Tuesday, February 9, 2016

Diane Coyle — The capitalism we deserve

  Émile Durkheim held that collective consciousness is a key factor in sociology. Societies not only differ owing to culture and institutional arrangements, but also culture and institutional arrangements are both the product of the group mindset and also influence its transformation through influence on the mindsets of individuals. Sociology is a science to the degree that it can identify regularities in social behavior. 

Culture and institutions are analogous to mathematical functions with respect to outcomes of individual behavior in groups, so it is not surprising that patterns of social behavior can be identified and expressed rigorously. 

Societies are not merely aggregations of individuals making individual decisions independently based on individual preferences, as some have supposed. Not only is cross-influence operative, but also sets of rules, some implicit, like tradition, and some explicit, like law. Behavior is internally correlated by shared mindsets but and externally correlated by culture and institutions.

Capitalism is a socio-economic phenomenon exhibited by many societies. Being an expression of a shard mindset and established through custom and law, it is subject to these influences and follows rules. 

Capitalism's expression and transformations in particular societies is based on the level of collective consciousness of that society. The type of collective consciousness and their level in the sense of exhibiting inclusivity and universality that sociologists call "solidarity" fluctuates.

In this sense the culture and institutions that a society "deserves" is based on the level of collective consciousness. Because collective consciousness is not constant, it can be "improved" in the sense of increasing the sense of solidarity. This implies different varieties of capitalism based on different levels of solidarity, from the extreme individualism of laissez-faire to the managed capitalism of social democracy.
Historian Jürgen Kocka has written Capitalism: A Short History at 169 pages. What’s more, it spans the centuries from China during the Han Dynasty through the Arab empire and the European Middle Ages to global financial capitalism today.
The Enlightened Economist
The capitalism we deserve
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

Bill Mitchell — Is exchange rate depreciation inflationary?

One of the first things that conservatives (and most economists which is typically a highly overlapping set) raise when Modern Monetary Theory (MMT) proponents suggest that increased deficits are essential to reduce mass unemployment is the so-called balance of payments constraint. Accordingly, we are told that the capacity of a nation to increase domestic employment is limited by the external sector. And these constraints have become more severe in this age of multinational firms with their global supply chains and the increased volume of global capital flows. I will address the specific issue of a balance of payments constraint on real GDP growth (that is, the limits of fiscal stimulus) in a future blog. But today I want to consider the so-called Exchange Rate Pass-Through (ERPT) effects of that are part of the balance of payments constraint story. The mainstream narrative goes like this. Higher wage demands associated with full employment and/or stronger imports associated with higher fiscal deficits lead to external imbalances due to rising imports and loss of competitiveness in international markets (eroding export potential). In a system of flexible exchange rates, the currency begins to lose value relative to all other currencies and the rising import prices (in terms of the local currency) are passed-through to the domestic price level – with accelerating inflation being the result. If governments persist in pursuing domestic full employment policies the domestic inflation worsens and the hyperinflation is the result, with a chronically depreciated currency. Real standards of living fall and a general malaise overwhelms the nation and its citizens. I am sure you have heard that narrative before – it is almost a constant noise coming from the deficit phobes. Like most of the conservative economic claims and I include the austerity-lite Leftist parties in this group, it turns out that reality is a bit different. Here is some discussion on that issue.…
Bill Mitchell – billy blog
Is exchange rate depreciation inflationary?
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Sanders Wins!

I'm for once with Olbermann here:

Monday, February 8, 2016

William Dunkerley — Six reasons you can't take the Litvinenko report seriously

I’ve been analysing this case since Litvinenko’s death, and I’ve followed the inquiry closely. I don’t know whether or not his murder was ordered by the Russian president or anyone in the Kremlin. What I do know is that Owen’s findings are not supported by reliable evidence.

The report relies on hearsay and is marred by inconsistent logic. It offers no factual insights into what really happened to Litvinenko, yet has been taken as gospel truth by governments and pundits across the west.

Here are some of the problems…. 
All the earmarks of propaganda. Dunkerley concludes:
It is clear that those who are behind these claims against the Russian president have an agenda, and are using a wealth of means in their attempts to convince others.

