Tag: ek Politics

Jamie Dimon, the head of it, is one of the smartest bankers we got.”- Barack Obama

And now he’s maybe going to lose his job.

Investors May Lobby JPMorgan to Clip Dimon’s Wings If Vote Fails

Reuters

Sunday, 5 May 2013, 5:15 PM ET

JPMorgan Chase’s Jamie Dimon may be losing ground in his fight to keep the title of chairman, as some major investors push for more oversight of the chief executive after the “London Whale” trading losses.

At the largest U.S. bank’s annual meeting in two weeks, shareholders will be able to vote on a non-binding proposal to separate the chairman and CEO roles. Two of the bank’s top 10 shareholders told Reuters they are considering voting in favor of the proposal, a reversal of their position last year, because of the disastrous bets on credit derivatives that cost the bank more than $6 billion last year.

Though he’s flat out promised to quit if he loses the Chairmanship.  And he’s not the only Director in trouble.

JPMorgan Directors Feel Heat in a Vote

By SUSANNE CRAIG and JESSICA SILVER-GREENBERG, The New York Times

May 3, 2013, 8:08 pm

Some JPMorgan shareholders are taking public aim at individual directors who hold crucial positions on the bank’s audit and risk committees as the bank grapples with an onslaught of regulatory challenges.

On Friday, the CtW Investment Group, which represents union pension funds and owns six million shares in JPMorgan, said it planned to vote against the three directors on the risk policy committee and the head of the audit committee.

…

Shareholders like CtW are singling out members of the risk committee because they think the board failed to police the bank in important areas, contributing to the trading loss in 2012.

“What we have learned over the past year is that the performance of the risk committee is even worse than we thought,” said Richard Clayton, CtW’s research director. “Their behavior is a combination of being out at sea and asleep at the wheel. Both are bad and together they are disastrous.”

James S. Crown, who has been a director of JPMorgan or one of its predecessor companies since 1991, is chairman of the risk policy committee. The other members are David M. Cote, the head of Honeywell International; Timothy P. Flynn, a former KPMG executive; and Ellen V. Futter, president of the American Museum of Natural History. Mr. Flynn was appointed to the risk policy committee in August 2012.

CtW also plans to vote against Laban P. Jackson, chairman of the audit committee, which shares responsibility for oversight.

They should all lose their jobs.

JPMorgan Caught in Swirl of Regulatory Woes

By JESSICA SILVER-GREENBERG and BEN PROTESS, The New York Times

May 2, 2013, 10:00 pm

The possible action comes amid showdowns with other agencies. One of the bank’s chief regulators, the Office of the Comptroller of the Currency, is weighing new enforcement actions against JPMorgan over the way the bank collected credit card debt and its possible failure to alert authorities to suspicions about Bernard L. Madoff, according to people who were not authorized to discuss the cases publicly.

In a meeting last month at the bank’s Park Avenue headquarters, the comptroller’s office delivered an unusually stark message to Jamie Dimon, the chief executive and chairman: the nation’s biggest bank was quickly losing credibility in Washington. The bank’s top lawyers, including Stephen M. Cutler, the general counsel, have also cautioned executives about the bank’s regulatory problems, employees say.

…

In the energy market investigation, the enforcement staff of the Federal Energy Regulatory Commission, or FERC, intends to recommend that the agency pursue an action against JPMorgan over its trading in California and Michigan electric markets.

The 70-page document also took aim at a top bank executive, Blythe Masters. A seminal Wall Street figure, Ms. Masters is known for helping expand the boundaries of finance, including the development of credit default swaps, a derivative that played a role in the financial crisis.

The regulatory document cites her supposed “knowledge and approval of schemes” carried out by a group of energy traders in Houston. The agency’s investigators claimed that Ms. Masters had “falsely” denied under oath her awareness of the problems and said that JPMorgan had made “scores of false and misleading statements and material omissions” to authorities, the document shows.

…

In the credit card investigation, people briefed on the case said the comptroller’s office had discovered that JPMorgan was relying on faulty documents when pursuing lawsuits against delinquent customers. The accusations, which are expected to prompt an enforcement action later this year, echo complaints that JPMorgan and rivals plowed through home foreclosures with little regard for accuracy.

In a separate investigation into JPMorgan’s relationship with Mr. Madoff, the comptroller’s office raised concerns that the company may have violated a federal law that requires banks to report suspicious transactions.

Out of Control – New Report Exposes JPMorgan Chase as Mostly a Criminal Enterprise

David Dayen, Naked Capitalism

Thursday, March 14, 2013

It’s hard to summarize all of the documented instances in this report of JPM has been breaking the law, but here’s my best shot. I try to keep up on these matters, and yet some of these I’m learning about for the first time:

• Bank Secrecy Act violations;
• Money laundering for drug cartels;
• Violations of sanction orders against Cuba, Iran, Sudan, and former Liberian strongman Charles Taylor;
• Violations related to the Vatican Bank scandal (get on this, Pope Francis!);
• Violations of the Commodities Exchange Act;
• Failure to segregate customer funds (including one CFTC case where the bank failed to segregate $725 million of its own money from a $9.6 billion account) in the US and UK;
• Knowingly executing fictitious trades where the customer, with full knowledge of the bank, was on both sides of the deal;
• Various SEC enforcement actions for misrepresentations of CDOs and mortgage-backed securities;
• The AG settlement on foreclosure fraud;
• The OCC settlement on foreclosure fraud;
• Violations of the Servicemembers Civil Relief Act;
• Illegal flood insurance commissions;
• Fraudulent sale of unregistered securities;
• Auto-finance ripoffs;
• Illegal increases of overdraft penalties;
• Violations of federal ERISA laws as well as those of the state of New York;
• Municipal bond market manipulations and acts of bid-rigging, including violations of the Sherman Anti-Trust Act;
• Filing of unverified affidavits for credit card debt collections (“as a result of internal control failures that sound eerily similar to the industry’s mortgage servicing failures and foreclosure abuses”);
• Energy market manipulation that triggered FERC lawsuits;
• “Artificial market making” at Japanese affiliates;
• Shifting trading losses on a currency trade to a customer account;
• Fraudulent sales of derivatives to the city of Milan, Italy;
• Obstruction of justice (including refusing the release of documents in the Bernie Madoff case as well as the case of Peregrine Financial).

And, exhale.

The sheer litany of illegal activities just overwhelms you. And these are only the ones where the company has entered into settlements or been sanctioned; it doesn’t even include ongoing investigations into things like Libor, illegally concealing inclusions of mortgage-backed securities in employer funds (another ERISA violation), the Fail Whale trades, and especially putback suits for mortgages, where a recent ruling by Judge Jed Rakoff has seriously increased exposure. While the risks are still very much alive and will continue to weigh on the firm, ultimately shareholders will pay, certainly not executives as long as the no-prosecutions standard holds.

Mirabile Dictu! JP Morgan Finally on Regulatory Hot Seat for Widespread Control Failures and Alleged Lying by Blythe Masters Under Oath

Yves Smith, Naked Capitalism

Friday, May 3, 2013

The Times reports that the bank faces actions across eight regulators including: FERC, for a series of “schemes” to dupe state authorities to overpay for power and includes allegations that JP Morgan executive Blythe Masters lied under oath; using false documents when collecting credit card debt; and a failure to report suspicious trading activities by Bernie Madoff.

The fact that JP Morgan is in hot water isn’t news. Josh Rosner revealed in an extensive report released in early March that the bank had paid out over $8.5 billion in fines since 2009, nearly 12% of its net income, for violations across virtually all of its operations. This account showed the carefully cultivated picture of JP Morgan as a well-managed operation was an artful fabrication.

…

The London Whale fiasco alone demonstrated beyond doubt that JP Morgan was, as Rosner put it, out of control. Even before the Senate investigation, media reports provided compelling evidence of astonishing risk management failures, such as having risk management reporting to the CIO, rather than being independent. Sarbanes Oxley expert Michael Crimmins saw the risk management and control failures to be so severe as to firing Dimon.

…

And despite this impressive history of bad conduct, JP Morgan was getting special treatment from regulators as recently as January of this year. Marcy Wheeler noted the OCC failed to clean up “previously identified systemic weaknesses” in its anti-money laundering compliance. Eighteen months of intransigence and all the OCC did was scold a bit. It issued no fine.

Even though regulators are finally waking up to the fact that JP Morgan is a dangerous institution that thinks it can act as a law unto itself, the bank does not appear ready to change its ways.

JPMorgan’s annual meeting will be May 21 in Tampa, Florida.

after re-election.

Obama diversity disappoints again

By JENNIFER EPSTEIN, Politico

5/5/13 7:04 AM EDT

There were, after all, just eight women among the 23 Cabinet-level officials in Obama’s first term. And that number will be even lower in his second.

