economic shocks.

The poverty rate declined by 38 percent, and extreme poverty by 47 percent. Much of the decline in poverty was a result of economic growth and employment, but some was also a result of government programs that helped poor people, such as the cash transfer program Bono de Desarollo Humano, which more than doubled in size as a percent of GDP.

The reduction in poverty was many times larger than that of the previous decade.

Inequality also fell substantially, as measured by the Gini coefficient (from 0.55 to 0.47), or by the ratio of the top 10 percent to the bottom 10 percent of the income distribution (from 36 to 25, as of 2012).

The government doubled social spending, as a percentage of GDP, from 4.3 percent in 2006 to 8.6 percent in 2016. This included large increases in spending on education, health, and urban development and housing.

There were significant gains in enrollment at various levels of education. Spending on higher education increased from 0.7 to 2.1 percent of GDP; this is the highest level of government spending on higher education in Latin America, and higher than the average of the Organisation for Economic Co-operation and Development countries.

Government expenditure on health services doubled as a percentage of GDP from 2006 to 2016.

Public investment increased from 4 percent of GDP in 2006 to 14.8 percent in 2013, before falling to about 10 percent of GDP in 2016.

Policy Changes and Reforms

The 2008 constitution reverses the mandate of the 1998 constitution that had made the Central Bank formally independent of the government, with its most important responsibility to ensure price stability. The Central Bank became part of the economic team of the executive branch.

The government defaulted on $3.2 billion, about one-third of its foreign debt, in December 2008 after an international commission found that it was illegally or illegitimately contracted. A domestic liquidity requirement for banks was established. This mandates that all banks hold 45 percent of their liquid assets domestically. This was increased to 60 percent in August 2012, and the actual amount of these reserves held domestically increased to more than 80 percent by 2015. A tax on capital leaving the country raised about$1 billion annually in government revenue from 2012 to 2015.

Government revenue increased from 27 percent of GDP in 2007 to a peak of 44 percent in 2012, before falling to 30 percent in 2016.

A fiscal stimulus of 5 percent of GDP was enacted in 2009, to help minimize damage from the world recession, and a collapse in oil prices and remittances.

The "solidarity-based" part of the financial sector ― cooperatives, credit unions, savings and loan associations, and other member-based organizations - expanded from 8.3 percent of total credit in 2008 to 13.6 percent in 2016.