The public inquiry’s acceptance of so many of their questionable allegations casts a pall over Owen’s efforts and renders his report practically useless.
The Guardian
Six reasons you can't take the Litvinenko report seriously
William Dunkerley

IRS tax refunds recovering only very slowly, threatening recession now.

I was bullish until January 29. On or around that date a computer glitch at the IRS caused electronic filing, payments and refund activity to be shut down.

This had a huge effect on overall Federal spending levels. January ended horribly--$266 billion for the month when a "normal" January should have been about $80 billion to $100 billion higher.

The flow of tax refund payments is huge in February. Biggest month of year. Well over $100 billion for the month and closer to $120 billion or, $130 billion. It pushes the overall month of February up to $460 billion or more. That's more than 10% of all government spending happens in February.

Supposedly the IRS computer glitch has been fixed, but those tax refunds are still lagging way behind.

Here's the problem: sentiment now is horrible and the economy is barely growing. One small cutback in government spending now, like the loss of a portion of those tax refunds, combined with the chilling effect of the stock market selloff, will throw the economy into recession.

We are at great risk for this now and also great risk for a further market selloff is those refunds don't get back up to where they need to be.

Jeff Desjardins — Putting America’s Defense Spending into Perspective

Visual Capitalist
Jeff Desjardins

Richard A. Werner — “Negative” Interest Rates and the War on Cash

Banks cannot lend out their reserves at the central bank. As we show in the book “Where does Money come from?”, banks’ reserves at the central bank are simply credits created by the central bank for the benefit of the banks – central bank money that cannot circulate in the economy.
As a result, negative interest rates on banks’ reserves at the central bank are simply a tax imposed on banks. So why would central banks impose new taxes on banks at this stage? The experience of Switzerland may provide answers: negative rates raise banks’ costs of doing business. The banks respond by passing on this cost to their customers. Due to the already zero deposit rates, this means banks will raise their lending rates. As they did in Switzerland. In other words, reducing interest rates into negative territory will raise borrowing costs!
Out of paradigm in other ways, though.

“Negative” Interest Rates and the War on Cash
Richard A. Werner | Professor of International Banking, University of Southampton

Karel van Wolferen — The Predators Behind the TPP

The designation “trade” used by politicians and the media when talking about the Trans-Pacific Partnership (TPP) pact and the proposed Trans-Atlantic Trade and Investment Partnership (TPIP) agreement is another perfect example of a misnomer thanks to which a new shadow will be cast over the generally more fortunate parts of the world.
If signed and ratified, the trans-Pacific and trans-Atlantic agreements, which seek to organize business activity under one gigantic umbrella of new rules, are likely to change our living environment in ways very different from what elected officials have been misled to imagine.
They have been peddled as trade treaties, and hence as being wonderful for economic growth, job creation, social well-being and general happiness.
But the TPP agreement, which aims to tie the United States together with close to a dozen countries in Asia, Oceania and a bit of Latin America, is not in the first place about trade, and may hardly be significant at all for stimulating genuine exchanges traditionally labelled that way. The same is true for its TPIP companion, which is meant to create and foster a new American-European business environment.
The TPP and TPIP accords are about power, not trade. More specifically, the agreements are about changed power relations between a collectivity of politically well-connected large corporations and the sovereign states in which these entities want to sink new roots. In particular, these treaties would allow U.S. corporations to engage in conduct unchecked by national rules of the participating countries. In eyes not fogged over through neoliberal dogma, such a thing would be recognized as predation.…
All this is easily understood. But it still leaves us with the puzzle of why Asians as well as Europeans, whose EU trade commissioners have been mouthing the same job creating nonsense around the TPIP that accompanies the TPP rhetoric, appear unable to tackle intellectually the dominant power aspects of these treaties.
Perhaps this is because the world in which they exist is politically sterilized by current economic suppositions. More generally, the concept of power (not influence with which it is often confused) receives a “stepmotherly” treatment in popular as well as serious writing, and the social science denizens of academia are entirely at sea over it.
Mainstream economics is ahistorical by design and hence has no room for power, which has helped continue the fateful division of political and economic affairs into separate realms for discussion that has long served the interests of power elites…
Raging Bull-Shit
The Predators Behind the TPP
Karel van Wolferen, former NRC Handelsblad correspondent for East Asia, and professor emeritus of comparative political and economic institutions at the University of Amsterdam
(cross-posted from The Japan Times)

