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Demeter

(85,373 posts)
Fri Jan 2, 2015, 05:19 PM Jan 2015

Weekend Economists Have an Epiphany! January 2-4, 2015!

I typed the right year, without mistake! I even got the month right! I've been having one of those reading jags where I read until my eyes hurt, so not screwing up simple tasks becomes a real effort.



ahem....

The 12 Days of Christmas (do you need a refresher?) run from Dec. 25th to January 5th, or 12th Night. Jan. 6 is Epiphany, also known as Three Kings Day, a holy day in the Catholic calendar:

On this day, according to the liturgical calendar, the Christian Church commemorates the visit of the wise men to the Christ Child. Some, like Lutherans, call the day Epiphany; others, like the Orthodox Church, celebrate Christmas. Whichever label you use, the fact is that the account of this call on Jesus' household by the magi is recorded only once in Scripture, in the Gospel of Matthew:


Now after Jesus was born in Bethlehem of Judea in the days of Herod the king, magi from the east arrived in Jerusalem, saying, "Where is He who has been born King of the Jews? For we saw His star in the east and have come to worship Him." When Herod the king heard this, he was troubled, and all Jerusalem with him. Gathering together all the chief priests and scribes of the people, he inquired of them where the Messiah was to be born. They said to him, "In Bethlehem of Judea; for this is what has been written by the prophet:

'And you, Bethlehem, land of Judah,
Are by no means least among the leaders of Judah;
For out of you shall come forth a Ruler
Who will shepherd My people Israel.'"

Then Herod secretly called the magi and determined from them the exact time the star appeared. And he sent them to Bethlehem and said, "Go and search carefully for the Child; and when you have found Him, report to me, so that I too may come and worship Him." After hearing the king, they went their way; and the star, which they had seen in the east, went on before them until it came and stood over the place where the Child was. When they saw the star, they rejoiced exceedingly with great joy. After coming into the house they saw the Child with Mary His mother, and they fell to the ground and worshiped Him. Then, opening their treasures, they presented to Him gifts of gold, frankincense, and myrrh. And having been warned by God in a dream not to return to Herod, the magi left for their own country by another way.
--- Matthew 2:1-12 (NASB)


Looking closely at these words, we learn the following about the magi and their trip:

- they arrive after the birth of Christ in Bethlehem;
- they arrive during the reign of King Herod;
- they hail from the East;
- they go to Jerusalem;
- the purpose of their journey is to find and worship the Child who was born King of the Jews;
- they find their way to Jerusalem by following a star;
- their mission (to find the Christ Child) troubles Herod and all Jerusalem;
- Herod consults the chief priests and scribes about the Messiah's prophesied birthplace;
- Herod secretly consults with the magi to determine the time frame for the Messiah's birth;
- Herod dispatches the magi to search for the Christ Child;
- Herod asks the magi to report back to him per the location of the Christ Child;
- the magi continue on their way, following the star until they find Jesus and His family;
- Jesus and His mother, Mary, are residing in a house;
- upon locating the Christ Child, the magi worship Him and present Him with gifts;
- the magi present gifts of gold, frankincense, and myrrh;
- the magi are warned by God in a dream not to return to Herod, prompting their departure home.

Now let's compare this information with what I gleaned from an article in the Latino Voices section of the Huffington Post, an article that came to my attention yesterday through the Facebook posting of a friend. Quoting from the aforementioned source:


According to the Gospel of Matthew, the men found the divine child by following the North Star across the desert for twelve days to Bethlehem. Melchoir, Caspar, and Balthazar --- representing Europe, Arabia, and Africa respectively --- traveled by horse, camel, and elephant in order to present baby Jesus with three symbolic gifts...

- the North Star is nowhere mentioned in the Gospel of Matthew;
- the length of the journey taken by the magi is not mentioned in the Gospel reading;
- crossing the desert, especially in twelve days, goes unmentioned;
- the number of wise men is not given;
- the ethnicity or nationality of the wise men is not mentioned;
- Scripture is silent on the types of animals that were used to travel to Jerusalem an Bethlehem.

The only remotely correct information in the above-quoted paragraph was the reference to the gifts of gold, frankincense, and myrrh being symbolic. This is true.

GOLD. Commonly understood to be a gift fit for a king. It is a symbol of kingship on earth. Gold can also symbolize virtue.

FRANKINCENSE. A perfume spice often considered symbolic of divinity or deity. Frankincense can also represent incense that is burned as an offering to God, or prayer.

MYRRH. Used as anointing or embalming oil, myrrh is symbolic of mortality and death. It can also represent suffering and sacrifice.

Let's face it, much of what we actually know about the visit of the wise men is tradition, narratives that have been around so long the average layperson rarely remembers where the tales came from or if they are factually true...

http://astrugglingbeliever.blogspot.com/2013/01/the-epiphany-story-read-bible.html






The twelve days of Christmas end with the Feast of Epiphany also called "The Adoration of the Magi" or "The Manifestation of God." Celebrated on January 6, it is known as the day of the Three Kings (or wise men/magi): Caspar, Melchior and Balthasar. According to an old legend based on a Bible story, these three kings saw, on the night when Christ was born, a bright star, followed it to Bethlehem and found there the Christchild and presented it with gold, frankincense and myrrh.

January 6, the last day of Christmas, comes with its own traditions, rituals and symbols. Carolers are going from house to house; in many homes the Christmas tree is taken down and in some areas is burnt in a big bonfire. For the children this is an especially joyous occasion because, associated with taking down the tree goes the "plündern" (raiding) of the tree. The sweets, chocolate ornaments wrapped in foil or cookies, which have replaced the sugar plums, are the raiders' rewards.

The history of Christmas, (the festival of the nativity of Jesus Christ,) is intertwined with that of the Epiphany. The commemoration of the Baptism (also called the Day of Lights, i.e. the Illumination of Jesus) was also known as the birthday of Jesus, because he was believed to have been born then of the Virgin or reborn in baptism. In some records Christmas and Epiphany were referred to as the first and second nativity; the second being Christ's manifestation to the world.

In the fourth century, December 25 was finally adopted by the Western Christian Church as the date of the Feast of Christ's birth. It is believed that this change in date gave rise to the tradition of the "12 Days of Christmas." While the Western Christian Church celebrates December 25th, the Eastern Christian Church to this day recognizes January 6 as the celebration of the nativity. January 6 was also kept as the physical birthday in Bethlehem. In the Teutonic west, Epiphany became the Festival of the Three Kings (i.e. the Magi), or simply Twelfth day.

On the evening before Three Kings, traditionally there were prayers, blessed dried herbs would be burnt and their aromatic smell would fill the house. Doorways would be sprinkled with holy water and the master of the house would write with chalk C + M + B and the year above the house and barn door and say: "Caspar, Melchior, Balthasar, behütet uns auch für dieses Jahr, vor Feuer und vor Wassergefahr." ("CMB, protect us again this year from the dangers of fire and water.&quot C + M + B has traditionally been translated with Caspar, Melchior and Balthasar, however, according to the Church it stands for "Christus Mansionem Benedictat" (Christ bless this home).

The custom of the Star Singers, reminiscent of the travel of the Three Kings is still very much alive in Bavaria and Austria. Beginning with New Years and through January 6, children dressed as the kings, and holding up a large star, go from door to door, caroling and singing a Three Kings' song. For this they receive money or sweets. Formerly the collected donations went to unemployed craftsmen and veterans, today they go to charities of the church or the Third World.

http://three-kings-day.123holiday.net/


If you were fortunate enough to have grown up in a town such as Tarpon Springs, Florida, where I attended high school, then you are probably quite familiar with some of the unique cultural celebrations associated with Epiphany. What I remember vividly about this ancient church holiday is skipping school each year on Epiphany to see many of my classmates (young men ages 16-18 of the Greek Orthodox faith) dive into the chilly waters of Spring Bayou to retrieve the cherished cross. The "blessing of waters" and "diving for the cross" ceremonies were famous in our predominately Greek community, and that fame was shared for a year by one special Greek classmate who had the honor of recovering the crucifix and receiving the traditional full-year's blessing....http://christianity.about.com/od/christmas/f/whatisepiphany.htm


If I am not mistaken, it is at this point that the Flight into Egypt, to escape Herod's hunt and the slaughter of all the children, is taken by Joseph's family....

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Weekend Economists Have an Epiphany! January 2-4, 2015! (Original Post) Demeter Jan 2015 OP
For those who have had enough Christmas, this is the last Weekend Demeter Jan 2015 #1
Too early for bank failures--check back later! Demeter Jan 2015 #2
America’s Retirement Security Crisis Is Huge and Quickly Approaching Demeter Jan 2015 #3
How Congress Has Already Cut Your Social Security Benefits (SECOND SAMPLE!) Demeter Jan 2015 #4
Enormous bitcoin "mining" operation goes up in flames IN NOVEMBER Demeter Jan 2015 #5
Thanks for the write-up. mahatmakanejeeves Jan 2015 #6
oh, dear God Demeter Jan 2015 #10
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RICHARD D WOLFF'S LECTURE SERIES--SOCIALIST PROFESSOR OF ECONOMICS Demeter Jan 2015 #8
My apologies to the good professor, he is a Marxist Economist! Demeter Jan 2015 #16
Yanis Varoufakis: Greek and European Prospects for 2015 Demeter Jan 2015 #9
The success of Obamanomics (SATIRE?) Demeter Jan 2015 #11
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The Real Constitutional Crisis Is Hidden Demeter Jan 2015 #13
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Drop in Factory Orders Index May Be More Benign Than It Looks xchrom Jan 2015 #22
Spin, spin, spin Demeter Jan 2015 #25
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Bill Mitchell: Demystifying Modern Monetary Theory Demeter Jan 2015 #26
Michael Hudson: The War on Pensions – The US Budget Anti-Pension Law DemReadingDU Jan 2015 #27
Political Aspects of Full Employment1 by Michal Kalecki Demeter Jan 2015 #28
If the Supreme Court tackles the NSA in 2015, it’ll be one of these five cases Demeter Jan 2015 #29
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I've been in Aldi's and it ain't any such thing Demeter Jan 2015 #61
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Demeter

(85,373 posts)
1. For those who have had enough Christmas, this is the last Weekend
Fri Jan 2, 2015, 05:23 PM
Jan 2015

for those who haven't, keep it in your heart and home...and a Happy New Year to all!

 

Demeter

(85,373 posts)
3. America’s Retirement Security Crisis Is Huge and Quickly Approaching
Fri Jan 2, 2015, 05:31 PM
Jan 2015
http://www.alternet.org/books/americas-retirement-security-crisis-huge-and-quickly-approaching?akid=12627.227380.aCFJEd&rd=1&src=newsletter1029485&t=26

(Editor’s note: The following is an excerpt from a new book, “Social Security Works! Why Social Security Isn’t Going Broke and How Expanding It Will Help Us All,” published by The New Press, 2015, all rights reserved.)

You’ve heard about boomerang kids—adult children in their 20s and 30s who have returned to live in their parents’ homes. Well, get ready for boomerang parents, formerly independent middle-aged people who—ten, fifteen, twenty years hence—will have no choice but to move into their adult children’s homes because they cannot afford to maintain their own.

While politicians and journalists have been distracted for years by a faux crisis in Social Security, a very real crisis has gathered momentum and threatens to undermine the plans and hopes for a secure retirement of tens of millions of today’s workers.

Congressional champions are beginning to sound the alarm. Retiring United States Senator Tom Harkin (D-IA) warns that the “retirement crisis is worse than most people realize... [The] difference between what people have saved for retirement and what they should have at this point—is a staggering $6.6 trillion, and half of Americans have less than $10,000 in savings.”

“Add up . . . the dramatic decline in individual savings and the dramatic decline of guaranteed retirement benefits and employer support,” explains senator Elizabeth Warren (D-MA), “and we’re left with a retirement crisis—a crisis that is as real and as frightening as any policy problem facing the United States today.” And President Obama has weighed in, explaining, in his 2014 State of the Union address, that, “Today, most workers don’t have a pension. A Social Security check often isn’t enough on its own.”


MORE AT LINK
 

Demeter

(85,373 posts)
4. How Congress Has Already Cut Your Social Security Benefits (SECOND SAMPLE!)
Fri Jan 2, 2015, 05:36 PM
Jan 2015
http://www.alternet.org/books/how-congress-has-already-cut-your-social-security-benefits?akid=12633.227380.h99zmy&rd=1&src=newsletter1029524&t=18

It’s not widely recognized, but Social Security is gradually weakening. Still the most important source of retirement income for the vast majority, Social Security benefits have been chipped away, and will be roughly 24 percent lower for workers born after 1959. Here’s why. In 1983 Congress passed legislation that included significant reductions in benefits. Very importantly, the 1983 legislation raised Social Security’s full retirement age from age 65 to 67, a change that is still being phased in. The 1983 amendments set the Social Security “full retirement age” at 66, gradually phased in for those born in 1943 through 1954. It will then gradually increase to age 67, fully phased in for those born after 1959.

For those not thoroughly immersed in how Social Security benefits are calculated, increasing Social Security’s “full” retirement age may sound like just a small, reasonable adjustment for changes in life expectancy. But that is not right. Rather than a single, fixed retirement age, it is more accurate to think of Social Security as having a band of ages. Workers may claim benefits as early as age 62. For every month they delay up until age 70, benefits are increased to take into account that they will be received for one month less. Consequently, because of the way that Social Security benefits are calculated, raising the age defined in the Social Security Act as the “retirement age” by one year is mathematically indistinguishable from about a 6.5 percent cut in retirement benefits, whether one retires at age 62, 67, 70, or any age in between. Raising the statutorily defined retirement age sounds like it should mean that if you work longer, you will eventually get what you would have gotten. But you never actually do catch up. If the definition of retirement age is changed to be an older age, you always get less than you would have without the change.

This point is complicated and not well understood, even by some experts. Because the use of the phrase “full retirement age” lends to confusion, keep in mind that the important thing to understand about retirement age increases is that for every year that Social Security’s “full retirement age” is raised, retirement benefits are cut by roughly 6.5 percent. It does not matter when someone first claims benefits—at 62 or 70, or somewhere in between. The 1983 enactment, which gradually phases in a two-year increase in the full retirement age from age 65 to age 67, has already lowered benefits by around 6.5 percent. When fully phased in, the change will cut the benefits of those born in 1960 or later by around 13 percent.

In addition to increasing the full retirement age, the 1983 legislation delayed the annual automatic cost of living adjustment by six months, from June to January. Again, it’s a bit complicated to understand without knowing the details of benefit calculations, but this delay translates into a 1.4 percent cut for everyone, now and in the future. Finally, decisions made in 1983 and 1993 to treat a growing portion of Social Security benefits as taxable income for an increasing number of retirees effectively will have lowered benefits (i.e., net after-tax benefit in- come) by 9.5 percent in about thirty-five years. Prior to the 1983 legislation, Social Security benefits were tax-free. Since 1984, up to 50 percent of Social Security benefits have been counted as taxable income for individuals with incomes in excess of $25,000; $32,000 for couples. Since 1993, additionally, up to 85 percent of Social Security benefits have been taxed for individuals with incomes in excess of $34,000; $44,000 for couples. Because these thresholds are not adjusted for inflation, the reduction in effective benefits increases over time. The effective cut is, on average, 6 percent in 2012, 8.8 percent in 2030, and 9.5 percent in 2050.

The result of all these cuts together is that Social Security—by far the most important retirement asset that most working Americans have now and will have in the future —is on a trajectory to replace less and less pre-retirement earnings. Even so, it remains the most widespread, effective, secure, and significant source of retirement income for today’s workers and those who will follow. This is why it is so important for Social Security’s retirement protections to be expanded, especially because, as we detail in Social Security Works!, the prospects for relief from other quarters are slim to none.
 

Demeter

(85,373 posts)
5. Enormous bitcoin "mining" operation goes up in flames IN NOVEMBER
Fri Jan 2, 2015, 05:49 PM
Jan 2015
?itok=ZuKHFR31

http://www.correntewire.com/enormous_bitcoin_mining_operation_goes_up_in_flames

The operation was run by Euro expats in Thailand, a "cooperative" called Cowboyminers. The entire facility was paid for in bitcoin, and wasn't insured.

It's all very William Gibson-esque: Massive computer power strung together on the fly by geeks, some of them no doubt bent:

The fire highlights the possible pitfalls for any Bitcoin mining startup. Bitcoin mining's appeal is its relative simplicity—you just need computing power. But setting up a facility is more complicated than throwing a bunch of hardware together in a room. Every detail of the traditional data center is designed with cooling in mind, from the placement of vents to the hot aisle/cold aisle layout of the equipment.

And regardless of how the fire started at the Thai facility, it clearly spread, possibly because of a flammable acoustic foam. A traditional datacenter would have also had sprinklers—or in fancier iterations, gas fire extinguishing systems—that detected smoke or heat early on to minimize the damage. Of course, these systems don't come cheap.

Mining currency may no longer involve people, but it still does involve monster machines—machines that are very expensive and very destructible.


And then of course there's that awkward confluence between glibertarians, regulations, and regulatory arbitrage:

The bitcoin network infrastructure is split between data centers and no-frills hashing centers featuring high-density hardware and low-reliability power infrastructure, often housed in former warehouses. Many bitcoin entrepreneurs focus on building high-powered infrastructure at the cheapest price point possible. As industrial mining operations scale up, they are optimized for rapid changes in hardware and economics.

But there are tradeoffs that accompany this single-minded focus on cost. Data center veteran Mark MacAuley has been publicly warning about the potential for this type of incident in low-budget mining facilities. “The nuances between a mining facility and a data center are more obvious than I thought,” Macauley tweeted in September. “A data center cares if there is a fire, for example.” MacAuley warned that the design of some bitcoin mines created the potential for fires.

Most traditional data centers feature fire suppression equipment. These systems typically involved advanced systems to detect heat and smoke, including sensors using VESDA (Very Early Smoke Detection Apparatus). Early detection can allow data center operators to quickly extinguish a fire or smoke condition before it can damage entire racks and rows of expensive equipment.

When a fire occurs, data centers use several methodologies to extinguish the fire. These include “pre-action” sprinkler system in which water fills the sprinkler pipes only upon an alarm, reducing the potential that leaks in overhead pipes will cause water damage. Some data center forego water altogether, using gas-based fire prevention and “clean agents” – electrically non-conductive gases that don’t leave a residue. Most clean agents are hydrofluorocarbons (HFC), which lack the ozone-depleting characteristics of chlorofluorocarbons (CFCs) like Halon gas, which was once popular in data centers.

Will this incident prompt more bitcoin miners to consider hosting equipment in traditional data centers? It’s too early to say. Recent declines in the price of bitcoin have further tightened profit margins for miners. To remain competitive, industrial mining operations are making large investments in new hardware. Many businesses would seek to protect these investments with business insurance, but insurers will likely to want the equipment to be hosted in facilities with proper fire detection and suppression equipment.


Wait, wait. Data centers don't have a single-minded focus on cost? MBAs don't run them, like they run everything else?

Makes you wonder how much of "the cloud" is out there in Bangkok suburbs, or, if Bangkok is too pricey, Manila or Hanoi or Yangon or Jakarta. Of course, one obvious remedy here is never do business with a company that has "cowboy" in its name, but who are the cowboys, really?

UPDATE I've heard that one owner's house, 350 yards away, also went up in smoke (no link). So, one does wonder who didn't get a cut from the enterprise, and whether they were anxious to share their feelings....
 

Demeter

(85,373 posts)
10. oh, dear God
Fri Jan 2, 2015, 06:26 PM
Jan 2015

I am NOT the one to glorify Elvis....too young, for one thing. Will you show up and help out?

 

Demeter

(85,373 posts)
7. Something Called 'The Race To Zero' Is Scaring A Lot Of Tech Companies
Fri Jan 2, 2015, 05:52 PM
Jan 2015
http://www.businessinsider.com/cloud-storage-race-to-zero-2014-11

Cloud computing has completely changed the tech industry, but it has a dark side for the companies competing in the market, something those in the industry call "the race to zero."

There's so much competition in the cloud industry that cloud companies keep cutting their prices, even while they increase their storage limits.

There are a couple of reasons for this. For one, computer storage keeps getting cheaper. A gigabyte's worth of storage on a hard drive in 1993 cost more than $9,000, but it cost a mere 4 cents in 2013.

But you can really thank Amazon for making sure that cloud computing companies pass those savings along to customers. As its costs drop, Amazon cuts its prices for its cloud. Amazon Web Services had 45 price cuts in about the past six years, it says, thanks to a culture of "frugality."

MORE
 

Demeter

(85,373 posts)
8. RICHARD D WOLFF'S LECTURE SERIES--SOCIALIST PROFESSOR OF ECONOMICS
Fri Jan 2, 2015, 05:57 PM
Jan 2015

I've gotten through 3 of them...he gives the big picture: shows the tidal waves instead of focusing on every little droplet in the ocean. These lectures start in 2010 but they are invaluable for understanding where we are today, and why:

"GLOBAL CAPITALISM" 1

(IF YOU SEARCH FOR THE PLAYLIST IT AUTOMATICALLY TAKES YOU THROUGH EACH SEGMENT)

&list=PLA02191CF97A00E27


"GLOBAL CAPITALISM" 2

&list=PL09DD0F805BBD6271&index=1

"GLOBAL CAPITALISM" 3

&list=PL5B68FA34A15FA0DD&index=1

 

Demeter

(85,373 posts)
9. Yanis Varoufakis: Greek and European Prospects for 2015
Fri Jan 2, 2015, 06:14 PM
Jan 2015
http://www.nakedcapitalism.com/2015/01/yanis-varoufakis-greek-european-prospects-2015.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

YVES: ...As much as a Grexit would be a lose-lose of major proportions, Varoufakis argues that the logic of current Eurozone arrangements is driving members to a break-up. Indeed, some observers believe that Germany would like to kick Greece out of the Eurozone....


By Yanis Varoufakis, professor of economics at the University of Athens. From an interview by Alessandro Bianchi in L’Antidiplomatico on Greece and Europe in the run up to the Greek general election of 25th January 2015

European media often speak of the “Greek recovery” and the growth of competitiveness of the country to try to persuade the public opinion about the effectiveness of austerity and structural reforms imposed by the Troika. Considering the macroeconomic data, however, we find a youth unemployment above 50%, a negative inflation rate and a debt-deflation spiral out of control. How is it possible to speak of “recovery” when three Greek citizens out of five have exceeded the poverty line?

Over the past two years, no fact could get in the way of the EU propaganda machine which, approximately eighteen months ago, went into overdrive in an attempt to shore up the Samaras government, terrified at the prospect of a new government in Athens that insists of speaking truth to power. Have you noticed how the ‘Greek Success Story’ narrative disappeared once elections became inevitable? What kind or ‘recovery’ was it that went up in a puff of smoke the moment an election appeared over the horizon?

The answer is: a ‘recovery’ that existed only in the realm of propaganda. A ‘recovery’ that was engineered by means of two new bubbles, one in the bond market the other in the market for Greek banking shares – bubbles that burst the moment the Greek people seemed as if they were to have a chance to express what they felt about the said ‘recovery’ in the polling stations. A ‘recovery’ evidenced in one quarter’s positive GDP growth (equal to 0.7%), after seven years of continuous decline, which was due to the sad fact that nominal GDP fell – but for the first time it fell less than average prices did.


So, let’s be frank: There was no recovery. What we did have was a monstrous denial that was functional to the story Mrs Merkel wanted to convey to European citizens: If austerity worked even in Greece, it must be the right cure for every European realm, and it must thus be accepted unthinkingly by every European – especially the… Italians.

In Greece there will be a general election next January 25, 2015. According to the latest polls, SYRIZA, the main opposition party critic of the austerity measures imposed by the Troika, could be the winner. But, victory at the polls could be precluded by the speculative attack of the markets on spread, aimed at creating a climate of terror among the public. What remains of democracy in this oligarchic regime of the European Union? And the same scenario could be repeated in other countries with those parties critical of the institutional architecture of the EU?