From 2011 to 2016, $6.8 billion of quantitative easing (QE) was used to ease a credit crunch, government spending, and loans from state-owned banks. Central bank credit to the government (as a part of QE) increased to 2.4 percent of GDP in 2016, as part of an effort to combat recession. The primary budget deficit increased from$3.4 billion to $4.3 billion, from 2013 to 2014. It then decreased to$3.7 billion in 2015, before rising to 6.1 billion (about 6 percent of GDP) in 2016. In March 2015, the government adopted a temporary balance of payments safeguard, under World Trade Organization rules, in response to the collapse of oil prices and the appreciation of the US dollar. This move enabled Ecuador to impose tariffs on a range of imports. A reduction of imports as a result of tariffs adopted under the balance of payments safeguard provided a stimulus of about 7.6 percent of GDP, thus counteracting spending cuts. anne -> anne... , February 11, 2017 at 07:31 AM https://research.stlouisfed.org/fred2/graph/?g=29Od August 4, 2014 Real per capita Gross Domestic Product for Mexico, Ecuador and Bolivia, 2000-2014 (Percent change) August 4, 2014 Real per capita Gross Domestic Product for Mexico, Ecuador and Bolivia, 2000-2014 (Indexed to 2000) anne -> anne... , February 11, 2017 at 07:32 AM https://research.stlouisfed.org/fred2/graph/?g=29Of November 1, 2014 Total Factor Productivity at Constant National Prices for Mexico, Ecuador and Bolivia, 2000-2011 November 1, 2014 Total Factor Productivity at Constant National Prices for Mexico, Ecuador and Bolivia, 2000-2011 (Indexed to 2000) #### [Feb 12, 2017] The state of our infrastructure: Roads and bridges ###### Feb 12, 2017 | economistsview.typepad.com Fred C. Dobbs -> Tom aka Rusty... February 11, 2017 at 08:05 AM , 2017 at 08:05 AM It has been observed that the US needs a LOT of bridge work. The state of our infrastructure: Roads and bridges http://sponsored.bostonglobe.com/rocklandtrust/the-state-of-our-infrastructure-roads-and-bridges/ Boston Globe - January 31 ... A 2015 survey by the U.S. Dept. of Transportation found there are more than 450 structurally deficient bridges in the state, although the number is down from previous years. Every working day, nearly 10 million cars, trucks, and school buses cross these deteriorating overpasses. And then there's the nation's rail system and airports, which lag far behind other nations in speed, efficiency, and modernization. ... (And that's just in Massachusetts.) Soul Super Bad -> Fred C. Dobbs... , February 11, 2017 at 11:02 AM US needs a LOT of bridge work. " Bridgework and a partial plate! Should we shift gears on our interstate construction? By building our long haul interstates as one-way roads interleaved with roads going in other direction, we could have twice as many roads but intersections could be much simpler, efficient, and less confusing. Freeflow overpass/underpass with turning ramps will save fuel thus environment. Sure! We waste lot of traffic control man hours and squad cars that could be otherwise deployed towards solving crime and crushing the mob. By proper design and construction of speed bumps some of this highway patrol could be eliminated. Ceu! Rather that short 2 foot bumps in the road, build smooth slow and long valley and knoll that will not rattle your frame and bill you for steering realignment but instead send an 18 wheeler up into the air for a half gainer. This kind of speed trap could eliminate lot of bad chromosomes from the gene-pool ! #### [Feb 12, 2017] Trump is more reality based than free trade enthusiast and corporate shills who helped destroy the US by cheering on free trade and de-industrialization. ###### Feb 12, 2017 | economistsview.typepad.com , February 10, 2017 at 08:35 PM The US neoliberal society is facing a lot of serious problems, in many different domains, energy, financial, political, moral. Looks like we live in the society the is either close or is entering the stage of the "perma crises" not just "secular stagnation" as before in "golden years" of Bush II and Obama. But our problem is not called Donald Trump. It is much deeper. He is just a symptom, an apt manifestation of our problems, if you wish. That's what Professor Krugman and his neoliberal friends in NYT are missing in their jeremiad against him. Trump at least noticed 70,000 factories were lost; robots ate homework story total nonsense : , February 10, 2017 at 09:37 PM Trump is more reality based than free trade enthusiast and corporate shills who helped destroy the US by cheering on free trade de-industrialization. Krugman et al. not aware Africa is devoid of industry while East Asia is PACKED with manufacturing and where 90% of robots are produced and used. Trump is about the only sentient policymaker left in America. GOD BLESS HIM AND HIS NOBLE WORK TO RESTORE THE NATION ECONOMISTS WORKED SO HARD TO DESTROY libezkova -> Trump at least noticed 70,000 factories were lost; robots ate homework story total nonsense... , February 11, 2017 at 05:04 AM What has happened to "hope and change" is very straightforward: it buried Democratic Party with its lies and militarism and there is no way back. That's why Trump. Obama said all the right things and did the opposite. He has gutted the country and obliterated the middle class while continuing fighting wars of neoliberal expansion and conquest. Dismissing Trump and Trump's voters as "deplorables" gives Democrats like Krugman an excuse to avoid any self examination about how the neoliberal policies they advocated failed the majority of population of the country and have alienated electorate. The last two democrat presidents destroyed as much of the New Deal as their Republican counterparts and couldn't wait to gut the remnants such as SS. That's undeniable. As a result the key tenets of neoliberal ideology are now as dead as the key postulated of Bolshevism were in 1945. The rule of financial oligarchy disguised as "Liberal democracy", globalization and free trade, free markets as a substitute for government, deregulation, de-industrialization, letting market forces determine the characteristics of employment, etc. Does anybody here believes this sh*t? I doubt it. Even those who advocate it, have doubts. Still as a result of 36 years of brainwashing large swathes of US society accept without questioning the core tenets of neoliberalism much like Soviet population assepted the key postulated on Bolshevism. They believe that "the market" trumps all other forms of organization of activities of the society, that everything works better that way, that markets are virtuous. As a result, they believe in the false notion that the government is always and ever getting in the way of markets and therefore needs to be made as small and weak as possible. If you read Michael Mann's, The Sources of Social Power you will notice that he places Ideological Power first in his four component model of social power: ideological, economic, military, and political. Each of them create different but complementary sources of power within a given society: -- Ideological Power derives from the human need to find ultimate meaning in life, to share norms and values, and to participate in aesthetic and ritual practices with others. -- Economic Power derives from the human need to extract, transform, distribute, and consume the products of nature. Economic relations are powerful because they combine the intensive mobilization of labor with use of capital, trade, and production chains -- Military Power is based on refined, concentrated and lethal violence. -- Political Power is the centralized and territorial regulation of social life. The basic function of government is the provision of order using this type of power. The main tenets of neoliberalism are still very powerfully embedded in people minds. But ideology is dead and that spells troubles the same way as death of Bolshevism spelled troubles for the USSR. See also series of Mark Blyth interviews such as https://www.youtube.com/watch?v=a0q_Ww1q1j8 cm -> libezkova... , February 11, 2017 at 06:30 PM If by bolshevism you mean Soviet communism (the party ideology), I don't know why you say it was dead in 1945. The SU had just won a major war (OK, not entirely on its own), and social development undoubtedly trended up until at least the 70's. Likewise in most other "communist" nations. It was the transition from a largely agrarian society to one based predominantly on industry and technology (powered by fossil fuels, mostly), and much expanded motor vehicle based transportation, like in the West. cm -> cm... , February 11, 2017 at 06:37 PM And the SU along with all other "communist" nations stagnated and declined in the 80's, maybe late 70's. The reasons are manifold, but part was corruption and ineffectiveness of the decision making apparatus by elites insulating themselves from problems and feedback, and self-dealing (at least the top echelons of the elites provided themselves access to Western consumer goods). At the same time they clung on to an increasingly ineffective central planning regime that probably worked better in the early stages, but was overwhelmed by complexity it couldn't handle, aside from corruption. Heavy handed oppression by a pervasive security apparatus could not compensate for nor remove the underlying issues. libezkova -> cm... , February 12, 2017 at 09:14 AM That's all true. What you are missing is the "fish rots from the head". After 1945 or somewhat later the ideology was discredited. The idea that Bolshevism can produce faster economic and technological growth at this time was clearly seen by both the elite and "Russian Intelligentsia" ( https://en.wikipedia.org/wiki/Intelligentsia ) as false. And that fact was intuitively felt as "something went wrong" by Soviet white-collar and blue collar workers. The same happens with neoliberalism in 2008. Suddenly people see that the king is naked. That redistribution of wealth up via "market mechanisms" does not bring prosperity for everybody, just to the top 10 or 20% of population. And top 1% becomes filthy rich at the expense of everybody else. That's the net result. Like in the USSR brainwashing is so strong that this zombie stage will last decades, but I do think neoliberalism is doomed for the same reason that Bolshevism was doomed if not in 1945, then in 70th. It failed to deliver on its promises. And if in the past people like Krugman were viewed as gurus and their math perversions were considered as some hidden revelation of truth about the economics of modern society, now they are viewed as corrupt academic stooges of financial oligarchy they always were. And their math exercises as another smoke screen of charlatans who are pretending to be scientists. Modern snake oil salesmen if you wish. Krugman now can print his math equations (especially differential equations, of which he was so proud of ;-) shred them and eat them with borsch to demonstrate some repentance... If you said nothing as the US deindustrialized and became a third world country, please be quiet now : , February 11, 2017 at 11:26 PM Economists who cheered on de-industrialization and the destruction of the US industrial base really don't have the moral right to say much at this point. You did nothing while the country burned to the ground and now half of the US is a ghetto, and the other half is not a ghetto only because of credit cards and exploding debt levels. Pres. Trump should invite free trade economists on a tour of the destroyed cities: Gary, Camden, E. St. Louis etc. #### [Feb 12, 2017] The neoliberal framework in antitrust is based on pecifically its pegging competition to "consumer welfare," defined as short-term price effects and as such s unequipped to capture the architecture of market power in the modern economy ###### Feb 12, 2017 | economistsview.typepad.com anne : February 11, 2017 at 11:43 AM , 2017 at 11:43 AM http://www.yalelawjournal.org/article/amazons-antitrust-paradox