Alexander Mercouris — How the Sanctions Are Preparing the Ground for the Next Russian Economic Boom

When all is said and done, sanctions are a form of blackmail. The US and its allies imposed them on Russia in order to force Russia to do what they wanted in Ukraine.

That is blackmail however justified it might be, and however it is dressed up, and whatever it is called.
Regardless of what view one takes of Russian policy in Ukraine, capitulating to US demands to get the sanctions lifted would for Russia have been extremely dangerous.
Anyone with any knowledge or experience of blackmail knows that the biggest mistake one can make with a blackmailer is to submit to his demands. All that does is pave the way for more and more demands.
Had Russia capitulated to the US over Ukraine because of the sanctions, it would have shown weakness. The US would have learnt that Russia is a country that submits to pressure. More demands - backed by more threats of more sanctions and more pressure - would have followed.

These would in time have covered the whole spectrum of the US-Russia relationship, including the war in Syria, arms control, the conduct of court cases in Moscow, compensation for the Yukos shareholders, the way votes in Russian elections are counted, or whatever.
The best possible response to a blackmailer is to refuse to acknowledge his blackmail - and that is exactly what Russia has done.
There is no doubt the Russians understand this. That is why - as I discussed recently - Russian leaders like Putin, Lavrov, Ivanov and Patrushev say Russia refuses to talk about the sanctions with Western leaders.…
Not only Putin has noticed.

Russia Insider
How the Sanctions Are Preparing the Ground for the Next Russian Economic Boom
Alexander Mercouris

Why Economists Don’t Know How to Think About Growth — Eric Michael Johnson interviews Fritjof Capra

Quantitative versus qualitative, physics versus biology, market system versus welfare system, growth versus harmony and balance, and unsustainability versus sustainability.

Why Economists Don’t Know How to Think About Growth
Eric Michael Johnson interviews Fritjof Capra

Joseph E. Stiglitz and Hamid Rashid — What’s Holding Back the World Economy?

Out of paradigm.

Project Syndicate
What’s Holding Back the World Economy?
Joseph E. Stiglitz and Hamid Rashid

Martin Armstrong — The Overview of the Political Storm

Trump would be better insofar as he will not sign whatever tax bill is before him. Bernie would sign any tax bill that targets the so called “rich” and he would destroy jobs for the youth for it is SMALL BUSINESS that creates 70% of all jobs – not big corporations.
If neither one wins the election, we are looking at the complete collapse by the 2018 election. Congress will not reform without a gun pointed to its head and the economy is going to do just that beginning in 2017.
Armstrong Economics
The Overview of the Political Storm
Martin Armstrong

Paul Craig Roberts and Michael Hudson — The Atlanticist Tactic Revisited

Paul Craig Roberts and Michael Hudson team up to analyze the Russian economy and economic policy. MMT-friendly.

Michael Hudson
The Atlanticist Tactic Revisited
Paul Craig Roberts and Michael Hudson

Bill Mitchell — The capacity of the state and the open economy – Part 1

Wolfgang Merkel wrote in his recent Op Ed (February 5, 2016) – Economy, Culture And Discourse: Social Democracy In A Cosmopolitanism Trap? – that “we are dealing with a partially deliberate, partially careless surrender of the state’s capacity to regulate and intervene in an economy that structurally creates socio-economic inequality and erodes the fundamental democratic principle of political equality”. I highlight, the “partially deliberate, partially careless surrender” description of what has occurred over the last several decades as neo-liberalism has gained traction. Today’s blog continues my series that will form the content for my next book (due out later this year) about the impacts of globalisation on the capacities of the nation state. Our contention (I am writing this with Italian journalist and author Thomas Fazi) is that there has been no diminuition in the power of the state to impact on the domestic economy. The neo-liberal era has seen many commentators deny that proposition, yet, knowingly advocate use of these powers to further advantage capital at the expense of labour. The state is still central to the picture – it just helps capital more and workers less than it did during the full employment period in the Post World War II decades.…
Bill Mitchell – billy blog
The capacity of the state and the open economy – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Egypt Food Supply

Might be something to keep an eye on.  Looks like food flow to Egypt is in danger of some disruption.