The threat to a SYRIZA government will not come from the markets. Remember: Greece is bankrupt and is not borrowing from private investors. When you do not borrow, you do not care about the interest rate! No, the threat to a SYRIZA government comes from the ECB, from the EU and from Berlin. Days after its election, there is a strong chance that our European partners’ officials, in violation of democracy’s – and logic’s – most basic principles, will threaten the new Athens government with a shutdown of Greece’s banking system until and unless it bows to their will. This is far, far worse, and morally more reprehensible, than being terrorised by the markets. Investors have every right to demand high interest rates in order to lend you money. Fellow democratic governments and unelected central bankers have no right to threaten a newly elected government with Armageddon if it dares ask for a renegotiation of an unsustainable loan agreement with the EU, the ECB and the IMF.

In its program, SYRIZA provides for the annulment of the Memorandum, the complete restructuring of the public debt, the refusal to pay interest on it until it will be a real economic recovery (suspension of payment of the debt) and, finally, the ECB becomes lender of last resort in order to guarantee a portion of the debt Greek. Given the hostile attitudes of Berlin, Brussels and Frankfurt, how would SYRIZA react facing a new absolute denial of the European authorities compared to its demands? Would it be the pretext to consider the unilateral exit from the euro zone?

Exit from the euro is not an idea that a SYRIZA government will ever entertain or use as a negotiating strategy. While it is clear that Greece should never have entered the Eurozone (and, indeed, that the Eurozone should never have been designed the way it was), exiting would inflict massive damage upon everyone. At the same time, the ‘logic’ of the current agreement is busily working toward dismantling the Eurozone. Italy’s social economy for instance is unsustainable under policies inspired by those first tried in Greece in 2010. To save the Eurozone, and indeed to save Europe’s integrity and soul, we need a New Deal for Europe. SYRIZA is determined to kickstart the conversation on what this New Deal should be. Naturally, the outcome of such a debate will be a compromise. Alexis Tsipras, SYRIZA’s leader, knows this: When you are entering a negotiation, you are aiming at a compromise with which all sides can live. To bring it about, you must stake your initial position – which is what the party’s platform does – and set thin red lines which, if the other side crosses, you walk out. One such line, in Greece’s case, must concern the demand that Greece borrows from, amongst others, the ECB to repay the… ECB for bonds that the ECB bought in 2010/1. If Berlin continues to insist on such illogical transactions, a SYRIZA government must simply say ‘No’ and refuse to do it. Whatever the threats.

In these three and a half years of the troika regime, Greece has lost important parts of public land and areas of national strategic interest in a program of wild privatization. Is SYRIZA thinking of a new state intervention to nationalize at least the essential public services to be delivered to the citizens? And in that case it would not be a violation of the principle of non-interventionism enshrined by the Maastricht Treaty?

The privatisation program has failed spectacularly. There are, indeed, some assets that have been turned over to shady privateers (e.g. the national lottery and the Hellenikon site) which a new government must look at afresh – at least in terms of their legality as re-nationalisation will be impossible given the state’s illiquidity. Having said all this, the most extensive privatisations took place not during 2010-14 but during 2000-2009 involving banks, the state telecommunications monopoly etc. As for public services, the problem there is not that they were privatised. The problem was that they were dismantled or strangled by austerity and hideous cutbacks.

However, the response of European crisis continues to be clear and summarized in the reduction of public spending, increasing taxation and so-called structural reforms to bring down the cost of labour, the only way to compensate for the competitiveness gap between countries. Compared to this, Syriza puts forward very interesting proposals, but those are measures that had been rejected in the past by Brussels, because they violate the rules of the existing treaties, such as Eurobonds and the political control of the European states on the European Central Bank. Do you believe that it is time to overcome Maastricht and to start thinking about a new Treaty?

Our proposals have been calibrated in a way that they do not violate any of the Treaties. For instance, our proposal for an ECB-mediated conversion loan for the Maastricht compliant part of each member-state’s debt, without monetisation by the ECB or debt guarantees by the surplus countries. Or, to give another example, the proposal for a form of Quantitative Easing where the ECB buys large quantities of European Investment Bank bonds for the purposes of funding a European invstement-led Recovery Program. These are some of a number of ideas that can be implemented tomorrow morning, political will permitting. Once we stabilise Europe by means of such policies, we can then talk until the cows come home about a future federation, future Treaties etc. But any attempt to tamper with the Treaties now, while the crisis percolates, will only backfire.

In the event that the countries of the North, as already claimed in the past, will oppose these scenarios of change needed to overcome the crisis, should the countries of the South, in particular the parties critical of the current institutional architecture, start thinking about a new form of integration funded on economic and social solidarity, which aim to the respect of the national sovereignty? Due to the severe conditions of their economies, is there still time to deal with a drawing up of a new Treaty based on those principles?

No, I do not think so. As I argued above, this is not the time for Treaty changes. First we must halt the fragmentation and only then discuss consolidation. Having said that, the current Treaties allow for so-called ‘enhanced cooperation’ – which allows for nine member-states or more to go it alone in the implementation of European Union policies that are not binding on the rest. Perhaps Europe’s ‘South’ could use this institutional facility.

On the opposite side, Europe seems to head very quickly toward a road opposite to that outlined by Syriza. This is clear especially after the sanctions to Russia and the political interferences of NATO in Ukraine, the inevitable passage of TTIP, the area of free trade with the United States, which the European elites want to approve in 2015. Could a new majority of Syriza in the national Parliament stop the ratification of TTIP?

The idea of free trade with the United States is splendid. The problem with TTIP is that it is not at all about free trade but, rather, about handing inordinate property rights over environmental standards and intellectual property to multinational corporations. Similarly with the security issue. Ukraine should be stabilised and Russia democratised. Alas, the current standoff with Moscow is not about this but, rather, it is part of a grubby geopolitical tussle out of which Europe’s citizens, from the Atlantic to the Urals, will lose out.
 

Demeter

(85,373 posts)
11. The success of Obamanomics (SATIRE?)
Fri Jan 2, 2015, 06:39 PM
Jan 2015
http://america.aljazeera.com/opinions/2014/12/obama-economic-stimuluspoliciesstockmarket.html

By a host of measures, the U.S. economy has done exceptionally well under President Barack Obama. So why does he receive such poor approval ratings, especially from the most prosperous and economically conservative Americans?

  • The investor class should be thrilled. Under Obama, the Dow has risen an astonishing 126 percent, to a record high of 18,030. Under President George W. Bush, the index fell by a quarter, from 10,587 to 7,949.

  • Corporate America should exult. Profits, both before and after taxes, have doubled since Obama took office in 2009.

  • Fiscal hawks should cheer, because the federal budget deficit is down from 10 percent of the economy in Obama’s first year to less than 3 percent in fiscal year 2015, which began Oct. 1. With continued job growth, this might even turn into a surplus before Obama leaves. And while Bush was a spendthrift, Obama has been the most tightfisted president in the last half-century in terms of discretionary federal spending.

  • Health insurance companies should be laughing all the way to the bank, because Obama ignored advice to pursue a single-payer system, which would have eliminated the industry, and instead won approval for the Affordable Care Act, which guarantees health insurers a lucrative future.

  • Wall Street banks should be exuberant for two reasons. First, Obama and his attorney general, Eric Holder, refused to prosecute easily proved crimes, including mail, mortgage, securities and wire fraud and commercial bribery. Second, this month Obama signed into law the CRomnibus budget bill, which approved derivatives gambling with taxpayer-insured bank deposits. Derivatives are the complex financial products that contributed to the 2008 financial crisis.

  • Big retailers, monopolists and manufacturers who moved production offshore should toast Obama, who has promised to expedite approval of the Trans-Pacific Partnership, which would insulate many big companies from the rigors of market competition and ease their path to greater offshoring and even bigger profits.

  • Consumers and energy-intensive businesses should be cheering now that gasoline prices are lower than Newt Gingrich said he would make them if he had been elected president in 2012.

  • Anti-government tea partyers should be pleased too. Since Obama took office, the federal workforce has shrunk 2.4 percent, taking the number of federal workers below where it stood when Bush took office almost 15 years ago. (Bush added federal workers.) State and local government workforces are also smaller under Obama, partly because of reduced federal revenue sharing.

  • Workers should be content too. In Bush’s last year, the country lost 4.4 million jobs, a scary trend that continued for another year. Since then, the U.S. has enjoyed a record 57 months of consecutive increases in private-sector jobs, though Obama gets little credit for that or the fact that we now enjoy not just a record 140 million jobs but also an accelerating rate of job growth.

    Stagnation


    So what’s not to like about the economic record of this president?

    What most people know is that they are working hard and getting nowhere and that even if they perform well, their jobs can evaporate in an instant.
    Median household income was $59,139 last year, about $4,500 below 2007 but up all of $189 from 2012. As I showed in a previous column, the median wage last year was at its lowest level since 1998, and the average wage remains below its 2007 peak. Had congressional Republicans cooperated with the president, our economy would be larger by 3 percent, or about $529 billion. Therein lies a key to understanding dissatisfaction with Obama’s economic policies. While about 10 million jobs have been added since the low point a year into his first term, wages have stagnated. We could have had many more new jobs, perhaps another 4 million to 6 million, which would have drawn many people back into the labor force, reducing demand for food stamps and other government benefits as well as producing more tax revenues. That in turn would have resulted in higher wages, more savings and less consumer debt relative to income.

    Instead we got a drop in the labor force participation rate, which measures the population 16 or older working or looking for work. It peaked at 67 percent in 2000 and now stands just under 63 percent. The aging population is the biggest single factor in this decline. But other factors include people’s choosing to retire, raise children and enjoy leisure time, all of which can be considered social goods. We would also have more jobs but for corporate greed when it comes to the benefits of increased productivity. Historically workers shared in productivity gains, but with the government rules rigged against unions, the market for labor has become distorted. Power is almost entirely on the side of big companies and their shareholders, which refuse to share productivity gains with workers. One-sided markets are not markets at all but exploitive systems that in the long run breed economic stagnation and social unrest.

    Most workers have little understanding of how complex government rules harm their interests. A majority of Americans were born since the labor movement peaked in 1973, starting the long trend toward capital’s taking an ever-larger slice of the income pie at the expense of most workers.

    The cost of obstruction

    Imagine how much better off we would all be but for a meeting of 14 top Republicans, 12 of them members of Congress, on the very day Obama was inaugurated six years ago. They agreed to oppose Obama’s economic policies, as Gingrich, a former speaker of the House, and others have boasted. This approach stands in sharp contrast to the actions of Democrats eight years earlier, when Bush was inaugurated. Even though many Democrats felt his tax cuts would damage the economy, as they did, they agreed to approve his economic policies nonetheless. The GOP decision six years ago to oppose Obama’s economic policies despite the Great Recession immediately harmed the economy. Congress enacted an economic stimulus bill that was much too small to counter the drop in private spending, though research has since shown it was key to reviving the economy and keeping America from falling into a much deeper hole. The 2009 stimulus also included new tax cuts, which are inherently anti-stimulus. Yet Obama enabled his critics when he spoke in favor of those tax cuts.

    Since then the Republicans have fought the Affordable Care Act, despite its success in enabling about 10 million more Americans to get health care while maintaining the private insurance system Republicans favor. They have done so because they are against whatever Obama favors, period. Had congressional Republicans cooperated with the president, our economy would be larger by 3 percent, or about $529 billion, the St. Louis Federal Reserve and other researchers estimate. Unrealized economic output is a terrible waste, especially when it results from petty political animus. Now that the economy is expanding at the fastest rate we’ve seen in more than a decade, public perception about Obama’s economic policies is beginning to improve. But whatever Americans ultimately conclude about Obama, they should view his economic policies in a light that balances his broad successes and failures with the declared determination of Republican congressional leaders to oppose Obama’s policies at all costs.

    David Cay Johnston, an investigative reporter who won a Pulitzer Prize while at The New York Times, teaches business, tax and property law of the ancient world at the Syracuse University College of Law. He is the best-selling author of “Perfectly Legal,” “Free Lunch” and “The Fine Print” and editor of the new anthology “Divided: The Perils of Our Growing Inequality.”
  •  

    Demeter

    (85,373 posts)
    12. Hedge Funds Surrender to Oil Rout as Bullish Bets Drop
    Fri Jan 2, 2015, 06:50 PM
    Jan 2015
    http://www.bloomberg.com/news/2014-12-31/hedge-funds-surrender-to-oil-rout-as-bullish-bets-drop.html

    Hedge funds finally pulled back from bets on higher oil prices as the market faced its worst year since 2008.

    Speculators reduced their net-long position in West Texas Intermediate crude for the first time in four weeks, cutting their holdings by 5 percent in the week ended Dec. 23, Commodity Futures Trading Commission data showed yesterday. Long wagers dropped the most since August.

    Prices tumbled today to the lowest level in more than five years as U.S. output climbed and the Organization of Petroleum Exporting Countries refused to make production cuts. The International Energy Agency and U.S. Energy Information Administration cut their estimates of 2015 global fuel consumption this month amid expectations for slower economic growth outside the U.S.

    MORE
     

    Demeter

    (85,373 posts)
    13. The Real Constitutional Crisis Is Hidden
    Fri Jan 2, 2015, 09:13 PM
    Jan 2015
    http://www.theatlantic.com/politics/archive/2014/12/there-is-a-constitutional-crisis-but-not-the-one-many-people-think-nsa-war-torture/384120/

    It's the Bush-Obama record of surveillance and lack of accountability—and not executive action on immigration—that ought to concern citizens.

    “By acting lawlessly and assuming legislative power, the Obama administration is driving full speed ahead to a constitutional crisis, tilting the scales of our three-branch government in his favor and threatening to unravel our system of checks and balances,” Representative Robert Goodlatte, a Virginia Republican, said December 2. He was speaking about President Obama’s “deferred action” program for undocumented immigrants. But much the same sentiment has been expressed nationwide since then, about Obama’s entry into a climate agreement with China, his promulgation of new regulations under the Clean Air Act, his decision to reopen relations with Cuba, and his designation of Alaska’s Bristol Bay as indefinitely protected from oil and gas drilling.

    Take this column by Victor Davis Hanson:
    “Until now there were two types of peaceful American change. One was a president, such as Franklin D. Roosevelt or Ronald Reagan, working with Congress to alter American life from the top down by passing a new agenda. The other was popular reform pressure.” Obama, Hanson argues, “has introduced a quite different, third sort of revolution ... bypassing Congress through executive orders and presidential memoranda of dubious legality.”


    Is this true? Are we at a crisis that threatens the entire system? Do the American people face a lawless, overreaching executive rampaging through immigration and environmental policy? There is a crisis, and it is serious. But it is not the crisis that Goodlatte or Hanson are talking about. It has nothing to do with immigration, climate change, clean air, or oil and gas. Some of the people yelping about “overreach” are just boys crying “Wolf!” Others, I fear, are themselves wolves in waiting...Cries that one president or another has become a Caesar are a regular feature of American history. These charges, sometimes valid and sometimes silly, are inevitable because of design flaws in the system. Article II, Section 2 of the Constitution, which claims to set out the president’s powers, is so sketchy that virtually no one on either side of any issue really consults its text in practical situations. So presidents have asserted their authority, and Congresses have sought to rein it in, since the dawn of the republic. These disputes are usually settled by negotiation between the branches. That has been the pattern since 1793: Presidents assert, Congresses protest, negotiations ensue, the system muddles on. Nothing Obama has done in his six years in office comes close to the kind of assertions made by presidents like Andrew Jackson, Abraham Lincoln, Andrew Johnson, Theodore and Franklin Roosevelt, Woodrow Wilson, Harry Truman, Richard Nixon, or George W. Bush....A good rule of thumb is that to find the real danger in a situation, look at what neither side wants to talk about.

    Consider these questions: What if the government asserted the power to engage in major military operations without congressional authorization, secretly eavesdrop on private conversations, collect and store data on innocent citizens, use lethal drone strikes against civilians outside war zones, and conceal evidence of torture and war crimes even from Congress itself? Would that be a constitutional crisis? The true danger to the republic right now is an executive establishment that, under the past two presidents, has taken on itself the role of deciding where and whether to make war, has made a mockery of constitutional and statutory restraints on surveillance, and has first conducted and then persistently concealed a shocking campaign of torture. The problem is not that Obama is better or George W. Bush was worse—what is striking instead is the continuity between administrations on these matters. Does anyone believe that the National Security Agency has changed its stripes since the news of its massive surveillance program broke in 2013? Top officials went to Capitol Hill, took a solemn oath to tell the truth, and lied. Have they been punished? Has the executive branch even rebuked, much less prosecuted, anyone at the Central Intelligence Agency for its use of torture and its systematic lies about it? In the world of truth and reconciliation, “We tortured some folks” doesn’t go very far—especially when no one is going to face criminal justice for committing torture and war crimes, or even for unlawful attacks on the U.S. Senate itself, and even more so when the agency itself insists defiantly that it did nothing wrong. Democrats, when they controlled the Senate, weren’t able to produce a reasonable debate on the scope and limits of Obama’s new war with ISIS or of the limits on NSA surveillance. Does anyone believe that the new Republican majority will combat the national-security state? Evidence suggests instead that their leaders want to protect it, so they can command it two years from now.
     

    Demeter

    (85,373 posts)
    14. The Outlook for the New Year by PAUL CRAIG ROBERTS
    Fri Jan 2, 2015, 09:25 PM
    Jan 2015
    http://www.counterpunch.org/2014/12/31/the-outlook-for-the-new-year/


    Washington has shaped 2015 to be a year of conflict. The conflict could be intense.
    Washington is the cause of the conflict, which has been brewing for some time. Russia was too weak to do anything about it when the Clinton regime pushed NATO to Russia’s borders and illegally attacked Yugoslavia, breaking the country into small easily controlled pieces. Russia was also too weak to do anything about it when the George W. Bush regime withdrew from the ABM treaty and undertook to locate anti-ballistic missile bases on Russia’s borders. Washington lied to Moscow that the purpose of the ABM bases is to protect Europe from non-existent Iranian nuclear ICBMs. However, Moscow understood that the purpose of the ABM bases was to degrade Russia’s nuclear deterrent, thereby enhancing Washington’s ability to coerce Russia into agreements that compromise Russian sovereignty.

    By summer 2008 Russian power had returned. On Washington’s orders, the US and Israeli trained and equipped Georgian army attacked the breakaway republic of South Ossetia during the early hours of August 8, killing Russian peacekeepers and civilian population. Units of the Russian military instantly responded and within a few hours the American trained and equipped Georgian army was routed and defeated. Georgia was in Russia’s hands again, where the province had resided during the 19th and 20th centuries. Putin should have hung Mikheil Saakashvili, the American puppet installed as president of Georgia by the Washington-instigated “Rose Revolution”, and reincorporated Georgia into the Russian Federation. Instead, in a strategic error, Russia withdrew its forces, leaving Washington’s puppet regime in place to cause future trouble for Russia. Washington is pushing hard to incorporate Georgia into NATO, thus adding more US military bases on Russia’s border. However, at the time, Moscow thought Europe to be more independent of Washington than it is and relied on good relations with Europe to keep American bases out of Georgia.

    Today the Russian government no longer has any illusion that Europe is capable of an independent foreign policy. Russian President Vladimir Putin has stated publicly that Russia has learned that diplomacy with Europe is pointless, because European politicians represent Washington’s interest, not Europe’s. Foreign Minister Sergei Lavrov recently acknowledged that Europe’s Captive Nation status has made it clear to Russia that Russian goodwill gestures are unable to produce diplomatic results. With Moscow’s delusion shattered that diplomacy with the West can produce peaceful solutions, reality has set in, reinforced by the demonization of Vladimir Putin by Washington and its vassal states. Hillary Clinton called Putin the new Hitler. While Washington incorporates former constituent parts of the Russian and Soviet empires into its own empire and bombs seven countries, Washington claims that Putin is militarily aggressive and intends to reconstitute the Soviet empire. Washington arms the neo-nazi regime Obama established in Ukraine, while erroneously claiming that Putin has invaded and annexed Ukrainian provinces. All of these blatant lies are echoed repeatedly by the Western presstitutes. Not even Hitler had such a compliant media as Washington has.

    Every diplomatic effort by Russia has been blocked by Washington and has come to naught. So now Russia has been forced by reality to update its military doctrine. The new doctrine approved on December 26 states that the US and NATO comprise a major military threat to the existence of Russia as a sovereign independent country. The Russian document cites Washington’s war doctrine of pre-emptive nuclear attack, deployment of anti-ballistic missiles, buildup of NATO forces, and intent to deploy weapons in space as clear indications that Washington is preparing to attack Russia. Washington is also conducting economic and political warfare against Russia, attempting to destabilize the economy with economic sanctions and attacks on the ruble. The Russian document acknowledges that Russia faces Western threats of regime change achieved through “actions aimed at violent change of the Russian constitutional order, destabilization of the political and social environment, and disorganization of the functioning of governmental bodies, crucial civilian and military facilities and informational infrastructure of Russia.” Foreign financed NGOs and foreign owned Russian media are tools in Washington’s hands for destabilizing Russia.

    Washington’s reckless aggressive policy against Russia has resurrected the nuclear arms race. Russia is developing two new ICBM systems and in 2016 will deploy a weapons system designed to negate the US anti-ballistic missile system. In short, the evil warmongers that rule in Washington have set the world on the path to nuclear armageddon.

    The Russian and Chinese governments both understand that their existence is threatened by Washington’s hegemonic ambitions. Larchmonter reports that in order to defeat Washington’s plans to marginalize both countries, the Russian and Chinese governments have decided to unify their economies into one and to conjoin their military commands. Henceforth, Russia and China move together on the economic and military fronts. The unity of the Bear and the Dragon reduces the crazed neoconservatives’ dream of “an American century” to dangerous nonsense. As Larchmonter puts it, “The US and NATO would need Michael the Archangel to defeat China-Russia, and from all signs Michael the Archangel is aligned with the Bear and its Orthodox culture. There is no weapon, no strategy, no tactic conceivable in the near future to damage either of these rising economies now that they are ‘base pairs.’”

    Larchmonter sees hope in the new geopolitics created by the conjoining of Russia and China. I don’t dispute this, but if the arrogant neoconservatives realize that their hegemonic policy has created a foe over which Washington cannot prevail, they will push for a pre-emptive nuclear strike before the Russian-Chinese unified command is fully operational. To forestall a sneak attack, Russia and China should operate on full nuclear alert.

    The US economy–indeed the entire Western orientated economy from Japan to Europe–is a house of cards. Since the economic downturn began seven years ago, the entirety of Western economic policy has been diverted to the support of a few over-sized banks, sovereign debt, and the US dollar. Consequently, the economies themselves and the ability of populations to cope have deteriorated. The financial markets are based on manipulation, not on fundamentals. The manipulation is untenable. With debt exploding, negative real interest rates make no sense. With real consumer incomes, real consumer credit, and real retail sales stagnant or falling, the stock market is a bubble. With Russia, China, and other countries moving away from the use of the dollar to settle international accounts, with Russia developing an alternative to the SWIFT financial network, the BRICS developing alternatives to the IMF and World Bank, and with other parts of the world developing their own credit card and Internet systems, the US dollar, along with the Japanese and European currencies that are being printed in order to support the dollar’s exchange value, could experience a dramatic drop in exchange value, which would make the import-dependent Western world dysfunctional.

    In my opinion, it took the Russians and Chinese too long to comprehend the evil that has control in Washington. Therefore, both countries risk nuclear attack prior to the full operational capability of their conjoined defense. As the Western economy is a house of cards, Russia and China could collapse the Western economy before the neoconservatives can drive the world to war. As Washington’s aggression against both countries is crystal clear, Russia and China have every right to the following defensive measures. As the US and EU are conducting economic warfare against Russia, Russia could claim that by wrecking the Russian economy the West has deprived Russia of the ability to repay loans to the European banks. If this does not bring down the thinly capitalized EU banks, Russia can announce that as NATO countries are now officially recognized by Russian war doctrine as an enemy of the Russian state, Russia can no longer support NATO’s aggression against Russia by selling natural gas to NATO members. If the shutdown of much of European industry, rapidly rising rates of unemployment, and bank failures do not result in the dissolution of NATO and thus the end of the threat, the Chinese can act. The Chinese hold a very large amount of dollar-denominated financial assets. Just as the Federal Reserve’s agents, the bullion banks, dump massive shorts onto the bullion futures markets during periods of little activity in order to drive down the bullion price, China can dump the equivalent in US Treasuries of years of Quantitative Easing in a few minutes. If the Federal Reserve quickly creates dollars with which to purchase the enormous quantity of Treasuries so that the financial house of cards does not implode, the Chinese can then dump the dollars that they are paid for the bonds in the currency market. Whereas the Federal Reserve can print dollars with which to purchase the Treasuries, the Fed cannot print foreign currencies with which to buy the dollars.