January, 2017 Amazon's Antitrust Paradox By Lina M. Khan Abstract Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm's structure and conduct pose anticompetitive concerns-yet it has escaped antitrust scrutiny. This Note argues that the current framework in antitrust-specifically its pegging competition to "consumer welfare," defined as short-term price effects-is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon's dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational-even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors. This Note maps out facets of Amazon's dominance. Doing so enables us to make sense of its business strategy, illuminates anticompetitive aspects of Amazon's structure and conduct, and underscores deficiencies in current doctrine. The Note closes by considering two potential regimes for addressing Amazon's power: restoring traditional antitrust and competition policy principles or applying common carrier obligations and duties. #### [Feb 12, 2017] Dean Baker on fakeness of neoliberal concept of labour market and NYT presstitutes which promote it ###### Feb 12, 2017 | economistsview.typepad.com anne : February 11, 2017 at 06:45 AM , 2017 at 06:45 AM http://cepr.net/blogs/beat-the-press/justin-wolfers-is-mistaken-restrictions-on-firing-don-t-have-to-reduce-employment February 10, 2017 Justin Wolfers Is Mistaken, Restrictions on Firing Don't Have to Reduce Employment Donald Trump has used his podium on several occasions to harangue companies about moving jobs overseas. This is probably not an effective way to conduct economic policy, but Justin Wolfers misled * New York Times readers in claiming: "Research shows that efforts to boost employment by making it difficult or costly to fire workers have backfired. The prospect of a costly and lengthy legal battle for laid-off employees makes it less appealing to hire new workers. The result has been that higher firing costs have led to to weaker productivity, sclerotic labor markets and higher unemployment." Actually, more recent research results, ** including more recent work *** from the Organisation for Economic Co-operation and Development (the source to which he links), show that there is no necessary link between restrictions on firing and unemployment. While excessive restrictions on firing can undoubtedly hurt employment and growth, there is no reason to assume that moderate amounts of severance pay, or other disincentives to dismiss workers, will discourage investment and hiring. A requirement to give longer term workers severance pay when dismissed does change the incentives facing an employer. In this situation they have more incentive to retrain workers to ensure that they are as productive as possible. They may also opt to invest more in existing facilities rather than move overseas in order to avoid severance pay. -- Dean Baker cm -> anne... , February 11, 2017 at 11:55 AM The primary reason preventing hiring is lack of demand or sales prospects for additional product/services the company produces. A company that can pressure its existing workers to work more, without much risk of resistance or departure, will usually do that. Of course that works only up to a point due to negative impact on work quality etc. When there is convincing additional demand promising sufficient margin, they *will* hire. I have yet to see a company that will forgo profitable business to restrict its size (exception - small founder-owned/controlled businesses where the owner doesn't want the business to grow to the point where they can no longer themselves manage it, and have to accept outside "meddling" in business decisions, i.e. it's no longer their business; also known as "lifestyle business"). In the latter case the reason may also be that outside funding is needed to acquire new capacity (e.g. buy or build a new location), with the risk and imposition of external control that brings. But none of those are problems hiring workers. cm -> anne... , February 11, 2017 at 12:01 PM One thing that employers will frequently do, if they can, is bring in contingent workers on time-limited contracts that are extended one period at the time, for any position where this is possible (low cost to bring somebody up to speed, no dependency on and risk of loos of institutional memory). State or national labor departments will often at some point react to "abuse" (e.g. perma-temps) by imposing limits on contract extensions. Then the next gambit is herding temp workers through staffing agencies, and telling them to change employer every so often to avoid the extension limit. And they will do it because they have no better options. And that's where it always ends up - too few better options for workers. anne -> cm... , February 11, 2017 at 12:12 PM Really nicely explained. cm -> anne... , February 11, 2017 at 12:32 PM Thanks. Of course what would be convenient for employers is to be able to just let go of people who they have to hire as "perm" and retain for a while because of high costs of acquiring in-house experience and institutional knowledge effects. But every product/technology becomes obsolete eventually, the related experience diminishes in value, or at least the volume of demand for it, and after a number of years/decades, well, the workers are also exactly that many years older. #### [Feb 12, 2017] Still Seeking Growth From Tax Cuts and Union Busting ###### Feb 12, 2017 | economistsview.typepad.com Denis Drew : February 11, 2017 at 08:29 AM , 2017 at 08:29 AM Re: Still Seeking Growth From Tax Cuts and Union Busting - Noah Smith States should feel perfectly free to rebuild labor union density -- one state at a time -- making union busting a felony. Republicans will have no place to hide. Suppose the 1935 Congress passed the NLRA(a) intending to leave any criminal sanctions for obstructing union organizing to the states. Might have been because NLRB(b) conducted union elections take place local by local (not nationwide) and Congress could have opined states would deal more efficiently with home conditions -- or whatever. What extra words might Congress have needed to add to today's actual bill? Actually, today's identical NLRA wording would have sufficed perfectly. Suppose, again, that under the RLA (Railroad Labor Act -- covers railroads and airlines, FedEx) -- wherein elections are conducted nationally -- that Congress desired to forbid states criminalizing the firing of organizers -- how could Congress have worded such a preemption (assuming it was constitutionally valid)? Shouldn't matter to us. Congress did not! :-O NYT's Nate Cohn reports Trump won by trading places with Obama as blue collar hero v Wall Street -- trade (unions) back. Republicans will have no place to hide. or more musings on what and how else to rebuild union density locally: http://ontodayspage.blogspot.com/2016/12/wet-backs-and-narrow-backs-irish.html #### [Feb 12, 2017] Russia Will Not Sell Snowden To Trump; Heres Why Zero Hedge ###### Feb 12, 2017 | www.zerohedge.com Submitted by Alexander Mercouris via TheDuran.com, On Friday 10th February 2017 NBC circulated a report the Russian government in order to improve relations with the Trump administration was preparing to hand Edward Snowden over to the US. The report obviously worried Snowden himself, who tweeted that the report proved that he was not and never had been a Russian agent . That suggests that he took the report seriously. Snowden should not be worried, since the report is groundless and is clearly a provocation. To see why it is only necessary to look at the NBC report itself , which makes it clear who is behind it... U.S. intelligence has collected information that Russia is considering turning over Edward Snowden as a "gift" to President Donald Trump - who has called the NSA leaker a "spy" and a "traitor" who deserves to be executed. That's according to a senior U.S. official who has analyzed a series of highly sensitive intelligence reports detailing Russian deliberations and who says a Snowden handover is one of various ploys to "curry favor" with Trump. A second source in the intelligence community confirms the intelligence about the Russian conversations and notes it has been gathered since the inauguration. (bold italics added) It turns out that the story does not originate in Russia. It originates with our old friends the 'anonymous officials' of the US intelligence community. One of these officials claims that the story is based on "intelligence" of "Russian conversations" that the US intelligence community has 'gathered since the inauguration". We have no way of knowing at what level these "conversations" took place, assuming they took place at all, but it is inconceivable that the US intelligence community is genuinely informed of discussions within the top level of the Russian leadership – where such a question would be discussed – or if it is that it would publicise the fact by blurting the fact out to NBC. The reality is that there is no possibility of the Russians handing Snowden over to the US in order to please Donald Trump . Not only would doing so almost certainly breach Russian law – as Snowden's lawyer, who has denied the whole story , has pointed out – but it contradicts what I personally heard Russian President Putin say at the St. Petersburg International Economic Forum in 2014 when the subject of Snowden was brought up, which is that Russia never hands over people like Snowden once they have gained asylum in Russia. That is indeed Russian practice extending far back into the Soviet period, and I can think of no exceptions to it. As it happens Russian Foreign Ministry spokesman Maria Zakharova has denied the story in a Facebook post which links it to the ongoing struggle between the Trump administration and the US intelligence community (about which see more below). Here is how RT translates her post Today, US intelligence agencies have stepped up their work, updating two stale stories, 'Russia can gift Snowden to Trump' and 'confirmation found on the details of the scandalous dossier on Trump allegedly collected by an ex-employee of British intelligence.' But it may seem so only to those who do not understand the essence of the game. None of these statements have been made by representatives of the special services, but is information coming from NBC and CNN, citing unnamed sources. The difference is obvious, but only to experts. Yet it is useful for scandalizing the public and maintaining a degree of [public outrage] . It is evident that the pressure on the new administration on the part of political opponents within the United States continues, bargaining is going on. And that's why the US foreign policy doctrine has not yet been formed It is just possible that US intelligence overheard some gossip in Moscow about the Kremlin handing Snowden over to Donald Trump in order to curry favour with him. The various reports the US intelligence community released during the Clinton leaks hacking scandal show that the US intelligence community is not actually very well informed about what goes on in Moscow or how the Russian government works. In light of that it would not be entirely surprising if someone overheard some gossip about Snowden in Moscow which the US intelligence community is over-interpreting. Far more likely however is that – as Maria Zakharova says – this is a deliberate provocation, spread by someone within the US intelligence community who either wants to signal to Moscow what Moscow 'needs to do' if it wants better relations with the US, or (more probably) as a signal to Donald Trump of the minimum the US intelligence community expects of him if he wants the US intelligence community's support in seeking better relations with Russia. This story is interesting not because of what it says about what the Russians are going to do to Snowden – which in reality is nothing. Rather it is interesting because it shows the degree