Wednesday, September 17, 2014

Saker — Uniat priests calls for depriving Orthodox from basic civil rights

Saker advises not overlooking the religious dimension in the Ukrainian conflict. Religion is always a complicating factor.

For example, Jewish exceptionalism is based on being God's (YHVH) chosen people. American exceptionalism is based on the belief that God — and Jesus is God — has favored the US. Some conservative Christians believe that it is the mission of the US to convert the world to their conception of Christianity and open the way for the Second Coming. Islamic exceptionalism is based on the belief that the world will eventually be converted to Islam and live under sharia. The most conservative of all three believe that God's law is superior to and supersedes human law. These ideas are strong forces geopolitically today.

In Christianity, the split between the Latin (Roman) Church and the Orthodox churches in 1054, a split that is largely forgotten in the West but not in the East, eventually led to war. Similarly, the Protest Reformation also led to war and the conflict has persisted in some places, notably Northern Ireland.

These are powerful forces that should not be overlooked or underestimated, especially because the religious factor is closely combined with other factors such as nationalism and ethnicity. People have been willing to fight and die over these differences. The stage is set for Ukraine to become another Northern Ireland.

The Vineyard of the Saker
Uniat priests calls for depriving Orthodox from basic civil rights

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Chris Dillow — What Phillips curve?

Economists have recently been abandoning once-core concepts in macroeconomics such as the money multiplier and IS-LM model. This week's figures remind me of something I'd also throw on the bonfire - the Phillips curve.
Bill Mitchell and Joan Muysken have already done that in Full Employment Abandoned: Shifting Sands and Policy Failures (Elgar, 2008).

Stumbling and Mumbling
What Phillips curve?
Chris Dillow | Investors Chronicle

David Kravets — Justice Sotomayor says technology could lead to “Orwellian world”

Let's hope that Sonia Sotomajor becomes the next William O. Douglas.

Ars Technica
Justice Sotomayor says technology could lead to “Orwellian world”
David Kravets
h/t Yves Smith at Naked Capitalism

Lord Keynes — Gillies’ Philosophical Theories of Probability, Chapter by Chapter Summaries


Social Democracy For The 21St Century: A Post Keynesian Perspective
Gillies’ Philosophical Theories of Probability, Chapter by Chapter Summaries
Lord Keynes

Saker — On a lighter note: the BBC propaganda is still the best [snark]

I had the same thoughts when I read the BBC report.

The Vineyard of the Saker
On a lighter note: the BBC propaganda is still the best

Background with pictures: The Situation in the Donbass as of September 2, 2014 at

Ramanan — Credit And Economic Growth

Here I expand on Ramanan's SFC analysis with the observation that credit fuels nominal growth, but only up to a point. Then, the credit burden becomes a drag on further spending. At this point the economy adjusts to lower spending. This affects both the business and financial cycles. 

This has to do with expectations in the face of uncertainty, Keynes's "animal spirits," which at tops become Shiller's "irrational exuberance." As the credit wave crests and the cycle rolls over, Keynes's paradox of thrift kicks in. Increasing saving desire of more and more parties results in lagging demand and economic contraction, unless another sector offsets the increasing propensity to say. 

This cyclical behavior of credit is also described in Hyman Minsky's analysis of financial instability.

The rational approach to credit is to manage credit balances in such a way to provide a margin of safety regarding repayment. This is management of cash flow or liquidity, and the penalty for not doing so sufficiently is insolvency.

However, not everyone behaves rationally all the time. At tops, greed trumps fear, and in troughs, fear trumps greed. It is simply not the case that borrowers always hit the sweet spot. If they did, then economic and financial cycles would flatten in an endogenous, credit-based money system.

In any case, credit fuels growth in an endogenous money system where spendable funds enter the system chiefly through bank credit. Therefore, the changing ratio between propensity to save and propensity to spend determines a critical amount of spendable funds created in the consolidated domestic private sector. 