    The dollar would collapse, and with it the power of the Hegemon. The war would be over without a shot or missile fired.

    In my view, Russia and China owe it to the world to prevent the nuclear war intended by the neoconservatives simply by replying in kind to Washington’s economic warfare. Russia and China hold all the cards. Not Washington. Russia and China should give no warning. They should just act. Indeed, instead of step by step, Russia and China could simultaneously use the counter-measures. With four US banks holding derivatives totaling many times world GDP, the financial explosion would be the equivalent to a nuclear one. The US and Europe would be finished, and the world would be saved.

    Larchmonter possibly is correct. 2015 could be a very good year, but pre-emptive economic moves by Moscow and Beijing could be required. Putin’s current plan seems to be to turn away from the West, ignore the provocations, and mesh Russia’s strategic and economic interests with those of Asia. This is a humane and reasonable course of action, but it leaves the West untroubled and undistracted by its economic vulnerabilities. An untroubled West remains a grave danger not only to Russia and China but also to Americans and the entire world.



    Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. Roberts’ How the Economy Was Lost is now available from CounterPunch in electronic format. His latest book is How America Was Lost.
     

    Demeter

    (85,373 posts)
    15. US plans to deploy armored brigade to Europe pre-date Ukraine hostilities
    Fri Jan 2, 2015, 09:29 PM
    Jan 2015
    http://www.rt.com/news/218891-us-russia-europe-military/

    By the end of next year, Washington plans to station about 150 tanks and armored vehicles in Europe, according to a US military commander, who said the decision was made before the Ukrainian crisis strained Russia-US relations.

    Although no official announcement has been made as to where the armored tanks and vehicles will be stationed, possible locations include Poland, Romania or the Baltic States, Lieutenant-General Ben Hodges, commander of the US Army in Europe, told Reuters.

    Hodges confirmed that around 150 pieces of assorted US military armor would be permanently stationed in Europe.

    "By the end of ... 2015, we will have gotten all the equipment for a heavy brigade, that means three battalions plus a reconnaissance squadron, the artillery headquarters, engineers, and it will stay in Europe," Hodges said.

    "You are talking about 150-ish, maybe 160 M1 tanks, M2 Bradley fighting vehicles, 24 self-propelled Howitzers."


    Hodges, who said he believes renewed hostilities will occur between pro-Kiev and rebel forces in the east of the country, said plans to send an armored brigade to Europe was first proposed two years ago, before the Ukrainian crisis erupted in January 2014. The move on the part of Washington will certainly provoke a reaction from Moscow, which has just agreed on a new military doctrine that lists the 28-member North Atlantic Treaty, which has been steadily encroaching on Russia’s borders since the collapse of the Soviet Union, and the United States, which has undertaken a series of military offensives deemed unconstitutional even by its own people, as “major foreign threats.” The doctrine lists among major foreign military threats “the creation and deployment of global strategic anti-ballistic missile systems that undermines the established global stability and balance of power in nuclear missile capabilities, the implementation of the ‘prompt strike’ concept, intent to deploy weapons in space and deployment of strategic conventional precision weapons.”

    Hodges said he expected the deployment of US armored vehicles to Europe to continue throughout 2015 and into 2016.

    At least one-third of the armored vehicles will be stationed at US military bases in Germany, the US commander said. The United States, despite recent breakdowns in its relations with its European allies - including a spy scandal that revealed the National Security Agency was tapping the personal mobile phone of German Chancellor Angela Merkel, as well as other high-ranking EU officials - continues to field some 30,000 Army troops on European soil, and about the same number of Air Force, Navy and Marine personnel, Hodges said.
     

    Demeter

    (85,373 posts)
    17. The Cold Wet Mackerel of Reality
    Fri Jan 2, 2015, 11:40 PM
    Jan 2015
    http://thearchdruidreport.blogspot.com/2014/12/the-cold-wet-mackerel-of-reality.html


    To misuse a bit of prose from Charles Dickens, it was neither the best of times nor the worst of times, but I know very few people who will object when, a few hours from now, 2014 gets dragged off to the glue factory. This has not been a good year for most people in the United States. By all accounts, this year’s holiday season was an economic flop of considerable scale—the US media, which normally treats cheery corporate press releases with the same enforced credulity that Pravda used to give to pronouncements from the Politburo in the Soviet era, has had to admit that Black Friday sales were down hard this year, even counting the internet—and plenty of Americans outside the echo chambers of the media have very good reasons to worry about what 2015 will bring. Mind you, cheerleading of a distinctly Pravda-esque variety can still be heard from those pundits and politicians who are still convinced that people can be talked into ignoring their own experience if they can only be force-fed enough spin-doctored malarkey. That sort of enthusiasm for the glorious capitalist banker’s paradise has plenty of company just now; I’m thinking in particular of the steady drumbeat of articles and essays in the US mass media wondering aloud why so many Americans haven’t noticed the economic recovery of the last four years, and are still behaving as though there’s a recession on.

    Of course there’s an explanation for that awkward fact, which is that the recovery in question never happened—outside, that is, of the abstract otherworld of numerical jugglery and spin doctoring that passes for official economic statistics these days. For most Americans, the last four years have been a bleak era of soaring expenses, shrinking incomes and benefits, rising economic insecurity, and increasingly frequent and bitter struggles with dysfunctional institutions that no longer bother even to pretend to serve the public good. That’s the reality people in the United States face when they get out of bed each morning, but it’s not a reality that’s welcome in the American mass media, so endless ingenuity has been expended in explaining why so many people in the US these days haven’t noticed the alleged economic recovery that’s allegedly burgeoning all around them. I expect to see a good deal more of this sort of twaddle in the weeks immediately ahead, as those mass media pundits who haven’t yet trotted out their predictions for the new year get around to that annual task. For that matter, it’s doubtless safe to assume that out here on the fringes where archdruids lurk, there will be plenty of predictions of a different kind or, rather, several different kinds. There will be another round of claims that this is the year when the global economy will seize up suddenly and leave us all to starve in the dark; there will be another round of claims that this is the year when this or that or the other hot new technology will come swooping in to save the day and let the middle classes maintain their privileged lifestyles; there will be—well, those of my readers who have been following the blogosphere for any length of time can fill in the blanks themselves.

    I’ve noted in previous years just how many of these latter predictions get rehashed every single January in the serene conviction that nobody will notice how often they’ve flopped before. Popular though that habit may be, it seems counterproductive to me, since—at least in theory—predictions of the sort we’re discussing is intended to be something more than light entertainment. With this in mind, I’d like to engage in the annual ritual of glancing back over the predictions I posted here at the beginning of the year now ending, and see how well I did. Here’s what I said:

    “My prediction for 2014, in turn, is that we’ll see more of the same: another year, that is, of uneven but continued downward movement along the same arc of decline and fall, while official statistics here in the United States will be doctored even more extravagantly than before to manufacture a paper image of prosperity. The number of Americans trying to survive without a job will continue to increase, the effective standard of living for most of the population will continue to decline, and what used to count as the framework of ordinary life in this country will go on unraveling a thread at a time. Even so, the dollar, the Euro, the stock market, and the Super Bowl will still be functioning as 2015 begins; there will still be gas in the gas pumps and food on grocery store shelves, though fewer people will be able to afford to buy either one.

    “The fracking bubble has more than lived up to last year’s expectations, filling the mass media with vast amounts of meretricious handwaving about the coming era of abundance: the same talk, for all practical purposes, that surrounded the equally delusional claims made for the housing bubble, the tech bubble, and so on all the way back to the Dutch tulip bubble of 1637. That rhetoric will prove just as dishonest as its predecessors, and the supposed new era of prosperity will come tumbling back down to earth once the bubble pops, taking a good chunk of the American economy with it. Will that happen in 2014? That’s almost impossible to know in advance. Timing the collapse of a bubble is one of the trickiest jobs in economic life; no less a mind than Isaac Newton’s was caught flatfooted by the collapse of the South Sea Bubble in 1720, and the current bubble is far more opaque. My guess is that the collapse will come toward the end of 2014, but it could have another year or so to run first.

    “It’s probably a safe bet that weather-related disasters will continue to increase in number and severity. If we get a whopper on the scale of Katrina or Sandy, watch the Federal response; it’s certain to fall short of meeting the needs of the survivors and their communities, but the degree to which it falls short will be a useful measure of just how brittle and weak the national government has become. One of these years—just possibly this year, far more likely later on—that weakness is going to become one of the crucial political facts of our time, and responses to major domestic disasters are among the few good measures we’ll have of how close we are to the inevitable crisis.

    “Meanwhile, what won’t happen is at least as important as what will. Despite plenty of enthusiastic pronouncements and no shortage of infomercials disguised as meaningful journalism, there will be no grand breakthroughs on the energy front. Liquid fuels—that is to say, petroleum plus anything else that can be thrown into a gas tank—will keep on being produced at something close to 2013’s rates, though the fraction of the total supply that comes from expensive alternative fuels with lower net energy and higher production costs will continue to rise, tightening a noose around the neck of every other kind of economic activity. Renewables will remain as dependent on government subsidies as they’ve been all along, nuclear power will remain dead in the water, fusion will remain a pipe dream, and more exotic items such as algal biodiesel will continue to soak up their quotas of investment dollars before going belly up in the usual way. Once the fracking bubble starts losing air, expect something else to be scooped up hurriedly by the media and waved around to buttress the claim that peak oil won’t happen, doesn’t matter, and so on; any of my readers who happen to guess correctly what that will be, and manage their investments accordingly, may just make a great deal of money.

    “Sudden world-ending catastrophes will also be in short supply in 2014, though talk about them will be anything but...Both the grandiose breakthroughs that never happen and the equally gaudy catastrophes that never happen will thus continue to fill their current role as excuses not to think about, much less do anything about, what’s actually happening around us right now—the long ragged decline and fall of industrial civilization that I’ve called the Long Descent. Given the popularity of both these evasive moves, we can safely assume that one more thing won’t happen in 2014: any meaningful collective response to the rising spiral of crises that’s shredding our societies and our future. As before, anything useful that’s going to happen will be the work of individuals, families, and community groups, using the resources on hand to cope with local conditions.”


    As I write these words, the US media is still parroting the fantasy of a fracking-driven “Saudi America” with a mindless repetitiveness that puts broken records to shame, and so the next shiny distraction disguised as a marvelous new energy breakthrough hasn’t yet been trotted out for the usual round of carefully choreographed oohs and aahs. Other than that, once again, I think it’s fair to say I called it. Continuing economic decline, check; a fracking bubble heading toward a world-class bust, check; climate-related disasters on the rise, with government interventions doing less and less to help those affected, check; and a continuing shortage of game-changing breakthroughs, world-ending catastrophes, and meaningful collective responses to the crisis of our age, check-check-check. If this were a bingo game, I’d be walking up to the front of the room with a big smile on my face. Now of course a case could be made that I’m cheating. After all, it doesn’t take any particular insight to point out that continuing trends tend to continue, or to choose trends that are pretty clearly ongoing and predict that they’ll keep on going for another year. While this is true, it’s also part of the point I’ve been trying to make here for getting on for nine years now: in the real world, by and large, history is what happened when you weren’t looking. Under some circumstances, sudden jarring discontinuities can hit societies like a cold wet mackerel across the face, but close attention to the decade or so before things changed routinely shows that the discontinuity itself was the product of long-established trends, and could have been anticipated if anyone was willing to do so. That’s a particularly relevant issue just now, because the sort of long-established trends that can lead to sudden jarring discontinuities have been more and more evident in the United States in recent years, and one of the things that made 2014 so wretched for everyone outside the narrowing circle of the privileged well-to-do is precisely that several of those trends seem to be moving toward a flashpoint. I’d like to sketch out a couple of examples, because my predictions for 2015 will center on them.

    The first and most obvious is the headlong collapse of the fracking bubble, which I discussed at some length in a post earlier this month. For most of the last decade, Wall Street has been using the fracking industry in all the same ways it used the real estate industry in the runup to the 2008 crash, churning out what we still laughably call “securities” on the back of a rapidly inflating speculative bubble. As the slumping price of oil kicks the props out from under the fracking boom, the vast majority of that paper—the junk bonds issued by fracking-industry firms, the securitized loans those same firms used to make up for the fact that they lost money every single quarter, the chopped and packaged shale leases, the volumetric production agreements, and all the rest of it—will revert to its actual value, which in most cases approximates pretty closely to zero. It’s important in this context to remember that those highly insecure securities haven’t been cooped up in the financial equivalent of the dog pound where they belong; quite the contrary, they’ve gone roaming all over the neighborhood, leaving an assortment of messes behind. Banks, investment firms, pension funds, university endowments, and many other institutions in the US and abroad snapped this stuff up in gargantuan amounts, because it offered something like what used to count as a normal rate of return on investment. As a result, as the fracking boom goes belly up, it’s not just firms in the fracking industry that will be joining it in that undignified position. In the real estate bust, a great many businesses and institutions that seemingly had nothing to do with real estate found themselves in deep financial trouble; in the fracking bust, we can count on the same thing happening—and a great deal of the resulting bankruptcies, defaults, and assorted financial chaos will likely hit in 2015.

    Thus one of the entertainments 2015 has in store for us is a thumping economic crisis here in the US, and in every other country that depends on our economy for its bread and butter. The scale of the crash depends on how many people bet how much of their financial future on the fantasy of an endless frack-propelled boom, but my guess is it’ll be somewhere around the scale of the 2008 real estate bust.

    -----------------------------
    Something else that’s baked into the baby new year’s birthday cake at this point is a rising spiral of political unrest here in the United States. The mass protests over the extrajudicial executions of nonwhite Americans by police were pretty much inevitable, as pressures on the American underclass have been building toward an explosion for decades now. There’s a certain bleak amusement to be had from watching financially comfortable white Americans come up with reasons to insist that this can’t possibly be the case, or for that matter, from hearing them contrive ways to evade the awkward fact that American police seem to have much less difficulty subduing belligerent suspects in nonlethal ways when the skins of the suspects in question are white....Behind the killings and the protests, though, lies an explosive tangle that nobody on either side of the picket lines seems willing to address. Morale in many police departments across the United States resembles nothing so much as morale among American enlisted men in Vietnam in the last years of US involvement; after decades of budget cuts, grandstanding politicians, bungled reforms, an imploding criminal justice system, and ongoing blowback from misguided economic and social policies, a great many police officers feel that they’re caught between an enemy they can’t defeat and a political leadership that’s more than willing to throw them to the wolves for personal advantage. That the “enemy” they think they’re fighting is indistinguishable from the people they’re supposed to be protecting just adds to the list of troubling parallels.

    In Vietnam, collapsing morale led to war crimes, “fragging” of officers by their own men, and worried reports to the Pentagon warning of the possibility of armed mutinies among US troops. We haven’t yet gotten to the fragging stage this time, though the response of New York police to Mayor De Blasio suggests that we’re closer to that than most people think. The routine extrajudicial execution of nonwhite suspects—there are scores if not hundreds of such executions a year—is the My Lai of our era, one of the few warnings that gets through the Five O’Clock Follies of the media to let the rest of us know that the guys on the front lines are cracking under the strain.

    The final bitter irony here is that the federal government has been busily worsening the situation by encouraging the militarization of police departments across the United States, to the extent of equipping them with armored personnel carriers and other pieces of hardware that don’t have any possible use in ordinary policing. This is one of a good many data points that has me convinced that the US government is frantically gearing up to fight a major domestic insurgency. What’s more, they’re almost certainly going to get one. For decades now, since the post-Soviet “color revolutions,” the US has been funding and directing mass movements and rebellions against governments we don’t like, with Syria and Ukraine the two most recent beneficiaries of that strategy. We’ve made a lot of enemies in the process; it’s a safe bet that some of those enemies are eager to give us a heaping dose of our own medicine, and there are certainly nations with the means, motive, and opportunity to do just that. Will an American insurgency funded by one or more hostile foreign powers get under way in 2015? I don’t think so, though I’m prepared to be wrong....

    ...I’ve heard quite a few people insist hopefully that since 2014 was so bad, 2015 has to be better. I’m sorry to say, though, that I don’t see much likelihood of that, at least here in the US. Quite the contrary, I think that when people recall 2015, they may just think of it as the year in which America got slapped across its collective face with the cold wet mackerel of reality. Come New Year’s Day of 2016, I expect to find the dollar, the Euro, the stock market, and the Super Bowl still functioning, gas in the pumps and products for sale on the grocery store shelves—but the nation in which these things exist will have passed through a traumatic and crisis-ridden year, and the chances of avoiding an even more difficult 2016 don’t seem good just now. Still, we’ll see.

    xchrom

    (108,903 posts)
    18. Arctic Air Will Freeze The Midwest And East Coast Next Week
    Sat Jan 3, 2015, 07:29 AM
    Jan 2015
    http://www.businessinsider.com/cold-weather-in-midwest-and-east-coast-2015-1

    In a pattern fitting for January, waves of cold air will flow into the Midwest and East with brutal blasts of arctic air poised to sweep southeastward next week.

    Following a large storm that bring snow and ice to a large part of the Upper Midwest and interior Northeast this weekend, multiple blasts of cold air will follow.

    The first blast will have many people shivering as they head back to work and school in the Midwest early next week.

    Another batch of arctic air set to move during the middle to second half of next week is likely to bring the lowest temperatures of the season so far to parts of the Midwest and much of New England and the mid-Atlantic.

    With the frigid air moving in, temperatures may hold in the single digits around Chicago and the teens around Chicago or lower on multiple days next week.



    Read more: http://www.accuweather.com/en/weather-news/brutal-cold-midwest-east-next-week/39958655#ixzz3NkzbcvRC


    Read more: http://www.accuweather.com/en/weather-news/brutal-cold-midwest-east-next-week/39958655#ixzz3NkzRGstI
     

    Demeter

    (85,373 posts)
    24. O goody! And what was last week?
    Sat Jan 3, 2015, 09:04 AM
    Jan 2015

    I was thinking I'd lost my adaptability, I felt so cold. Turns out I had the first cold virus of the new year. Lucky me. Wipe your screens---I've been sneezing my head off!

    xchrom

    (108,903 posts)
    19. US STOCKS END MIXED AS MANUFACTURING GROWTH SLOWS
    Sat Jan 3, 2015, 07:36 AM
    Jan 2015
    http://hosted.ap.org/dynamic/stories/F/FINANCIAL_MARKETS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-01-02-16-41-42

    NEW YORK (AP) -- Stocks got off to a sluggish start on the first day of trading in the New Year, ending the day mixed as a report showed that manufacturing growth slowed in December.

    U.S. factory activity grew at the slowest pace in six months last month, weakened by declines in orders and production, according to the Institute for Supply Management. While the sector is still in good health, growth was slower than economists had forecast.

    The stock market climbed to record levels at the end of 2014 and investors may now be reassessing the outlook for the market at the start of the year, said Brad McMillan, chief investment officer for Commonwealth Financial, an independent broker-dealer firm. While growth prospects in the U.S. look decent, in Europe and Asia they are less encouraging.

    Investors are "stepping back and saying, `now we're in the New Year, let's take a fresh look,' " said McMillan. "There's certainly some degree of, I wouldn't say pessimism, but readjustment, going on."

    xchrom

    (108,903 posts)
    20. US FACTORIES GROW AT SLOWEST PACE IN 6 MONTHS
    Sat Jan 3, 2015, 07:37 AM
    Jan 2015
    http://hosted.ap.org/dynamic/stories/U/US_ECONOMY_MANUFACTURING?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-01-02-12-12-33

    WASHINGTON (AP) -- U.S. factory activity grew at the slowest pace in six months in December, weakened by declines in orders and production. Yet growth was still healthy, a sign manufacturing may help drive the economy's expansion in 2015 as it did last year.

    The Institute for Supply Management, a trade group of purchasing managers, said Friday that its manufacturing index fell to 55.5 in December from 58.7 in November. Any reading above 50 signals expansion. November's figure was just below a three-year high reached in October.

    December's reading is the lowest since June. But it is also close to the average for all of 2014 and remains at a solid level. Americans are buying more cars and appliances, boosting demand for factory-made goods. Economists also forecast that businesses may spend more on industrial equipment this year, which would also lift output.

    A labor dispute at West Coast seaports, from San Diego to Seattle, has interrupted the shipment of raw materials for many manufacturers, the ISM survey found. That has disrupted production and likely contributed to the lower reading.

    xchrom

    (108,903 posts)
    21. FCC TO VOTE NEXT MONTH ON NET NEUTRALITY RULES
    Sat Jan 3, 2015, 07:39 AM
    Jan 2015
    http://hosted.ap.org/dynamic/stories/U/US_FCC_NET_NEUTRALITY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-01-02-19-11-11

    WASHINGTON (AP) -- Federal regulators are expected to vote next month on rules to govern how Internet service providers like AT&T, Verizon and Comcast deal with the flow of content on their high-speed networks.

    The five-member Federal Communications Commission will consider then a proposal from Chairman Tom Wheeler on so-called net neutrality rules, agency spokeswoman Kim Hart said Friday. She was confirming reports in The Washington Post and The Wall Street Journal on the planned timing of the vote.

    Details of the draft proposal weren't disclosed. President Barack Obama has asked the FCC to put Internet service providers under the same rules as those imposed on telephone companies 80 years ago. The aim is to protect net neutrality, the concept that all online traffic should be treated equally and given the same access to networks.

    The outcome could affect the prices consumers pay for access to entertainment, news and other online content.

    xchrom

    (108,903 posts)
    22. Drop in Factory Orders Index May Be More Benign Than It Looks
    Sat Jan 3, 2015, 08:13 AM
    Jan 2015
    http://www.bloomberg.com/news/2015-01-02/drop-in-ism-orders-index-may-be-more-benign-than-meets-the-eye.html

    Some purchasing managers are betting they will get a better deal on raw materials if they wait until this year to stock up. That probably means manufacturing in the U.S. will pick up once again in early 2015.

    The Institute for Supply Management’s orders index, one of the components of the Tempe, Arizona-based group factory gauge, decreased 8.7 points to 57.3 in December. It was the second-biggest decline since 2002, exceeded only by the 13.2-point plunge in January 2014 when much of the nation was covered by a blanket of snow, the figures showed today.

    Some customers, watching the rout in crude oil prices, are delaying bookings and depleting inventories in anticipation that raw-material costs will follow suit, according to a comment in the ISM report from an executive in the plastics industry. With consumer spending gaining momentum and stockpiles low, stabilization in commodities would probably unleash a flurry of new orders that will give the expansion a boost in early 2015.

    “Prices aren’t going to be falling forever, so at some point it’s going to make sense for these people to start buying again,” said Guy Berger, an economist at RBS Securities Inc. in Stamford, Connecticut. “If anything, it suggests we may be back-loading activity into 2015 that would have taken place in December, and that is actually good news.”

    xchrom

    (108,903 posts)
    23. Lithuania Adopts Euro as Russian Worries Rattle Baltics
    Sat Jan 3, 2015, 08:17 AM
    Jan 2015
    http://www.bloomberg.com/news/2014-12-31/lithuania-adopts-euro-as-russian-expansion-worry-rattles-baltics.html

    Lithuanians celebrated with fireworks and toasted champagne bought with euros as their country finished a quarter-century transition from a communist economy to a member of the single European currency.

    Swapping its litas for euros at midnight, the Baltic country of 3 million wedged between Poland and Latvia became the 19th member of the currency bloc. Crowds gathered by the cathedral on the main square in the old town of Vilnius, the capital, as Prime Minister Algirdas Butkevicius withdrew the country’s first euros from a bank machine.

    Lithuania’s entry puts the entire Baltic region in the euro area after neighboring Latvia’s accession a year ago and Estonia’s in 2011. It also comes as the countries, which gained independence in 1990 and 1991 during the collapse of the Soviet Union, are seeking greater security guarantees from their allies amid signs of growing Russian expansionism.

    “Joining the euro zone is a very logical step in the chain of very important steps for my country,” Finance Minister Rimantas Sadzius said in an interview. “Euro adoption is perhaps the final step at this stage of integrating Lithuania into the single market of western Europe. This of course has security implications, like joining NATO and the European Union.”