After picking an all-white, all-male slate to fill departures at key departments including State and Treasury, Obama urged critics to be patient. Given time, he promised just before his second inauguration, he’d erase concerns sparked by an entirely white and male group of top picks.

“I would just suggest that everybody kind of wait until they’ve seen all my appointments – who is in the White House staff and who is in my Cabinet – before they rush to judgment,” he said. “Until you’ve seen what my overall team looks like, it’s premature to assume that somehow we’re going backwards. We’re not going backwards, we’re going forward.”

Now the second term Cabinet is complete, with final selections that include both Pritzker and Anthony Foxx, an African American, for Transportation secretary. Still, Obama’s put together a less diverse Cabinet than in his first term, when his picks were criticized for being too white and male. And quite a few of the people Obama had asked to hold off until the picture was complete say they they’re not so sure it was worth the wait.

…

(O)verall, there’s no denying the group he wound up with isn’t just less diverse than the current demographics of the country, and far less representative of the coalition of voters that got Obama reelected. It even falls short in virtually every category of the marks he set in his first term.

…

If Foxx is confirmed, there will be three African Americans in the Cabinet, one fewer than before. The number of Asian Americans has dropped from 3 to just 1: first-term holdover Eric Shinseki, the Secretary of Veterans Affairs. And if Labor Secretary-designate Thomas Perez is confirmed, the number of Latinos will have officially made an identical slide.

…

“I at least expected that more than a third of the jobs would go to women,” NOW’s president, Terry O’Neill told POLITICO. “Women should be half the Cabinet. We’re 51 percent of the population, and more than half of us voted for the president’s reelection.” Instead, women have been picked for just seven of 23 Cabinet posts.

The numbers speak for themselves.

Over at The Plum Line Jamelle Bouie is a little irrationally exhuberant about the prospects for renewed action on Gun Safety based on promises of a new talking tour by Joe Biden and reports of deteriorating public polls for Ayotte, Baucus, Begich, and Murkowsi.

Well, not so fast buckaroo.

OFA’s first foray falls short

By: Reid J. Epstein, Politico

May 3, 2013 05:02 AM EDT

President Barack Obama’s man in North Dakota couldn’t pitch in to help shame Sen. Heidi Heitkamp for her vote against gun control – he was busy with his new job selling Toyotas.

Organizing for Action’s top Montana official wouldn’t canvass the state to turn up the heat on Sen. Max Baucus because there was no reimbursement for the gas money.

Alaska Sens. Mark Begich and Lisa Murkowski haven’t had to worry about running up against OFA’s influence there, since Obama’s former state director there has turned back to building up her own political consulting business – “I need to get to making money,” she said.

…

Even in states Obama carried handily – places like Ohio and New Hampshire – the group couldn’t hold big rallies, blanket the airwaves with TV ads or motivate enough supporters to match the volume of phone calls from pro-gun advocates. Asked for demonstrations of the strong effort they were mounting, OFA staff pointed to “tweet your senator” pushes they encouraged in the days after the vote.

…

What that’s added up to so far: On the weekend after the background checks vote, seven OFA volunteers protested at the Tampa office of Sen. Marco Rubio (R-Fla.). “More than 30” came to protest Sen. Max Baucus (D-Mont.) at his Bozeman office, according to a local TV station, though some of them were counter-protesters in support of Baucus’s no vote on background checks.

Just 20 people came to protest Sen. Richard Burr (R-N.C.) at his Winston-Salem office. The OFA protesters were invited into the office two at a time to air their grievances to staff, a Burr spokesman told POLITICO. A few accepted the offer, but many did not.

There were no events in North Dakota or Alaska, each home to Democrats who voted no. In Arkansas, the lead state volunteer planned events in and around Little Rock, where he lives, and posted them to OFA’s website. Barely anyone showed.

Outside groups like Mayors Against Illegal Guns are counting on OFA to help them pack town hall meetings to confront senators who voted against the background checks bill.

But at New Hampshire Republican Kelly Ayotte’s town hall meetings Tuesday, there was no discernible OFA presence. While there were protesters, many of them attended on their own to voice concerns to Ayotte about gun control or were organized by the Michael Bloomberg-backed group, which distributed signs saying, “Shame on you.”

OFA has just 19 paid state coordinators.  11ty Dimensional Chess my ass.

A Story for May Day: The Fed, Apple, and Trickle-Down Economics

Robert Reich

Wednesday, May 1, 2013

It would be one thing if Apple and other giant companies were borrowing in order to expand operations and create new jobs. But that’s not what’s going on. Apple, remember, is still sitting on $145 billion.

The reason big companies aren’t creating more jobs is consumers aren’t buying enough to justify the expansion. And government is cutting back on spending.

Big corporations are borrowing simply in order to push stock prices up and reward their investors.

It’s a sump pump with the Fed on one end buying up bonds to keep interest rates low, and shareholders on the other end raking in the returns.

Get it? Easy money from the Fed can’t get the economy out of first gear when the rest of government is in reverse.

Trickle-down economics is the first cousin of austerity economics. Austerity is nuts when so many millions are out of work. And as we’ve learned before, trickle-down is a fraud. Nothing ever trickles down.

Oh, wait- EVERYBODY!

Obama’s budget puts House Democrats in bind

By: Alex Isenstadt, Politico

April 30, 2013 05:00 AM EDT

How large a role Medicare and Social Security play in the 2014 debate remains to be seen – Democrats intend to highlight issues like immigration and gun control, with an eye toward driving minority and younger voters to the polls. But they also want to use entitlements as part of a broader message branding Republicans as overly ideological and uncaring about the middle class.

Driving home that theme, some Democrats say, will be tricky after the president’s controversial endorsment of chained CPI, a stingier way of calculating growth in Social Security benefits, as well as hundreds of billions of dollars in Medicare cuts.

“It is highly problematic,” said one Democratic pollster and veteran of congressional races, who requested anonymity because he didn’t want to be seen as picking a fight with the White House. “There is no question the entitlement debate makes for an easy campaign ad.”

…

In an interview with CNN after Obama unveiled his budget earlier this month, National Republican Congressional Committee Chairman Greg Walden of Oregon called the plan “a shocking attack on seniors.”

“I’ll tell you when you’re going after seniors the way he’s already done on Obamacare, taken $700 billion out of Medicare to put into Obamacare and now coming back at seniors again, I think you’re crossing that line very quickly here in terms of denying access to seniors for health care in districts like mine certainly and around the country,” he said.

Walden’s remarks drew criticism from some in the GOP, which has come out in favor of chained CPI as a way of reducing the deficit. But the NRCC chairman’s point was made: Republicans had been given a free opportunity to hit back on entitlements, long a Democratic trump card.

Brock McCleary, a GOP pollster and former NRCC deputy political director, said Republicans couldn’t expect to gain an advantage on who’s most likely to defend programs but could try to fight the issue to a draw.

“The president has very clearly shown the way for how Republicans can keep voters in the lurch about which party is going to protect entitlements,” he said.

Electoral victory my ass.

YEARS passed. The seasons came and went, the short animal lives fled by. A time came when there was no one who remembered the old days before the Rebellion, except Clover, Benjamin, Moses the raven, and a number of the pigs.

Muriel was dead; Bluebell, Jessie, and Pincher were dead. Jones too was dead-he had died in an inebriates’ home in another part of the country. Snowball was forgotten. Boxer was forgotten, except by the few who had known him. Clover was an old stout mare now, stiff in the joints and with a tendency to rheumy eyes. She was two years past the retiring age, but in fact no animal had ever actually retired. The talk of setting aside a corner of the pasture for superannuated animals had long since been dropped. Napoleon was now a mature boar of twenty-four stone. Squealer was so fat that he could with difficulty see out of his eyes. Only old Benjamin was much the same as ever, except for being a little greyer about the muzzle, and, since Boxer’s death, more morose and taciturn than ever.

There were many more creatures on the farm now, though the increase was not so great as had been expected in earlier years. Many animals had been born to whom the Rebellion was only a dim tradition, passed on by word of mouth, and others had been bought who had never heard mention of such a thing before their arrival. The farm possessed three horses now besides Clover. They were fine upstanding beasts, willing workers and good comrades, but very stupid. None of them proved able to learn the alphabet beyond the letter B. They accepted everything that they were told about the Rebellion and the principles of Animalism, especially from Clover, for whom they had an almost filial respect; but it was doubtful whether they understood very much of it.