The flow is subject to irrational behavior owing to "animal spirits," in which expectations are driven by alternating balance between fear and greed, for example, that result in differences in liquidity preference. Changing liquidity preference results in different saving/borrowing patterns that are visible in hindsight. But, as Keynes observed, markets can remain irrational longer than one can remain solvent. Identifying cyclical tops and bottoms in advance is difficult to impossible.

The monetarist view is the the interest rate determines liquidity preference rationally. This overlooks the human aspects of expectations and behavior that are affected by strong emotions. Interest rates are highest at tops, where greed impels parties to pay more for liquidity in order to take advantage of apparent profit opportunities or spend more in the consumption frenzy. Then, at bottoms, low interest rates do not necessarily lead to increased borrowing and spending as predicted, owing to the perceived necessity to deleverage and also extreme caution in managing cash flow.

The Case for Concerted Action
Credit And Economic Growth

Marshall Auerback — The Continuing Sorrows Of Matteo Renzi

Update on Italy.

Macrobits by Marshall Auerback
The Continuing Sorrows Of Matteo Renzi
Marshall Auerback

Tuesday, September 16, 2014

Zhao Jinglun — The West provoked the Ukraine crisis

A Chinese viewpoint.
The West provoked the Ukraine crisis
Zhao Jinglun |Columnist

Lidia Kelly — Russia needs government investment to avoid recession, says former finance minister

Russia risks slipping into recession because the government is not investing enough in the economy to weather Western sanctions, former finance minister Alexei Kudrin said on Tuesday, criticizing the strategy so far.
A strong advocate of liberal reforms, Kudrin has become almost the only voice in the Russian elite to question economic policy since the Ukraine crisis, counting on his long-term close ties to President Vladimir Putin to protect him from censure.
Taking aim at the generous spending pledges Putin made when he returned to the presidency in 2012, Kudrin said Moscow did not have the funds to invest in an economy, which was flagging before the West imposed sanctions over Russia's role in Ukraine.
"In a difficult moment like this, it would be useful to increase government investments. This is exactly what the market needs now. To cut government investment now and increase pay is inappropriate," he told a foreign business conference.
Somebody gets it.

Russia needs government investment to avoid recession, says former finance minister
Lidia Kelly

Joe Romm — This Changes Everything: Naomi Klein Is Right, Unchecked Capitalism Will Destroy Civilization

Joe Romm reviews This Changes Everything: Capitalism Vs. The Climate.

Think Progress
This Changes Everything: Naomi Klein Is Right, Unchecked Capitalism Will Destroy Civilization
Joe Romm

Dean Baker — The Myth That Sold the Wall Street Bailouts

With the other Wall Street behemoths also on shaky ground, then–Treasury Secretary Henry Paulson ran to Capitol Hill, accompanied by Federal Reserve Chairman Ben Bernanke and New York Fed President Timothy Geithner. Their message was clear: The apocalypse was nigh. They demanded Congress make an open-ended commitment to bail out the banks. In a message repeated endlessly by the punditocracy ever since, the failure to cough up the money would have led to a second Great Depression.
The claim was nonsense then, and it’s even greater nonsense now.

William Blum — Hiding Ukraine’s Neo-Nazi Reality

Perhaps the biggest taboo of the U.S. mainstream coverage of the Ukraine crisis is to block out the role played by neo-Nazi militias in both the Feb. 22 coup and this summer’s bloody offensive in eastern Ukraine, but the ugly reality occasionally breaks through, as William Blum noted in Anti-Empire Report.
Hiding Ukraine’s Neo-Nazi Reality
William Blum

Peter Cooper — Supporting a Basic Income Guarantee on Incentive Grounds

Sometimes supporters of a basic income guarantee (BIG) argue for the policy on the grounds that it would increase “incentives to work”. This conclusion follows from standard neoclassical labor-supply analysis. Irrespective of the correctness or otherwise of the argument – and, if correct, it probably does have some utility as a negator of frequent neoliberal claims to the contrary – it is important to keep in mind obvious limitations of the argument and to go well beyond it. Two limitations, in particular, spring to mind.
Supporting a Basic Income Guarantee on Incentive Grounds
Peter Cooper — The Nuclear Answer to Chamberlain