to which Snowden continues to be an object of obsession for the US intelligence community. The reason for that is that the US intelligence community knows that Snowden is not a Russian spy. As Snowden has pointed out, if he really were a Russian spy no-one in Washington would be talking about the Russians handing him over. The Russians do not hand their spies over any more than the US does, and if Snowden really were a Russian spy no-one in Washington would talking about the Russians handing him over. However if Snowden had been a Russian spy his actions would in that case have been simply a Russian intelligence operation of which the US intelligence community was the victim, of which there have been many since the Second World War. Espionage is what the US and Russia routinely do to each other, and there would be nothing remarkable about Snowden in that case. It is the fact that Snowden is on the contrary a deeply patriotic American who acted from patriotic motives that has the US intelligence community enraged and alarmed. From their point of view having a patriotic American publicly expose their practices Jason Bourne style is a far greater threat than have a Russian spy penetrate their systems, since because of the far greater publicity it is far more likely to damage them politically. This explains the extraordinary feud the US intelligence community has waged against Snowden, which in part explains why it has become so hostile to Russia, the country which has become his protector. Mr.Sono -> knukles •Feb 12, 2017 5:41 PM Putin is a man of his words and not a little bitch like Obama. I was suprised that fake news was all over zerohedge regarding this topic, but at the end zerohedge confirmed the fake news. Giant Meteor -> FreeShitter •Feb 12, 2017 5:35 PM One of the smartest plays the deep state could make is allowing him back, make small fuss, and issue a pardon. It would go far in deflating, diffusing the situation, de minimis so to speak. But, I suppose it is more about absolute control, control of the narrative, full spectrum dominance, cautionary tales etc. Pride goeth before the fall (destruction) I believe. Eventually this laundry is going to get sorted and cleaned, one way or the other. boattrash •Feb 12, 2017 5:13 PM " as Maria Zakharova says – this is a deliberate provocation, spread by someone within the US intelligence community who either wants to signal to Moscow what Moscow 'needs to do' if it wants better relations with the US, or (more probably) as a signal to Donald Trump of the minimum the US intelligence community expects of him if he wants the US intelligence community's support in seeking better relations with Russia." A full pardon from Trump would improve his standing with the American people, IMHO, on both the left and the right. HumanMan -> boattrash •Feb 12, 2017 5:29 PM This was my thought when the story broke. Putin can no longer claim to be a protector of human rights if he hands over Snowden...Unless Trump is going to pardon him. As you pointed you, that would be great (politically) for Trump too. Done this way would be a win win for the two and another win for We The People. On top of that, Putin doesn't want to babysit Snowden. I'm sure the Russians would be happy to have a politically expediant way to get the American spy out of their country. HRClinton •Feb 12, 2017 5:16 PM The Deep State rules, no matter what DJT thinks. The roots go deep in my fomer DOS and in the CIA. Even in the DOD and Senate. Bill and I know this better than anyone. FAKE NEWS: On Friday 10th February 2017 NBC circulated a report the Russian government in order to improve relations with the Trump administration was preparing to hand Edward Snowden over to the US. How many gringos were fooled???--- not many shovelhead •Feb 12, 2017 5:37 PM Pissgate II... Brought to you from your friends at the CIA. Mr. Crisp •Feb 12, 2017 5:50 PM Snowden showed the world that the NSA wasn't just tracking terrorists, they were tracking pretty much everyone, everywhere. He deserves a full pardon. #### [Feb 11, 2017] The Paradox of Financialized Industrialization ##### Notable quotes: ##### "... More than any other economist of his century, Marx tied together the three major kinds of crisis that were occurring. His Theories of Surplus Value explained the two main forms of crises his classical predecessors had pointed to, and which the bourgeois revolutions of 1848 were fought over. These crises were the result of survivals from Europe's feudal epoch of landed aristocracy and banking fortunes. ..." ##### "... Financially, Marx pointed to the tendency of debts to grow exponentially, independently of the economy's ability to pay, and indeed faster than the economy itself. The rise in debt and accrual of interest was autonomous from the industrial capital and wage labor dynamics on which Volume I of Capital focused. Debts are self-expanding by purely mathematical rules – the "magic of compound interest." ..." ##### "... Industrial companies profit from labor not only by employing it, but by lending to customers. General Motors made most of its profits for many years by its credit arm, GMAC (General Motors Acceptance Corp.), as did General Electric through its financial arm. Profits made by Macy's and other retailers on their credit card lending sometimes accounted for their entire earnings. ..." ##### "... This privatization of rents and their transformation into a flow of interest payments (shifting the tax burden onto wage income and corporate profits) represents a failure of industrial capitalism to free society from the legacies of feudalism. ..." ##### "... Marx expected economies to act in their long-term interest to increase the means of production and avoid unproductive rentier income, underconsumption and debt deflation. Believing that every mode of production was shaped by the technological, political and social needs of economies to advance, he expected banking and finance to become subordinate to these dynamics. ..." ##### "... It seemed that the banking system's role as allocator of credit would pave the way for a socialist organization of economies. Marx endorsed free trade on the ground that industrial capitalism would transform and modernize the world's backward countries. Instead, it has brought Western rentier finance and privatization of the land and natural resources, and even brought the right to use these country's currencies and financial systems as casinos. And in the advanced creditor nations, failure of the U.S. and European economies to recover from their 2008 financial crisis stems from leaving in place the reckless "junk mortgage" debts, whose carrying charges are absorbing income. Banks were saved instead of industrial economies, whose debts were left in place. ..." ##### "... No observer of Marx's epoch was so pessimistic as to expect finance capital to overpower industrial capitalism, engulfing economies as the world is seeing today. Discussing the 1857 financial crisis, Marx showed how unthinkable anything like the 2008-09 Bush-Obama bailout of financial speculators seemed to be in his day. "The entire artificial system of forced expansion of the reproduction process cannot, of course, be remedied by having some bank, like the Bank of England, give to all the swindlers the deficient capital by means of its paper and having it buy up all the depreciated commodities at their old nominal values." [6] ..." ##### "... Marx wrote this reductio ad absurdum not dreaming that it would become the Federal Reserve's policy in autumn 2008. The U.S. Treasury paid off all of A.I.G.'s gambles and other counterparty "casino capitalist" losses at taxpayer expense, followed by the Federal Reserve buying junk mortgage packages at par. ..." ##### "... The failure to socialize banking (or even to complete its industrialization) has become the most glaring economic tragedy of Western industrial capitalism. It became the tragedy of post-Soviet Russia after 1991, letting its natural resources and industrial economy be financialized while failing to tax land and natural resource rent. The commanding heights were sold to domestic oligarchs and Western investors buying on credit with their own banks or in association with Western banks. This bank credit was simply created on computer keyboards. Such credit creation should be a public utility, but it has broken free from public regulation in the West. That credit is now reaching out to China and the post-Soviet economies as a means of appropriating their resources. ..." ##### "... Note: Marx described productive capital investment by the formula M–C–M´, signifying money (M) invested to produce commodities (C) that sell for yet more money (M´). But the growth of "usury capital" – government bond financing for war deficits, and consumer lending (mortgages, personal loans and credit card debt) – consist of the disembodied M–M´, making money simply from money in a sterile operation. ..." ###### Jan 26, 2017 | newscontent.cctv.com RGC -> RGC... January 26, 2017 at 05:44 AM The Paradox of Financialized Industrialization By Michael Friday, October 16, 2015 These remarks were made at the World Congress on Marxism, 2015, at the School of Marxism, Peking University, October 10, 2015. The presentation was part of a debate with Bertell Ollman (NYU). I was honored to be made a permanent Guest Professor at China's most prestigious university. When I lectured here at the Marxist School six years ago, someone asked me whether Marx was right or wrong. I didn't know how to answer this question at the time, because the answer is so complex. But at least today I can focus on his view of crises. More than any other economist of his century, Marx tied together the three major kinds of crisis that were occurring. His Theories of Surplus Value explained the two main forms of crises his classical predecessors had pointed to, and which the bourgeois revolutions of 1848 were fought over. These crises were the result of survivals from Europe's feudal epoch of landed aristocracy and banking fortunes. Financially, Marx pointed to the tendency of debts to grow exponentially, independently of the economy's ability to pay, and indeed faster than the economy itself. The rise in debt and accrual of interest was autonomous from the industrial capital and wage labor dynamics on which Volume I of Capital focused. Debts are self-expanding by purely mathematical rules – the "magic of compound interest." We can see in America and Europe how interest charges, stock buybacks, debt leveraging and other financial maneuverings eat into profits, deterring investment in plant and equipment by diverting revenue to economically empty financial operations. Marx called finance capital "imaginary" or "fictitious" to the extent that it does not stem from within the industrial economy, and because – in the end – its demands for payment cannot be met. Calling this financial accrual a "void form of capital." [1] It was fictitious because it consisted of bonds, mortgages, bank loans and other rentier claims on the means of production and the flow of wages, profit and tangible capital investment. The second factor leading to economic crisis was more long-term: Ricardian land rent. Landlords and monopolists levied an "ownership tax" on the economy by extracting rent as a result of privileges that (like interest) were independent of the mode of production. Land rent would rise as economies became larger and more prosperous. More and more of the economic surplus (profits and surplus value) would be diverted to owners of land, natural resources and monopolies. These forms of economic rent were the result of privileges that had no intrinsic value or cost of production. Ultimately, they would push up wage levels and leave no room for profit. Marx described this as Ricardo's Armageddon. These two contributing forces to crisis, Marx pointed out, were legacies of Europe's feudal origins: landlords conquering