The farm was more prosperous now, and better organised: it had even been enlarged by two fields which had been bought from Mr. Pilkington. The windmill had been successfully completed at last, and the farm possessed a threshing machine and a hay elevator of its own, and various new buildings had been added to it. Whymper had bought himself a dogcart. The windmill, however, had not after all been used for generating electrical power. It was used for milling corn, and brought in a handsome money profit. The animals were hard at work building yet another windmill; when that one was finished, so it was said, the dynamos would be installed. But the luxuries of which Snowball had once taught the animals to dream, the stalls with electric light and hot and cold water, and the three-day week, were no longer talked about. Napoleon had denounced such ideas as contrary to the spirit of Animalism. The truest happiness, he said, lay in working hard and living frugally.

Somehow it seemed as though the farm had grown richer without making the animals themselves any richer-except, of course, for the pigs and the dogs. Perhaps this was partly because there were so many pigs and so many dogs. It was not that these creatures did not work, after their fashion. There was, as Squealer was never tired of explaining, endless work in the supervision and organisation of the farm. Much of this work was of a kind that the other animals were too ignorant to understand. For example, Squealer told them that the pigs had to expend enormous labours every day upon mysterious things called “files,” “reports,” “minutes,” and “memoranda.” These were large sheets of paper which had to be closely covered with writing, and as soon as they were so covered, they were burnt in the furnace. This was of the highest importance for the welfare of the farm, Squealer said. But still, neither pigs nor dogs produced any food by their own labour; and there were very many of them, and their appetites were always good.

As for the others, their life, so far as they knew, was as it had always been. They were generally hungry, they slept on straw, they drank from the pool, they laboured in the fields; in winter they were troubled by the cold, and in summer by the flies. Sometimes the older ones among them racked their dim memories and tried to determine whether in the early days of the Rebellion, when Jones’s expulsion was still recent, things had been better or worse than now. They could not remember. There was nothing with which they could compare their present lives: they had nothing to go upon except Squealer’s lists of figures, which invariably demonstrated that everything was getting better and better. The animals found the problem insoluble; in any case, they had little time for speculating on such things now. Only old Benjamin professed to remember every detail of his long life and to know that things never had been, nor ever could be much better or much worse-hunger, hardship, and disappointment being, so he said, the unalterable law of life.

And yet the animals never gave up hope. More, they never lost, even for an instant, their sense of honour and privilege in being members of Animal Farm. They were still the only farm in the whole county-in all England!-owned and operated by animals. Not one of them, not even the youngest, not even the newcomers who had been brought from farms ten or twenty miles away, ever ceased to marvel at that. And when they heard the gun booming and saw the green flag fluttering at the masthead, their hearts swelled with imperishable pride, and the talk turned always towards the old heroic days, the expulsion of Jones, the writing of the Seven Commandments, the great battles in which the human invaders had been defeated. None of the old dreams had been abandoned. The Republic of the Animals which Major had foretold, when the green fields of England should be untrodden by human feet, was still believed in. Some day it was coming: it might not be soon, it might not be with in the lifetime of any animal now living, but still it was coming. Even the tune of Beasts of England was perhaps hummed secretly here and there: at any rate, it was a fact that every animal on the farm knew it, though no one would have dared to sing it aloud. It might be that their lives were hard and that not all of their hopes had been fulfilled; but they were conscious that they were not as other animals. If they went hungry, it was not from feeding tyrannical human beings; if they worked hard, at least they worked for themselves. No creature among them went upon two legs. No creature called any other creature “Master.” All animals were equal.

One day in early summer Squealer ordered the sheep to follow him, and led them out to a piece of waste ground at the other end of the farm, which had become overgrown with birch saplings. The sheep spent the whole day there browsing at the leaves under Squealer’s supervision. In the evening he returned to the farmhouse himself, but, as it was warm weather, told the sheep to stay where they were. It ended by their remaining there for a whole week, during which time the other animals saw nothing of them. Squealer was with them for the greater part of every day. He was, he said, teaching them to sing a new song, for which privacy was needed.

It was just after the sheep had returned, on a pleasant evening when the animals had finished work and were making their way back to the farm buildings, that the terrified neighing of a horse sounded from the yard. Startled, the animals stopped in their tracks. It was Clover’s voice. She neighed again, and all the animals broke into a gallop and rushed into the yard. Then they saw what Clover had seen.

It was a pig walking on his hind legs.

Yes, it was Squealer. A little awkwardly, as though not quite used to supporting his considerable bulk in that position, but with perfect balance, he was strolling across the yard. And a moment later, out from the door of the farmhouse came a long file of pigs, all walking on their hind legs. Some did it better than others, one or two were even a trifle unsteady and looked as though they would have liked the support of a stick, but every one of them made his way right round the yard successfully. And finally there was a tremendous baying of dogs and a shrill crowing from the black cockerel, and out came Napoleon himself, majestically upright, casting haughty glances from side to side, and with his dogs gambolling round him.

He carried a whip in his trotter.

There was a deadly silence. Amazed, terrified, huddling together, the animals watched the long line of pigs march slowly round the yard. It was as though the world had turned upside-down. Then there came a moment when the first shock had worn off and when, in spite of everything-in spite of their terror of the dogs, and of the habit, developed through long years, of never complaining, never criticising, no matter what happened-they might have uttered some word of protest. But just at that moment, as though at a signal, all the sheep burst out into a tremendous bleating of-

“Four legs good, two legs better! Four legs good, two legs better! Four legs good, two legs better!”

It went on for five minutes without stopping. And by the time the sheep had quieted down, the chance to utter any protest had passed, for the pigs had marched back into the farmhouse.

…

For once Benjamin consented to break his rule, and he read out to her what was written on the wall. There was nothing there now except a single Commandment. It ran:

ALL ANIMALS ARE EQUAL

BUT SOME ANIMALS ARE MORE EQUAL THAN OTHERS

After that it did not seem strange when next day the pigs who were supervising the work of the farm all carried whips in their trotters. It did not seem strange to learn that the pigs had bought themselves a wireless set, were arranging to install a telephone, and had taken out subscriptions to John Bull, TitBits, and the Daily Mirror. It did not seem strange when Napoleon was seen strolling in the farmhouse garden with a pipe in his mouth-no, not even when the pigs took Mr. Jones’s clothes out of the wardrobes and put them on, Napoleon himself appearing in a black coat, ratcatcher breeches, and leather leggings, while his favourite sow appeared in the watered silk dress which Mrs. Jones had been used to wear on Sundays.

…

An uproar of voices was coming from the farmhouse. They rushed back and looked through the window again. Yes, a violent quarrel was in progress. There were shoutings, bangings on the table, sharp suspicious glances, furious denials. The source of the trouble appeared to be that Napoleon and Mr. Pilkington had each played an ace of spades simultaneously.

Twelve voices were shouting in anger, and they were all alike. No question, now, what had happened to the faces of the pigs. The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.

You see, merely one op-ed in The New York Times will not sufficiently restore the reputation of Reinhart and Rogoff.  Unfortunately for them 2 won’t either.

Debt, Growth and the Austerity Debate

By CARMEN M. REINHART and KENNETH S. ROGOFF, The New York Times

Published: April 25, 2013

Our research, and even our credentials and integrity, have been furiously attacked in newspapers and on television. Each of us has received hate-filled, even threatening, e-mail messages, some of them blaming us for layoffs of public employees, cutbacks in government services and tax increases. As career academic economists (our only senior public service has been in the research department at the International Monetary Fund) we find these attacks a sad commentary on the politicization of social science research. But our feelings are not what’s important here.

Reinhart and Rogoff: Responding to Our Critics

By CARMEN M. REINHART and KENNETH S. ROGOFF

Published: April 25, 2013

Our critics seem to suggest that they can ignore everything else we have done because we are somehow going around placing great emphasis on one outlier estimate for growth. This is wrong. We have never used anything but the conservative median estimate in our public discussions, where we stated that the difference between growth associated with debt under 90 percent of G.D.P. and debt over 90 percent of G.D.P. is about 1 percentage point. See, for example, a Bloomberg Businessweek article from July 2011 that has been cited as evidence that we are fiscal hawks. In that article, we cite only the median.

Some have claimed that where we have really done damage is not in our public statements, but in what we say behind closed doors to policy makers. Some of those discussions have indeed leaked out over time, but they consistently show that our focus has been the median estimate.

We might add that when we give public opinions and especially when we give policy advice, we base our ideas on our entire experience and knowledge of the literature, never just on our own work.

…

(W)e view ourselves as scholars, though obviously given the prominence of book, and the extraordinary circumstances of the financial crisis, politicians will of course try to use our results to advance their cause. We have never advised Mr. Ryan, nor have we worked for President Obama, whose Council of Economic Advisers drew heavily on our work in a chapter of the 2012 Economic Report of the President, recreating and extending the results.