    DemReadingDU

    (16,000 posts)
    27. Michael Hudson: The War on Pensions – The US Budget Anti-Pension Law
    Sat Jan 3, 2015, 09:12 AM
    Jan 2015

    1/3/15 Michael Hudson: The War on Pensions – The US Budget Anti-Pension Law
    On the Senate’s last day in session in December, it approved the government’s $1.1 trillion budget for coming fiscal year.
    Few people realize how radical the new U.S. budget law was. Budget laws are supposed to decide simply what to fund and what to cut. A budget is not supposed to make new law, or to rewrite the law. But that is what happened, and it was radical.
    Wall Street’s representatives in Congress – the Democratic leadership as well as Republicans – took the opportunity to create an artificial crisis. The press called this “holding the government hostage.” The House – backed by the Senate – said that it would shut the government down at some future date if two basic laws were not changed.
    Most of the attention has been paid to Elizabeth Warren’s eloquent attack on the government guaranteeing bank trades in derivatives. Written by Citigroup lobbyists, this puts taxpayer funds behind future bank bailouts if banks make more bad bets on complex financial derivatives, such as packaged junk mortgage loans.
    Critics have focused on how there must be a loser for every winner in a derivatives contract. The problem is that if banks lose, the government will bail them out just as it did in 2008.
    Less attention has been paid to what happens if banks win. They will win largely in making bets against pension funds. Indeed, pension funds have not been treated well by Wall Street in recent years.
    They are in a bind. Pension funds will fall further and further behind what theyneed to pay retirees if they do not make the impossibly high returns of 8.5%. The guiding philosophy of pension funds has been that instead of making employers pay enough to cover the pensions they have promised, funds can make money purely financially – by Wall Street sharpies.
    The problem is that safe interest rates today are less than 1% for Treasury bonds.
    Everyithing else – stocks, corporate bonds, and hedge fund derivatives – are much more risky. And when Goldman Sachs, or JPMorgan Chase draw up a derivative for a client, their aim is to make money for themselves, not for the client.
    .
    .
    The first great test case is expected to be the Teamsters’ Central States Fund. The rationale for cutting back pensions for drivers is that in 1980 it had four employees for every retiree. Today, it has just one driver for every five retirees. How can such a plan succeed?
    The normal answer would be, by turning to the PBGC.
    But let’s look more closely at the alleged source of the problem. It’s not just that there are so many fewer employees per retiree. The Teamsters Central States Fund is a prime example of Wall Street mismanagement. Goldman Sachs, Northern Trust and other firms make the decisions, not the Fund’s own board. A recent report has found that “Roughly a third of the pension system’s shortfalls — or almost $9 billion – can be traced to investment losses accrued during the financial industry’s 2008 collapse. These losses were in addition to more than $250 million in fees paid by the plan to financial firms in just the last 5 years.”
    Obviously there is as much conflict of interest at work in letting Wall Street sharpies manage pension funds as there is in lettingMafiosi rip them off.
    The important thing is that the PBGC has been as lax in oversight as the Federal Reserve has been lax in overseeing the banking system. But whereas the Fed then bailed out the banks in 2008 on the ground that they were systemically necessary for the economy to function, no such assumption is being made with regard to labor’s pensions.
    It seems part of a long-term strategy to cut back pensions, privatize them into individual accounts managed by Wall Street investment banks and insurance companies, and then to privatize Social Security.
    This is part of the strategy to use the demand for budgetary balance to privatize the nations’ infrastructure too as it falls apart – on the ground that the government is broke, and cannot raise taxes on the rich or simply print the money itself to fuel economic growth.
    It looks like Greece may be the test case for where the American economy is heading.


    http://www.nakedcapitalism.com/2015/01/michael-hudson-war-pensions-us-budget-anti-pension-law.html

     

    Demeter

    (85,373 posts)
    28. Political Aspects of Full Employment1 by Michal Kalecki
    Sat Jan 3, 2015, 09:28 AM
    Jan 2015
    http://mrzine.monthlyreview.org/2010/kalecki220510.html

    PART 1

    1. A solid majority of economists is now of the opinion that, even in a capitalist system, full employment may be secured by a government spending programme, provided there is in existence adequate plan to employ all existing labour power, and provided adequate supplies of necessary foreign raw-materials may be obtained in exchange for exports.

    If the government undertakes public investment (e.g. builds schools, hospitals, and highways) or subsidizes mass consumption (by family allowances, reduction of indirect taxation, or subsidies to keep down the prices of necessities), and if, moreover, this expenditure is financed by borrowing and not by taxation (which could affect adversely private investment and consumption), the effective demand for goods and services may be increased up to a point where full employment is achieved. Such government expenditure increases employment, be it noted, not only directly but indirectly as well, since the higher incomes caused by it result in a secondary increase in demand for consumer and investment goods.

    2. It may be asked where the public will get the money to lend to the government if they do not curtail their investment and consumption. To understand this process it is best, I think, to imagine for a moment that the government pays its suppliers in government securities. The suppliers will, in general, not retain these securities but put them into circulation while buying other goods and services, and so on, until finally these securities will reach persons or firms which retain them as interest-yielding assets. In any period of time the total increase in government securities in the possession (transitory or final) of persons and firms will be equal to the goods and services sold to the government. Thus what the economy lends to the government are goods and services whose production is 'financed' by government securities. In reality the government pays for the services, not in securities, but in cash, but it simultaneously issues securities and so drains the cash off; and this is equivalent to the imaginary process described above.

    What happens, however, if the public is unwilling to absorb all the increase in government securities? It will offer them finally to banks to get cash (notes or deposits) in exchange. If the banks accept these offers, the rate of interest will be maintained. If not, the prices of securities will fall, which means a rise in the rate of interest, and this will encourage the public to hold more securities in relation to deposits. It follows that the rate of interest depends on banking policy, in particular on that of the central bank. If this policy aims at maintaining the rate of interest at a certain level, that may be easily achieved, however large the amount of government borrowing. Such was and is the position in the present war. In spite of astronomical budget deficits, the rate of interest has shown no rise since the beginning of 1940.

    3. It may be objected that government expenditure financed by borrowing will cause inflation. To this it may be replied that the effective demand created by the government acts like any other increase in demand. If labour, plants, and foreign raw materials are in ample supply, the increase in demand is met by an increase in production. But if the point of full employment of resources is reached and effective demand continues to increase, prices will rise so as to equilibrate the demand for and the supply of goods and services. (In the state of over-employment of resources such as we witness at present in the war economy, an inflationary rise in prices has been avoided only to the extent to which effective demand for consumer goods has been curtailed by rationing and direct taxation.) It follows that if the government intervention aims at achieving full employment but stops short of increasing effective demand over the full employment mark, there is no need to be afraid of inflation

    PART 2

    1. The above is a very crude and incomplete statement of the economic doctrine of full employment. But it is, I think, sufficient to acquaint the reader with the essence of the doctrine and so enable him to follow the subsequent discussion of the political problems involved in the achievement of full employment.

    In should be first stated that, although most economists are now agreed that full employment may be achieved by government spending, this was by no means the case even in the recent past. Among the opposers of this doctrine there were (and still are) prominent so-called 'economic experts' closely connected with banking and industry. This suggests that there is a political background in the opposition to the full employment doctrine, even though the arguments advanced are economic. That is not to say that people who advance them do not believe in their economics, poor though this is. But obstinate ignorance is usually a manifestation of underlying political motives.

    There are, however, even more direct indications that a first-class political issue is at stake here. In the great depression in the 1930s, big business consistently opposed experiments for increasing employment by government spending in all countries, except Nazi Germany. This was to be clearly seen in the USA (opposition to the New Deal), in France (the Blum experiment), and in Germany before Hitler. The attitude is not easy to explain. Clearly, higher output and employment benefit not only workers but entrepreneurs as well, because the latter's profits rise. And the policy of full employment outlined above does not encroach upon profits because it does not involve any additional taxation. The entrepreneurs in the slump are longing for a boom; why do they not gladly accept the synthetic boom which the government is able to offer them? It is this difficult and fascinating question with which we intend to deal in this article.

    The reasons for the opposition of the 'industrial leaders' to full employment achieved by government spending may be subdivided into three categories: (i) dislike of government interference in the problem of employment as such; (ii) dislike of the direction of government spending (public investment and subsidizing consumption); (iii) dislike of the social and political changes resulting from the maintenance of full employment. We shall examine each of these three categories of objections to the government expansion policy in detail.

    2. We shall deal first with the reluctance of the 'captains of industry' to accept government intervention in the matter of employment. Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense. Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of 'sound finance' is to make the level of employment dependent on the state of confidence.

    3. The dislike of business leaders for a government spending policy grows even more acute when they come to consider the objects on which the money would be spent: public investment and subsidizing mass consumption.

    The economic principles of government intervention require that public investment should be confined to objects which do not compete with the equipment of private business (e.g. hospitals, schools, highways). Otherwise the profitability of private investment might be impaired, and the positive effect of public investment upon employment offset, by the negative effect of the decline in private investment. This conception suits the businessmen very well. But the scope for public investment of this type is rather narrow, and there is a danger that the government, in pursuing this policy, may eventually be tempted to nationalize transport or public utilities so as to gain a new sphere for investment.3

    One might therefore expect business leaders and their experts to be more in favour of subsidising mass consumption (by means of family allowances, subsidies to keep down the prices of necessities, etc.) than of public investment; for by subsidizing consumption the government would not be embarking on any sort of enterprise. In practice, however, this is not the case. Indeed, subsidizing mass consumption is much more violently opposed by these experts than public investment. For here a moral principle of the highest importance is at stake. The fundamentals of capitalist ethics require that 'you shall earn your bread in sweat' -- unless you happen to have private means.

    4. We have considered the political reasons for the opposition to the policy of creating employment by government spending. But even if this opposition were overcome -- as it may well be under the pressure of the masses -- the maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders. Indeed, under a regime of permanent full employment, the 'sack' would cease to play its role as a 'disciplinary measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension. It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests. But 'discipline in the factories' and 'political stability' are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the 'normal' capitalist system.

    PART 3

    1. One of the important functions of fascism, as typified by the Nazi system, was to remove capitalist objections to full employment.

    The dislike of government spending policy as such is overcome under fascism by the fact that the state machinery is under the direct control of a partnership of big business with fascism. The necessity for the myth of 'sound finance', which served to prevent the government from offsetting a confidence crisis by spending, is removed. In a democracy, one does not know what the next government will be like. Under fascism there is no next government.

    The dislike of government spending, whether on public investment or consumption, is overcome by concentrating government expenditure on armaments. Finally, 'discipline in the factories' and 'political stability' under full employment are maintained by the 'new order', which ranges from suppression of the trade unions to the concentration camp. Political pressure replaces the economic pressure of unemployment.

    2. The fact that armaments are the backbone of the policy of fascist full employment has a profound influence upon that policy's economic character. Large-scale armaments are inseparable from the expansion of the armed forces and the preparation of plans for a war of conquest. They also induce competitive rearmament of other countries. This causes the main aim of spending to shift gradually from full employment to securing the maximum effect of rearmament. As a result, employment becomes 'over-full'. Not only is unemployment abolished, but an acute scarcity of labour prevails. Bottlenecks arise in every sphere, and these must be dealt with by the creation of a number of controls. Such an economy has many features of a planned economy, and is sometimes compared, rather ignorantly, with socialism. However, this type of planning is bound to appear whenever an economy sets itself a certain high target of production in a particular sphere, when it becomes a target economy of which the armament economy is a special case. An armament economy involves in particular the curtailment of consumption as compared with that which it could have been under full employment.

    The fascist system starts from the overcoming of unemployment, develops into an armament economy of scarcity, and ends inevitably in war.

    PART IV

    1. What will be the practical outcome of the opposition to a policy of full employment by government spending in a capitalist democracy? We shall try to answer this question on the basis of the analysis of the reasons for this opposition given in section II. We argued there that we may expect the opposition of the leaders of industry on three planes: (i) opposition on principle to government spending based on a budget deficit; (ii) opposition to this spending being directed either towards public investment -- which may foreshadow the intrusion of the state into the new spheres of economic activity -- or towards subsidizing mass consumption; (iii) opposition to maintaining full employment and not merely preventing deep and prolonged slumps.

    Now it must be recognized that the stage at which 'business leaders' could afford to be opposed to any kind of government intervention to alleviate a slump is more or less past. Three factors have contributed to this: (i) very full employment during the present war; (ii) development of the economic doctrine of full employment; (iii) partly as a result of these two factors, the slogan 'Unemployment never again' is now deeply rooted in the consciousness of the masses. This position is reflected in the recent pronouncements of the 'captains of industry' and their experts. The necessity that 'something must be done in the slump' is agreed; but the fight continues, firstly, as to what should be done in the slump (i.e. what should be the direction of government intervention) and secondly, that it should be done only in the slump (i.e. merely to alleviate slumps rather than to secure permanent full employment).

    2. In current discussions of these problems there emerges time and again the conception of counteracting the slump by stimulating private investment. This may be done by lowering the rate of interest, by the reduction of income tax, or by subsidizing private investment directly in this or another form. That such a scheme should be attractive to business is not surprising. The entrepreneur remains the medium through which the intervention is conducted. If he does not feel confidence in the political situation, he will not be bribed into investment. And the intervention does not involve the government either in 'playing with' (public) investment or 'wasting money' on subsidizing consumption.

    It may be shown, however, that the stimulation of private investment does not provide an adequate method for preventing mass unemployment. There are two alternatives to be considered here. (i) The rate of interest or income tax (or both) is reduced sharply in the slump and increased in the boom. In this case, both the period and the amplitude of the business cycle will be reduced, but employment not only in the slump but even in the boom may be far from full, i.e. the average unemployment may be considerable, although its fluctuations will be less marked. (ii) The rate of interest or income tax is reduced in a slump but not increased in the subsequent boom. In this case the boom will last longer, but it must end in a new slump: one reduction in the rate of interest or income tax does not, of course, eliminate the forces which cause cyclical fluctuations in a capitalist economy. In the new slump it will be necessary to reduce the rate of interest or income tax again and so on. Thus in the not too remote future, the rate of interest would have to be negative and income tax would have to be replaced by an income subsidy. The same would arise if it were attempted to maintain full employment by stimulating private investment: the rate of interest and income tax would have to be reduced continuously.4

    In addition to this fundamental weakness of combating unemployment by stimulating private investment, there is a practical difficulty. The reaction of the entrepreneurs to the measures described is uncertain. If the downswing is sharp, they may take a very pessimistic view of the future, and the reduction of the rate of interest or income tax may then for a long time have little or no effect upon investment, and thus upon the level of output and employment.

    3. Even those who advocate stimulating private investment to counteract the slump frequently do not rely on it exclusively, but envisage that it should be associated with public investment. It looks at present as if business leaders and their experts (at least some of them) would tend to accept as a pis aller public investment financed by borrowing as a means of alleviating slumps. They seem, however, still to be consistently opposed to creating employment by subsidizing consumption and to maintaining full employment.

    This state of affairs is perhaps symptomatic of the future economic regime of capitalist democracies. In the slump, either under the pressure of the masses, or even without it, public investment financed by borrowing will be undertaken to prevent large-scale unemployment. But if attempts are made to apply this method in order to maintain the high level of employment reached in the subsequent boom, strong opposition by business leaders is likely to be encountered. As has already been argued, lasting full employment is not at all to their liking. The workers would 'get out of hand' and the 'captains of industry' would be anxious to 'teach them a lesson. Moreover, the price increase in the upswing is to the disadvantage of small and big rentiers, and makes them 'boom-tired.'

    In this situation a powerful alliance is likely to be formed between big business and rentier interests, and they would probably find more than one economist to declare that the situation was manifestly unsound. The pressure of all these forces, and in particular of big business -- as a rule influential in government departments -- would most probably induce the government to return to the orthodox policy of cutting down the budget deficit. A slump would follow in which government spending policy would again come into its own.

    This pattern of a political business cycle is not entirely conjectural; something very similar happened in the USA in 1937-8. The breakdown of the boom in the second half of 1937 was actually due to the drastic reduction of the budget deficit. On the other hand, in the acute slump that followed the government promptly reverted to a spending policy.

    The regime of the political business cycle would be an artificial restoration of the position as it existed in nineteenth-century capitalism. Full employment would be reached only at the top of the boom, but slumps would be relatively mild and short-lived.

    PART V

    1. Should a progressive be satisfied with a regime of the political business cycle as described in the preceding section? I think he should oppose it on two grounds: (i) that it does not assure lasting full employment; (ii) that government intervention is tied to public investment and does not embrace subsidizing consumption. What the masses now ask for is not the mitigation of slumps but their total abolition. Nor should the resulting fuller utilization of resources be applied to unwanted public investment merely in order to provide work. The government spending programme should be devoted to public investment only to the extent to which such investment is actually needed. The rest of government spending necessary to maintain full employment should be used to subsidize consumption (through family allowances, old-age pensions, reduction in indirect taxation, and subsidizing necessities). Opponents of such government spending say that the government will then have nothing to show for their money. The reply is that the counterpart of this spending will be the higher standard of living of the masses. Is not this the purpose of all economic activity?

    2. 'Full employment capitalism' will, of course, have to develop new social and political institutions which will reflect the increased power of the working class. If capitalism can adjust itself to full employment, a fundamental reform will have been incorporated in it. If not, it will show itself an outmoded system which must be scrapped.

    But perhaps the fight for full employment may lead to fascism? Perhaps capitalism will adjust itself to full employment in this way? This seems extremely unlikely. Fascism sprang up in Germany against a background of tremendous unemployment, and maintained itself in power through securing full employment while capitalist democracy failed to do so. The fight of the progressive forces for all employment is at the same time a way of preventing the recurrence of fascism.

    NOTES

    1 This article corresponds roughly to a lecture given to the Marshall Society in Cambridge in the spring of 1942.

    2 Another problem of a more technical nature is that of the national debt. If full employment is maintained by government spending financed by borrowing, the national debt will continuously increase. This need not, however, involve any disturbances in output and employment, if interest on the debt is financed by an annual capital tax. The current income, after payment of capital tax, of some capitalists will be lower and of some higher than if the national debt had not increased, but their aggregate income will remain unaltered and their aggregate consumption will not be likely to change significantly. Further, the inducement to invest in fixed capital is not affected by a capital tax because it is paid on any type of wealth. Whether an amount is held in cash or government securities or invested in building a factory, the same capital tax is paid on it and thus the comparative advantage is unchanged. And if investment is financed by loans it is clearly not affected by a capital tax because if does not mean an increase in wealth of the investing entrepreneur. Thus neither capitalist consumption nor investment is affected by the rise in the national debt if interest on it is financed by an annual capital tax. See 'A Theory of Commodity, Income, and Capital Taxation'

    3 It should be noted here that investment in a nationalized industry can contribute to the solution of the problem of unemployment only if it is undertaken on principles different return than private enterprise, or it must deliberately time its investment so as to mitigate from those of private enterprise. The government must be satisfied with a lower net rate of slumps.

    4 A rigorous demonstration of this is given in my article to be published in Oxford Economic Papers. See 'Full Employment by Stimulating Private Investment?'


    Michal Kalecki (22 June 1899 - 18 April 1970) was a Polish Marxist economist. This essay was first published in Political Quarterly in 1943; it is reproduced here for non-profit educational purposes. A shorter version of this essay was published in The Last Phase in the Transformation of Capitalism (Monthly Review Press, 1972).
     

    Demeter

    (85,373 posts)
    29. If the Supreme Court tackles the NSA in 2015, it’ll be one of these five cases
    Sat Jan 3, 2015, 09:48 AM
    Jan 2015
    http://arstechnica.com/tech-policy/2015/01/if-the-supreme-court-tackles-the-nsa-in-2015-itll-be-one-of-these-five-cases/

    Roughly a year and a half since the first Snowden disclosures, there's already been a judicial order to shut down the National Security Agency's bulk metadata collection program.

    The lawsuit filed by Larry Klayman, a veteran conservative activist, would essentially put a stop to unchecked NSA surveillance. And at the start of 2015, he remains the only plaintiff whose case has won when fighting for privacy against the newly understood government monitoring. However, it's currently a victory in name only—the judicial order in Klayman was stayed pending the government’s appeal. Klayman v. Obama is only one of a number of notable national security and surveillance-related civil and criminal cases stemming fully or partially from the Snowden documents. In 2014, a handful of these advanced far enough through the legal system that 2015 is likely to be a big year for privacy policy. One or more could even end up before the Supreme Court.

    "I think it's impossible to tell which case will be the one that does it, but I believe that, ultimately, the Supreme Court will have to step in and decide the constitutionality of some of the NSA's practices," Mark Rumold, an attorney with the Electronic Frontier Foundation, told Ars.


    Rumold is one of the attorneys in First Unitarian Church, a case that is challenging government surveillance much like Klayman. Along with that pair, headline watchers should set alerts for cases such as American Civil Liberties Union (ACLU) v. Clapper, United States v. Moalin, and United States v. Muhtorov. Not only are there several other related cases that will likely be influenced by these decisions, but those five cases represent the strongest and most direct legal challenges to the current NSA surveillance state...

    MUCHO DETAIL AT LINK---EXCITING AND TERRIFYING
     

    Demeter

    (85,373 posts)
    30. Say Goodbye to 'Made in China'
    Sat Jan 3, 2015, 09:58 AM
    Jan 2015
    http://www.bloombergview.com/articles/2014-12-29/welcome-to-the-era-of-chinese-outsourcing

    These are not the best of times to be one of China's massive, state-owned steel mills. The domestic economy is slowing, competition is increasing, and there's widespread disgust and impatience with the smog pouring out of their stacks. In short, their lucrative business model for the past three decades is slowly dying. So what’s a manager of a Chinese steel mill to do?

    One surprisingly popular option is to bid China goodbye. In November, Hebei Iron & Steel Co Ltd, a provincial-owned company and China’s largest steelmaker by production, announced that it was moving 5 million tons of its annual production -- roughly 11 percent of the 45 million tons of steel it makes every year -- to South Africa. According to press reports, it won’t be going abroad alone. By 2023, Hebei Province -- China’s most polluted province -- plans to export 20 million tons of steel, 30 million tons of cement and 10 million weight boxes of glass capacity (a weight box equals roughly 50 kilograms) to points still not named.

    Second, Hebei may simply be at a loss as to how to scale back businesses that they recognize have become massively bloated. Officials in China’s construction-related industries clearly have too much capacity and too little demand....

    MORE--VERY SIGNIFICANT!

    At first glance, the export of excess industrial capacity wouldn’t appear to make much business sense. As Bloomberg News noted two weeks ago, Hebei Iron & Steel’s South African mill will be “equivalent to two-thirds of that nation’s output last year, and a third of continental Africa’s.” In other words, it's not clear there's much demand in these new locales for the Chinese steel giant's plentiful wares. Why, then, are they doing it?

    The officials in Hebei Province who oversee the company may have felt they had no choice. First, they undoubtedly faced political pressure to reduce their environmental impact in China: reducing production of steel, cement and glass -- all highly polluting industries, especially in developing countries -- will have a direct impact on Xi Jinping’s pollution goals. (Starting in Hebei will have the added benefit of cleaning up polluted, neighboring Beijing.)
     

    Demeter

    (85,373 posts)
    31. On the Stupidity of Demand Deficient Stagnation
    Sat Jan 3, 2015, 10:11 AM
    Jan 2015
    http://mainlymacro.blogspot.com/2014/12/on-stupidity-of-demand-deficient.html

    In my last post I wrote about “why recessions caused by demand deficiency when inflation is below target are such a scandalous waste. It is a problem that can be easily solved, with lots of winners and no losers. The only reason that this is not obvious to more people is that we have created an institutional divorce between monetary and fiscal policy that obscures that truth.” I suspect I often write stuff that is meaningful to me as a write it but appears obtuse to readers. So this post spells out what I meant.

    First a preliminary. If you do not understand why economies can suffer from deficient demand, and why this is a needless waste of resources, then to be honest your best bet is to read a few chapters of a popular book on macro, like Tim Harford’s latest. If you have done a macro course and do not believe prolonged demand deficiency is possible, just tell me how you get out of a liquidity trap in a world with inflation targets after reading this post (and maybe this).