the land and appropriating natural resources and infrastructure; and banks, which remained largely usurious and predatory, making war loans to governments and exploiting consumers in petty usury. Rent and interest were in large part the products of wars. As such, they were external to the means of production and its direct cost (that is, the value of products). Most of all, of course, Marx pointed to the form of exploitation of wage labor by its employers. That did indeed stem from the capitalist production process. Bertell Ollman has just explained that dynamic so well that I need not repeat it here. Today's economic crisis in the West: financial and rent extraction, leading to debt deflation Bertell Ollman has described how Marx analyzed economic crisis stemming from the inability of wage labor to buy what it produces. That is the inner contradiction specific to industrial capitalism. As described in Volume I of Capital, employers seek to maximize profits by paying workers as little as possible. This leads to excessive exploitation of wage labor, causing underconsumption and a market glut. I will focus here on the extent to which today's financial crisis is largely independent of the industrial mode of production. As Marx noted in Volumes II and III of Capital and Theories of Surplus Value, banking and rent extraction are in many ways adverse to industrial capitalism. Our debate is over how to analyze the crisis the Western economies are in today. To me, it is first and foremost a financial crisis. The banking crisis and indebtedness stems mainly from real estate mortgage loans – and also from the kind of massive fraud that Marx found characteristic of the high finance of his day, especially in canal and railroad financing. So to answer the question that I was asked about whether Marx was right or wrong, Marx certainly provided the tools needed to analyze the crises that the industrial capitalist economies have been suffering for the past two hundred years. But history has not worked out the way Marx expected. He expected every class to act in its own class interest. That is the only way to reasonably project the future. The historical task and destiny of industrial capitalism, Marx wrote in the Communist Manifesto, was to free society from the "excrescences" of interest and rent (mainly land and natural resource rent, along with monopoly rent) that industrial capitalism had inherited from medieval and even ancient society. These useless rentier charges on production are faux frais, costs that slow the accumulation of industrial capital. They do not stem from the production process, but are a legacy of the feudal warlords who conquered England and other European realms to found hereditary landed aristocracies. Financial overhead in the form of usury-capital is, to Marx, a legacy of the banking families that built up fortunes by war lending and usury. Marx's concept of national income differs radically from today's National Income and Product Accounts (NIPA). Every Western economy measures "output" as Gross National Product (GNP). This accounting format includes the Finance, Insurance and Real Estate (FIRE) sector as part of the economy's output. It does this because it treats rent and interest as "earnings," on the same plane as wages and industrial profits – as if privatized finance, insurance and real estate are part of the production process. Marx treated them as external to it. Their income was not "earned," but was "unearned." This concept was shared by the Physiocrats, Adam Smith, John Stuart Mill and other major classical economists. Marx was simply pressing classical economics to its logical conclusion. The interest of the rising class of industrial capitalists was to free economies from this legacy of feudalism, from the unnecessary faux frais of production – prices in excess of real cost-value. The destiny of industrial capitalism, Marx believed, was to rationalize economies by getting rid of the idle landlord and banking class – by socializing land, nationalizing natural resources and basic infrastructure, and industrializing the banking system – to fund industrial expansion instead of unproductive usury. If capitalism had achieved this destiny, it would have been left primarily with the crisis between industrial employers and workers discussed in Volume I of Capital: exploiting wage labor to a point where labor could not buy its products. But at the same time, industrial capitalism would be preparing the way for socialism, because industrialists needed to conquer the political stranglehold of the landed aristocracy and the financial power of banking. It needed to promote democratic political reform to overcome the vested interests in control of Parliaments and hence the tax system. Labor's organization and voting power would press its own self-interest and turn capitalism into socialism. China has indeed exemplified this path. But it has not occurred in the West. All three kinds of crisis that Marx described are occurring. But the West is now in a chronic depression – what has been called Debt Deflation. Instead of banking being industrialized as Marx expected, industry is being financialized. Instead of democracy freeing economies from land rent, natural resource rent and monopoly rent, the rentiers have fought back and taken control of Western governments, legal systems and tax policy. The result is that we are seeing a lapse back to the pre-capitalist problems that Marx described in Volumes II and III of Capital and Theories of Surplus Value. This is where the debate between Bertell Ollman and myself centers. My focus is on finance and rent overwhelming industrial capitalism to impose a depression stemming from debt deflation. This over-indebtedness is making the labor/capital problem worse, by weakening labor's political and economic position. To make matters worse, labor parties in the West no longer are fighting over economic issues, as they were prior to World War I. My differences with Ollman and Roemer: I focus on non-production costs Bertell follows Marx in focusing on the production sector: hiring labor to produce products, but trying to get as much markup as possible – while underselling rivals. This is Marx's great contribution to the analysis of capitalism and its mode of production – employing wage labor at a profit. I agree with this analysis. However, my focus is on the causes of today's crisis that are independent and autonomous from production: rentier claims for economic rent, for income without work – "empty" pricing without value. This focus on rent and interest is where I differ from that of Ollman, and also of course from that of Roemer. Any model of the crisis must tie together finance, real estate (and other rent-seeking) as well as industry and employment. The rising debt overhead can be traced mathematically, as can the symbiosis of the Finance, Insurance and Real Estate (FIRE) sector. But the interactions are too complex to be made into a single economic "model." I am especially worried that Roemer's model might be followed here in China, because it overlooks the most dangerous tendencies threatening China today: Western financial practice and its pro-rentier tax policy. China has spent the last half-century solving Marx's "Volume I" problem: the relations between labor and its employers, recycling the economic surplus into new means of production to provide more output, higher living standards, and most obviously, more infrastructure (roads, railways, airlines) and housing. But right now, it is experiencing financial problems from credit creation going into the stock market instead of into tangible capital formation and rising consumption standards. And of course, China has experienced a large real estate boom. Land prices are rising in China, much as they are in the West. What would Marx have said about this? I think that he would have warned China not to relapse into the pre-capitalist problems of finance funding real estate – turning the rising land rent into interest – and into permitting housing prices to rise without taxing them away. Soviet planning failed to take the rent-of-location into account when planning where to build housing and factories. But at least the Soviet era did not force labor or industry to pay interest or for rising housing prices. Government banks simply created credit where it was needed to expand the means of production, to build factories, machinery and equipment, homes and office buildings. What worries me about the political consequences of Roemer's model is that it focuses only on what Marx said about the production sector and employer-labor relations. It does not ask how "endowments" come into being – or how China has changed so radically in the past generation. It therefore neglects the danger of industrial capitalism lapsing back into a rent-and-interest economy. And by the same token, it underplays the threat to China and other socialist economies of adopting the West's surviving pre-feudal practices of predatory Bubble Finance (debt leveraging to raise prices) and wealth in the form of land-rent charges. These two dynamics – interest and rent – represent a privatization of banking and land that rightly are public utilities. Marx expected industrial capitalism to achieve this transition. Certainly socialist economies must achieve it! China has no need of foreign bank credit – except to cover the cost of imports and the foreign-exchange cost of investment in other countries. But China's foreign exchange reserves already are large enough to be basically independent of the U.S. dollar and euro. Meanwhile, the American and European economies are suffering from chronic debt deflation and depression that will reduce their ability to serve as markets – for their own producers as well as for China. Today's debt-wracked economies throw into question just what kind of crisis the capitalist countries are experiencing. Marx's analysis provides the tools to analyze its financial, banking and rent-extraction problems. However, most Marxists still view the 2008 financial and junk mortgage crash as resulting ultimately from industrial employers squeezing wage labor. Finance capital is viewed as a derivative of this exploitation, not as the autonomous dynamic Marx described. The costs of carrying the rising debt burden (interest, amortization and penalties) deflate the market for commodities by absorbing a growing wedge of disposable business and personal income. This leaves less to be spent on goods and services, causing gluts that lead to crises in which businesses scramble for money. Banks fail as bankruptcy spreads. By depleting markets, finance capital is antithetical to the expansion of profits and tangible physical capital investment. Despite this sterility, finance capital has achieved dominance over industrial capital. Transfers of property from debtors to creditors – even privatizations of public assets and enterprises – are inevitable as the growth of financial claims surpasses the ability of productive power and earnings to keep pace. Foreclosures follow in the wake of crashes, enabling finance to take over industrial companies and even governments. China has largely solved the "Volume I" problem – that of expanding its internal market for labor, investing the economic surplus in capital formation and rising living standards. It is confronted by Western economies that have failed to solve this problem, and also have failed to solve the "Volumes II and III" problem: finance and land rent. Yet few Western Marxists have applied his theories to the present downturn and its rentier problem. Following Marx, they view the task of solving this problem to be solved by industrial capitalism, starting with the bourgeois revolutions of 1848. Already in 1847, Marx's Poverty of Philosophy described the hatred that capitalists felt for landlords, whose hereditary rents siphoned off income to an idle class. Upon