Reinhart and Rogoff Are Not Being Straight

Dean Baker, Center for Economic and Policy Research

Friday, 26 April 2013 04:32

Carmen Reinhart and Ken Rogoff, used their second NYT column in a week, to complain about how they are being treated. Their complaint deserves tears from crocodiles everywhere. They try to present themselves as ivory tower economists who cannot possibly be blamed for the ways in which their work has been used to justify public policy, specifically as a rationale to cut government programs and raise taxes, measures that lead to unemployment in a downturn.

This portrayal is disingenuous in the the extreme. Reinhart and Rogoff surely are aware of how their work has been used. They have also encouraged this use in public writings and talks. While it is unfortunate that they have “received hate-filled, even threatening, e-mail messages,” as one who works in the lower-paid corners of policy debates, let me say, welcome to the club.

…

In addition to misleading the public about the role their work has played in policy debates, they also are not quite straight about two strictly factual points. The first sentence begins by referring to the publication of their article in May of 2010. This might lead readers to believe that this is when their claims about high debt slowing growth first began to affect public debate on stimulus and deficits.

This is not right as I know since my first e-mail requesting their data was written in January of 2010. In fact, their work first made a splash in international debates when they put out a version of this article as a National Bureau of Economic Research working paper in January, 2010. Their findings were already widely known by the time the paper was published in May, 2010.

The other point on which they mislead readers is the claim:

“Our 2010 paper found that, over the long term, growth is about 1 percentage point lower when debt is 90 percent or more of gross domestic product. The University of Massachusetts researchers do not overturn this fundamental finding, which several researchers have elaborated upon.”

Actually, their 2010 paper found that growth was 2.9 percentage points lower in countries with debt to GDP ratios above 90 percent than in the group with debt to GDP ratios in the 60-90 percent range.

Herr Doktor Professor-

Grasping At Straw Men

Paul Krugman, The New York Times

April 26, 2013, 8:53 am

OK, Reinhart and Rogoff have said their piece. I’d say that they’re still trying to have it both ways, on two fronts. They deny asserting that the debt-growth relationship is causal, but keep making statements that insinuate that it is. And they deny having been strong austerity advocates – but they were happy to bask in the celebrity that came with their adoption as austerian mascots, and never to my knowledge spoke out to condemn all the “eek! 90 percent!” rhetoric that was used to justify sharp austerity right now. Sorry, guys, but with so much at stake you have a responsibility not just to put stuff out but to make crystal clear what you think it implies for policy.

Evidence and Economic Policy

Paul Krugman, The New York Times

April 24, 2013, 8:03 pm

Henry Blodget says that the economic debate is over; the austerians have lost and whatshisname has won. And it’s definitely true that in sheer intellectual terms, this is looking like an epic rout. The main economic studies that supposedly justified the austerian position have imploded; inflation has stayed low; the bond vigilantes have failed to make an appearance; the actual economic effects of austerity have tracked almost exactly what Keynesians predicted.

But will any of this make a difference? The story of the past three years, after all, is not that Alesina and Ardagna used a bad measure of fiscal policy, or that Reinhart and Rogoff mishandled their data. It is that important people’s will to believe trumped the already ample evidence that austerity would be a terrible mistake; A-A and R-R were just riders on the wave.

The cynic in me therefore says that after a brief period of regrouping, the VSPs will be right back at it – they’ll find new studies to put on pedestals, new economists to tell them what they want to hear, and those who got it right will continue to be considered unsound and unserious.

The 1 Percent’s Solution

By PAUL KRUGMAN

Published: April 25, 2013

Economic debates rarely end with a T.K.O. But the great policy debate of recent years between Keynesians, who advocate sustaining and, indeed, increasing government spending in a depression, and austerians, who demand immediate spending cuts, comes close – at least in the world of ideas. At this point, the austerian position has imploded; not only have its predictions about the real world failed completely, but the academic research invoked to support that position has turned out to be riddled with errors, omissions and dubious statistics.

…

(T)he dominance of austerians in influential circles should disturb anyone who likes to believe that policy is based on, or even strongly influenced by, actual evidence. After all, the two main studies providing the alleged intellectual justification for austerity – Alberto Alesina and Silvia Ardagna on “expansionary austerity” and Carmen Reinhart and Kenneth Rogoff on the dangerous debt “threshold” at 90 percent of G.D.P. – faced withering criticism almost as soon as they came out.

And the studies did not hold up under scrutiny. By late 2010, the International Monetary Fund had reworked Alesina-Ardagna with better data and reversed their findings, while many economists raised fundamental questions about Reinhart-Rogoff long before we knew about the famous Excel error. Meanwhile, real-world events – stagnation in Ireland, the original poster child for austerity, falling interest rates in the United States, which was supposed to be facing an imminent fiscal crisis – quickly made nonsense of austerian predictions.

…

What is true, however, is that the years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers. The 1 percent may not actually want a weak economy, but they’re doing well enough to indulge their prejudices.

And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make. To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?

In a battle of movement, a blitzkrieg, there is always a point that has the opportunity to be decisive in the final outcome.  It is at this point the opponents should marshal their effort even at the expense of less vital areas.

Successful Commanders are usually those who are able to swiftly shift their resources from point to point responding to changes in the situation and assemble a correlation of forces sufficient to thwart the ambitions of their adversary and (hopefully) reserve enough to move against newly exposed vulnerabilities.  Napoleon and Lee are good examples.

The significance of the metaphor is that fluid situations are… well, fluid frankly and a Revolutionary (no leaders or followers here, thank you) engaged in an asymetrical struggle against an overwhelmingly powerful adversary must be prepared to shift focus quickly, minimizing the inevitable and numerous setbacks

T.E. Lawrence–

The Arabs might be a vapour, blowing where they listed. It seemed that a regular soldier might be helpless without a target. He would own the ground he sat on, and what he could poke his rifle at. The next step was to estimate how many posts they would need to contain this attack in depth, sedition putting up her head in every unoccupied one of these 100,000 square miles. They would have need of a fortified post every four square miles, and a post could not be less than 20 men. The Turks would need 600,000 men to meet the combined ill wills of all the local Arab people. They had 100,000 men available.

…

Most wars are wars of contact, both forces striving to keep in touch to avoid tactical surprise. The Arab war should be a war of detachment: to contain the enemy by the silent threat of a vast unknown desert, not disclosing themselves till the moment of attack. This attack need be only nominal, directed not against his men, but against his materials: so it should not seek for his main strength or his weaknesses, but for his most accessible material. In railway cutting this would be usually an empty stretch of rail. This was a tactical success. From this theory came to be developed ultimately an unconscious habit of never engaging the enemy at all. This chimed with the numerical plea of never giving the enemy’s soldier a target. Many Turks on the Arab front had no chance all the war to fire a shot, and correspondingly the Arabs were never on the defensive, except by rare accident.

…

(T)he Arab army was so weak physically that it could not let the metaphysical weapon rust unused. It had won a province when the civilians in it had been taught to die for the ideal of freedom: the presence or absence of the enemy was a secondary matter.

…

Battles are impositions on the side which believes itself weaker, made unavoidable either by lack of land-room, or by the need to defend a material property dearer than the lives of soldiers. The Arabs had nothing material to lose, so they were to defend nothing and to shoot nothing. Their cards were speed and time, not hitting power, and these gave them strategical rather than tactical strength.

…

The tactics were always tip and run; not pushes, but strokes. The Arab army never tried to maintain or improve an advantage, but to move off and strike again somewhere else. It used the smallest force in the quickest time at the farthest place. To continue the action till the enemy had changed his dispositions to resist it would have been to break the spirit of the fundamental rule of denying him targets.

With that in mind-

Coming Down The Pipeline

By Charles P. Pierce, Esquire Magazine

4/23/13 at 11:00AM

It really is remarkable at this point how completely tattered the case for building the pipeline actually is. The jobs claims have been debunked time and again as inflated. The public-safety promises from TransCanada, the corporation seeking to completely the pipeline, have collapsed as badly as that pipeline in Arkansas did. And, in a country that prizes bipartisanship as much as this one allegedly does, the coalition against the pipeline is as diverse as could ever be expected – ranchers and tree-huggers, scientists and Native American activists. On the other side is money and power, and a simple brute desire not to be frustrated by the lines of ranchers, tree-huggers, scientists, and Native American activists. That’s the whole fight now. One side wants what it wants because it wants it. Period. The president has to decide where he’s lining up.

Dale Pierce just published the last part of a 3 part introduction to Modern Monetary Theory and while I quote Krugman when I think his policy prescriptions are useful (which is frequently) and frame most of my arguments from a NeoClassical (Samuelson) perspective (because then I don’t have to waste a lot of photons justifying myself), I’m increasingly attracted to MMT.

It’s fundamentally based on generally accepted principles of accounting (who says accountancy is boring) that have been around (documented) since the 1400s so in its own way it’s the Magna Carta of Economics.