    Demand deficiency when inflation is persistently below target (the stagnation of the title) should not occur, because it is easy to solve technically. If I was a benevolent dictator in charge of both monetary and fiscal policy instruments, stagnation would never persist in my economy. The way I would ensure this most of the time is by varying interest rates, but if nominal interest rates hit zero (a liquidity trap) I have a whole range of alternative instruments, ranging from cutting various taxes to increasing transfers or raising public spending. I know of no macroeconomic theory on earth which tells me that every one of these instruments will fail to raise demand.

    Whatever instrument I use to raise demand in a liquidity trap, I need to finance it. I can do this by issuing bonds (increasing government debt) or creating money. A higher stock of government debt or money is the only legacy (apart from happier people) of my successful operation to remove demand deficiency. We generally prefer governments to use bond finance, for reasons I will come to. But supposing there is some constraint (real or imagined) on issuing bonds. As a benevolent dictator I can just create money, which we call money financed fiscal stimulus. Money financed fiscal stimulus is a sure way of ending demand deficiency in a liquidity trap. If that higher stock of money proves too great later on when the economy has recovered, I can reduce it by various means. There will be no subsequent above target inflation. There are no technical problems that I as a benevolent dictator need to worry about here. Of course creating lots of money on a temporary basis is exactly what central banks in the UK, US and Japan have recently done (QE - Quantitative Easing). The problem is that they have not been accompanied by sufficient tax cuts, increased transfers or increased government spending. Creating money to buy financial assets is by comparison to money financed fiscal stimulus an unreliable way of raising demand.

    So that is it. Demand deficient stagnation is easy to prevent technically. The huge waste of resources that we see in the long and incomplete US recovery, the even slower UK recovery and the absence of recovery in the Eurozone are all unnecessary, because we know how to fix them. {1}

    What stops this happening in the real world is that we have become fixated by the labels ‘monetary’ and ‘fiscal’ policy, and created an independent institution to handle the former. Central banks do monetary policy (varying interest rates and creating money) but are not allowed to give money directly to the people (helicopter money, or John Muellbauer’s QE for the people). Governments run fiscal policy, so can do bond financed fiscal stimulus, but are not allowed to create money. So a self-imposed institutional setup prevents either central banks or governments doing money financed fiscal stimulus alone...A major reason why this institutional arrangement exists is to discourage non-benevolent governments creating inflation through fiscal profligacy, or more recently in order to increase policy credibility. Of course during a period of stagnation there is no danger of rampant inflation. Unfortunately this institutional arrangement creates a problem when governments – in my view for largely imaginary reasons - put a priority on reducing deficits. Money financed fiscal stimulus is not available to get you out of a liquidity trap. So we get this huge waste of resources. Within the existing institutional framework, there is plenty to be done to convince fiscal policy makers that reducing deficits should not be a priority in the short term, or in trying to improve the monetary policy framework so liquidity traps happen less often. Yet it would be better still if we had an institutional framework which was a little more robust to failures on either front. We need to regain the possibility of money financed fiscal stimulus in a liquidity trap.

    NOTE

    {1} What I say here has a lot in common with the advocates of Modern Monetary Theory. However, it also appears to be perfectly standard macroeconomics to me, so here I will simply commend them for highlighting these aspects of mainstream thought.
     

    Demeter

    (85,373 posts)
    34. Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People
    Sat Jan 3, 2015, 10:31 AM
    Jan 2015
    http://www.foreignaffairs.com/articles/141847/mark-blyth-and-eric-lonergan/print-less-but-transfer-more

    ... Princeton economics professor named Ben Bernanke argued that central bankers could still turn the country around. Japan was essentially suffering from a deficiency of demand: interest rates were already low, but consumers were not buying, firms were not borrowing, and investors were not betting. It was a self-fulfilling prophesy: pessimism about the economy was preventing a recovery. Bernanke argued that the Bank of Japan needed to act more aggressively and suggested it consider an unconventional approach: give Japanese households cash directly. Consumers could use the new windfalls to spend their way out of the recession, driving up demand and raising prices.

    As Bernanke made clear, the concept was not new: in the 1930s, the British economist John Maynard Keynes proposed burying bottles of bank notes in old coal mines; once unearthed (like gold), the cash would create new wealth and spur spending. The conservative economist Milton Friedman also saw the appeal of direct money transfers, which he likened to dropping cash out of a helicopter. Japan never tried using them, however, and the country’s economy has never fully recovered. Between 1993 and 2003, Japan’s annual growth rates averaged less than one percent.

    Today, most economists agree that like Japan in the late 1990s, the global economy is suffering from insufficient spending, a problem that stems from a larger failure of governance. Central banks, including the U.S. Federal Reserve, have taken aggressive action, consistently lowering interest rates such that today they hover near zero. They have also pumped trillions of dollars’ worth of new money into the financial system. Yet such policies have only fed a damaging cycle of booms and busts, warping incentives and distorting asset prices, and now economic growth is stagnating while inequality gets worse. It’s well past time, then, for U.S. policymakers -- as well as their counterparts in other developed countries -- to consider a version of Friedman’s helicopter drops. In the short term, such cash transfers could jump-start the economy. Over the long term, they could reduce dependence on the banking system for growth and reverse the trend of rising inequality. The transfers wouldn’t cause damaging inflation, and few doubt that they would work. The only real question is why no government has tried them....


    GIVE MONEY TO POOR PEOPLE? WHAT ARE YOU, SOME KIND OF DO-GOODER? A SOCIALIST? A COMMUNIST? THE OBSCENELY WEALTHY ARE THE ONLY ONES ENTITLED TO FREE MONEY! EVERYBODY ELSE PAYS!

    DemReadingDU

    (16,000 posts)
    32. Ellen Brown video: The Confiscation of Bank Deposits
    Sat Jan 3, 2015, 10:12 AM
    Jan 2015

    12/31/14 The Confiscation of Bank Deposits and The Derivative Debt: Ellen Brown on GRTV

    Last month’s G20 Summit in Australia came and went without the protests and riots we’ve come to expect at the summit in recent years. But as author and researcher Ellen Brown notes, the real fireworks happened behind closed doors, where the group rubber stamped new regulations that will make Cyprus style bank bail-ins a worldwide reality. This is the GRTV Feature Interview with Ellen Brown and your host, James Corbett.

    appx 23 minutes


    more at Ellen Brown's website
    http://ellenbrown.com/

     

    Demeter

    (85,373 posts)
    35. For what it's worth, Yves Smith accuses Ellen Brown of being sloppy
    Sat Jan 3, 2015, 10:36 AM
    Jan 2015

    and printing wrong information on occasion....

    xchrom

    (108,903 posts)
    33. Draghi Prepares to Act Against Risk of Deflation
    Sat Jan 3, 2015, 10:14 AM
    Jan 2015
    http://www.bloomberg.com/news/2015-01-02/draghi-says-ecb-prepares-action-as-deflation-risk-non-negligible.html


    Mario Draghi gave his strongest signal yet that the European Central Bank is likely to start large-scale government-bond purchases by saying he can’t rule out deflation in the euro area.

    The ECB president seldom gives interviews and his comments to the German newspaper Handelsblatt reflect a drive to win over that nation. Policy makers there have led criticism of quantitative easing, saying it threatens financial stability, reduces the incentive for governments to restructure their economies, and is legally tricky.

    “The risk cannot be entirely excluded, but it is limited,” Draghi said when asked if the region could enter a spiral of declining prices, falling wages and postponed spending. “We have to act against such risk.”
     

    Demeter

    (85,373 posts)
    38. Draghi comments send euro to lowest level since 2010
    Sat Jan 3, 2015, 02:07 PM
    Jan 2015

    www.bbc.com/news/business-30654641

    The value of the euro has fallen to its lowest level since the middle of 2010, following comments from Mario Draghi, the president of the European Central Bank (ECB). In a newspaper interview, he hinted again that the bank might soon start a policy of quantitative easing to try to stimulate the eurozone economies. The aim would be to stop the continued fall in the general level of prices.

    The euro fell 0.4% to $1.2034 after Mr Draghi's comments were made public.
    Recently, the official eurozone inflation rate has fallen to just 0.3%.

    'Making preparations'

    To stop deflation - falling prices - gaining a grip on the world's largest trading bloc, the ECB could launch its own programme of quantitative easing (QE) by buying government bonds, thus copying its counterparts in the UK and the US. The purpose would be to inject cash into the banking system, stimulate the economy and push prices higher. Speaking in an interview with the German newspaper Handelsblatt, Mr Draghi said: "We are making technical preparations to alter the size, pace and composition of our measures in early 2015."

    Lee Hardman, a currency analyst at Bank of Tokyo-Mitsubishi UFJ, said: "The comments suggest the ECB will soon adopt sovereign debt QE, which may come as soon as their next meeting.''


    If bond prices rose because of this extra demand from the central bank, the yield available to bond investors would fall, with the knock-on effect of reducing the general level of interest rates in the eurozone banking system. And it is that prospect which has helped to weaken the value of the euro on the foreign exchanges.

    Many hints

    Although the ECB has already cut interest rates to a record low level, and also bought some bonds issued by private companies, a full-scale programme of QE has not yet been launched. But it has been on the cards since April 2014, when Mr Draghi made the first of a series of comments suggesting that he might trigger such a policy in due course.

    " the euro could break below $1.20 since there is a risk of a very low inflation reading out of the euro zone next week," said Niels Christensen, an FX strategist at Nordea.

    "That will just add to pressure on the ECB to take measures when it meets later this month."


    The next ECB policy meeting will be on 22 January.


    Analysis: Andrew Walker, economics correspondent, BBC World Service

    Mr Draghi's remarks are yet another signal that full-scale quantitative easing in the eurozone is probably coming. It could be less than three weeks away. The ECB's first major policy meeting of the year is on 22 January. Another clue to the ECB's likely actions comes next week, when we get a first estimate for eurozone inflation in December. The previous month's figure was 0.3%. Anything lower would reinforce the odds of early action by the ECB.

    And there are plenty of reasons to think inflation might be lower. There is the continued decline in global oil prices, and new business survey data suggesting the eurozone is still weak. We have also had figures for Spain in December showing prices falling more rapidly than before.
     

    Demeter

    (85,373 posts)
    41. Stability and Prosperity in Monetary Union MARIO DRAGHI HIMSELF!
    Sat Jan 3, 2015, 02:29 PM
    Jan 2015
    http://www.project-syndicate.org/commentary/ecb-eurozone-economic-union-by-mario-draghi-2015-1

    There is a common misconception that the euro area is a monetary union without a political union. But this reflects a deep misunderstanding of what monetary union means. Monetary union is possible only because of the substantial integration already achieved among European Union countries – and sharing a single currency deepens that integration. If European monetary union has proved more resilient than many thought, it is only because those who doubted it misjudged this political dimension. They underestimated the ties among its members, how much they had collectively invested, and their willingness to come together to solve common problems when it mattered most. Yet it is also clear that our monetary union is still incomplete. This was the diagnosis offered two years ago by the so-called “Four Presidents” (the European council president in close collaboration with the presidents of the European Commission, the European Central Bank, and the Eurogroup). And, though important progress has been made in some areas, unfinished business remains in others.

    But what does it mean to “complete” a monetary union? Most important, it means having conditions in place that make countries more stable and prosperous than they would be if they were not members. They have to be better off inside than they would be outside. In other political unions, cohesion is maintained through a strong common identity, but often also through permanent fiscal transfers between richer and poorer regions that even out incomes ex post. In the euro area, such one-way transfers between countries are not foreseen (transfers do exist as part of the EU’s cohesion policy, but are limited in size and are primarily designed to support the “catching-up” process in lower income countries or regions). This means that we need a different approach to ensure that each country is permanently better off inside the euro area. This implies two main things. First, we have to create the conditions for all countries to thrive independently. All members need to be able to exploit comparative advantages within the Single Market, attract capital, and generate jobs. And they need to have enough flexibility to respond quickly to short-term shocks. This comes down to structural reforms that spur competition, reduce unnecessary red tape, and make labor markets more adaptable.

    Until now, whether or not to carry out such reforms has largely been a national prerogative. But in a union such as ours they are a clear common interest. Euro area countries depend on one another for growth. And, more fundamentally, if a lack of structural reforms leads to permanent divergence within the monetary union, this raises the specter of exit – from which all members ultimately suffer. In the euro area, stability and prosperity anywhere depend on countries thriving everywhere. So there is a strong case for sharing more sovereignty in this area – for building a genuine economic union. This means more than beefing up existing procedures. It means governing together: shifting from coordination to common decision-making, and from rules to institutions. The second implication of the absence of fiscal transfers is that countries need to invest more in other mechanisms to share the cost of shocks. Even with more flexible economies, internal adjustment will always be slower than it would be if countries had their own exchange rate. Risk-sharing is thus essential to prevent recessions from leaving permanent scars and reinforcing economic divergence.

    A key part of the solution is to improve private risk-sharing by deepening financial integration. Indeed, the less public risk-sharing we want, the more private risk-sharing we need. A banking union for the euro area should be catalytic in encouraging deeper integration of the banking sector. But risk-sharing is also about deepening capital markets, especially for equity, which is why we also need to advance quickly with a capital markets union. Still, we have to acknowledge the vital role of fiscal policies in a monetary union. A single monetary policy focused on price stability in the euro area cannot react to shocks that affect only one country or region. So, to avoid prolonged local slumps, it is critical that national fiscal policies can perform their stabilization role. To allow national fiscal stabilizers to work, governments must be able to borrow at an affordable cost in times of economic stress. A strong fiscal framework is indispensable to achieve this, and protects countries from contagion. But the crisis experience suggests that, in times of extreme market tensions, even a sound initial fiscal position may not offer absolute protection from spillovers.

    This is a further reason why we need economic union: markets would be less likely to react negatively to temporarily higher deficits if they were more confident in future growth prospects. By committing governments to structural reforms, economic union provides the credibility that countries can indeed grow out of debt. Ultimately, economic convergence among countries cannot be only an entry criterion for monetary union, or a condition that is met some of the time. It has to be a condition that is fulfilled all of the time. And for this reason, to complete monetary union we will ultimately have to deepen our political union further: to lay down its rights and obligations in a renewed institutional order.

    GIVE IT UP, MARIO...IT AIN'T POSSIBLE. PUT DOWN THE HOOKAH AND DEAL WITH REALITY.
     

    Demeter

    (85,373 posts)
    42. Digital Tax Increase to Take Effect in Europe
    Sat Jan 3, 2015, 02:39 PM
    Jan 2015


    http://www.cepr.net/index.php/blogs/beat-the-press/european-union-imposes-a-tax-on-digital-transactions-equal-to-0006-percent-of-gdp

    The NYT reported that the European Union (EU) will start collecting a tax on digital transactions in 2015 that is expected to raise $1 billion this year. For those who are not very familiar with the size of the EU economy, it is projected to be close to $19 trillion in 2015, which means that the revenue from this tax will be a bit less than 0.006 percent of GDP.


    http://www.nytimes.com/2015/01/02/business/international/digital-tax-increase-to-take-effect-in-europe.html?ref=business

    Europe’s tax showdown could be headed straight to people’s wallets.
    With the new year, a change in fiscal rules in the European Union is increasing the tax on many purchases of digital content like e-books and smartphone applications. Under the new rules, first approved in 2008, the tax rate on digital services like cloud storage and movie streaming will be determined by where consumers live, and not where the company selling the product has its European headquarters. Tax experts say Europe’s revamped rules could add up to an extra $1 billion in annual tax revenue for European governments. What remains unclear is who in the 28-country bloc will pay most of the bill.

    “There inevitably will be a price change,” said Richard Mollet, chief executive of the Publishers Association, a British trade body. “The question is whether retailers, publishers or customers will have to take on board any increase.”


    The changes to Europe’s so-called value-added tax — a tax on goods and services similar to sales taxes in the United States — are part of a continuing push by lawmakers to tax the region’s digital economy more heavily. Companies like Apple and Amazon have been roundly criticized for housing their European operations in low-tax countries like Ireland and Luxembourg. The companies say they operate there legally.

    Many of the world’s largest tech companies selling digital products, like Amazon and Microsoft, now house their European digital businesses in Luxembourg, where the V.A.T. rate is as low as 3 percent for e-book purchases. In contrast, countries like Britain charge companies a 20 percent sales tax for selling e-books. Analysts say the current rules provide an advantage to global companies that have the financial muscle to shop around for the lowest tax rate....


    THE EUROCRATS ARE CRAZY CATS
     

    Demeter

    (85,373 posts)
    43. Interview with Peter Praet, Member of the Executive Board of the ECB
    Sat Jan 3, 2015, 02:43 PM
    Jan 2015
    Interview with Börsen-Zeitung, conducted by Mark Schrörs on 11 December 2014 and published on 31 December 2014

    European Central Bank Directorate General Communications & Language Services
    Global Media Relations Division, Sonnemannstrasse 20, 60314 Frankfurt am Main, Germany
    Tel.: +49 69 1344 7455, E-mail: media@ecb.europa.eu, website: http://www.ecb.europa.eu

    Reproduction is permitted provided that the source is acknowledged.


    https://www.ecb.europa.eu/press/inter/date/2014/html/sp141231.en.html

    Mr Praet, the macroeconomic assessment of the European Central Bank (ECB) has become much grimmer recently, the ECB sounds increasingly alarmed. Are you now worrying about a new recession or deflation – or even a “Euro crisis 2.0”?

    No, we don’t really think that there is a high risk of a recession in the euro area. Also the risk of broadly-based deflation in the euro area is not high. And we don’t see risks for the financial system as was the case in 2012, when the euro area was on the brink of a dangerous downward spiral.

    But?

    But what we are increasingly worried about and what explains the sense of urgency expressed by our President Mario Draghi is the very high risk that after seven years of crisis and very poor economic performance in the euro area businesses and households are reducing their long-term growth expectations and adapting to weak growth and low inflation. To some extent this risk is already materialising: companies are starting to adjust to a “1% growth/1% inflation economy”.

    That means to a “new mediocre”, to use a term of the International Monetary Fund (IMF)?

    I don’t think that this term fits our situation well. I think it is more like Keynes’ underemployment equilibrium…

    … that basically says that if there is widespread pessimism in an economy, this leads to low or even negative return expectations in aggregate. In such a situation nobody wants to invest and no new jobs are created.

    Yes, and this is certainly what we observe in the euro area right now. Before the crisis we probably had excessively high growth expectations. Now it is the opposite. The big risk is that this growth pessimism perpetuates the current situation of weak growth and low inflation.

    What do you mean by that?

    In countries with high debt it will be even harder to deleverage without nominal growth. In addition to that you can see hysteresis effects: the longer the crisis, the bigger the long-term damage – not least for employment. In the end, there is a risk of a real economic vicious cycle: there is less investment which in turn reduces potential growth, the future becomes even grimmer and consequently investment is reduced even further. This is why we are underlining that urgent action is necessary. There is a need for a comprehensive response now: all the authorities have to live up to their responsibilities – on the fiscal, structural and monetary policy side.

    But it seems as if the politicians in the euro area don’t share this “sense of urgency”, right? At least when it comes to structural reforms, especially in France and Italy, very little happens.

    My impression is that there has been an important change. In France, the government for the first time is taking real political risks to improve the labour market. In Italy there is also significant progress at least in policy intentions. The authorities have recognised that muddle-through will not make it. But what is important now is implementation. Now is the moment of truth: there is a need for concrete results. Monetary policy alone will not solve our structural problems.

    But these results are questionable because there is a lot of political resistance.

    If nothing happens you will also end up with political tensions. The rise of populism should be a wake-up call. The governments have to give priority to difficult political decisions and follow through with the much-needed reforms.

    And if nothing happens, will the ECB, seen by many as the only institution that is able to act, play the sweeper again?

    In the past we have had the unfortunate situation in which the ECB was seen as “the only game in town”. But I think this is changing.

    Should the “comprehensive” response preferably also be coordinated?

    Comprehensive yes, coordinated no. In the end coordination only leads to a situation in which everybody negotiates and negotiates – and nobody acts. Moreover, the central bank would be drawn into a political process.

    But some observers say that it would make it easier for the ECB to help again and to also buy government bonds if euro area countries commit to reforms.

    Monetary policy would be much easier if countries were to commit themselves to reforms in a credible way. But you have to find the right balance. You should not forget: we have a mandate and we cannot simply say that our action depends on the action of someone else.

    But isn’t it a fact that the ECB will hardly be able to reach its medium-term goal of below, but close to, 2% inflation if political leaders do not ensure the necessary economic environment? President Draghi himself said something along those lines once – even if he rectified it a little later.

    We as an institution have been given a clear mandate to preserve price stability and a very high degree of independence in order to reach our objective. If we come to the conclusion that our objective is at risk we have an obligation to act – an obligation to act! – and if necessary to use all available instruments within our mandate. We cannot simply say that we hope that things are getting better. If we were to say that accomplishing our objective is beyond our control or that we are powerless because our tools do not work or are limited, we would not respect our mandate. That would have huge implications for the independence of the ECB.

    And you have to accept it if the politicians simply lean back again?

    There is always a risk that others will say “Thank you, you act and I take the benefit” – and that they then don’t act on their own. Moral hazard is an issue for monetary policy, I don’t deny that. At the same time, it cannot be an excuse not to act if you come to the conclusion that this is needed, given your mandate. But at the same time, we have to signal very clearly to the politicians that the euro area will never be in a good shape if we don’t all deliver.

    Meanwhile markets are seeing it as a done deal that the ECB will start “quantitative easing” (QE) at the beginning of 2015, including buying sovereign bonds – something that was seen as a taboo for a very long time. Do you feel comfortable with that expectation?

    Let me first of all say: our monetary policy has achieved a lot when it comes to easing financial conditions. That should be acknowledged. Borrowing rates for households and businesses are falling even in the stressed economies – a phenomenon that has not been observed there since the start of the crisis. This improvement has been visible since the summer and to a very great extent it is due to our recent policy measures. The decline in some yields that we observed during the autumn is partly based on the expectations concerning QE – but not only. Some say we should be patient and wait for this stimulus already in place to work its way through the economy.

    But there are others in the Governing Council who want to do more.

    We have always emphasised that there are two contingencies for further action: first, our measures taken so far have not been enough to have the intended effect – that is, are not sufficiently sizeable in terms of expanding our balance sheet to provide the stimulus that is necessary in current conditions; and second, the inflation outlook itself has deteriorated since we decided on the measures we took in the past. Now we have a little bit of both.

    Which means?

    That from what we know today – also after the second TLTRO – there is the risk that we won’t have achieved the degree of monetary accommodation that we had intended. And the Eurosystem staff have also substantially revised downwards their inflation projections. This is why we have to be very vigilant and ask ourselves: have we done enough? The sense of urgency was expressed when we said that we would reassess the situation “early next year”.

    If the ECB sees a need for further accommodation, is it likely that there would be a gradual approach, for example, first of all buying corporate bonds or bonds of supranational agencies like the EIB, and only as a last resort sovereign bonds – or rather a comprehensive programme straight away, also as a sign of the ECB’s determination?

    There are different routes we could go. But let me say something more general: with our traditional refinancing operations everything depends on whether banks play along. If banks – in the underemployment equilibrium – do not use the liquidity we offer, we are not going to achieve the monetary expansion we intend. But as we have started buying assets the effect for each euro we create is different – depending on what we buy. This is also why it is so difficult to give an explicit balance sheet target. The composition, the size and the pace of the purchases are closely linked.

    What do you mean exactly?

    If we buy an asset in an impaired market with a high liquidity premium, the direct effect on the financial conditions will be much bigger compared with buying only safe AAA assets in well-functioning markets. If ultimately it was decided only to buy very safe assets it would be clear that the appropriate size should be greater. There are trade-offs.

    You have created the impression that you would favour buying sovereign bonds and not corporate bonds if there were to be a widening of the purchases. Why is that?

    I would not “favour” that. I would say unfortunately this is the only sort of security that has a significant market volume. There is not too much to buy on the corporate bond market and it is concentrated in a small number of countries. Buying bank bonds could raise concerns, because we are also supervisors. Theoretically, we could also always buy indices where you have no control of the composition.

    But if you were to buy government bonds you would mutualise the risks – so it would have a similar effect as euro bonds, which are rejected by Germany.

    Monetary policy in general implies risk-sharing. This is so for our refinancing operations: if there are losses, we take them collectively. In the absence of a fiscal union, potential outright purchases of government bonds raise specific issues which we have to acknowledge. You can deal with these issues in different ways.