being sent copies of Henry George's Progress and Poverty a generation later, in 1881, he wrote to John Swinton that taxing land rent was "a last attempt to save the capitalist regime." He dismissed the book as falling under his 1847 critique of Proudhon: "We understand such economists as Mill, Cherbuliez, Hilditch and others demanding that rent should be handed over to the state to serve in place of taxes. That is a frank expression of the hatred the industrial capitalist bears towards the landed proprietor, who seems to him a useless thing, an excrescence upon the general body of bourgeois production." [2] As the program of industrial capital, the land tax movement stopped short of advocating labor's rights and living standards. Marx criticized Proudhon and other critics of landlords by saying that once you get rid of rent (and usurious interest by banks), you will still have the problem of industrialists exploiting wage labor and trying to minimize their wages, drying up the market for the goods they produce. This is to be the "final" economic problem to be solved – presumably long after industrial capitalism has solved the rent and interest problems. Industrial capitalism has failed to free economies from rentier interest and rent extraction In retrospect, Marx was too optimistic about the future of industrial capitalism. As noted above, he viewed its historical mission as being to free society from rent and usurious interest. Today's financial system has generated an overgrowth of credit, while high rents are pricing American labor out of world markets. Wages are stagnating, while the One Percent have monopolized the growth in wealth and income since 1980 – and are not investing in new means of production. So we still have the Volume II and III problems, not just a Volume I problem. We are dealing with multiple organ failure. Instead of funding new industrial capital formation, the stock and bond markets to transfer ownership of companies, real estate and infrastructure already in place. About 80 percent of bank credit is lent to buyers of real estate, inflating a mortgage bubble. Instead of taxing away the land's rising rental and site value that John Stuart Mill described as what landlords make "in their sleep," today's economies leave rental income "free" to be pledged to banks. The result is that banks now play the role that landlords did in Marx's day: obtaining for themselves the land's rising rental value. This reverses the central thrust of classical political economy by keeping such rent away from government, along with natural resource and monopoly rents. Industrial economies are being stifled by financial and other rentier dynamics. Rising mortgage debt, student loans, credit card debt, automobile debt and payday loans have made workers afraid to go on strike or even to protest working conditions. To the extent that wages do rise, they must be paid increasingly to creditors (and now to privatized health insurance and drug monopolies), not to buy the consumer goods they produce. Labor's debt dependency thus aggravates the "Volume I" problem of labor's inability to purchase the products it produces. To top matters, when workers seek to join the middle class "homeowner society" by purchasing their homes on mortgage instead of paying rent, the price entails locking themselves into debt serfdom. Industrial companies profit from labor not only by employing it, but by lending to customers. General Motors made most of its profits for many years by its credit arm, GMAC (General Motors Acceptance Corp.), as did General Electric through its financial arm. Profits made by Macy's and other retailers on their credit card lending sometimes accounted for their entire earnings. This privatization of rents and their transformation into a flow of interest payments (shifting the tax burden onto wage income and corporate profits) represents a failure of industrial capitalism to free society from the legacies of feudalism. Marx expected industrial capitalism to act in its own self-interest by industrializing banking, as Germany was doing along the lines that the French reformer Saint-Simon had urged. However, industrial capitalism has failed to break free of pre-industrial usurious banking practice. And in the sphere of tax policy, it has not shifted taxes away from land and natural resource rent. It has inverted the classical reformers' idea of "free markets" as being free from economic rent and predatory moneylending. The slogan now means economies free for the rentier class to extract interest and rent. Mode of production or mode of parasitism? Instead of serving industrial capitalism, today's financial sector is bleeding it to death. Instead of seeking profits by employing labor to produce goods at a markup, it doesn't even want to hire labor or engage in the process of production and develop new markets. The epitome of this postindustrial economics is Enron: its' managers wanted no capital at all – no employment, only traders at a desk (and crooked accountants). Today's characteristic mode of accumulating wealth is more by financial than industrial means: riding the wave of debt-financed asset-price inflation to reap "capital" gains. This seemed unlikely in Marx's era of the gold standard. Yet today, most academic Marxists still concentrate on his "Volume I" crisis, neglecting finance capitalism's failure to free economies from the rentier dynamics surviving from European feudalism and the colonial lands conquered by Europe. Marxists who went into Wall Street have learned their lessons from Volumes II and III. But academic Marxism has not focused on the FIRE sector – Finance, Insurance and Real Estate. It is as if interest and rent extraction are secondary problems to the dynamics of wage labor. The great question today is whether post-feudal rentier capitalism will stifle industrial capitalism instead of serving it. The aim of finance is not merely to exploit labor, but to conquer and appropriate industry, real estate and government. The result is a financial oligarchy, neither industrial capitalism nor a tendency to evolve into socialism. Marx's optimism that industrial capital would subordinate finance to serve its own needs Having provided a compendium of historical citations describing how parasitic "usury capital" multiplied at compound interest, Marx announced in an optimistic Darwinian tone that the destiny of industrial capitalism was to mobilize finance capital to fund its economic expansion, rendering usury an obsolete vestige of the "ancient" mode of production. It is as if "in the course of its evolution, industrial capital must therefore subjugate these forms and transform them into derived or special functions of itself." Finance capital would be subordinated to the dynamics of industrial capital rather than growing to dominate it. "Where capitalist production has developed all its manifold forms and has become the dominant mode of production," Marx concluded his draft notes for Theories of Surplus Value, "interest-bearing capital is dominated by industrial capital, and commercial capital becomes merely a form of industrial capital, derived from the circulation process." [3] Marx expected economies to act in their long-term interest to increase the means of production and avoid unproductive rentier income, underconsumption and debt deflation. Believing that every mode of production was shaped by the technological, political and social needs of economies to advance, he expected banking and finance to become subordinate to these dynamics. "There is no doubt," he wrote, "that the credit system will serve as a powerful lever during the transition from the capitalist mode of production to the production by means of associated labor; but only as one element in connection with other great organic revolutions of the mode of production itself." [4] The financial problem would take care of itself as industrial capitalism mobilized savings productively, subordinating finance capital to serve its needs. This already was happening in Germany and France. It seemed that the banking system's role as allocator of credit would pave the way for a socialist organization of economies. Marx endorsed free trade on the ground that industrial capitalism would transform and modernize the world's backward countries. Instead, it has brought Western rentier finance and privatization of the land and natural resources, and even brought the right to use these country's currencies and financial systems as casinos. And in the advanced creditor nations, failure of the U.S. and European economies to recover from their 2008 financial crisis stems from leaving in place the reckless "junk mortgage" debts, whose carrying charges are absorbing income. Banks were saved instead of industrial economies, whose debts were left in place. Irving Fisher coined the term debt deflation in 1933. He described it as occurring when debt service (interest and amortization) to pay banks and bondholders diverts income from being spent on consumer goods and new business investment. [5] Governments use their tax revenues to pay bondholders, cutting back public spending and infrastructure investment, education, health and other social welfare. No observer of Marx's epoch was so pessimistic as to expect finance capital to overpower industrial capitalism, engulfing economies as the world is seeing today. Discussing the 1857 financial crisis, Marx showed how unthinkable anything like the 2008-09 Bush-Obama bailout of financial speculators seemed to be in his day. "The entire artificial system of forced expansion of the reproduction process cannot, of course, be remedied by having some bank, like the Bank of England, give to all the swindlers the deficient capital by means of its paper and having it buy up all the depreciated commodities at their old nominal values." [6] Marx wrote this reductio ad absurdum not dreaming that it would become the Federal Reserve's policy in autumn 2008. The U.S. Treasury paid off all of A.I.G.'s gambles and other counterparty "casino capitalist" losses at taxpayer expense, followed by the Federal Reserve buying junk mortgage packages at par. Socialist policy regarding financial and tax reform Marx described the historical destiny of industrial capitalism as being to free economies from unproductive and predatory finance – from speculation, fraud and a diversion of income to pay interest without funding new means of production. On this logic, it should be the destiny of socialist economies to treat bank credit creation as a public function, to be used for public purposes – to increase prosperity and the means of production to give populations a better life. Socialist nations have freed their economies from the internal contradictions of industrial capitalism that stifle wage labor. China has solved the "Volume I" problem. But it still must deal with the West's unsolved "Volume II and III" problem of privatized finance, land rent and natural resource rent. Western economies seek to extend these neoliberal practices to use finance as a lever to pry away the economic surplus, to finance the transfer of property at interest, and to turn profits, rent, wages and other income into interest. The failure to socialize banking (or even to complete its industrialization) has become the most glaring economic tragedy of Western industrial capitalism. It became the tragedy of post-Soviet Russia after 1991, letting its natural resources and industrial economy be financialized while failing to tax land and natural resource rent. The commanding heights were sold to domestic oligarchs and Western investors buying on credit with their own banks or in association with Western banks. This bank credit was simply created on computer keyboards. Such credit creation should be a public utility, but it has broken free from public regulation in the West. That credit is now reaching out to China and the post-Soviet economies