Now what makes MMT “Modern” is that it assumes Government issued fiat currency (money) not associated with any particular commodity or fixed exchange rate (into other currencies).  A lot of intellectual energy goes into justifying that historically because so many people are emotionally invested in the concept that Gold or similar bright and shiny objects == money and that arbitrary currency inevitably leads to hyper-inflation (which is not inherently a bad thing provided wages and returns on capital investment keep pace).

Told you I was radical.

It is posted at New Economic Perspectives which I heartily advise bookmarking if you are into economic policy.  These are serious dudes with chops of the same sort as Friedman/Randian/Chicago School Monitarists and NeoLiberal/Rubinite/Salt Water Free Trader Globalists.

Modern Monetary Theory – An Introduction: Part 1

By Dale Pierce

Posted on April 22, 2013

MMT explores the monetary- and fiscal-policy implications (of) fiat-money. And this is, or should be, a politically neutral line of inquiry. We don’t have one monetary system for Democrats and another one for Republicans. However, there are few areas of policy disputation that are more hotly contested in America today than the ones MMT is most interested in exploring. The top three things that MMT seeks to explain are tax policy, the government’s budgetary and other other fiscal policies, and monetary policy. Enough said. Neutrality isn’t really an option when we will be addressing such unavoidably controversial subjects.

…

For Americans, the history the 1970s is painful history. a lot of people would just rather not think about it. But somewhere in the fourth year of a decade whose first year was all about Viet Nam, and whose final year witnessed the hostage-taking in Tehran, Richard Nixon completed the process he began with the suspension of convertibility of dollars for gold in 1971. Nixon “floated the dollar” on international currency markets. Except for people who were itching to speculate on gold, the public hardly noticed any of it. The experts said not to worry. And, sure enough, there were no noticeable effects for individual citizens – with the emphasis on “noticeable”. Behind the scenes, and in ways not even financial experts understood at the time, this change would change everything.

But initially – who really cared? Gold and dollars hadn’t been convertible for American citizens since a Depression-era measure which was passed way back in 1935. A provision of it banned the private ownership of any more than jewelry-size amounts of gold. People were glad to see that restriction go away – it was an affront to tell people what they could or could not buy, including gold. As for whatever central banks did with the stuff – well, what did they do with, or do about, anything?

…

Most Americans who think about it at all blame the Great Inflation of the 1970s on the introduction of fiat money back then. This was, after all, a core thesis of Milton Friedman’s monetarist, anti-Keynesian counter-revolution. His updated version of the Quantity Theory of Money had every conservative pundit with a working larynx intoning that “inflation is always, and everywhere, a monetary phenomenon.” Which, if you think about it, is much like saying that obesity is  always, and everywhere, a weight problem. But if anyone noticed the tautological or non-informative character of this generalization at the time, they either didn’t say so or were drowned out by the then-rising tide of Monetarism.

Friedman’s one-liner had a straightforward, common-sense appeal back then and it still does. And the monetarist story hangs together quite convincingly too, even on the first hearing. Prices are stable. Until they are destabilized by the dilution of the money supply with new fiat-dollars. Fractional reserve banking then kicks in, so most of the new dollars (up to 90%) get re-lent by banks, over and over again, as the money-multiplier does its dirty-work. In the end, a purchasing power many times as great as the original money injection is chasing the same goods that existed before – so, prices go up. Bada-bing.

Most of the people Modern Monetary Theory is trying to convince – educated Americans who think about the economy – have been exposed to, and believe, some version of this story. So, we don’t start from a level spot. We start from a situation where the conventional wisdom, for all but a few Americans, is that the Keynesian deficit-spending of immoral fiat-dollars always-and-everywhere causes inflation. And always carries the risk that it will accelerate into a hyper-inflation.

…

A very large majority of people unconsciously fail to distinguish between what is merely financial and what is real.

And here’s one way to think about the short-form narrative:

The private sector creates wealth and value – real wealth – real goods and services. Think houses, cars, dry-cleaning, corn-on-the-cob. The public sector creates money – obviously. Who else would create it? The private sector needs the government’s money to pay its taxes. The government supplies it by fiat-spending it into the economy, which also has the effect of moving real goods and services into the public domain. A government may do these things well or badly – efficiently or inefficiently – in ways that advance the common good or in ways that do not. But under our modern, fiat monetary system, this is the way things must work. It is the way they already do work every day. We just aren’t accustomed to thinking about them in this way.

…

Every day, the monetarist narrative on inflation is contradicted by the empirical evidence – as it has been for the past three decades and more. For if there is one thing absolutely everyone understands about the spending of the U.S. government today, it is that it spends vastly more than it collects in taxes. That is what deficit spending is. If the rate of consumer-price inflation really was, in any way, a straight-line function of the size of the government budget deficit, the inflation rate for 2008 and 2009 should have been spectacularly higher than in 2006 or 2012 – and much lower in 1998, when the Clinton administration ran the largest of its famous surpluses. The rate was about the same in all five of these years, and has rarely either exceeded four percent or been less than two percent in any year since the Great Inflation’s high-water mark in 1982.

People deal with the 30-years-and-counting absence of any significant amount of consumer-price inflation in a variety of ways. Some say monetarism just “worked”, and, for some reason, only had to work once. Some claim that the government is hiding the real inflation rate through accounting gimmicks or that T-bond sales somehow make the fiat dollars so illiquid, the deficits aren’t “monetized” (as if it was difficult or labor-intensive to sell a T-bond). Other people single out oil or some other commodity where monopoly power and speculation are the real price-drivers. Some then point to artificially created monopolies like health insurance and various forms of access to the telecommunications infrastructure. Even if the reason why a price goes up is monopolist power – or because Congress has granted rent-extracting opportunities to some well-connected lobby – many people will still lump that in with every other increase in their personal cost of living and label it “inflation.” And blame it on deficits, Keynesians and the national debt.

Modern Monetary Theory – An Introduction: Part 2

By Dale Pierce

Posted on April 23, 2013

The wave of capitalist triumphalism that spread around the world from the 1980s on was, and remains, a very complex social, political and economic phenomenon. Future historians, if there are any, will marvel at the suddenness of its rise and the completeness of its victory. Margaret Thatcher and Ronald Reagan seemed to come out of nowhere. Working class Tories and Reagan Democrats rose up in their millions – to vote against the very parties and ideas that had made them prosperous. And which had also made it possible for many of them to send their kids to college for the very first time. The kids themselves graduated into an economy plagued by inflation and full of uncertainties and unknowable quantities that everyone, everywhere seemed determined to blame on some English guy named John Maynard Keynes. Him and his Welfare State. And all that reckless deficit spending. And all those high taxes. Who wanted to be for things like Welfare and taxes? So, a lot of those kids went ahead and took the logical next step and became Young Republicans.

But the institutions of Keynesianism were, for the most part, and in the advanced world at any raate, very deeply entrenched. The Welfare State was unpopular as a concept, not as the set of  policies through which it was concretely expressed. These everyone took for granted and scarcely noticed – until some politician was foolish enough to take himself seriously, move from the general to the particular and actually oppose a program like Social Security. In such political moments, the shallowness and insubstantiality of the Right’s propaganda and political economy were briefly revealed. But if it was only an inch deep, it was still at least a mile wide. Large numbers of Democrats and other progressives, afraid of the wild rise in popularity of “free-market” economic ideas, rapidly adopted those same ideas themselves. They became “centrists” and later “deficit hawks”. But as they moved to the right to appease their newly conservative-minded constituents, the Right itself moved relentlessly to the far-far-Right, culminating in the all-out craziness of today’s Tea Party.

Ironically, Democrats and liberals found it easy to forget their Keynesian roots precisely because those roots were as deep and strong as they were. In all Western countries, and most Asian ones, there was some version of Social Security – and, as a rule, far stronger and more universal state-insured medical systems than in the United States. Institutionally, these and other safety-net programs looked unassailable – from unemployment benefits to welfare (or “the dole”), and even to state-paid child care in some countries. By the time of the Thatcher-Reagan “revolution” – it was really a counter-revolution – no one was seen as actively opposing the safety net. So liberals didn’t feel much need or obligation to defend it.

…

It is not the whole answer, but one big part of it is that “neo-classical” economics is, in at least one important respect, quite similar to the original. Like the Adam Smith version of Economics, (though unlike either Marxism or Keynesianism), the “neo-classicists” have very little interest in how we came to center so much of our economic activity around the getting and spending of money. For money itself is useless. Even money that is made out of silver or gold can only become useful by losing its status as money – i.e., by being melted down or hammered out or somehow otherwise made into something else – something that is no longer money. Some people like to look at coins, of course, and some also collect rare coins and notes. But their interest is in the incidental (and even accidental) characteristics of what they collect – the artwork, the state of preservation, and especially things that get printed or stamped incorrectly, and which are therefore rarities. Numismatists aren’t interested in the “money-ness”, per se, of their collections at all. And neither are “mainstream” neo-classical economists.