Egypt, for the second time in a week, scrapped a tender for wheat, after receiving offers for just four cargos, underlining the extent of caution among merchants over dealing with the world's top importer of the grain. Gasc, the official Egyptian grain authority, gave no reason for ditching the tender. However, the event attracted offers of just four cargos of wheat – two from France, and one apiece from Romania and Russia. 
A Gasc tender just before Christmas - the last before Egypt's wheat purchases because shrouded in concerns over credit, and a zero tolerance of cargos containing ergot – received offers of more than 1.2m tonnes of the grain. The price of the wheat offered was - at $186.63-193.55 a tonne, excluding freight of $5.00-7.59 a tonne, depending on origin - also viewed by some traders as an above-market rate, reflecting a premium for the increased risk of dealing with Egypt.

Throw another one on the pile

Here's another one now "Paypal is money!"... looks like T.O. thinks so...

Patrick Smith interviews Ray McGovern — A veteran CIA agent spills the goods on the Deep State and our foreign policy nightmares

You prolly want to read this. Some bombshells.

“Intelligent people know that the empire is on the downhill”: A veteran CIA agent spills the goods on the Deep State and our foreign policy nightmares
Patrick Smith, Salon’s foreign affairs columnist and former foreign correspondent or the International Herald Tribune and The New Yorker, interviews Ray McGovern, twenty-seven year CIA veteran turned dissident.

Sunday, February 7, 2016

Ann Jones — American Capitalism Has Failed Us: We're Overworked, Underemployed and More Powerless than Ever Before

Comparing America to the Nordic model. Guess which wins big?

Sputnik — Obama Eager to Slow Russian Campaign in Syria 'By Any Means Possible'

Washington's true intentions with regard to Syria have long been a hot topic, with many saying that the Obama administration is still determined to pursue a regime change in the war-torn Arab country despite the fact that it has toned down its "Assad must go" rhetoric.
International relations expert Rob Prince shares this sentiment. He believes that Washington wants President Bashar al-Assad out of the picture "so that the oil fields and pipeline corridors could be secured by the western oil giants and protected by new US military bases sprinkled across the country."
In the expert's opinion, this has been Washington's "basic game plan since Day 1."

Not just this "expert." Pepe Escobar has been tracing this out for some time.

Obama Eager to Slow Russian Campaign in Syria 'By Any Means Possible'

Eric Tymoigne — Money and Banking – Part 5

Next up in the series.
Previous posts studied the balance sheet of the fed, definitions and relation to the balance sheet of the fed, and monetary-policy implementation. In this post, I will answer some FAQs about monetary policy and central banking. Each of them can be read independently.
New Economic Perspectives
Money and Banking – Part 5
Eric Tymoigne | Associate Professor of Economics at Lewis and Clark College, Portland, Oregon; and Research Associate at the Levy Economics Institute of Bard College

Prediction Markets update

Election Betting Odds


Predict It

Iowa Electronic Markets

IRS computer glitch a problem.Throws economy into peril. Stock market could be looking at fresh lows

The IRS computer glitch that occurred 10 days ago is a problem. Tax refunds are not going out. Spending has dropped down sharply versus last year. It had been up, modestly, but now it's fallen off and it's not obvious that the economy can handle any gov't spending pullback now when people are really on the defensive. Data from the Daily Treasury Statement does not show tax refunds picking up very much. Stock market could be looking at fresh lows.

Gene Epstein on oil price

Oil bulls, take heart. The last leg of the bear market that began in mid-2014 is probably in sight, as marginal producers fall by the wayside. Supply cutbacks should bring a rebound in the price of crude by the second half of 2016.