Uping the ante.
Translated by: Gleb Bazov, Edited by S. Naylor

Eric Schliesser — Predicting the Future of the Economy; On Rosenberg on Krugman on Reflexivity and Uncertainty

In conclusion, my two qualifications do not undercut Rosenberg’s general thrust. But they also generate some chilling possibilities. Computer power is becoming cheap and we are starting to drown in easily available data. This allows, as Oskar Lange foresaw, for massive simulations and modelling. If governments or corporations could limit our options as consumers to the option generated in simulations then barring natural disasters and war, the economy would be predictable. This is not just science fiction tempting to future rulers of Singapore. Whole chunks of the economy are funny hybrids of public/private entanglements (health, education, defense, construction, etc.) or attempts at generating closed corporate networks (cf, Google, Apple, Facebook, etc.).

Lars P. Syll — Krugman and Mankiw on loanable funds — so wrong, so wrong

Nice quote from Bill Vickrey's  Fifteen Fatal Fallacies of Financial Fundamentalism. I hope Paul Krugman will read the whole thing. Then we might get some forward motion from him. Greg Mankiew on the other hand?

Lars P. Syll’s Blog
Krugman and Mankiw on loanable funds — so wrong, so wrong
Lars P. Syll | Professor, Malmo University

Andrea Terzi — Searching hard for Taylor’s inflation

In February 2011, I was in the audience of a lecture given by John Taylor on the “exit strategy”. One main theme was that the policy of the Fed called “Quantitative Easing” meant a high risk of monetization and inflation, if not hyper-inflation, in the U.S. economy. In the Q&A session, I asked Professor Taylor why he thought that “monetization” is inflationary. I argued that Quantitative Easing boils down to portfolio shifts in banks’ balance sheets, and that asset reallocation does not seem to be causing an increase in demand, nor a price increase. His answer (that I quickly noted in every detail on a piece of paper) was:…
Any day now. We have a model. :)

Money And The Real Economy
Searching hard for Taylor’s inflation
Andrea Terzi, Professor of Economics, Franklin College, Switzerland

Ezra Klein — Why Democrats and Republicans don’t understand each other

Identity politics versus interest politics.
On its face, this presents a puzzle: how can conservatism be the more popular ideology even as the Democrats are the more popular party?
Grossmann and Hopkins disagree. They see this not as a puzzle about American politics but as an explanation for why it works the way it does. They note that 73 percent of Republican voters say they're conservative but only 42 percent of Democratic voters say they're liberal. And they note that while voters tend to agree with Republicans on the philosophical questions in American politics (should government be smaller?) they tend to agree with Democrats on the policy questions in American politics (like should Social Security be smaller?).
73 percent of Republican voters say they're conservative but only 42 percent of Democratic voters say they're liberal
The Republican Party, in other words, has a very good reason to base itself around philosophical conservatism, while the Democratic Party has a very good reason to base itself around policy deliverables. And so the Republican Party bases itself around philosophical conservatism and the Democratic Party bases itself around policy deliverables.…
Republicans are uncompromising because compromise tends to expand the scope of government. Democrats are willing to make deep concessions because policy moves in a generally liberal direction. Republicans have a clearer message about government because their message about government is fundamentally popular. Democrats talk more about policy because what they have to say about policy is fundamentally popular.…
Democrats tend to project their preference for policymaking onto the Republican Party — and then respond with anger and confusion when Republicans don't seem interested in making a deal. Republicans tend to assume the Democratic Party is more ideological than it is, and so see various policy initiatives as part of an ideological effort to remake America along more socialistic lines.…
Still, there's much that this data does illuminate. I've often heard liberals wonder why there's no Democratic analogue to the Tea Party. I've often heard conservatives complain that their party doesn't spend enough time coming up with serious policy solutions for issues like health care. And, to be sure, there are some liberals trying to popularize Tea Party-like tactics and some conservatives trying to come up with sweeping new health reforms. But it's hard for these initiatives to succeed. There's a tendency to imagine the parties as mirror images of each other, and so to believe they can easily follow the other's strategies. But they can't. The parties are good at different things because they really are different.
Why Democrats and Republicans don’t understand each other
Ezra Klein