Whether they have used this terminology or not, classical and neo-classical economists have largely concerned themselves, not with money, but with utility – that is, with usefulness. People “truck, barter and exchange” things (to follow Adam Smith’s terminology) because, at any given moment, they have more use for some things than they have for others. And so, from the first paragraph of the second chapter of the very first Enlightenment-era economics text, we find a line of reasoning which minimizes and marginalizes money. (I.e., “The Wealth of Nations“).

Money is not even strictly necessary, this line of reasoning stresses. We could very well have an economy, (and there have been some actual economies) without any kind of money. In many versions, Robinson Crusoe and man-Friday  wander through the narrative at this juncture, colorfully haggling over the price of fish relative to coconuts and vice versa. And so on, through unknowable centuries and millennia of pre-historic time (this Economics says), humanity trucked, bartered, exchanged – and groped for a better way to do business.

Different universal commodities were tried – from cattle to salt to circular stones so big no one could lift them. What tribe or culture first chanced upon the advantages of the precious metals is lost in the mists of time, but the advantages persisted and metal money was born. It was imperishable, portable, and uniform. It was ubiquitous enough to be found everywhere but still rare enough to represent value in a concentrated way. In short, it was perfect. As hunter-gathering and pastoralism receded and civilization commenced, gold, silver and copper coins became the markers of the new social wealth of the elites. The institution and the forms of metal money were then passed down, with the added force of tradition, all the way to modern times.

Apart from its being largely untrue as history, this very conventional classical account of the origins of money also suffers from the singular defect of saying nothing about the issuer of all this money. It offers no theory at all about the role of the state. Indeed, it is scarcely mentioned. This is very much in keeping with the neo-classical definition of Economics as the micro-examination of utility-maximizing behavior by individual “agents”. It is sometimes granted that these agents may be human beings, but this is regarded as largely unimportant and is rarely even mentioned. Money, having no utility, is unimportant to this version of Economics too – as are the institutions and operations of a country’s monetary authorities. Debt is another almost entirely ignored category for neo-classicists, as are the operations of banks, including central banks.

Modern Monetary Theory – An Introduction: Part 3

By Dale Pierce

Posted on April 24, 2013

The state’s money is a good store of value and a reliable medium of exchange because absolutely everybody needs at least a little of it. Even off-the-grid survivalists and doomsday preppers need it. Because when they pay for their hollow-point ammunition at Dick’s, or for their freeze-dried mashed potatoes at Costco, they not only pay for the goods – they also pay the sales tax. Now, Dick’s and Costco only take dollars or dollar-denominated credit anyway, but what makes the state’s money valuable is that every company has to collect the tax piece in dollars and cents – and pay dollars to the government at the close of each week or month or other accounting period. Between sales taxes, property taxes, income taxes and all other taxes, everyone knows that there will be a stable, long-term demand for the currency which the state alone can issue. If this currency is reasonably well-managed by the country’s monetary authorities, it will remain everyone’s preferred legal tender – unless a person really is a survivalist or some other kind of crank.

The federal government spends by crediting private bank accounts, creating U.S. dollars in real time, by fiat, when it does so. Almost every single dollar the U.S. government has spent since a day back in mid-1971 has been created in exactly this way. (Exceptions include those famous went-missing-in-Iraq pallets of hundred-dollar bills we learned about later. The oddness of the example makes the main point that much stronger). The federal government doesn’t have or need a hoard of dollars stored away somewhere. Money is almost entirely a set of spreadsheets now. Such money is just electrons. Just zeros and ones stored in the computer databases of banks and central banks.

Since its spending is by fiat, the U.S. government doesn’t have to collect taxes or borrow from the Chinese to get money to spend. The function and true effect of taxation in a fiat money economy is to regulate aggregate demand. (the bonds are for interest-rate management). Taxes destroy some of the fiat dollars the federal government creates when it spends. They don’t “go” anywhere. They just disappear from private bank accounts. When we pay our taxes, there are a few fewer zeros and a few fewer ones in our particular spreadsheet cell in our bank’s computer. That’s all. The rest – the receipt, essentially – is a formality. The U.S. government is not more able to spend another dollar after we have been debited a dollar. It is not less able to spend after someone is credited one. And this account of the matter is not theoretical or, to the operatives who actually run the banks, in any way controversial. This is just the way the banking and central banking system works every day. Completely routine.

…

The thing modern fiat money preserves and improves upon is simple to say, but a little complicated to explain. It doesn’t yield easily to the gold-standard version of common sense. But it’s something anyone can understand if they try: one way of unlocking the mystery of money is to think of it as really just being a tax credit. Easy to say, but needs some unpacking.

This starts with understanding that the state, clearly, has no use for its own money – for its own I.O.U., one might even say. The things a government needs in order to be a government are mostly the same kinds of real goods and services the private sector needs – and produces. From jet planes to ink-jet printers to new printing presses for the national mint, the things government needs differ in only quite minor ways from the things individuals and firms sell to, and buy from, each other. But when the government buys them, it is a quite special case.

When the federal government buys something (or a state government does, spending federal dollars) the transaction has a completely different character than when an individual or a company buys something. In the latter case, existing dollars change hands – dollars which were previously spent into existence by the state. These dollars have been saved – set aside by someone in anticipation of some expected future need. But when the government spends, it creates new  dollars by fiat, ex nihilo or “from nothing”. It doesn’t draw them from some hoard or store. It never needs one. And these transactions are completely voluntary. Companies and other private-sector entities compete with the same energy and determination for sales to government entities as they do for any other category of sales. If anything, governments are even more desirable as customers – because they can always pay, and they virtually always do.

The conundrum of fiat money is why anyone takes it in return for their real goods and services. The economist Hyman Minsky once, somewhat famously, remarked that, “Anyone can print their own money. The trick is getting someone to accept it”. But if we think of the government’s I.O.U. as a tax credit – as a ready means of eliminating any private party’s obligation to pay a tax imposed by government, the mystery disappears. We could just as easily think of the tax – the real tax – as having been “paid” when we surrendered our goods or rendered a service to our government – in the first place. The fiat-dollars we receive in return can just as easily be thought of as records – recording the fact and magnitude of our real-goods transfers for future recognition by the government at tax time.

…

Neo-classicists represent borrowing as a contrast between “patient” individual agents, who are willing to wait for the things they want, and “impatient” ones, who want immediate gratification. (Or who want to finance a new entrepreneurial venture). Interest is the price of impatience and the reward that patient agents are entitled to receive in return for waiting. Patient agents, (who are probably sentient humans) save money and deposit it in a bank. These savings are, thus, the “loanable funds” available to be borrowed at any given time. Even Paul Krugman talks like this (he’s a “neo-Keynesian” – i.e. a neo-classicist with a conscience, who therefore gives a damn whether the “agents” he studies live or die). Since our available “loanable funds” are limited – are a function of the patience supply – governments must take great care not to borrow too much of the patient agents’ savings, lest their borrowing come to “crowd out” impatient entrepreneurs seeking capital for new or expanded ventures.

Now, since it is a certified, bi-partisan Truth that “governments can’t create jobs – only the private sector can”, it follows that the one and only way for a country’s government to help employment and growth recover from a recession is to leave as many of the banks’ “loanable funds” un-borrowed as it possibly can. And the only politically viable way to do that is to spend less money. From this point of view, it doesn’t make much difference what part of the budget you cut (if this sounds like the Sequester, that’s because it sounds exactly like the Sequester). If the only cuts that are politically possible are random cuts, that’s still O.K. All you’re trying to do is leave more zeros and ones in the banks’ spreadsheets so that all those hordes of salivating, animal-spirited, would-be entrepreneurs will find enough of them waiting there to launch their piece of the Next Big Thing and thereby, finally, Create Jobs.

…

“Loanable Funds” is bunk, just like the Quantity of Money and all the rest of Whatchamacallit Economics. Deposits don’t create loans – loans create deposits. Banks don’t lend out deposits, and they obviously don’t lend out reserves. Their loans just confer purchasing power on borrowers, along with debt. Modern Monetary Theory calls this bank-created credit “horizontal” money-creation [Primer Link] to distinguish it from the “vertical” money-creation only the state can engage in. Private debt and credit “net to zero” – they cancel each other out, so to speak. But looking at the way banks and central banks actually operate renders the entire framework of “loanable funds” absurd. This justification for austerity in a recession is – or should be – laughable.