But before a rebound, West Texas Intermediate crude will probably continue to fall, perhaps as low as $20 a barrel, before vaulting to the mid-$50s by year end.…
Across the Curve
$20 Oil
Gene Epstein, Barron's

James Hamilton — Negative interest rates

Knock-on effects.

Negative interest rates
James Hamilton


The International Monetary Fund in January published a report which calls on European countries to accept the majority of refugees and to temporarily employ and pay them with less than the guaranteed minimum wage.
The IMF in its report recommended the implementation of short-term differentiation between asylum seekers and EU citizens through “temporary” and limited deviations from the minimum wage for refugees.…
South Front
Published at AlterMainstreamInfo, translated by Mario Andrijasevic exclusively for SouthFront

Edward Lozansky — Looming War: Who Is to Blame?

The film about nuclear war with Russia recently shown on the BBC, which is considered to be a serious and not an entertainment channel, suggests that such a war is no longer unthinkable but a real possibility. What was even more frightening was that the people in the film who made a fateful decision to start an Armageddon were not actors, but high level albeit retired politicians.

The film was timed to the release of the latest Pentagon analysis where Russia topped the list of threats to U.S. national security, followed by China, North Korea, Iran and finally, terrorism.…
Getting the sheeple ready.

Russia Insider
Looming War: Who Is to Blame?
Edward Lozansky

Moon of Alabama — Why Kerry Blames The Opposition For The Continuing Bombing In Syria

MOA finds it unlikely that the US will allow Turkey and Saudi Arabia to drag it into a war with Russia it doesn't want in support of Al Qaeda. 

Recall this all began with Zbig selling Jimmy Carter on sending "freedom fighters" to Afghanistan to destabilize the USSR. It morphed into a monster that turned around and bit the US in the ass and is now destabilizing Europe in addition to MENA. It is far from over, and Russia has now drawn some red lines to put a stop to the insanity. Now the West is drying in its beer over Russian successes.

Vesti — Ryabkov: Washington Is Preparing A "Global Strike"

Washington continues to prepare a global strike, according to Deputy Foreign Minister of the Russian Federation Sergei Ryabkov to RIA Novosti . He noted that a continuation of negotiations on further nuclear reductions are impossible for this reason. 
Fort Russ
Ryabkov: Washington Is Preparing A "Global Strike"
Vesti (original in Russian)
Translated by Ollie Richardson for Fort Russ

Jacques Sapir — Russia and Global Finance

The shaping of economic reactions by globalized finance
The result of these different factors is well known. The ruble has taken quite a beating since late summer 2014. But, this has not been the direct driver for the recession Russia is experiencing. The real driver was the reaction of the Central Bank. And here we could argue well that the Central Bank policy was self-destructing. A large part of the current recession has been created by Central Bank actions and definitely not by Western sanctions or oil prices fall. We are then to precisely figure the Central Bank reaction to the inflationary bout induced by the fall of the rouble we discussed above. The Central Bank of Russia is committed to an “inflation targeting” policy[8]. Wise or unwise[9], and we don’t think it is wise as much is to be said about the so-called “inflation targeting” policy[10], it’s a fact. The CBR will then increase its interest rates every time inflationary pressures are seen coming.
But the story doesn’t end here. If the ruble depreciation is taking a fast dive, the Central Bank will increase much its rates to “crush” speculation, as it has be seen in December 2014 when the CBR raised its primary rates to 17%. Here again it was a blatant mistake, but here again it’s a fact. High interest rates have never prevented speculation on any currency in the world[11]. It was too true for the ruble.
But the dramatic increase of interest rates had a very negative impact on the economy. To sum up a drop in oil prices is creating a very adverse financial environment for households and enterprises alike. Household are reducing (or more precisely containing) their debts linked to consumption and enterprises are reducing investments. This parallel reduction in investment and consumption had and still is having a very negative influence on economic activity.