as a means of appropriating their resources. The eurozone seems incapable of saving itself from debt deflation, and the United States and Britain likewise are limping along as they de-industrialize. That is what leads them to hope that perhaps socialist China can save them – as long as it remains free of the financial disease. asset stripping and debt deflation. Western neoliberal economists claim that this financialization of erstwhile industrial capitalism is "progress," and even the end of history. Yet having watched China grow while their economies have remained stagnant since 2008 (except for the One Percent), their hope is that socialist China's market can save their financialized economies driven too deeply into debt to recover on their own. Note: Marx described productive capital investment by the formula M–C–M´, signifying money (M) invested to produce commodities (C) that sell for yet more money (M´). But the growth of "usury capital" – government bond financing for war deficits, and consumer lending (mortgages, personal loans and credit card debt) – consist of the disembodied M–M´, making money simply from money in a sterile operation. Footnotes • [1] In Volume III of Capital (ch. xxx; Chicago 1909: p. 461) and Volume III of Theories of Surplus Value. • [2] Karl Marx, The Poverty of Philosophy [1847] (Moscow, Progress Publishers, n.d.): 155. • [3] Karl Marx, Theories of Surplus Value III: 468 • [4] Capital III (Chicago, 1905), p. 713. • [5] See Irving Fisher, "The Debt-Deflation Theory of the Great Depression," Econometrica (1933), p. 342. Online at http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf. He used the term to refer to bankruptcies wiped out bank credit and spending power, and hence the ability of economies to invest and hire new workers. I provide a technical discussion in Killing the Host (ISLET 2015), chapter 11, and "Saving, Asset-Price Inflation and Debt Deflation," in The Bubble and Beyond, ch. 11 (ISLET 2012), pp. 297-319. • [6] Capital III (Moscow: Foreign Languages Publishing House, 1958), p. 479. RC AKA Darryl, Ron -> RGC... January 26, 2017 at 07:32 AM THANKS! It was awesome, Dude and easy enough to read. #### [Feb 11, 2017] Welfare is assumed to be based upon real income and not relative income with ones group ###### Feb 01, 2017 | economistsview.typepad.com Another good article by Rodrik but a weakness of his analysis is that welfare is assumed to be based upon real income and not relative income with ones "group". Most analyses of welfare find that relative income is quite important. Obviously if one assumes that one's reference group is the world, then the problem goes away; but empirically this is not the case. Assuming that welfare is strongly affected by relative income with a group which is smaller than the world, then global equality is no longer welfare maximizing. Those interested in these issues might be interested in Robert Shelburne, A Utilitarian Welfare Analysis of Trade Liberalization , available as a UN working paper. #### [Feb 11, 2017] As a result of 36 years of brainwashing large swathes of US society accept without questioning the core tenets of neoliberalism much like Soviet population accepted the key postulates of Bolshevism ##### Obama was not a progressive he was a Neo liberal puppet who just spoke the language of progressives at the same time selling out the public﻿ ##### Notable quotes: ##### "... Still as a result of 36 years of brainwashing large swathes of US society accept without questioning the core tenets of neoliberalism much like Soviet population accepted the key postulates of Bolshevism. They believe that "the market" trumps all other forms of organization of activities of the society, that everything works better that way, that markets are virtuous. As a result, they believe in the false notion that the government is always and ever getting in the way of markets and therefore needs to be made as small and weak as possible. ..." ##### "... Ideological Power derives from the human need to find ultimate meaning in life, to share norms and values, and to participate in aesthetic and ritual practices with others. ..." ##### "... The main tenets of neoliberalism are still very powerfully embedded in people minds. But ideology is dead and that spells troubles the same way as death of Bolshevism spelled troubles for the USSR. ..." ###### Feb 11, 2017 | economistsview.typepad.com libezkova -> Trump February 11, 2017 at 05:04 AM What has happened to "hope and change" is very straightforward: it buried Democratic Party with its lies and militarism and there is no way back. That's why Trump. Obama said all the right things and did the opposite. He has gutted the country and obliterated the middle class while continuing fighting wars of neoliberal expansion and conquest. Dismissing Trump and Trump's voters as "deplorables" gives Democrats like Krugman an excuse to avoid any self examination about how the neoliberal policies they advocated failed the majority of population of the country and have alienated electorate. The last two democrat presidents destroyed as much of the New Deal as their Republican counterparts and couldn't wait to gut the remnants such as SS. That's undeniable. As a result the key tenets of neoliberal ideology are now as dead as the key postulates of Bolshevism were in 1945. The rule of financial oligarchy disguised as "Liberal democracy", globalization and free trade, free markets as a substitute for government, deregulation, de-industrialization, letting market forces determine the characteristics of employment, etc. Does anybody here believes this sh*t? I doubt it. Even those who advocate it, have doubts. Still as a result of 36 years of brainwashing large swathes of US society accept without questioning the core tenets of neoliberalism much like Soviet population accepted the key postulates of Bolshevism. They believe that "the market" trumps all other forms of organization of activities of the society, that everything works better that way, that markets are virtuous. As a result, they believe in the false notion that the government is always and ever getting in the way of markets and therefore needs to be made as small and weak as possible. If you read Michael Mann's, The Sources of Social Power you will notice that he places Ideological Power first in his four component model of social power: ideological, economic, military, and political. Each of them create different but complementary sources of power within a given society: • Ideological Power derives from the human need to find ultimate meaning in life, to share norms and values, and to participate in aesthetic and ritual practices with others. • Economic Power derives from the human need to extract, transform, distribute, and consume the products of nature. Economic relations are powerful because they combine the intensive mobilization of labor with use of capital, trade, and production chains • Military Power is based on refined, concentrated and lethal violence. • Political Power is the centralized and territorial regulation of social life. The basic function of government is the provision of order using this type of power. The main tenets of neoliberalism are still very powerfully embedded in people minds. But ideology is dead and that spells troubles the same way as death of Bolshevism spelled troubles for the USSR. See also series of Mark Blyth interviews such as #### [Feb 11, 2017] Trump is more reality based than free trade enthusiast and corporate shills who helped destroy the US by cheering on free trade de-industrialization. ###### Feb 11, 2017 | economistsview.typepad.com libezkova : , February 10, 2017 at 08:35 PM The US neoliberal society is facing a lot of serious problems, in many different domains, energy, financial, political, moral. Looks like we live in the society the is either close or is entering the stage of the "perma crises" not just "secular stagnation" as before in "golden years" of Bush II and Obama. But our problem is not called Donald Trump. It is much deeper. He is just a symptom, an apt manifestation of our problems, if you wish. That's what Professor Krugman and his neoliberal friends in NYT are missing in their jeremiad against him. Trump at least noticed 70,000 factories were lost; robots ate homework story total nonsense : , February 10, 2017 at 09:37 PM Trump is more reality based than free trade enthusiast and corporate shills who helped destroy the US by cheering on free trade de-industrialization. Krugman et al. not aware Africa is devoid of industry while East Asia is PACKED with manufacturing and where 90% of robots are produced and used. Trump is about the only sentient policymaker left in America. GOD BLESS HIM AND HIS NOBLE WORK TO RESTORE THE NATION ECONOMISTS WORKED SO HARD TO DESTROY #### [Feb 10, 2017] The twisted logic of shale propagandists assumes that investors continue to put money into shale oil companies because they believe in abiotic oil. I'm pretty sure that is ###### Feb 10, 2017 | peakoilbarrel.com George Kaplan says: 02/09/2017 at 4:12 pm I had trouble following the logic – one line seems to be that investors continue to put money into oil companies because they (the investors) believe in abiotic oil. I'm pretty sure that is wholly incorrect. I don't get why the recent uptick in USA production (much of which was due to GoM projects that had been started several years ago, not just from shale drilling) has got anything really to do with the losses of the companies highlighted. Is the suggestion that without that uptick investors would have suddenly realised that all the oil companies are going down the toilet? I'm pretty sure that's wrong as well. LTO is still a relatively small part of ExxonMobil and Chevrons portfolio (note if you look only at the upstream parts of those companies the losses actually have been worse than shown, they were saved by downstream profits). The losses are because of over investment leading to a supply glut. There has been almost no impact from falling global demand. The over investment was in all sections not just in LTO. LTO stands out because the supply can be seen to clearly increase over the past few years, but it had not much more impact than oil sands (also showing a clear increase) or in fill drilling in Russia and Opec ME, which just acted to stop decline, and therefore doesn't stand out so much. That ETP thing gets thrown in but, apart from being wrong in many different ways, doesn't seem to be linked to any of the other observations or conclusions. I like the charts though. Rune Likvern says: 02/09/2017 at 6:02 pm Dennis, thanks for posting this. A few comments first of all I advise people to have a look at ExxonMobil's press release re Q4-16 , 2016 results. http://cdn.exxonmobil.com/~/media/global/files/earnings/2016/news_release_earnings_4q16.pdf Negative cash flow does not automatically translate into unprofitably if CAPEX is a big portion of it. There are no doubts that oil companies have taken on more debts, but it would be more helpful if debts were presented on a specific basis that is$of debt per barrel of oil (or oil equivalent) of reserves. So far I cannot see the author has made any real attempts to explain the thermodynamic oil collapse. SRSrocco says: 02/09/2017 at 6:22 pm Rune, Good to see you woke up from the DEAD. Haven't seen you posting much. Glad to know I am able to get you out of BED once in a while. Anyhow . I would imagine we can use any financial metric to show how profitable or unprofitable a company is by relating it to this or that metric, but in the end the figures speak for themselves. The U.S. Major Oil Industry is in big trouble. Hell, the majority of the economy and financial system is one big BUBBLE looking for a PIN. Regardless, ExxonMobil and the rest of the U.S. energy sector is in serious trouble. While ExxonMobil only has$29 billion in long term debt, their total liabilities are \$169 billion.