    What do you have in mind?

    There has been no decision. One theoretical possibility would be to buy according to the outstanding debt. That would create less distortion of relative prices and the impact on inflation would be bigger – but also bring a higher degree of risk-sharing across the union as well as more moral hazard.

    Another alternative is outright purchasing without loss-sharing in the event of default.

    Also, theoretically speaking, there is the alternative of minimising the risks by buying only AAA-rated bonds. By the way, I don’t share the assessment that this would have no impact. For example, by buying long-term maturities we could compress the long end of the yield curve further. But at the same time, you would need much bigger volumes to have the desired impact on inflation.

    In the Governing Council there is obviously some resistance to large-scale government bond purchases. Would you feel comfortable taking such a delicate decision against quite a number of colleagues, let’s say six or seven?

    It is premature to speculate about the number of colleagues who might take a different view. We are closely monitoring how the outlook for price stability is evolving in the context of the fall in oil prices. But one thing seems clear to me: if we had had some interest rate margin left, there would have been a unanimous decision to cut rates.

    That may be the case but the cost-benefit analysis for buying sovereign bonds is different.

    Yes, absolutely. This is why we would prefer consensus. But from my point of view we have to differentiate between two questions. The first question has to be: do we see a need for further accommodation? If yes, then the second question is: how to achieve it? We must not mix the two questions. If my assessment is that there is a need for further accommodation, and if I were willing to cut rates if that had been possible, then I should not be paralysed by the fact that the only option is to buy sovereign bonds. Then you have to look at how to deal with the resulting problems in the best possible way. If the tools within our mandate were limited because of political constraints, it would be very damaging from an institutional point of view.

    You have mentioned the oil price as a fundamental factor. In the past it was always said that the ECB has to “look through” such price volatility because it is temporary.

    I think that the oil price and its implications will be very important for the January meeting. You have to bear in mind that the oil price has fallen again substantially since the cut-off date for the latest Eurosystem projections published in December. With the recent oil prices, inflation would be even lower, even substantially lower than expected so far. This is especially true for 2015 – when the effect would amount to 0.3 to 0.4 percentage points, which could mean negative inflation during a substantial part of 2015. Here is where the assessment in the Governing Council diverges: some might say we should “look through” it again, as we always did in the past. Others might say – and I personally lean towards that argument – that in an environment in which headline inflation might become negative and in which inflation expectations are extremely fragile we cannot simply “look through”.

    But core inflation without the volatile energy component is quite stable between 0.7% and 1%.

    Yes, that’s true. But on the one hand we have always said that our focus is on headline inflation and not core inflation. We have to be consistent. On the other hand, the risk of second-round effects seems to be greater today than it was in the past. One example: if the oil price falls, profit margins usually go up temporarily, but there are no indirect effects on selling prices. But in an environment of weak growth many will pass through the lower oil price in order to keep market share. This price competition could also depress core inflation and contribute to the de-anchoring of inflation expectations.

    If the ECB goes for large-scale purchases of sovereign bonds, would you like to see political support, especially from Berlin – as was the case with the OMTs in 2012, when the Bundesbank voted against the programme but Berlin supported the ECB?

    I think we are in a situation was not sufficiently considered in the setting-up of our monetary union: that we reach the zero lower bound and that we have to consider outright asset purchases...

    Does that mean you would like to have a political backing?

    We must remain independent. As a central bank we have to fulfil our mandate and we must not be paralysed if we are convinced that a particular step is necessary. But, as for all important decisions, broad societal support is desirable.

    During the crisis, the role of the ECB has changed significantly. For example, as part of the troika, the ECB has become a political actor, and more and more responsibility has been given to the ECB. The BIS warns against an overburdening of central banks and an “expectations gap” – between what monetary policy is expected to deliver and what it can deliver.

    This is a concern that I take seriously. I think that the ECB has been led by necessity to take a role that has put a lot of pressure on the institution. We accepted that, also to make sure our single monetary policy could function. But that doesn’t mean that we like it. With regard to the troika, I would say that the time has come for a thorough reflection on how we see our role in the troika in the future.

    But is there really a way back to being a purely monetary authority – especially now that the ECB has also become the supervisor of banks?

    We have put the necessary safeguards in place to ensure that banking supervision does not interfere with our mandate to maintain price stability. But what concerns me now is that banking supervision is at the European level, but that the risk-sharing framework across jurisdictions remains incomplete. There has been some progress, but especially the issue of the backstop for the resolution mechanism in the transition period needs further work. In parallel, I expect the banking union to encourage a more integrated banking landscape, which should deliver greater private sector risk-sharing across our monetary union.

    And if something goes wrong in the end it will rebound on the ECB.

    We have a strict separation in place. Danièle Nouy and the team of supervisors work absolutely independently within the ECB. We as the Governing Council may discuss general guidelines but we should not discuss individual institutions. But in the end, we as the Governing Council, as the formal decision-making body, will be of course exposed. The question is: who will be blamed if there is a crisis? We have to be fully aware of that.

    What will the euro area look like in 10 or 15 years’ time?

    You mean that there will be even more Members States, right?

    The question is more about the composition. In Italy and some other countries we have some heated debates about leaving the euro area.

    Frankly this is something that doesn’t come to mind.

    So you don’t fear that the euro was an attempt to bring countries together which do not fit together – and that some countries might seek salvation by turning the clock back.

    Populist parties in some countries promise quick solutions – but they offer only recipes for disaster. Nobody should be under the illusion that you only need to return to the old system and everything will be better. All these countries have had their reasons for joining the euro area: the old system of constant devaluation was not working. What is needed now is to make the much needed structural adjustments. A devaluation policy doesn’t solve structural problems. But we also have to resolve institutional flaws at the EU level. We have a monetary union with a very strong central bank – but the other institutions have been too weak. We now have made some progress, for example, with the ESM as an instrument for safeguarding financial stability in distressed countries. But we certainly have not yet reached the end of the road.
     

    Demeter

    (85,373 posts)
    36. Where Will All the Workers Go? Nouriel Roubini
    Sat Jan 3, 2015, 10:53 AM
    Jan 2015
    http://www.project-syndicate.org/commentary/technology-labor-automation-robotics-by-nouriel-roubini-2014-12

    Technology innovators and CEOs seem positively giddy nowadays about what the future will bring. New manufacturing technologies have generated feverish excitement about what some see as a Third Industrial Revolution. In the years ahead, technological improvements in robotics and automation will boost productivity and efficiency, implying significant economic gains for companies. But, unless the proper policies to nurture job growth are put in place, it remains uncertain whether demand for labor will continue to grow as technology marches forward.

    Recent technological advances have three biases: They tend to be capital-intensive (thus favoring those who already have financial resources); skill-intensive (thus favoring those who already have a high level of technical proficiency); and labor-saving (thus reducing the total number of unskilled and semi-skilled jobs in the economy). The risk is that robotics and automation will displace workers in blue-collar manufacturing jobs before the dust of the Third Industrial Revolution settles.

    The rapid development of smart software over the last few decades has been perhaps the most important force shaping the coming manufacturing revolution. Software innovation, together with 3D printing technologies, will open the door to those workers who are educated enough to participate; for everyone else, however, it may feel as though the revolution is happening elsewhere. Indeed, the factory of the future may be 1,000 robots and one worker manning them. Even the shop floor can be swept better and cheaper by a Roomba robot than by any worker....Job-reducing technological innovations will affect education, health care, government, and even transportation. For example, will we still need so many teachers in the decades to come if the cream of the profession can produce increasingly sophisticated online courses that millions of students can take? If not, how will all of those former teachers earn a living? Governments, too, are shedding labor – particularly governments burdened by high deficits and debts. And, by transforming how services are provided to the public, the e-government trend can offset the employment losses with productivity gains. Even transportation is being revolutionized by technology. In a matter of years, driverless cars – courtesy of Google and others – may render millions of jobs obsolete. And, of course technological innovation that is capital-intensive and labor-saving is one of the factors – together with the related winner-take-all effects – driving the rise in income and wealth inequality. Rising inequality then becomes a drag on demand and growth (as well as a source of social and political instability), because it distributes income from those who spend more (lower- and middle-income households) to those who save more (high-net-worth individuals and corporate firms).

    Obviously, this is not the first time the world has faced such problems, and the past can help to serve as a model for resolving them. Late nineteenth- and early twentieth-century leaders sought to minimize the worst features of industrialization. Child labor was abolished throughout the developed world, working hours and conditions became more humane, and a social safety net was put in place to protect vulnerable workers and stabilize the (often fragile) macroeconomy. As we begin to seek enlightened solutions to the challenges that the Third Industrial Revolution presents, one overall theme looms large: The gains from technology must be channeled to a broader base of the population than has benefited so far. That requires a major educational component. In order to create broad-based prosperity, workers need the skills to participate in the brave new world implied by a digital economy. Even that may not be sufficient, in which case it will become necessary to provide permanent income support to those whose jobs are displaced by software and machines. Here, too, we should attend carefully to the lessons of the past.
     

    Demeter

    (85,373 posts)
    37. RICHARD WOLFF DECEMBER 2010 WITH A MESSAGE OF NEW YEAR'S HOPE
    Sat Jan 3, 2015, 11:35 AM
    Jan 2015
    &list=PLBB006F00F5647125

    WATCH THE WHOLE PLAYLIST TO THE END FOR HIS THOUGHTS ON BRINGING THE LEFT TO LIFE IN THE USA
     

    Demeter

    (85,373 posts)
    40. It's all Greek to Me--a compendium on the cradle of democracy
    Sat Jan 3, 2015, 02:24 PM
    Jan 2015
    Former Greek PM to create new party ahead of snap election

    http://www.france24.com/en/20150103-former-greek-pm-create-new-party-ahead-snap-election/

    Former Greek prime minister Georges Papandreou announced on Friday he was creating a new political party just weeks before snap elections this month, sparking anger in his own Socialist party.

    The move, described as "absurd" by the Socialist Pasok party of which Papandreou is still a lawmaker, is likely to complicate the potential outcome of the January 25 election...Papandreou, who was premier during the crisis-wracked period from 2009 to 2011, will officially launch the party on Saturday in the Benaki museum in Athens, the Ana agency reported.

    Papandreou said the new movement would work in the parliament that emerges from the closely-watched election "to definitively bring Greece out of the crisis ".

    Pasok, the party created by Papandreou's father Andreas in 1974 and which has largely ruled Greece ever since, accused him of trying to divide the party.


    Will Greece be in EMU at the end of 2015?


    http://www.marctomarket.com/2015/01/will-greece-be-in-emu-at-end-of-2015.html


    The Greek political drama is overshadowing the Russian crisis and the plunge the price of oil. A review of old and new media coverage suggests that many observers are repeating the same mistake they made 2-3 years ago. We were one of the few analysts that did not expect Greece to leave the monetary union then, and we expect it to remain in the union now. Investors understand economic issues but have a blind spot when it comes to politics. Informed by the liberal and neo-liberal economic determinism, they think politics is simply a function of economic self-interest. This reductionist approach proved wrong before, and it will likely be wrong again. They see monetary union and think it is about economics. Yet, monetary union itself is an economic answer to a fundamental political issue: Under what conditions could Germany be re-united with the fall of the Berlin Wall. EMU is fundamentally a political exercise. The euro-skeptics smell victory that has eluded them. Every challenge the euro area faces is seized upon as evidence of the folly of monetary union. Every problem a member faces can be resolved by dropping out of EMU and devaluing. Let's not count the chickens before they are hatched.

    Syriza, the left coalition in Greece, is 2-3 percentage points ahead of the New Democracy (ND). ND's Samaras heads up the current government, which is a coalition with the ND's longstanding rival in Greek politics, the Socialists. It is certainly possible that Syriza will win the election on January 25 and lead the next government but it is far from a sure thing. Greek politics are fluid, and over the next few days, former Socialist Prime Minister Papandreou is expected to form a new center-left political party. It will capitalize on the rank-and-file disenchantment with Venizelos, the Socialist Finance Minister. It is unlikely to emerge as a major party, but it may take 1-2 percentage points from Syriza. Greek politics very fragmented. The frustration this causes prompted the electoral reform that grants the top vote getting party 50 bonus seats in the 300-member parliament. While Syriza could get the most votes, it has never reached the level of public support that would give it an outright majority. Nor is it clear which political parties if any would join a Syriza-led coalition.

    We suspected that Samaras' failure to secure the selection of his presidential candidate, which has led to the early election could see him join the quarter of the Greek population that is unemployed. In his years in opposition, and now in office, Samaras has alienated some members of his party, which led to desertions to other parties. A new and different candidate for the New Democracy could boost its chances in the election. If Samaras remains the candidate, he will have to tack to the left and promise stiff negotiations with its official creditors. Greek debt dynamics were always going to a challenge when the end of its assistance program drew near. Samaras had hoped a smooth exit would have stolen some thunder from Syriza, but partly because of the rise of anti-EMU parties various creditor nations, including Germany, this path was blocked.

    The position of both Greece and its official creditors has strengthened over the past couple of years. Greece's economy shrank by over a quarter and investment plunged by nearly 2/3. However, the contraction is over, and the economy has begun expanding. The IMF forecast Greece to grow by almost 3% through 2019. More importantly, for its negotiating position, Greece is running a primary budget surplus of around 1.4% last year. By running a surplus excluding debt servicing costs, means that Greece no longer needs to borrow fresh funds. It is in repayment mode.

    The concern that a Greek crisis poses systemic risk of the euro area as a whole has lessened. Spain and Ireland, for example, are on the mend. The banking system is stronger, even if not completely healthy. Officials have created greater institutional capacity, including facilities such as the European Stabilization Mechanism. Peripheral markets have shown less sensitivity to developments in Greece. We note that Italy sold ten-year bonds last week at record low interest rates.

    In heated negotiations, it is not uncommon for each side to accuse the other of blackmailing the other. Syriza accuses the Troika of blackmailing Greece: Either Greece cuts its nose to spite its face by enacting even more austerity or the ECB cuts off the life support of liquidity. The Troika itself has not accused Greece of blackmailing it but that has not stopped numerous observers from claiming exactly that: Either the Troika renegotiates Greece debt, or the country will default.

    What makes Greece's case different from other debtors who have often used attainment of a primary surplus to squeeze extra concessions from the creditors or defaulted, is that its debt is primarily in official not private hands. Of the roughly 320 bln euros of debt, only 54 bln is in private hands. The rest is owned by the EU collectively and individually, the IMF and ECB. It has long understood that when at the end of Greece's aid program, the official creditors would ease the debt burden by lengthening maturities and reducing interest rates. There is more room to negotiate than the media often suggests and that the pundits as partisans want to recognize.

    Other parts of Syriza's platform are frankly more difficult for the official creditors to swallow. The budget agreements cannot be annulled. Unwinding some of the austerity measures in terms of civil servant salaries and pensions will destroy the very conditions that allow Greece to negotiate, if not from a position of strength, then a stronger position nonetheless. There may be room for some additional government spending, but it will not be acceptable to return to the pre-2009 period. At the same, it seems politically naive to think that there will be no contagion; that Greece could exit from monetary union in a perfectly calm, orderly and non-disruptive way. That there has not been financial contagion yet proves very little. Those arguing in favor of the creditors think that a Grexit would be a wake up to the other anti-EMU parties. Greece would be a bad example that others would seek to avoid.

    The risk lies in the opposite direction. If Syriza were to lead Greece out of monetary union, would not others be emboldened? There are parliamentary elections in five euro-zone countries this year (Greece, Estonia, Finland, Portugal and Spain). On New Year's Day, Italian President Napolitano indicated intentions to resign following Italy handing over the rotating EU presidency to Latvia. This presents an important challenge for Italy, where Renzi's structural reforms efforts have been bogged down in Italian politics. Podemos in Spain has come from nowhere to lead the polls, and its agenda is not very dissimilar to Syriza in terms of unwinding austerity measures. Would Podemos be fearful of a Grexit or would it be like a shot of adrenalin and encouragement. The risk of political contagion may very well prove to the channel of economic contagion.

    The Greek people have withstood significant human and social costs. There is now light at the end of the long tunnel. Exiting the monetary union would trigger a new political and economic crisis in Greece. Unemployment would rise, the economy would contract. In an unprecedented way, it would default to the IMF, ECB and EU and several countries that made bilateral loans. As was the case before, and it remains true now--inside EMU is difficult for Greece, but outside would be hellish.
     

    Demeter

    (85,373 posts)
    45. Is Global Poverty Falling? Not in Absolute Terms WSJ
    Sat Jan 3, 2015, 02:48 PM
    Jan 2015
    http://blogs.wsj.com/economics/2015/01/02/is-global-poverty-falling-not-in-absolute-terms/?mod=WSJBlog

    Economic growth and social policies have helped pull millions out of poverty in the developing world. Or have they?

    The often-heard narrative is based on data from the World Bank showing a sharp reduction in the number of people living below $1.25 per day, adjusted for inflation.



    However, new research suggests a deeper look into poverty statistics paints a different picture. While there has been progress in reducing the number of people living below the poverty line, this has been achieved largely by raising those considered ultrapoor to just above the poverty line, rather than by boosting the standard of living of the poor more broadly, according to a paper from Martin Ravallion, economist at Georgetown University’s Center for Economic Research.

    “There has been very little absolute gain for the poorest,” Mr. Ravallion writes in a new working paper from the National Bureau of Economic Research. “Using an absolute approach to identifying the floor, the increase in the level of the floor seen over the last 30 years or so has been small—far less than the growth in mean consumption.”

    The author cites Mahatma Gandhi and the late philosopher John Rawls as a basis for looking at poverty in absolute rather than comparative terms.

    “Recall the face of the poorest and the weakest man whom you may have seen, and ask yourself if the step you contemplate is going to be of any use to him,” the paper cites Mr. Gandhi as saying in 1948. “Will he gain anything by it?”

    According to the data, the answer so far is not very much.

    “The bulk of the developing world’s progress against poverty has been in reducing the number of people living close to the consumption floor, rather than raising the level of that floor,” Mr. Ravallion. “Growth in mean consumption has been far more effective in reducing the incidence of poverty than raising the consumption floor. In this sense, it can be said that the poorest have indeed been left behind.”
     

    Demeter

    (85,373 posts)
    47. The second most powerful banker in America MEET STANLEY FISCHER
    Sat Jan 3, 2015, 06:35 PM
    Jan 2015
    http://www.politico.com/story/2015/01/stanley-fischer-janet-yellen-113891.html?hp=t2_r

    Stanley Fischer came to the Federal Reserve in the spring with a higher profile than any vice chairman in the 100-year history of the institution after leading Israel’s central bank and holding top jobs at the International Monetary Fund and World Bank. Fed Chair Janet Yellen pushed for him to be her No. 2 in a move that was viewed as a show of confidence and strength as she prepares to lead the Fed through one of it most challenging periods, managing the wind down of massive stimulus programs put in place following the financial crisis.

    The pairing was dubbed a central banking “dream team” by Fed watchers.

    In his first six months on the job, Fischer has rewarded Yellen’s confidence by helping communicate the Fed’s policy moves to nervous financial markets while publicly defending the central bank against a growing chorus of critics. To many on Wall Street he helped alleviate worries about the lack of direct financial market involvement on her résumé.

    “Stan Fischer has market experience and goodwill that Chair Yellen doesn’t have,” said Jack Ablin, chief investment officer at BMO Private Bank. “It’s not a slam on the Fed chairman, it’s simply different experience.”


    In the coming year, his ability to help Yellen and the Fed keep the economy humming and Wall Street calm while also dealing with pressure from emboldened congressional skeptics will be pivotal to the success of the central bank’s policy decisions and to how much of its cherished political independence can be maintained.

    “I see him as potentially a very helpful adjunct to the chair,” said Donald Kohn, a senior fellow at the Brookings Institution and a former Fed vice chairman. “I think because of his prominence and because of his experience, particularly in the international arena, he might be more noticeable than past vice chairmen.”


    Fischer, 71, is expected to play a big role as a chief defender of the Fed, which faces intense scrutiny in the coming year from a Republican-controlled Congress as well as high-profile progressive Democrats, such as Sen. Elizabeth Warren of Massachusetts. While Yellen must strike a careful balance when it comes to Congress, Fischer will be freer to push back against attacks from Capitol Hill.

    “Just his sheer experience and authority and his wonderful demeanor and his credibility allows him to interact with the political class in a way which explains what the Fed is thinking, how it’s approaching its methodologies, and its mind-set as it’s looking to 2015,” said Timothy Adams, president of the Institute of International Finance and a Treasury official in the George W. Bush administration.


    Fischer has already done some of this pushing back, warning that GOP proposals requiring greater disclosure of Fed policy decisions would weaken the central bank. He’s also called it “an illusion” that Fed examiners can know everything happening within the banks they supervise — an apparent swipe at criticism that the central bank hasn’t done enough to police Wall Street following accusations from a former supervisor that the New York Fed went easy on Goldman Sachs on several occasions.

    Fischer may find liberal Democrats to be among his toughest audiences.

    I SHOULD HOPE SO!

    While his experience and connections within the world of finance are his greatest strength — he mentored officials such as former Fed Chairman Ben Bernanke and European Central Bank President Mario Draghi as a professor at MIT — his three-year stint at Citigroup has worried Wall Street critics, such as Warren, who complain that President Barack Obama has nominated too many people for economic jobs who have spent time at big banks.

    Asked whether he was pleased with Fischer’s performance so far, Sen. Sherrod Brown of Ohio, who will become the top Democrat on the Senate Banking Committee next year, said it’s too early to tell.

    “I like the meeting that he and Yellen and [Govs. Lael] Brainard and [Jerome] Powell did with learning more about the real economy,” Brown said, referring to a meeting the Fed officials had with community and labor groups in November.

    “That’s not a real high bar, but it’s a good thing they’re doing that,” Brown said. “I hope they do more of it.”

    ----------------------------------------------------------------------

    Fischer, a native of Zambia and a dual citizen of the United States and Israel, has also distinguished himself early in his tenure by carrying out his duties with an ease and aplomb that eludes most Fed newcomers, making clear he’s no buttoned-up central banker worried his every utterance will send markets into a tizzy. While most Fed governors come off as carefully scripted, Fischer is more likely to speak off the cuff than his predecessors, and to say exactly in public what he would in private. For example, he popped up earlier this month at an event at the Peterson Institute for International Economics. Seated at a roundtable in the middle of the room, Fischer could have been mistaken for another conference participant. But when handed the microphone, he weighed in on international regulators, political pressure on central bankers and even on lobbying by big U.S. banks.

    “I thought when Dodd-Frank started that the banks would not succeed in influencing it, having lost all the prestige that they lost,” he said. “And boy was I wrong.”



    SO, JANET'S GOT A REAL BIG GUN (POINTED) AT HER BACK...WATCHING HER EVERY MOVE. A MAN SO WELL-CONNECTED, YOU JUST KNOW HE'S GOT TO BE "MADE" IN THE MAFIA SENSE....
     

    Demeter

    (85,373 posts)
    48. Turkmenistan Devalues its Currency by 18% – Start of the Deflationary Contagion
    Sat Jan 3, 2015, 06:40 PM
    Jan 2015
    http://armstrongeconomics.com/2015/01/01/turkmenistan-devalue-by-18-start-of-the-deflationary-contagion/

    ?resize=360%2C270

    Turkmenistan, the former Soviet republic, devalued its currency against the US dollar by 18% for the new year. Turkmenistan is energy-rich and this is the latest sign of seriousness of the collapse in oil. This will contribute to now force the dollar higher as commodities decline, the energy producing nations will be compelled to devalue their currencies in an effort to try to make ends-meet. Devaluations will result in an attempt to create inflation to offset the deflation. We are in a major economic collapse on a global scale. Most people do not understand that this is the real threat we face.
     

    Demeter

    (85,373 posts)
    49. I don't know who gave me this cold
    Sat Jan 3, 2015, 08:31 PM
    Jan 2015

    but I have got to do something to them.

    I am sneezing my head off, the skin under it is chapped, my eyes itch, and I'm mean enough to kill a bear with my bare hands....

    Under the circumstances, I'm taking my cold to bed for the night. Perhaps in the morning, if I'm feeling better, I'll post some more.