The U.S. budget deficit has not “crowded out” any private borrowing, because that’s not how money, banking and credit work in the real world. And since nothing was crowded out – since their was no bidding war for access to the patient peoples’ limited stash of dough – U.S. interest rates went down, not up, in the years that saw the biggest deficits. And Zimbabwe? Core consumer price inflation remains all-but-undetectable as we continue to flirt with an austerity-induced second-dip recession eerily like the one Franklin D. Roosevelt induced in 1937. By following exactly the same kind of bad, deficit-hawking advice we are getting from “moderates” and “centrists” today.

OK, so it might be a 4 part “Trilogy”.  Sue me.

Will Social Security Be Unchained? Attacking the Serious People

Dean Baker

Al Jazeera English, April 15, 2013

President Obama’s efforts to appease Washington’s Serious People ran into serious obstacles last week. Responding to the cries of the Washington deficit hawks, President Obama proposed cutting Social Security by adopting a different measure of the rate of inflation for the annual cost-of-living adjustment (COLA).

This measure would gradually reduce the value of benefits through time. By age 75 retirees would see a benefit that is roughly 3 percent less than under current law. This is a much bigger hit to the income of the typical retiree than the tax increases at the end of last year were to the income of most of the wealthy people.

…

Why is a Democratic president trying to cut Social Security in response to a crisis created by a combination of Wall Street greed and Washington corruption and incompetence?

Chained CPI Helps Fund Corporate Tax Breaks and Trickle Down

By: masaccio, Firedog Lake

Friday April 19, 2013 10:49 am

Jack Lew, the Treasury Secretary and former head of the Office of Management and Budget, testified before the Senate Budget Committee recently. His written testimony explains the priorities set by President Bipartisan, Barack Obama, who seems to think he was elected on the long-term Republican promise to balance the budget.

Lew tells us that Obama’s budget is based on his Grand Bargain offers to Speaker Boehner that couldn’t garner any Republican backing. Lew doesn’t explain why that should be a starting point for further capitulations. Lew mentions such balanced ideas as the Chained CPI. That’s the part where we slash at Social Security and raise taxes on the middle class by raising income tax brackets less than inflation. Lew explains the reason for this assault on the 99%: “The chained CPI is a more accurate measure of inflation in that it does a better job of reflecting the substitution of goods in response to relative price changes.” That is a lie.

The CPI is supposed to measure how much it costs to maintain your lifestyle. The Chained CPI measures the decline in your standard of living as you change your protein intake from an occasional piece of beef to Alpo. Lew thinks that’s not a problem because it’s all protein. And it’s not a problem for the administration’s rich clients, whose life-style is utterly unaffected by inflation. For the 99%, the Chained CPI assumes that you are just as happy with canned catfood as you were with fresh salmon.

Lew’s headline number is $580 billion in tax hikes. It dwarfs the impact of cutting Social Security, which is $130 billion. At the same time, we are increasing taxes by $100 billion by raising the brackets more slowly than actual inflation. So, we have an actual $680 billion in increased revenues. Let’s see what we do with those. You probably think it has something to do with helping the middle class, as Lew claims in the section labeled “Strengthening the Middle Class by Investing in the U.S. Economy”. That translates to More Trickle Down From President Bipartisan. He wants to increase funding for US agencies to promote trade, including the Trans-Pacific Partnership, and the Transatlantic Trade and Investment Partnership, the new NAFTAs, and will hurt even worse as we watch corporations erode our sovereignty. Then we recycle the money back to corporations that shift foreign production back to the US. We paid them to leave, through deductions available for moving out (which supposedly will be repealed), and now we pay them to return. But that’s not all the corporations won. Take a look at the budget, pp. 7-35, where you can see all the money going to corporations on its way to trickling into the pockets of the rich.

…

Let’s just skip the tax increases on the middle class and the destruction of their retirement benefits. Why do Lew and Obama think balance is a good thing? Did the people on Social Security and Medicare and Medicaid cause the Great Crash? Did they reap billions of dollars in benefits from the Reagan/Bush/Obama tax rate cuts? Did they steal from pension plans or from stock and commodities brokerage accounts? Did they manipulate LIBOR for their personal benefit? Did they launder money for drug cartels and terrorists? Did they need Get Out Of Jail Free cards from the fake prosecutors at the Department of Justice? Did anyone in the entire country vote for this guy thinking “Oh good, at last someone will make the tough decision to cut my Social Security and give the money to the rich and their corporations?”

Discredited?  Thoroughly!  As if the factual wrongness of Reinhart and Rogoff (equally bought and paid for by that very same Pete Peterson who has so far invested $500 Million in his vendetta against Social Security) and the earlier discrediting of Alesina and Ardagna, there is now empirical (that means proven reality as opposed to faith based fantasy for my sado-austerity perverted readers) evidence from none less than Goldman Sachs economist Alec Phillips via Bill McBride at Calculated Risk–

The federal deficit continues to shrink. Through the first six months of the fiscal year, revenues have come in higher than expected, while spending has come in lower than expected. As a result we are lowering our deficit forecast for the current and next two fiscal years.

Earlier this year we lowered our FY2013 deficit forecast from $900bn (5.6% of GDP) to $850bn (5.3%). In light of recent trends, we are lowering it again to $775bn (4.8%). Spending in the fiscal year to date is lower than a year ago and the nominal growth rate is lower than it has been in decades. Revenues have also exceeded expectations, with a 12% gain fiscal year to date. What is more notable is that the strength in revenues preceded the payroll tax hike at the start of the year, and the spending decline does not seem to reflect sequestration, which has just started to take effect.

We expect the improvement to continue for the next few years. Although we had already expected additional cyclical improvement and residual fiscal policy tightening to reduce the deficit further in 2014 and 2015, we have reduced our estimates a bit further, to $600bn (3.5% of GDP) and $475bn (2.7%).

What kind of snake oil are these B-S artists peddling?

Simpson-Bowles Prod Congress Again to Anti-Deficit Fervor

By Richard Rubin, Bloomberg News

Apr 19, 2013 10:33 AM ET

The updated plan, released today in Washington, includes $740 billion in increased revenue over the next decade that Republicans have deemed unacceptable and a higher eligibility age for Medicare that President Barack Obama has rejected.

…

Their plan would reduce debt as a share of GDP below 70 percent by 2023, compared with 73 percent by that year in Obama’s budget released this month and 55 percent in House Republicans’ budget.

Over the past few days, a study by Carmen Reinhart and Ken Rogoff that warned of the dangers of government debt has been criticized for errors.

“What it doesn’t change is the common sense and my own personal experience in both the public and private sector that when any organization has too much debt, that that is an enormous risk factor,” Bowles said today.

See?  They know what they’re talking bullshit and they do it anyway.  To continue.

(T)he Medicare eligibility age of 65 would be gradually raised to 67.

…

Bowles and Simpson would cut $585 billion from health-care spending, including expanded means-testing of Medicare benefits. They would also cut $265 billion from other programs, such as agricultural subsidies and higher education.

Their plan adopts the chained consumer price index, a typically slower measure of inflation for benefits and tax brackets that Obama included in his budget.

And why?

Part of the plan is a rewrite of the U.S. tax code that would lower tax rates, remove breaks and impose lighter levies on multinational companies’ overseas income.

There you go.

The next potential point for action is the need for an increase in the debt limit, which will occur in the next several months.

Bowles said Congress has “one last good chance” to get a deal done between now and Aug. 1.

Instead of a so-called grand bargain, U.S. lawmakers have imposed about $2.7 trillion in deficit reduction through a series of deadline-driven agreements. That total doesn’t include the sequestration cuts.

“That’s not nothing,” Bowles said. “That’s a good step in the right direction. It doesn’t get us to the promised land.”

Adapted from Formula One 2013: Sakhir Qualifying and Formula One 2013: Sakhir at The Stars Hollow Gazette

Bahrain F1 Event Goes Ahead Despite Human Rights Protests

By HARVEY MORRIS, The New York Times

April 18, 2013, 8:17 am

(T)he government’s strong-arm reaction to demonstrators demanding greater democracy and equal rights for the island state’s Shia population has failed to quash the protest movement.

Dozens of people were injured in March as protesters clashed with the riot police on the second anniversary of a Saudi-led military intervention to assist the Bahraini authorities confront the unrest.

As isolated clashes between the police and protestors were reported on Thursday, the main Shia opposition group said it was planning a major demonstration to coincide with preparations for the Grand Prix.

Human Rights Watch, one of a number of groups that called for the event to be canceled, warned there was a risk that the Bahraini authorities would use repressive measures to clamp down on the protests.

“Bahrain is already tightening the lid on protest as the Formula 1 race grows near,” said Sarah Leah Whitson, the organization’s Middle East director. “The Formula 1 organizers apparently prefer to bury their heads in the sand, risking holding their race against repression it has provoked.”