Monday, September 15, 2014 — Ukraine’s Punitive Battalions

An industrious comrade began to collect statistics on the assorted punitive and territorial battalions of the Junta, where the structure is very confusing. Below is only a skeleton for a large database of the whole punitive organization, but eventually, the blanks in the table will be completely filled in…
Territorial battalions:
The National Guard of Ukraine [(“NGU”), also known as Nationalist Guard, NaziGuard, or simply nazis,] is a structure with law enforcement functions; a part of the Ministry of Internal Affairs (Police) of Ukraine; created by transforming the Police Internal Troops on March 12th, 2014 via a new law “On the National Guard of Ukraine”.
[Note: This is explained in the Wikipedia article on the Azov Battalion.]
By converting the internal troops of the Ministry of Internal Affairs into the National Guard of Ukraine, the coup-formed Ukrainian government achieved the following goals:
- Continuity of command in the ranks of the internal troops and the Ministry of Interior was broken, and their men put in key positions;
- Repression of political opponents under the guise of “cleaning the ranks of the internal troops and the Ministry of Interior” was enhanced and continued;
- Damaging files of criminal and administrative offenses were deleted; which – in the case of disclosure – could discredit the government;
- People in the former internal security forces who were too “by-the-book” were replaced; in effect replacing the “law and order” in the ranks of internal troops and the Interior Ministry with “ideological purity” and “nationalist ideals”.
Due to these changes the ranks of the NGU have swelled with volunteers and extremist fighters of the “Right Sector”. But, despite the apparent “ideological bias”, the confrontation between different battalions of the NGU, due to different understanding of the national idea, and different levels of training, has by now split the ranks of the National Guard into three structures:….
Ukraine’s Punitive Battalions
Posted By S. Naylor
Translated by Daniel Mihailovich

Max Sawicky — Does the UBI need work?

Commenters point me to some illuminating work on the UBI by Ed Dolan (‘ED’).
Max Speak
Does the UBI need work?

Counter Current News— Cop Who Shot and Killed College Student for Speaking Disrespectfully Still On the Job

Local KSAT News says that witnesses claim the officer “emptied his gun” into Redus with no provocation.
“I didn’t hear him say anything like, ‘Get down on your hands and knees,’ you know?” one witness recalled, “I didn’t hear him say anything. He just started shooting. He emptied the gun on him… Boom, boom, boom.Six shots — five or six.” 
Mohammad Haidarasl saw it all go down. He said that Redus’ final words were “Oh, you’re gonna shoot me?”Haidarasl added that the officer kept saying “Stop resisting, stop resisting,” even though Haidarasl saw no physical resistance at all.
This is the United States of America, the land of the free and home of the brave?

Counter Current News
Cop Who Shot and Killed College Student for Speaking Disrespectfully Still On the Job