    You wouldn't believe how far behind I got on the inbox...but these past few weeks I've made a bit of a dent in it.

    Fuddnik

    (8,846 posts)
    50. "Mean enough to kill a bear."
    Sat Jan 3, 2015, 09:56 PM
    Jan 2015

    My Dad gave you that cold. I saw him do it.

    I finally got him down here from SC. And after a week, I'm ready to buy him a ticket to one of my sisters homes, in Cleveland or Vegas. But I could buy you a ticket to Florida, and you'd get a vacation out of it.

     

    Demeter

    (85,373 posts)
    51. If I got on a plane, my sinuses would explode
    Sat Jan 3, 2015, 10:57 PM
    Jan 2015

    I did that once....never gonna do it again. I was in pain for 10 days.

    Thanks for the offer. And thanks for putting up with your dad. You'll miss him. I know.

    xchrom

    (108,903 posts)
    52. Germany Is Pretty Sure The Euro Zone Doesn't Need Greece
    Sun Jan 4, 2015, 08:13 AM
    Jan 2015
    http://www.businessinsider.com/r-germany-believes-euro-zone-could-cope-with-greece-exit-report-2015-1

    The German government believes that the euro zone would now be able to cope with a Greece exit if that proved to be necessary, Der Spiegel news magazine reported on Saturday, citing unnamed government sources.

    Both Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble believe the euro zone has implemented enough reforms since the height of the regional crisis in 2012 to make a potential Greece exit manageable, Der Spiegel reported.

    "The danger of contagion is limited because Portugal and Ireland are considered rehabilitated," the weekly news magazine quoted one government source saying.

    In addition, the European Stability Mechanism (ESM), the euro zone's bailout fund, is an "effective" rescue mechanism and was now available, another source added. Major banks would be protected by the banking union.



    Read more: http://www.businessinsider.com/r-germany-believes-euro-zone-could-cope-with-greece-exit-report-2015-1#ixzz3Nr1DQuyu
     

    Demeter

    (85,373 posts)
    70. Greek euro exit would be ‘Lehman Brothers squared’ Barry Eichengreen, other economists
    Sun Jan 4, 2015, 11:23 AM
    Jan 2015
    https://secure.marketwatch.com/story/greek-euro-exit-would-be-lehman-brothers-squared-economist-2015-01-03?siteid=YAHOOB

    A decision by a new Greek government to leave the eurozone would set off devastating turmoil in financial markets even worse than the collapse of Lehman Brothers in 2008, a leading international economist warned Saturday. A Greek exit would likely spark runs on Greek banks and the country’s stock market and end with the imposition of severe capital controls, said Barry Eichengreen, an economic historian at the University of California at Berkeley. He spoke as part of a panel discussion on the euro crisis at the American Economic Association’s annual meeting. The exit would also spill into other countries as investors speculate about which might be next to leave the currency union, he said.

    “In the short run, it would be Lehman Brothers squared,” Eichengreen warned.

    He predicted that European politicians would “swallow hard once again” and make the compromises necessary to keep Greece in the currency union.

    “While holding the eurozone together will be costly and difficult and painful for the politicians, breaking it up will be even more costly and more difficult,” he said.


    In general, the panel, consisting of four prominent American economists, was pessimistic about the outlook for the single-currency project. Jeffrey Frankel, an economics professor at Harvard University, said that global investors “have piled back into” European markets over the last years as the crisis ebbed. Now, there will likely be a repeat of the periods of market turmoil in the region and spreads between sovereign European bonds could widen sharply.

    Kenneth Rogoff, a former chief economist at the International Monetary Fund and a Harvard professor, said the euro “is a historic disaster.”

    “It doesn’t mean it is easy to break up,” he said.


    Martin Feldstein, a longtime critic of the euro project, said all the attempts to return Europe to healthy growth have failed.

    “I think there may be no way to end to euro crisis,” Feldstein said.

    The options being discussed to stem the crisis, including launch of full scale quantitative easing by the European Central Bank, “are in my judgment not likely to be any more successful,” Feldstein said.

    The best way to ensure the euro’s survival would be for each individual eurozone member state to enact its own tax policies to spur demand, including cutting the value-added tax for the next five years to increase consumer spending, Feldstein said.
     

    Demeter

    (85,373 posts)
    75. Competing Views: Grexit Would Be "Lehman Squared" vs. No Problem; Where to Point the Finger
    Sun Jan 4, 2015, 01:00 PM
    Jan 2015
    http://globaleconomicanalysis.blogspot.com/2015/01/competing-views-greece-exit-would-be.html

    There's an amusing pair of headlines back-to-back today on what a Greek exit from the Eurozone might mean. One view is catastrophic, the other is along the lines of no problem. Let's start with the catastrophe. Economic historian Barry Eichengreen says Greek Euro Exit Would be ‘Lehman Brothers Squared. (SEE ABOVE POST)
    NEXT:

    Yahoo!Finance reports Germany Believes Eurozone Could Cope with Greece Exit.

    The German government believes that the euro zone would now be able to cope with a Greece exit if that proved to be necessary, Der Spiegel news magazine reported on Saturday, citing unnamed government sources.

    Both Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble believe the euro zone has implemented enough reforms since the height of the regional crisis in 2012 to make a potential Greece exit manageable, Der Spiegel reported.

    "The danger of contagion is limited because Portugal and Ireland are considered rehabilitated," the weekly news magazine quoted one government source saying.

    In addition, the European Stability Mechanism (ESM), the euro zone's bailout fund, is an "effective" rescue mechanism and was now available, another source added. Major banks would be protected by the banking union.

    According to the report, the German government considers a Greece exit almost unavoidable if the leftwing Syriza opposition party led by Alexis Tsipras wins an election set for Jan. 25.


    Competing Views on Funding Needs

    Before taking a side in the above debate, let's take a look at competing views on Greek funding needs. Please consider a snip from SYRIZA Makes Fresh Pledge to Defend Greek Capitalism.

    Analysts at Bank of America Merill Lynch, “think Tsipras will face a budget black hole of at least 28 billion euros in the first two years of his government, with nowhere to borrow from and 17 billion euros of repayments to make in the first year.”


    In contrast, the Wall Street Journal reports Greece Expects Primary Budget Surplus for 2015.

    Greece’s 2015 budget, submitted by the government to parliament on Friday, aims to meet the fiscal demands of the country’s creditors but comes without the prior approval of its troika of international inspectors.

    According to the budget, Greece will achieve a primary budget surplus—before taking into account debt payments—of €3.3 billion ($4.1 billion), equal to 3% of gross domestic product, next year, which is in line with the country’s bailout program.

    Overall, the government will record only a minor budget deficit of €338 million—equivalent to just 0.2% of gross domestic product—next year, in effect marking the first balanced budget Greece has produced in four decades.

    Despite surpassing its budget targets for three years running, Greece is at loggerheads with the troika—made up of representatives from the European Commission, the International Monetary Fund and the European Central Bank—over further fiscal measures the country must take, as well as a number of promised overhauls.


    Primary Account Surplus or Not?

    Does Greece have a €28 billion black hole or a surplus?

    Both can technically be true. The €28 black hole counts interest on debt including the €245 bailout package. The primary surplus theory ignores interest on the debt. If the Troika suspends the bailout, then Greece will have no choice but to default. Of course, that points to the absurdity of the alleged bailout setup in the first place. Even if the interest rate on the bailout was 0%, with a €3 billion surplus every year, it would take Greece 81 years to pay back that debt!

    Economic Reality: There is no realistic way Greece can ever pay back €245 billion, so it won't.

    With that thought, let's return to the first question. Would a Greece exit be "Lehman Squared" or would it have little effect? Actually, no matter what happens with Greece, the entire eurozone setup is unstable. Greece, Spain, Italy, and Portugal all are in impossible payback setups. Even if Syriza loses the next election, sooner or later Greece, Spain, Italy, or possibly even France will exit the eurozone The "limited contagion" view is complete nonsense. The eurozone debt problem is going to explode, and whether or not it becomes "Lehman Squared" depends on the response. My view is the longer the ECB and EU attempt to hold this mess together with no debt writedowns, the bigger the catastrophe. Greece will not cause a catastrophe, but the EU/ECB handling of a Greece exit is highly likely to do just that.

    As I said in my November 23, 2011 post Eventually, Will Come a Time When ....

    Eventually, there will come a time when a populist office-seeker will stand before the voters, hold up a copy of the EU treaty and (correctly) declare all the "bail out" debt foisted on their country to be null and void. That person will be elected.

    Le Pen may be too early, and France may not be that country, but the time will come.

    Greece, Finland, Germany, Belgium, and even France are possibilities. All it will take, is for one charismatic person, timing social mood correctly, to say precisely one right thing at exactly the right time. It will happen.

    Possibilities

    Greece: Alexis Tsipras - Syriza (Radical Left)
    France: Marine Le Pen - Front National (Radical Right)
    Italy: Beppe Grillo - M5S Five Star Movement (Radical Left)
    Spain: Pablo Iglesias Turrión - Podemos (Radical Left)



    Where to Point the Finger When it Blows

    The pot is simmering and is likely to boil over at any time. When it does boil over, Greece will not really be to blame, even if Alexis Tsipras wins the election and carries out his threats. Rather, be prepared to point the finger at the EU, ECB, and IMF for their collective insistence that Greece, Spain, Italy, etc. repay debt that cannot and will not be paid back. By the way, there is a small chance Tsipras wins the election and Greece exits the eurozone with limited initial fallout. If so, the major problem will come when Spain or Italy does the same thing.

    Mike "Mish" Shedlock
     

    Demeter

    (85,373 posts)
    77. Tsipras says ECB cannot shut Greece out of stimulus
    Sun Jan 4, 2015, 02:10 PM
    Jan 2015
    http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_03/01/2015_545928

    Greek leftwing opposition leader Alexis Tsipras said the European Central Bank (ECB) could not exclude Greece if it decides to move to a full «quantitative easing» programme to stimulate the euro zone's faltering economy.

    Speaking at a party congress on Saturday, three weeks before a Jan. 25 general election, Tsipras also said his Syriza party would ensure much of Greece's debt was written off as part of a renegotiation of its international bailout deal.

    The election takes place three days after a Jan. 22 policy meeting at which the ECB may decide to proceed with a quantitative easing (QE) programme to pump billions of euros into the euro zone economy by buying government bonds.

    Tsipras said he hoped ECB President Mario Draghi would decide to go ahead with the programme and said Greece could not be shut out, as some economists and politicians from countries including Germany have suggested.

    "Quantitative easing by the ECB with direct purchases of government bonds must include Greece,» Tsipras said.

    MORE

    xchrom

    (108,903 posts)
    53. {oh brother}LARRY SUMMERS: This Could Be America's Next Economic Booster
    Sun Jan 4, 2015, 08:17 AM
    Jan 2015
    http://www.businessinsider.com/larry-summers-this-could-be-americas-next-economic-booster-2015-1

    BOSTON (Reuters) - As the Fed winds down its economic stimulus, former U.S. Treasury Secretary Lawrence Summers says the country’s next economic booster could be exporting its fossil fuels around the globe, a move that could make America the next Saudi Arabia.

    “The United States has the chance to be to the energy economy of the next decade what Saudi Arabia has been for the last two to three decades," Summers said on Saturday. "The effect of allowing oil exports ... would reduce rather than increase American gasoline prices.”

    Summers, known for his outspoken views about what he describes as a disappointing U.S. economic recovery, made his remarks at the annual American Economics Association conference.

    Meanwhile, at the same conference, Boston Federal Reserve President Eric Rosengren said low inflation rates across the world and only small amounts of wage and price pressure in the United States should force the Federal Reserve to move slowly as it pulls back on its accommodative monetary policy.



    Read more: http://www.businessinsider.com/larry-summers-this-could-be-americas-next-economic-booster-2015-1#ixzz3Nr2BDgXI

    Fuddnik

    (8,846 posts)
    60. Somebody, somewhere, has been spiking Summers coffee with LSD for years.
    Sun Jan 4, 2015, 10:08 AM
    Jan 2015

    The man has been delusional, and hallucinating miracles and reality since at least the '90s.

    Fit him for a nice, new jacket with buckles on the arms, and lead him to his rubber-walled office.

    xchrom

    (108,903 posts)
    54. This Is The Best Grocery Store In America, And It's Cheaper Than Trader Joe's
    Sun Jan 4, 2015, 08:20 AM
    Jan 2015
    http://www.businessinsider.com/this-is-the-best-grocery-store-in-america-and-its-cheaper-than-trader-joes-2015-1

    Chances are that you have never set foot inside the best grocery store in America: Aldi. And even if you are lucky enough to be in one of the 32 states where Aldi is, perhaps you were put-off by the cardboard boxes in lieu of shelves, or the row upon row of suspicious-looking off-brands.

    What is this place? Why do I have to put down a deposit to check out a cart? What is the weird giant shelf by the exit? And what do you mean, I have to pay for a bag?

    Calm your hormones, meine Schatzis: Aldi, which is short for Albrecht Discount, is the American incarnation of a German grocery chain that is so ubiquitous in the Vaterlandthat almost 90 percent of Germans shop there. (Not all German imports are luxury cars, beer, and super-cool glasses.)

    Aldi is part of a charming subset of Teutonic trade: the brother-run company that cleaves in twain. Shoe aficionados already know the story of the Dassler brothers, Adolf and Rudolf, whose bitter feud resulted in the creation of Adidas and Puma. (Germans pronounce Adidas differently— some might say correctly — AH-dee-das, fromAdi Dassler.) But outside Germany, few know about grocery-store kingpins Karl and Theo Albrecht (who was kidnapped in 1971!)—even though Karl, with a reported net worth of more than 17 billion euros, is the richest man in Germany (Theo’s descendants are a close second).



    Read more: http://www.slate.com/blogs/browbeat/2013/12/02/aldi_grocery_store_best_in_america_related_to_trader_joe_s.html#ixzz3Nr2zNBE4
     

    Demeter

    (85,373 posts)
    61. I've been in Aldi's and it ain't any such thing
    Sun Jan 4, 2015, 10:12 AM
    Jan 2015

    I will NEVER buy seafood from China, for one thing....our Chinese-born shun it like the plague. And the ratio of junk food to real food isn't a selling point, either.

    The inventory is random and spotty, the prices no better than the larger grocery store sales...

    I'm wondering how much it cost to get this puff piece placed.

    DemReadingDU

    (16,000 posts)
    72. Aldi's is in our area
    Sun Jan 4, 2015, 11:59 AM
    Jan 2015

    I have stopped in there a few times. Some people think Aldi's have a good selection of fresh produce. I wonder where it comes from?

     

    Demeter

    (85,373 posts)
    73. I'm sure our Aldi's produce comes from the Eastern Market in Detroit
    Sun Jan 4, 2015, 12:08 PM
    Jan 2015

    just like every other store in the area....

    xchrom

    (108,903 posts)
    55. US Oil Rigs Are Shutting Down Like Crazy
    Sun Jan 4, 2015, 08:31 AM
    Jan 2015
    http://www.businessinsider.com/baker-hughes-rig-count-december-29-2014-12

    The number of US oil rigs in operation keeps tumbling.

    The latest Baker Hughes rig count data showed that the total number of US rigs in operation — which includes both oil and gas rigs — fell by 35 last week, to 1,840 from 1,875. This report is usually released on Friday afternoons, but was released on Monday due to last week's Christmas holiday.

    This is down from 1,920 for the week ended December 5. Oil rigs in use fell by 37 last week, while gas rigs actually rose by 2.

    For the week ending December 12, the number of oil rigs in use fell by 27, which at that time was the single biggest weekly decline in two years. The following week, the number of rigs in use fell by 18.

    The drop in oil rigs on Monday also comes alongside two discouraging pieces of news for the oil industry. The price of West Texas Intermediate oil is crashing again, touching $53 a barrel for the first time since May 2009 and declining more than 3% on the day.



    Read more: http://www.businessinsider.com/baker-hughes-rig-count-december-29-2014-12#ixzz3Nr5ifRjg

    xchrom

    (108,903 posts)
    56. GOP FOCUS FOR CONGRESS: CUT DEFICIT, DON'T STUMBLE
    Sun Jan 4, 2015, 09:54 AM
    Jan 2015
    http://hosted.ap.org/dynamic/stories/U/US_CONGRESS_GOP_IN_CONTROL?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-01-03-08-22-06

    WASHINGTON (AP) -- In the first Republican-dominated Congress to confront President Barack Obama, GOP leaders will focus on bolstering the economy and cutting the budget - and oh yes, avoiding self-inflicted calamities that make voters wonder if the party can govern competently.

    When the new Congress raises the curtain Tuesday, Republicans will run both the House and Senate for the first time in eight years. GOP leaders want to showcase their legislative priorities, mixing accomplishments with showdowns with Obama but shunning government shutdowns and other chaotic standoffs.

    Another priority is minimizing distractions like the recent admission by No. 3 House leader Steve Scalise, R-La., that he addressed a white supremacist group in 2002.

    "Serious adults are in charge here and we intend to make progress," incoming Senate Majority Leader Mitch McConnell, R-Ky., told The Associated Press recently.
     

    Demeter

    (85,373 posts)
    62. "avoiding self-inflicted calamities" like, NOT killing the economy by deficit reduction?
    Sun Jan 4, 2015, 10:17 AM
    Jan 2015

    Oh, when will they ever learn?

    xchrom

    (108,903 posts)
    57. BAD BARLEY CROP PROBABLY WON'T AFFECT 2015 BEER PRICES
    Sun Jan 4, 2015, 09:55 AM
    Jan 2015
    http://hosted.ap.org/dynamic/stories/U/US_FOOD_AND_FARM_BEER_BARLEY_CROP?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-01-03-15-11-37

    HELENA, Mont. (AP) -- Problems with the 2014 malt barley crop in the western United States have resulted in the worst year for malting production in the nation, but beer drinkers likely won't have to shell out an extra couple dollars for their favorite brews.

    Much of the nation's large-scale brewing is done in the Midwest, says Collin Watters of the Montana Wheat and Barley Committee, but barley growing has been pushed farther west as corn and soy have become more profitable to grow.

    This year, farmers and maltsters have been scrambling to salvage a large portion of the crop hit by heavy rains in August, especially in Montana and Idaho, the top two barley-growing states in the U.S. Growers in North Dakota and Alberta, Canada, faced similar issues.

    "They always see a little bit of rain at harvest but never as widespread as it was this year," Scott Heisel, vice president at the American Malting Barley Association, said. "The industry has never had to deal with this issue on this scale before."

    xchrom

    (108,903 posts)
    58. SCRUTINY ON WORKER NON-COMPETE DEALS
    Sun Jan 4, 2015, 09:57 AM
    Jan 2015
    http://hosted.ap.org/dynamic/stories/U/US_JOBS_BLOCKED?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-01-03-18-09-03

    ATLANTA (AP) -- Fast food worker Caitlin Turowski had this much in common with high-paid CEOs: When she quit her job, she couldn't work for a competitor.

    Hired as a delivery driver for sandwich maker Jimmy John's and later made an assistant manager, Turowski said she signed a two-year non-competition agreement banning her from working for sandwich-making rivals within three miles of a Jimmy John's store. Burned out by long hours and low pay, Turowski quit in July, then took a pay cut to work in insurance telemarketing. She could earn more waitressing or bartending, but fears being sued.

    "We're struggling," said Turowski, now a plaintiff challenging alleged wage violations and the non-compete agreement.

    Non-competition agreements are better known in contracts for senior executives who have business secrets of interest to competitors. However, court records show the restrictions have also snared maids in Chicago, a nail stylist in Texas, cable TV installers in Michigan and agricultural workers in Washington. In October, Democrats in Congress asked the U.S. Federal Trade Commission and Department of Labor to investigate.
     

    Demeter

    (85,373 posts)
    64. Kiev's brutal strategy in eastern Ukraine
    Sun Jan 4, 2015, 10:35 AM
    Jan 2015
    http://www.latimes.com/opinion/op-ed/la-oe-golinkin-ukraine-humanitarian-crisis-20150102-story.html

    In mid-December, President Obama signed into law the Ukraine Freedom Support Act, which, among options for more sanctions against Russia, calls on the White House to provide Kiev with assistance for internally displaced persons as well as to cooperate with international organizations to distribute aid in Ukraine. Such aid is sorely needed in eastern Ukraine. Much of the infrastructure of Donetsk and Luhansk — the main cities in the Donbas region — has been destroyed, coal and food supplies are disrupted, and Kiev froze government pension and other payments to the region in November. With brutal winter conditions approaching, risks of starvation and death are becoming too real. As the United Nations and Amnesty International put it, a humanitarian crisis is looming.

    Unfortunately, recent statements by Col. Oleksiy Nozdrachov, Ukraine's chief of military and civilian cooperation in eastern Ukraine, show disturbing signs of Kiev's attitude toward this crisis. Where the U.N. sees a looming humanitarian disaster, Kiev may see an opportunity. Kiev's strategy, as outlined by Nozdrachov in USA Today, is to continue withholding government services from the rebel-held areas in hopes that increased suffering will turn the local population against the separatists. “This shows the population in the occupied territory that the situation under the Ukrainian government is much, much better,” Nozdrachov said. In addition, an Amnesty International report posted Dec. 24 said pro-Kiev “volunteer battalions are increasingly blocking humanitarian aid into eastern Ukraine in a move which will exacerbate a pending humanitarian crisis.” These actions are reprehensible. Kiev, and most of the world, rightly views the petty warlords in control of Donbas as illegitimate entities. However, if a gunman takes over an office building, no police department in the United States would condone withholding basic necessities from the hostages in the hope that they would rise up and vanquish the perpetrator. Providing aid to civilians trapped in a standoff is not appeasement or negotiation with terrorists; it is a fundamental principle: preventing needless loss of life.

    Any decision to use the tragic situation in eastern Ukraine as a weapon is not only morally repugnant, but it also will surely have negative repercussions for Kiev. The strategy may help force the rebels to capitulate and allow Ukrainian President Petro Poroshenko to establish nominal control over the region. But Ukraine is a land where grudges run deep. Western Ukrainians have never forgotten the genocidal policies of Josef Stalin's Russia (which, incidentally, employed hunger as a weapon); the Russian-speaking residents of Donbass are not likely to forgive Kiev for starving them into submission. Anger at Kiev, and the West, will continue to simmer in Donbass. And that is a problem. Ukraine cannot afford to have Donetsk and Luhansk solidify into a permanent conflict zone such as Transnistria in Moldova and Abkhazia and South Ossetia in Georgia, regions where long-standing enmities fester, preventing true national unity in those countries. Ukraine has long been teetering on the brink of economic collapse. Turning it around will be an enormous undertaking by the most optimistic of estimates; doing so without the industrial centers and natural resources of Donetsk and Luhansk may be impossible. Ukraine's best chance to beat back economic disaster is to move forward as a united nation, and to do that, it needs to win back the eastern Ukrainians.

    That presents a challenge, which cannot be overcome by simply regaining territory and planting a Ukrainian flag. Eastern Ukraine is separated from the rest of country by a cultural, linguistic, and even religious, divide, with one of the two major Orthodox churches aligned with Kiev and the other with Moscow. It is a blurry divide, running through towns, sometimes through neighborhoods and families. Until last year, it was not an insurmountable barrier to national unity — if that were the case, Ukraine would have split apart in the early 1990s, as did Yugoslavia and Czechoslovakia. But after 4,700 deaths in eastern Ukraine and Crimea, more than a million displaced persons and continued fighting, the chasms have deepened.

    On Monday, Poroshenko announced that he would meet Jan. 15 with representatives from France, Germany and Russia to discuss a peace settlement for Ukraine. Ukraine, he said, cannot win back Donbas militarily. In Moscow, Russia announced that it would continue to supply oil to Ukraine, and over the weekend, prisoners were exchanged between Kiev and rebel forces in separate peace talks in Minsk. These are welcome moves, but for the millions of pensioners and other civilians in Donbas, will the resolution they portend — a resolution that has been so far been elusive — come fast enough?



    Lev Golinkin, who was born in the former Soviet Union — in the city of Kharkov, which is now part of eastern Ukraine — is the author of the memoir "A Backpack, a Bear, and Eight Crates of Vodka." He lives in New Jersey.


    THE US/POROSHENKO REGIME IS INSANE AS WELL AS IMMORAL. IT IS ULTIMATELY, UNFIT TO RULE ANYTHING.
     