There's lots of garbage hidden in these companies that most investors tend to overlook.

steve

#### [Feb 10, 2017] From IEA figures suggest that while OPEC was pumping flat out in Q4/2016 we still were in a deficit

##### "... Some of it is probably China, but where did the rest of the 1.3 mbd go? tankers? ..."
###### Feb 10, 2017 | peakoilbarrel.com
daniel says: 02/10/2017 at 4:45 am
IEA numbers out today. One jumped out to me:

OECD stocks fell 800,000 bpd in Q4/2016. This is before any OPEC cuts.

Am I the only one who thinks this is worrying? OPEC was pumping flat out at that point and we still were in a deficit?

Jeff says: 02/10/2017 at 5:14 am
Strange graph though. Where did the oil go? http://www.iea.org/newsroom/news/2017/february/omr-the-first-cut-is-the-deepest.html
It looks like a stock build up of ~500,000 bpd in Q4/2016 but OECD inventories are down 800,000 bpd in the same period.

Some of it is probably China, but where did the rest of the 1.3 mbd go? tankers?

#### [Feb 10, 2017] Neoliberal globalization makes it difficult to sustain the postwar social bargain of labor peace in exchange for steadily improving worker pay and benefits

##### "... It's not globalization, it's "neoliberal globalization" and neoliberalism in general which killed the New Deal capitalism. As soon as the US elite realized the cookies are not enough for everybody they start withdrawing them from the table. Stagnation and the subsequent collapse of the USSR also played an important role, allowing neoliberal propagandists to claim the victory. ..."
###### Feb 10, 2017 | economistsview.typepad.com
Gibbon1 : February 10, 2017 at 01:47 AM
""seem unimpressed by the fact that globalization has lifted hundreds of millions of desperately poor people in China and India into the global middle class. ""

Ergo enabling the savaging of working class people in the US was worth it.

libezkova -> Gibbon1... , February 10, 2017 at 02:08 AM
And I am not sure that it was neoliberal globalization as the only factor in rasining the standards of living in case of China. They have also industrialization process going on, give or take. Chinese maquiladoras were allowed under strict conditions of transferring technology. That's what distinguishes China from India or Mexico, where neoliberal administrations were much less protective of interest of their nations and allowed Western monopolies more freedom.

After all the Communist Party is still a ruling Party of China. With a neoliberal twist yes, but they still adhere to the ideas of Marx.

pgl : , February 10, 2017 at 01:47 AM
Kuttner really captures the contributions of Dani Rodrik. If I had to pick one sentence to capture this review - it would be this:

On the basis of careful empirical work, Rodrik concluded that "globalization makes it difficult to sustain the postwar social bargain" of labor peace in exchange for "steadily improving worker pay and benefits."

libezkova -> pgl... , -1
It's not globalization, it's "neoliberal globalization" and neoliberalism in general which killed the New Deal capitalism. As soon as the US elite realized the cookies are not enough for everybody they start withdrawing them from the table. Stagnation and the subsequent collapse of the USSR also played an important role, allowing neoliberal propagandists to claim the victory.

#### [Feb 09, 2017] Why the USA target Russia for regime change? Is it because of an impending Seneca cliff in Saudi Arabia?

###### Feb 09, 2017 | peakoilbarrel.com
VK says: 02/06/2017 at 7:20 am
Why target Russia? Is it because of an impending Seneca cliff in Saudi Arabia? They were supposed to peak 10 years ago but water and nitrogen injections kept them afloat. Now?

"I've gotten a couple emails from people who have asked me what I think the "end game" is in regards to Russia. And, indeed, the government is going into extra innings with this whole Russia vilification project. This is worse than someone who has held on to a grudge for years. The government does that, too, but they haven't done it over ideology (as with Cuba) for quite some time now. What, then, is the motive?

The motive is perfectly clear: Oil. You see, Russia has already eclipsed Saudi Arabia as the world's biggest oil producer. This means the big Saudi oil fields are drying up. And the government knows that, but they can't tell us this because it'll create a panic. One would think this would motivate the United States to get cozier with Russia. However, what the United States government fears is that if we do that, Russia will twig to the motive for it, and realize it has the United States over a barrel. An oil barrel. At which point the price goes up. Not to mention extracting concessions in the global sphere of influence.

Thus, what the United States is playing at here is trying to install a different "regime" in Russia. That being, one that Vladimir Putin does not control or have any influence over. This is easier said than done and the United States knows this. But the stakes are quite a bit higher than controlling the dwindling oil supply in the Middle East. Russia is obviously in control of most of the world's remaining oil reserves. The United States needs a puppet regime in Russia to have access to that oil without paying the correct market price for it.

At some point, this gambit will fail. Russia is not the Middle East. A war with Russia cannot be won or cease-fired out of. Nor can a United States-backed "regime change" succeed over there. This is not the 1990s Russia of Boris Yeltsin. The United States, however, cannot come clean with the truth to the American people. The reason is because if the American people knew the truth, they'd never sleep nights anymore. The truth is this: Our entire economic system is based on petroleum and low-cost petroleum at that. But the actual nightmare is that our entire agricultural system is based on cheap oil."

George Kaplan says: 02/06/2017 at 2:50 pm
Saudi has had water injection for much longer than ten years on pretty well all it's fields and I don't think they are using nitrogen injection anywhere, there may be some small CO2 EOR projects though. Their production has been maintained by developing three old, heavy oil fields that were mostly dormant (Manifa, Khurais and Shaybah), by using a lot of in-fill drilling and intelligent wells (where water breakthrough can be controlled) on maturing fields and by extensively redeveloping offshore fields with new wellhead platforms and adding artificial lift.

I don't think their fields are anywhere near drying up; they may be hitting some limits in surface facilities – probably to do with water injection or treatment of produced water which means they have to continually choke back so as not to damage the reservoirs.

#### [Feb 09, 2017] Comparing well performance in the Permian and the Eagle Ford, it seems that average IP rates are not that different (582 b/d and 510 b/d, respectively, in the second month of production), but declines in the EFS are much steeper

##### "... That may explain why drilling/completion activity and LTO production in the Permian have remained more resilient and are quickly recovering; while EFS has seen the biggest decline in production among the key LTO plays. ..."
###### Feb 09, 2017 | peakoilbarrel.com
Enno Peters says: 02/07/2017 at 8:40 am
Alex,

"There is no data on average well quality for the wells that started production in 2016. Is that because the data for last year is incomplete?"

If you go to the "Well quality" tab in the first presentation, you'll see 2016 profiles as well.

The "Ultimate Recovery" overview only supports displaying production histories for wells of the same age. As there are still 2016 vintage wells on which I have no data (the ones that started in Nov/Dec), 2016 is not yet shown if you display it by "Year of first flow".

However, if you change the selection to "Quarter of first flow", or "Month of first flow", then you will see more recent data as well, incl 2016.

You may remember past discussions here where we discussed displaying or omitting incomplete tails in the well profile graphs. The Well Quality tab can show incomplete tails, while the Ultimate Recover tab can't.

AlexS says: 02/07/2017 at 10:34 am
Thanks Enno,

I just found that the number 2016 in the legend was hidden.

Comparing well performance in the Permian and the Eagle Ford, it seems that average IP rates are not that different (582 b/d and 510 b/d, respectively, in the second month of production), but declines in the EFS are much steeper.

As a result, by the tenth month, average well in the Permian produces 210.7 b/d, and in the EFS only 122.6 b/d.

Furthermore, well productivity in the Eagle Ford is detereorating over time compared to the wells drilled in previous years, which may suggest that
longer laterals and bigger fracs result in only slightly higher IPs but much steeper declines.

By contrast, new wells in the Permian continue to perfo