Texas Police ‘Fist Bump’ After Firing 80 Rounds Into Man With BB Gun

Robert Parry — Ukraine’s ‘Romantic’ Nazi Storm Troopers

The U.S. mainstream media’s deeply biased coverage of the Ukraine crisis – endlessly portraying the U.S.-backed coup regime in Kiev as “the good guys” – reached a new level of absurdity over the weekend as the Washington Post excused the appearance of Swastikas and other Nazi symbols among a Ukrainian government militia as “romantic.”
Bizarre. See Azov Battalion aka Azov brigade
In other words, for the first time since World War II, a government had dispatched Nazi storm troopers to attack a European population – and officials in Kiev knew what they were doing.…
Over the past several days, more evidence emerged about the presence of Nazis in the ranks of Ukrainian government fighters. Germans were shocked to see video of Azov militia soldiers decorating their gear with the Swastika and the “SS rune.” 
NBC News reported last week: “Germans were confronted with images of their country’s dark past on Monday night, when German public broadcaster ZDF showed video of Ukrainian soldiers with Nazi symbols on their helmets in its evening newscast.
“The video was shot … in Ukraine by a camera team from Norwegian broadcaster TV2. ‘We were filming a report about Ukraine’s AZOV battalion in the eastern city of Urzuf, when we came across these soldiers,’ Oysten Bogen, a correspondent for the private television station, told NBC News.
Ukraine’s ‘Romantic’ Nazi Storm Troopers
Robert Parry

Yves Smith — What Drives Obama’s Foreign Policy?

It has become commonplace to depict Obama as weak and overly reactive to Republican and media pressure. But that view conveniently ignores that Obama is a Republican in Democratic clothing.
I would not put it exactly that way. I would say that the US is a one party system with two factions that differ only slightly on most major issues and are pretty much in agreement on others, especially foreign policy.

I welcome reader input on how banking plays in, if at all, in the US shift to a more aggressive foreign policy posture.
Following Michael Hudson's analysis, one of the major pillars of globalization under Western hegemony is through financialization dominated by Western finance capital, in particular Wall Street and the City of London. Military conquest and colonization are a things of the past. Under globalization, the purpose of the military is "making the world safe for democracy," read dominance by Western capital and its cronies in the ROW. Under neoliberalism in contrast to classical liberalism, warfare is economic and financial, colonialism becomes neocolonialism, and imperialism becomes neo-imperialism. The chief arms of empire are no longer military power but economic and financial power imposed through Western dominated international institutions, in particular the BIS, IMF, World Bank, and G7. The BRICS are now beginning to revolt against this order and establish a new order. This is leading to conflict that will almost certainly result in war at some point if the US pushes unilateralism as the only acceptable option.

What drives Obama's foreign policy?

The publicly declared US foreign and military policy is global hegemony, including the warning that the US will not to permit any challenge to either American economic superiority or military superiority.

This puts the US on a collision course with a rising China and requires regime change in Russia and Iran to put these energy producers in the Western camp along with the rest of the Middle East and North Africa. Energy became the basis of the Great Game at the time of WWI, and it still is.

Realpolitik is the basis for explaining geopolicy and geostrategy.

Naked Capitalism
What Drives Obama’s Foreign Policy?
Yves Smith

Ambrose Evans-Pritchard — China's leaders refuse to blink as economy slows drastically

Premier Li Keqiang is determined to drive through deep reforms and wean the economy off exorbitant levels of debt before the damage becomes irreversible

Lord Keynes on QTM

Background: Lord Keynes, The Various Versions of the Quantity Theory

Social Democracy For The 21St Century: A Post Keynesian Perspective
Why is the Quantity Theory of Money Wrong and can Anything be Salvaged from it?
Lord Keynes

Philip Pilkington — Krugman at the Rethinking Economics Conference: Still Wrong on Monetary Theory

The Rethinking Economics conference in New York took place over the weekend. Anyway, Paul Krugman was on a panel with James Galbraith and Willem Buiter. The panel was interesting in and of itself. But what really caught my eye was when Krugman was confronted by an audience member on his support of NAIRU, the loanable funds theory and the theory of the natural rate of interest.
The audience member who asked this question was Rohan Grey, a friend of mine who runs the Modern Money Network who helped co-organise the event. You can see the question and the response in this video clip.
Go Rohan!
I don’t really want to get into the question of NAIRU too much as this would take us too far off track. But the other two questions provoked an interesting response from Krugman. First of all, he simply asserted that the loanable funds was true. Then he went on to assert that the natural rate of interest was true. “Clearly,” he said, “there is always some rate of interest that would produce more or less full employment”.
Krugman is an neoclassical monetarist and a Samuelson "Keynesian."
Krugman’s monetary theory is almost entirely wrong. He flip-flops on the loanable funds question and he is simply wrong on the question of a natural rate of interest. He also holds to an incorrect view of what a liquidity trap is that he picked up from John Hicks. While it is extraordinarily unlikely that he will give up on these ideas — he has dug in far too much now to concede these points and he seems unwilling to even openly debate them — I only hope that his errors will help to ensure that others do not make the same mistakes.
 So much for the economic champion of the "left."