    Demeter

    (85,373 posts)
    65. Obama Takes Care of Business by ANDREW LEVINE
    Sun Jan 4, 2015, 10:56 AM
    Jan 2015
    http://www.counterpunch.org/2015/01/02/obama-takes-care-of-business/

    IF YOU AREN'T SICK NOW, READING THIS HONEST ANALYSIS OF POTUS WILL MAKE YOU SO.

    IMPORTANT READ.
     

    Demeter

    (85,373 posts)
    66. “Is Inequality Good for You?”
    Sun Jan 4, 2015, 11:02 AM
    Jan 2015
    http://www.nakedcapitalism.com/2007/12/holiday-special-something-that-changed_31.html

    YVES: A 2002 article by Michael Prowse in the Financial Times addressed the question, “Is Inequality Good for You?” Normally, discussion of that topic involves issues of equity and efficiency. Those of a liberal bent contend that unequal societies undermine the legitimacy of authority. Those on the right argue that people are unequal, therefore results will be unequal (although the defenders of the US’s growing income disparity have to go through hoops to come up with a rationale for the fact that CEOs earn 400 times average wages). Conservatives also tell us that equality of opportunity means not meddling in outcomes, and the possibility of making it big (or merely doing better) is highly motivating and thus leads to more growth.

    Having lived in more and less unequal societies (New York is almost third world in its extremes of wealth), middle class societies are far more pleasant. And it turns out this gut reaction may actually have a sensible foundation.

    Prowse, citing the work of medical researchers, informs us that unequal societies make people sicker. And it isn’t due to the fact that the poor have worse diets and health care and that brings the averages down in societies with large income gaps. Once a country has achieved a first world standard of living, “….our income relative to others is more significant for our health than our absolute standard of living.”

    It is also noteworthy that this research has gotten no attention in the business media in the US.

    From the Financial Times:

    Unequal societies will remain unhealthy societies, and also unhappy societies, no matter how wealthy they become’

    We have grown accustomed to the health warnings issued by surgeon generals. “Smoking causes lung cancer is no longer a controversial proposition. But recent epidemiological research suggests that finance ministers, too, may some day be required to issue health warnings. There are good reasons to believe that policies that promote greater economic inequality – such as budgets that slash top tax rates – cause higher rates of sickness and mortality.

    The adverse physiological consequences of absolute poverty have long been understood. We know poor nutrition, damp housing, lack of heating, excessive working hours and pollution cause a higher incidence of many diseases and chronic disorders. Policymakers understand the argument for trying to eliminate these gross forms of material deprivation, even when they lack the will or capacity to enact the necessary legislation.

    By contrast, the argument that economic inequality in itself causes sickness and premature death remains controversial.

    But the case is persuasive enough to deserve a wider public hearing. It implies that governments need to rethink their policy objectives: to worry less about the sum total of material output and more about the way that income and wealth are distributed.

    It implies that if greater efforts are not made to counter growing inequality, the incidence of cancer, heart disease and other chronic disorders will remain needlessly high, regardless of the level of gross domestic product.

    In Britain, these new arguments are most closely associated with Richard Wilkinson, a professor at Nottingham University’s medical school. Wilkinson has spent much of the past two decade painstakingly assembling the evidence for a link between inequality and sickness. But researchers elsewhere, such as Ichiro Kawachi and Bruce Kennedy of the School of Public Health at Harvard University, have independently confirmed many of his claims.

    Those who would deny a link between health and inequality must first grapple with the following paradox. There is a strong relationship between income and health within countries. In any nation you will find that people on high incomes tend to live longer and have fewer chronic illnesses than people on low incomes.

    Yet, if you look for differences between countries, the relationship between income and health largely disintegrates. Rich Americans, for instance, are healthier on average than poor Americans, as measured by life expectancy. But, although the US is a much richer country than, say, Greece, Americans on average have a lower life expectancy than Greeks. More income, it seems, gives you a health advantage with respect to your fellow citizens, but not with respect to people living in other countries.

    We lack data on the relative health of the richest tiers in different countries, but it would not be surprising if even the wealthiest Americans paid a personal price for their nation’s inequality.

    The solution to the paradox, argues Wilkinson, cannot be found in differences in factors such as quality of healthcare, because this has only a modest impact on health outcomes in advanced nations. It lies rather in recognising that our income relative to others is more significant for our health than our absolute standard of living. Relative income matters because health is importantly influenced by “psychosocial” as well as material factors. Once a floor standard of living is attained, people tend to be healthier when three conditions hold: they are valued and respected by others; they feel “in control” in their work and home lives; and they enjoy a dense network of social contacts. Economically unequal societies tend to do poorly in all three respects: they tend to be characterised by big status differences, by big differences in people’s sense of control and by low levels of civic participation.

    In market societies, the wealthy regard themselves as p ‘winners” in life’s race. They enjoy high social status and considerable autonomy, both in the workplace and in their domestic lives. By contrast, people on low and moderate incomes are made to feel like “losers”. They have no symbols of affluence to flaunt, they occupy subordinate positions in the workplace and face a great deal of uncertainty and insecurity. The way this humiliating lack of status and control weakens their health is by putting them under much higher levels of stress than the better off.

    One of the signs that people are under intense stress is the prevalence of behavioural pathologies such as obesity, alcoholism and drug addiction. Sweet and fatty foods may well serve as natural anti-depressants. That millions of prescriptions for Prozac and other mood-altering drugs are also sold just confirms that unequal, competitive societies generate high levels of anxiety.

    A steep social health gradient is statistically visible even among the relatively privileged. In a study of British civil servants (where rank is precisely defined by a grading system), researchers found that junior support staff were four times as likely to die of heart disease as the most senior administrators. Even after allowing for all the usual risk factors such as smoking, alcohol consumption, high blood pressure and cholesterol, some 60 per cent of the difference in death rates was unexplained. The sheer number of different illnesses in which health inequalities are recorded is another reason for believing that psychosocial effects are real. Some 65 of the 78 most common causes of death in men are more common among manual than non-manual workers. A factor that adversely affects all manual workers – such as lack of social status and autonomy – seems more likely to explain their greater vulnerability to so many different illnesses than any physical cause.

    Experiments with other primates also appear to support Wilkinson’s arguments. For instance, researchers have manipulated the social status of macaque monkeys, while holding diet and other factors constant.

    They have put high status monkeys from different troupes together so that some would have to decline in status. The stressed out, socially downgraded monkeys got ill and died prematurely in just the same way as socially marginalised humans.

    A quirky item of medical history – uncovered by Robert Sapolsky, the biologist is also suggestive. In the century to 1930, corpses dissected in London medical schools were nearly always those of paupers. On the basis of these dissections, anatomists estimated the size of the human adrenal gland. When they occasionally saw the adrenal glands of the better off, they found that they were often oddly small, and they invented a new disease “idiopathic adrenal atrophy” – to explain the discrepancy. It was, of course, the adrenal glands of the paupers that were artificially enlarged: a result of lives lived under unremitting stress.

    Inequality is associated with higher mortality in another striking way: through its impact on homicide rates. International studies have confirmed what the casual tourist has always known: unequal societies tend to be violent.

    Thus Sweden and Japan have among the most egalitarian income distributions of developed countries, and they have correspondingly low homicide ~ rates. The US is one of the most unequal and also the most violent.

    Kennedy and Kawachi, of Harvard University, found the same close correlation between violence and inequality among the 50 US states. The greater the disparity in household incomes, the higher the state homicide rate. Significantly, the relationship between property crime (such as burglary) and inequality is much weaker than the relationship between violent crime and inequality.

    Why is this? The answer, according to Wilkinson and his US collaborators, is that violence is a social crime in a way that others are not. It reflects not a desire for personal gain but a perverse expression of the universal human desire for respect. They quote American prison psychiatrist James Giuigan, who wrote in a book on violence: “I have yet to see a serious act of violence that was not provoked by the experience of feeling shamed and humiliated, disrespected and ridiculed.” Violence is thus frequently an attempt to assert status on the part of those who feel they have no non-violent ways of commanding the respect of others, often because they are unskilled and illiterate and so incapable of advancing economically and socially.

    Conversely, greater income equality is linked, internationally and within the 50 US states, with increased levels of social trust. In his influential research on civic participation, Robert Puttnam, the US sociologist, uncovered a strong correlation between equality and “social capital” (his composite measure of the degree to which people bond together socially).

    The link makes sense. If people think of themselves as the equals of others, they are surely more likely to be public-spirited and to participate in civil and political projects. Participation matters because research indicates that people’s vulnerability to illness increases with social isolation.

    There is one piece of the puzzle still missing: how and why does socially induced stress and anxiety cause higher rates of cancer, heart disease and other degenerative disorders? The answer comes in two parts.

    Our pre-human ancestors evolved methods for coping with sudden physical threats – the so-called “fight or flight” response. This mobilises energy for muscular exertion by diverting resources from biological “housekeeping” functions – tissue maintenance and repair, inimnunty, growth, digestion and reproduction – inessential for a rapid response to danger. When the threats are short-lived, this diversion of physiological effort does little lasting harm. But with the chronic stress caused by feelings of social and economic inferiority, the body is put on a war footing for months or years. The health costs of neglecting the housekeeping functions escalate rapidly.

    In effect, stressed-out social inferiors experience faster ageing than their more fortunate rivals.

    But why didn’t our ancestors evolve ways of coping with socially induced stress? A possible answer is that stark differences in wealth and status are relatively recent. They probably date only from the beginnings of agriculture. Today’s hyper-competitive world reflects something that has emerged, metaphorically speaking, only in the last few minutes of human history: capitalism.

    For the great majority of human pre-history, we were hunters and gatherers, and we lived in small egalitarian groups. We shared food and we reached decisions in a consensual manner. No wonder, then, that capitalism makes people feel so ill.

    The significance of these ideas shouldn’t be underestimated. They reveal the true poverty of the “don’t mind the gap” argument that now finds favour even with centre-left political parties such as New Labour: the argument that inequality as such does not matter so long as we do something for the poorest.

    Economic inequality is correlated with status differentials, with declining civic participation, and with lack of control for those at the bottom of hierarchies. Such adverse social environments create high levels of stress, anxiety, and insecurity as well as feelings of shame and inferiority. And these, in turn, cause higher rates of serious illness and death, including death as a result of violent crime.

    Unequal societies, in other words, will remain unhealthy societies – and also unhappy societies no matter how wealthy they become. Their advocates those who see no reason whatever to curb ever-widening income differentials – have a lot of explaining to do.

    Michael Prowse recommends… Unhealthy Societies: The Afflictions of inequality by Richard G. Wilkinson (Routledge £19.99/$30).

    Mortality: The Social Environment, Crime and Violence by Richard G. Wilkinson A Ichiro Kawachi and Bruce P. Kennedy, Sociology of Health and Illness Vol. 20, No.5 1998.

    Mind the Gap: Hierarchies, Health and Human Evolution by Richard G. Wilkinson (Weidenfeld £7.99/Yale $9.95).

    Psychosocial and Material Pathways in the Relation between income and Health by Michael Marmot and Richard G. Wilkinson, British Medical Journal, May 2001.

    Violence: Our Deadly Epidemic and its Causes by James Gilligan (Putnam £9.95/$12)
     

    Demeter

    (85,373 posts)
    67. US Pays Spy Alan Gross US$3.2 M in Compensation
    Sun Jan 4, 2015, 11:08 AM
    Jan 2015
    http://www.telesurtv.net/english/news/US-Pays-Spy-Alan-Gross-US3.2-Mn-in-Compensation--20141224-0025.html

    Gross was arrested in Cuba in 2009 and condemned to 15 years in prison for trying to establish a clandestine internet service.

    Alan Gross, the U.S. spy freed last week after five years in a Cuban prison, will receive US$3.2 million from the government as part of a compensation package, officials confirmed Wednesday.

    Gross was arrested in Cuba on Dec. 3, 2009, and sentenced to 15 years in prison for trying to establish a clandestine internet service in the country. He was employed by Bethesda, Maryland-based Development Alternatives Inc. and worked as a subcontractor of U.S. Agency for International Development (USAID) to provide "humanitarian assistance.”

    Gross' release came after U.S. President Barack Obama and his Cuban counterpart Raul Castro agreed to a prisoner exchange. Gerardo Hernandez, Luis Medina, and Antonio Guerrero, the three remaining imprisoned members of the renowned Cuban Five, were also freed.

    The move followed an announcement of a major shift in Washington relations with Havana, when Obama said his country's policy toward Cuba had failed and that the countries will reestablish full diplomatic relations; the two countries will open embassies. While a complete end to the economic blockade of the island was not announced, Obama spoke of easing economic and travel restrictions that have been imposed on Cuba.

    A full end to the blockade must be approved by Congress. However, Cuban President Raul Castro said it is time for Obama to fully lift the inhumane policy.
     

    Demeter

    (85,373 posts)
    68. Dump the Dollar, Says Ecuadorean President
    Sun Jan 4, 2015, 11:11 AM
    Jan 2015
    http://www.telesurtv.net/english/news/Dump-the-Dollar-Says-Ecuadorean-President-20141217-0058.html

    President Rafael Correa says the U.S. dollar is the “exact opposite” of what Ecuador needs. Ecuador’s use of the U.S. dollar is hurting the country’s economic growth, President Rafael Correa warned Monday.

    “Dollarization was a bad decision,” Correa said.

    The president said that in the face of low oil prices, Ecuador would benefit from control of its own currency. Ecuador is the smallest member of OPEC. Under Correa, the Ecuadorean government has increasingly invested oil revenues in social services and economic development. However, with oil prices slumping, Correa says Ecuador needs a flexible currency now more than ever. He argued that by using the dollar, Ecuador is “doing exactly the opposite of what (it) must do to address the looming scenario.”

    “In these difficult times we will see just how important it is to have a national currency,” he added.


    Ecuador adopted the U.S. dollar in 2000 after the value of its former currency nosedived in 1999.

    Correa has long warned the continued use of the dollar is holding back the economy, once describing it as a “straight jacket.” In July, Ecuadorean legislators approved a law paving the way for the use of a parallel electronic currency for domestic use.
     

    Demeter

    (85,373 posts)
    69. Island Community in Maine Creates Worker-Owned Cooperative to Retain Local Businesses and Jobs
    Sun Jan 4, 2015, 11:13 AM
    Jan 2015
    http://www.cdi.coop/forming-of-iec-in-maine/

    6/17/2014

    Contact:

    Rob Brown, Director, Cooperative Development Institute’s Business Ownership Solutions program, 207-233-2987, rbrown@cdi.coop

    Island Community in Maine Creates Worker-Owned Cooperative to Retain Local Businesses and Jobs

    Deer Isle and Stonington, ME, June 17, 2014–Employees of three rural Maine businesses–Burnt Cove Market, V&S Variety and Pharmacy, and The Galley–are now the owners. All of them.

    By forming the Island Employee Cooperative, Inc. (IEC), the largest worker cooperative in Maine and one of the larger worker co-ops in the United States, the employees were able to purchase the businesses from retiring owners Vern and Sandra Seile. Combined, the three businesses are one of the island’s largest employers and provide the community with a full array of groceries, hardware, prescription drugs, pharmacy items, craft supplies, and other goods and services.

    The employees were concerned when word first circulated that the Seile’s were thinking about selling the stores and retiring. Potential buyers who were not part of the community would doubtfully have maintained the same level of jobs and services, and other employment options on the island are limited.

    As a result, last summer, the Seile’s and the employees began meeting with the Independent Retailers Shared Services Cooperative (IRSSC), a purchasing cooperative of independent grocers in New England, and the Cooperative Development Institute (CDI), a nonprofit group that provides technical assistance to all types of cooperative businesses. These conversations explored the idea of transferring ownership of the companies over to the workers.

    All agreed this was a win-win option. The employees began to work with IRSSC, CDI, Specialized Accounting Services and other advisors for nearly a year to create the worker cooperative, secure financing, purchase the stores, and ensure their livelihood while keeping ownership and profits local.

    Vern Seile said he and his wife, Sandra, “were pleased that we were able to help the employees purchase the stores that Sandra and I have built over the last 43 years. It’s our way of saying thank you to them and our customers for their support.”

    Now that they own their jobs, IEC president Alan White said, “This is a once in a lifetime opportunity. Many of us have worked in these stores for decades and never imagined this possibility. We know we have a lot to learn and a lot of work to do to be successful, but success means we will really achieve the American dream – economic security and building wealth through ownership, both for our families and our community.”

    In a worker co-op, each worker-owner has one (and only one) share in the corporation and one vote in its governance. Co-ops typically get their start when workers band together to launch a new business. Conversions from conventional corporations are much less common, especially ones of the size and scope of the IEC.

    “The IRSSC serves smaller, independent grocers and retailers around New England,” says Mark Sprackland, IRSSC Executive Director, “and we hope that this is only the first of many locally-owned and operated co-ops that we can help form in communities focused on sustainable growth.”

    People across the country have been trying to figure out the best way to assist business owners who want to consider conversion to employee ownership, either as a growth strategy or as a retirement strategy,” said Rob Brown, Director of CDI’s Business Ownership Solutions program. “In many ways this deal provides the model, and we look forward to working with the IEC into the future to ensure their success.”

    Maine-based CEI and the Cooperative Fund of New England, two Community Development Finance Institutions (CDFIs), organized the financing to buy the businesses. Without these funds, the workers’ dreams of buying the stores and keeping them local would have remained just that.

    “This financial transaction represents the best kind of collaboration to build wealth in Maine’s rural communities,” said CEI Loan and Investment Officer, Cole Palmer. “CEI was tremendously excited to help the IEC realize its goal to purchase these three businesses.

    “CFNE has worked with cooperatives since 1975 and was able to contribute expertise to the lending process. “We’re proud to commit to this very important worker-cooperative conversion, which preserves local ownership of these businesses and retains 62 essential jobs in the communities,” said Gloria LaBrecque, Northeast Loan and Outreach Officer with CFNE. “We congratulate the worker-owners of the IEC on this milestone achievement.”

    Now that the employees own the businesses, they are excited to have a say in how they are run and a share in the profits they generate. As Mr. Seile said, “Now it’s their turn build on and improve what we have done.”

    Independent Retailers Shared Services Cooperative
    Contact: Mark Sprackland, Executive Director
    ms51@comcast.net, 603-642-6911 office, 603-706-0868 cell

    Cooperative Development Institute
    We make democratic ownership work for everyone.
    Contact: Rob Brown, Program Director, Business Ownership Solutions
    www.cdi.coop, rbrown@cdi.coop, 207-233-2987, Northport ME

    CEI
    Promoting sustainable economic growth in rural communities since 1977.
    1-207-882-7552 www.ceimaine.org
    Contact: Liz Rogers, SVP, Marketing & Communications
    erogers@ceimaine.org 207-632-7693, Portland, ME

    Cooperative Fund of New England
    A socially responsible lending organization and investment option, supporting cooperatives since 1975.
    1-800-818-7833 www.cooperativefund.org
    Contact: Gloria J. LaBrecque, Northeast Loan and Outreach Officer
    gloria@coopfund.coop 207-272-2296, Portland, ME
    This entry was posted in Business Ownership Solutions News, CDI News and tagged business, business solutions, buy-outs, CEI, CFNE, co-ops, cooperatives, ISRCC, maine, worker co-ops, worker cooperatives, worker ownership, worker-owners, workers. Bookmark the permalink.
     

    Demeter

    (85,373 posts)
    74. The Sony Hack Fraud by Justin Raimondo @ antiwar.com
    Sun Jan 4, 2015, 12:15 PM
    Jan 2015
    http://original.antiwar.com/justin/2014/12/30/the-sony-hack-fraud/



    The progression of the government’s case indicting North Korea for hacking Sony’s computer system – and revealing the petty ego-trips of Hollywood’s glitterrati – was succinctly summed up by computer security expert Jeffrey Carr in a pithy tweet:

    "NK did it 100%
    OK, NK did it w/ help
    OK, NK outsourced it
    OK, NK was told later and bought them drinks
    God dammit, NK is guilty of something"


    The idea that Kim Jong-un was so enraged by a "comedy" that dramatizes his assassination – and, in the process, underscores the juvenility of its creators – was never all that credible to begin with. And the case for pinning the hack on the Hermit Kingdom goes rapidly downhill when one examines the initial communications from the "Guardians of Peace," as the hackers dubbed themselves, which never so much as mentioned "The Interview" and instead simply demanded money. It wasn’t until the media and the FBI itself suggested a North Korean connection that the hackers picked up on this diversion and ran with it....

    ...a rising chorus of independent cyber-security professionals are virtually unanimous in the opinion that the Obama administration muffed it. The North Koreans, they say, didn’t hack Sony – and our "retaliation" is looking more and more like unprovoked aggression. As Carr writes:

    "Under international law, ‘the fact that a cyber operation has been routed via the cyber infrastructure located in a State is not sufficient evidence for attributing the operation to that State’ (Rule 8, The Tallinn Manual). The White House must responsibly evaluate other options, such as this one, before taking action against another nation state. If it takes such action, and is proved wrong later, which it almost certainly will be, the reputation of the U.S. government and the intelligence agencies which serve it will be harmed."


    Eviscerated is more like it....the Obama administration’s absurd "investigation" seems to have been modeled on the Bush administration’s propaganda campaign in the run up to the Iraq war, in which every possible bit of pseudo-"evidence" was twisted to conclude that Saddam Hussein was building "weapons of mass destruction." Starting with a preordained conclusion, they proceeded to construct a case based on factoids that seemed to confirm it.

    Like the neocons who were desperate for a pretext to invade Iraq, the Obamaites have an agenda of their own: targeting North Korea and citing the alleged threat of a "cybernetic Pearl Harbor" in order to gin up public support for "cyber-security" legislation that would give the government greater power to regulate the Internet as a "public utility." They’ve been agitating for this for quite a while and clearly see the Sony hack as their doorway to success...


    THERE'S A LOT MORE TO THIS ESSAY...I HAVE PICKED THE PIECES THAT HANG TOGETHER ON THE USA'S ACTIONS. I RECOMMEND NERDS READ THE WHOLE THING FOR THE HACKER-TRACKING...
     

    Demeter

    (85,373 posts)
    76. Local news update
    Sun Jan 4, 2015, 01:37 PM
    Jan 2015

    There's a combination of water puddles and ice patches on the streets, but the trees are no longer coated in ice. The temperature is supposed to plunge to single digits by tomorrow morning, and stay there until the weekend, maybe. And there's always the chance of precipitation of one sort or another.

    The sneezing is much less, but the crankiness is unabated. Mercifully, there's no board or other meetings this week. So I can concentrate on recovery, and not killing the Kid...

     

    Demeter

    (85,373 posts)
    78. Unskilled Workers Report for New Jobs By Andy Borowitz (ALMOST SATIRE)
    Sun Jan 4, 2015, 03:41 PM
    Jan 2015
    http://www.newyorker.com/humor/borowitz-report/unskilled-workers-report-new-jobs?mbid=nl_BOROWITZ_010415&CNDID=26139401&spMailingID=7397113&spUserID=MzkxMjA1MjAwODQS1&spJobID=600420237&spReportId=NjAwNDIwMjM3S0

    WASHINGTON (The Borowitz Report)—Sixty-four unskilled workers will report to new jobs in Washington, D.C. on Tuesday as part of a federal jobs program that provides employment for people unable to find productive work elsewhere.

    The new hires, who have no talents or abilities that would make them employable in most workplaces, will be earning a first-year salary of $174,000. For that sum, the new employees will be expected to work a hundred and thirty-seven days a year, leaving them with two hundred and twenty-eight days of vacation.

    Some critics have blasted the federal jobs program as too expensive, noting that the workers were chosen last November in a bloated and wasteful selection process that cost the nation nearly four billion dollars.

    But Davis Logsdon, a University of Minnesota economics professor who specializes in labor issues, said that the program is necessary to provide work “for people who honestly cannot find employment anywhere else.”

    “Expensive as this program is, it is much better to have these people in jobs than out on the street,” he said.


    IF I THOUGHT I COULD GET ONE OF THOSE...BUT THEN, I'D HAVE TO SPEND A LOT OF TIME IN DC....

    I'VE ONLY BEEN ELECTED TO THE CONDO BOARD, BECAUSE NOBODY ELSE WANTED THE JOB...
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