Human rights groups say Bahrain’s Sunni rulers want to use the event to convey a semblance of normality in a country that is still wracked by regular clashes between the security forces and protesters.

The authorities have managed to confine the trouble mainly to Shia villages, out of sight of areas likely to be frequented by Grand Prix visitors.

“The public relations whirl around grand prix week always brings an attempt to suppress a few secrets that King Hamad’s regime would rather you did not see,” wrote Oliver Brown in the British newspaper, The Daily Telegraph.

It may seem to the casual observer that Bahrain is surprisingly quiet this year.

The political problems have not ceased, however, and Bahrain remains in the thick of its social upheaval. Negotiations between the government and the opposition began again in February, and the move in March to appoint Crown Prince Salman bin Hamad bin Isa al-Khalifa as first deputy prime minister was seen as a way to improve the negotiations, as he is considered to be a softer, more open man than his more hard-line father, King Hamad bin Isa al-Khalifa.

The opposition, meanwhile, is staging a series of peaceful demonstrations during the race weekend this year.

“These demonstrations show that the movement continues and the demands have not been met yet,” Khalil al-Marzouq, a leader of the main opposition group Wefaq, told Reuters on Wednesday. “Obviously, the presence of the media for the Formula One helps shed the spotlight on Bahrain.”

Bernie has been doing his unctuous best to try and pretend that he cares about anything except money-

But while Bernie has been going la la la, I can’t hear you and the toadies in the Sporting Media have been typically silent, what’s really been happening is brutal suppression.

Bahrain prince admits ‘issues’ on Grand Prix eve

AFP

4/20/13

Police were out in force for qualifying, with armoured vehicles deployed around the capital’s Pearl Square, epicentre of month-long pro-democracy protests in early 2011 that were crushed with deadly force.

Hundreds of Shiite demonstrators who attempted to gather in the square on Saturday evening were forcibly dispersed, witnesses said.

Police fired tear gas and chased demonstrators into side streets. Some protesters retaliated with petrol bombs, the witnesses added.

Hundreds had taken to the streets in Shiite villages outside Manama overnight, prompting clashes with police, but away from the circuit, witnesses said.

…

Prince Salman denied that the event was being exploited to boost the image and economy of the tiny Gulf monarchy that has a Shiite Muslim majority but is ruled by a Sunni dynasty and has been rocked by continuing Arab Spring-inspired unrest.

“We’ve never used this race to say that everything’s fine,” Prince Salman said. “We recognise there are issues in the country but they are to be solved in a political process which is well underway.”

Last year most teams stayed in Manama, Bahrain’s capital, and had to make a 20 mile trip to the track each day.  This year the teams are housed in a hotel steps from the paddock and are in virtual "voluntary" lockdown.  No Force India Molotovs this year.

Also, just like last year, independent journalists have been denied visas or ejected lest they report on things like this-

Bahrain protests to be stepped up before grand prix, says rights group

(P)ro-democracy protesters opposed to Sunday’s race have also been frustrated by increased security measures which have driven them out of the capital, Manama. Shehabi said: “There was a blanket ban on all protests after last year’s grand prix. People have been forced underground now. Protesters have been pushed to parts of small villages where they can’t be heard or seen. As long as you’re not seen or heard by anyone it’s OK.

“There is a continuation of government repression. We haven’t seen justice or accountability for the F1 staff who were sacked and arrested and tortured in 2011. They were tortured at the circuit itself.”

…

Said Yousif, spokesman for the Bahrain Centre for Human Rights, said: “There has been a government crackdown here and it started two weeks ago, especially in the villages close to the F1 track, and 65 people have been arrested. Leaders have been beaten and tortured before being released, so everyone can see the marks of beating and torture. Houses have been razed in different villages. Tear gas has been used at close range. No one has died, as happened last year, but the crackdown has continued. I was in jail for a month three months ago just because I tweeted an injury in the capital.”

For make no mistake, protests are continuing.

Bahrain protests grow as Bernie Ecclestone considers city for F1 start

As tension built here on Friday, with an estimated 10,000 pro-democracy demonstrators gathering at Budaiya Highway in the afternoon and more serious trouble expected overnight, Ecclestone’s stance could be seen as provocative.

Around the Sakhir circuit itself, there was tight and vigilant security and those travelling here had to negotiate widespread road blocks. There were hundreds of police on view and police cars and armoured vehicles were even more in evidence than they were last year. Early in the afternoon a long plume of smoke could be seen a few miles from the circuit. As another security measure, everyone has been photographed on the way to the track.

According to sections of the Italian media, the Ferrari team were told to remain in their hotel at night, although this was denied by a spokesman, who said: “Everyone has just been told to be careful.” Nonetheless, more teams are staying in a trackside hotel to avoid driving through the capital, Manama, as many of them did last year.

Those who did drive back to Manama on Thursday evening went down a highway which separated demonstrators from the police, who looked to be firing tear gas. The Gulf Daily news carried a report of rioters blocking roads and attacking police as violence escalated on Thursday evening, with a Molotov cocktail attack on Sitra police station. Another report highlighted an attack on Tubli Primary School for Boys, with disruption caused by locking the gates with chains.

…

Meanwhile, the British government has upgraded its warning to visitors to Bahrain, telling them to avoid large crowds and demonstrations and Bahraini nationals have been advised to avoid villages and financial districts following last Sunday’s explosion at the Bahrain Financial Harbour, where a gas cylinder was detonated inside a stolen car.

Which I reported on here.

Protests held in Bahrain ahead of Formula One

Thousands of Bahrainis have demonstrated near the capital, Manama, urging democratic reforms, part of a series of protests planned by the political opposition ahead of next week’s Formula One Grand Prix.

…

A second opposition group, the February 14 Movement, organised another protest on Thursday night in the village of Khamis that was broken up by police.

Thursday night’s demonstration came as a report by Human Rights Watch said that police have been rounding up pro-democracy activists in bid to head off protests.

…

Clashes erupted when anti-riot police intervened to disperse the crowd and demonstrators responded with Molotov cocktails, witnesses said.

…

Human rights groups say a total of 80 people have been killed since February 2011.

Clashes as Bahrain gears up for Grand Prix

Clashes began when supporters of the February 14 Revolution Youth Coalition, a clandestine cyber-group that had called for a “Day of Rage”, tried to march on the former Pearl Square in Manama, the capital.

…

Police fired tear gas and shotguns to disperse the protesters before they neared the area, witnesses said, but no casualties were reported.

The movement’s supporters – armed with petrol bombs and stones – clashed with police in Shia villages outside Manama and burnt tyres to block main roads, the sources said.

Smoke from burning tire fires which the protesters use as barricades is visible from the track and the road to and from Manama is lined with Police and Military in riot gear.

I reported last week on Damon Hill’s staunch opposition to holding this race at all in which he is joined by current driver Mark Webber.

Ecclestone, however, has said he is considering returning Bahrain to its ‘Season Opener’ status next year which is attractive to the Bahrainis because the teams arrive a week earlier for additional testing and would further bolster their “Everything’s perfectly all right now. We’re fine. We’re all fine here now, thank you.” case, even though there is a premium fee to be paid to Ecclestone and Formula One Management.

Most teams are lukewarm at the prospect–

Ferrari’s Stefano Domenicali said: “I don’t think it would be good for Formula One to be involved in the political situation of the country because then there is the risk of being pulled from one side to the other, which is not really what we should do.”

His counterpart at McLaren, Martin Whitmarsh, said: “I think we’re only all qualified to talk about it from a sporting perspective and since Bahrain introduced Formula One to this region, it’s been a great event and a hospitable grand prix to attend,” and Lotus’s Eric Boullier added: “It’s true that we don’t want to be dragged into a political situation. If the promoter, the FIA and the commercial rights holder agree with the decision to race here, we race here.”

Others on the grid though, privately are looking forward to getting the first available flight out on Sunday evening.

Goodbye and good riddance.

Clashes as Bahrain Grand Prix goes ahead

Al Jazeera

21 Apr 2013 17:26

The Formula One race has gone ahead despite ongoing clashes between Bahraini police and anti-government demonstrators in the capital, Manama.

Police fired birdshot and tear gas on Sunday to contain simmering resentment at a deadly crackdown by the Sunni royal family on Arab Spring-inspired protests that erupted two years ago led by the kingdom’s Shia Muslim majority.

Al Jazeera’s special correspondent, reporting from Manama, said that Sunday’s clashes had broken out at Al Jabrya secondary school, one kilometre from the centre of the capital.

“Students have barricaded themselves in, we could see smoke from burning tyres and I’ve seen pictures of tear gas outside classrooms. We’re hearing reports that two students are injured,” she said.