Fixing the Economists
Krugman at the Rethinking Economics Conference: Still Wrong on Monetary Theory
Philip Pilkington

Lars P. Syll — IS-LMism and unlimited ‘ceteris paribus’ alibi

Why much conventional economics is vacuous.

Hans Albert:
The [cet. par.] clause here produces something of an absolute alibi, since, for every apparently deviating behavior, some altered factors can be made responsible. This makes the statement untestable, and its informational content decreases to zero.
Lars P. Syll’s Blog
IS-LMism and unlimited ‘ceteris paribus’ alibiLars P. Syll | Professor, Malmo University 

Perceived Injustices Are Meaningless Without Context ... Surviving Reality Requires Continuous Exploration of Response Options

(Commentary posted by Roger Erickson.)


"If the wealth of the world's 5 richest families was confiscated no human being would have to starve again."

This one misses the point, even if technically plausible. Better to define optimal tuning options, rather than only define current injustices.

Problem? The rich are given, and are hoarding, immobilized, an outsize proportion of present fiat?

Suggested alternative? Why bother confiscating it? Just alter the ratio of feeding it (excessive hoarding) vs feeding dynamically distributed fiat. It'd wither as fast as it accumulated - or become irrelevant.

Why? Because today's net public fiat is always dwarfed by tomorrow's. It's been unstoppable for 4.5 Billion years!

How it's used is NOT. That depends entirely upon the quality (including tempo) of OUR distributed decision-making.

Here's a suggestion. Participate, yourself, in defining your own local and your own country's distributed options.

If you don't, some deranged economist will!

And that will only constrain the rate of exploring our cultural options.

Then you'll have to deal with the PRINCIPLE OF PRIOR PLAUSIBILITY, where an initial hypothesis builds outsized institutional momentum, SOLELY for lack of early opposition or alternatives. The statistics of phenotypic persistence dictates cultural agility. If we want to adjust quickly, then we have to some cultural habits as fast as we start other ones ... or be far more selective about which ones we start!

Hence Leonardo's famous maxim.
"It is easier to resist at the beginning than at the end." Leonardo da Vinci
He might just as easily have said "be selective," rather than just "resist."
And an immediate corollary?
"Democracy works better when practiced every minute, instead of trying to repair it every four years."  RGE :)
Call it the "Broken Democracy" approach. :( The prize to keep our eyes on is our own, constantly increasing Cultural Adaptive Rate. That's the best way to prevent the crime of innocent fraud.

ps: If we question the adaptive value of human fat, why don't we question the cultural utility of obese wallets that immobilizes people in gated communities? A fatty liver is bad for personal health. A fatty wallet is bad for cultural health. Anything beyond 0.1% having fatty wallets is an epidemic of unhealthy demand leakages, i.e., sloth.

(effects of liver cirrhosis)

Stages of cultural damage?
  From healthy culture (distributed decision-making)
  To cultural financial fibrosis? (bought politicians; "yellow" NeoCons)
  And on to cultural liquidity cirrhosis? (free tradeforeign adventures?)

Any artists care to illustrate a cirrhotic Wall St poisoning American policy agility?

Sunday, September 14, 2014

Sandwichman — (Other things being elsewhere...) "It’s a ceteris paribus thing,"

The IS-LM "ceteris paribus thing" is an "if p, then q" thing -- a tautology -- not a "since p, therefore q" thing. One cannot draw conclusions about the real world from it.
(Other things being elsewhere...) "It’s a ceteris paribus thing,"