It’s obvious than introducing some forms of capital controls could have done a better job. It is to be known that even the IMF now recommends capital controls in some specific situations[12] as it is now well acknowledged that strong exchange rates fluctuations could be extremely disruptive for the economy[13]. Some Russian authors have advocated such a move[14], and the debate is still going on[15]
The introduction of such a system could allow Russia to develop a strong industrial sector to provide both the internal market and the export market too without interference from the globalized finance. This was the strategy adopted by a number of East-Asian countries[16], but also by France between 1945 and 1975[17]. Such a development doesn’t imply to stop developing the commodity sector. Actually, the oil and gaz sector could become major consumer of Russian manufactured goods and help to develop a high-tech sector.
The main issue here is more how to ensure the development of manufactured goods without compromising the production of commodities. It is not just a problem of developing new productions but also one of changing the whole structure of Russian industry as a significant number of new enterprises are to be created to develop these new productions, and their development is challenging an industry used to rely on large integrated groups.
It is true to say that the Russian government has put a priority on the development of a modern manufacturing sector for years. But, when the Ukrainian crisis began to shape international relations Russia has not broken with its traditional model. To some extent the crisis in international relations has the direct effect to make the change of model both an absolute necessity. But, in the same time, this crisis was making it a very hard undertaking. So far Russia is still caught in the middle of a kind of new “transition”, but time is running short.…
These excerpts focus on the central bank. The post analyzes the Russian economy and financial system in greater depth, showing that the issue is really not economic but financial, with finance bound up in global finance to the detriment of Russia, and by implication other countries other than the Atlanticists that control global finance under the dollar system.

Sapir is one of the few people in the West I have encountered to recognize that the Central Bank of Russia is the chief problem. The heterodox wing of Russian economists knows this and has been lobbying for a change in policy. This crisis presents a perfect opportunity for restructuring but that requires domestic financing. The Central Bank of Russia is being an obstacle instead of facilitating restructuring as the issuer of the ruble.

This analysis reveals the pressing need to get MMT materials translated into other languages and more widely distributed.

Russia and Global Finance
Jacques Sapir

Jeffrey Sachs — Hillary Is the Candidate of the War Machine

There's no doubt that Hillary is the candidate of Wall Street. Even more dangerous, though, is that she is the candidate of the military-industrial complex. The idea that she is bad on the corporate issues but good on national security has it wrong. Her so-called foreign policy "experience" has been to support every war demanded by the US deep security state run by the military and the CIA.…
It is often believed that the Republicans are the neocons and the Democrats act as restraints on the warmongering. This is not correct. Both parties are divided between neocon hawks and cautious realists who don't want the US in unending war. Hillary is a staunch neocon whose record of favoring American war adventures explains much of our current security danger.
Jeff gets one right when it counts.
It is hard to know the roots of this record of disaster. Is it chronically bad judgment? Is it her preternatural faith in the lying machine of the CIA? Is it a repeated attempt to show that as a Democrat she would be more hawkish than the Republicans? Is it to satisfy her hardline campaign financiers? Who knows? Maybe it's all of the above. But whatever the reasons, hers is a record of disaster. Perhaps more than any other person, Hillary can lay claim to having stoked the violence that stretches from West Africa to Central Asia and that threatens US security.

The Huffington Post
Hillary Is the Candidate of the War Machine
Jeffrey Sachs

Professor Sachs serves as the Director of The Earth Institute, Quetelet Professor of Sustainable Development, and Professor of Health Policy and Management at Columbia University. He is Special Advisor to United Nations Secretary-General Ban Ki-moon on the Sustainable Development Goals, and previously advised both UN Secretary-General Ban Ki-moon and UN Secretary-General Kofi Annan on the Millennium Development Goals. He is a Distinguished Fellow of the International Institute of Applied Systems Analysis in Laxenburg, Austria. Sachs is Director of the UN Sustainable Development Solutions Network under the auspices of UN Secretary-General Ban Ki-moon. Sachs is co-founder and Chief Strategist of Millennium Promise Alliance, and is director of the Millennium Villages Project. Sachs is also one of the Secretary-General’s MDG Advocates, and a Commissioner of the ITU/UNESCO Broadband Commission for Development.