By Robert Reich – Glass-Steagall’s key principle was to keep risky assets away from insured deposits. It worked well for more than half century. Then Wall Street saw opportunities to make lots of money by betting on stocks, bonds, and derivatives (bets on bets) – and in 1999 persuaded Bill Clinton and a Republican congress to repeal it.
Nine years later, Wall Street had to be bailed out, and millions of Americans lost their savings, their jobs, and their homes.
Why didn’t America simply reinstate Glass-Steagall after the last financial crisis? Because too much money was at stake. Wall Street was intent on keeping the door open to making bets with commercial deposits. So instead of Glass-Steagall, we got the Volcker Rule – almost 300 pages of regulatory mumbo-jumbo, riddled with exemptions and loopholes.
Now those loopholes and exemptions are about to get even bigger, until they swallow up the Volcker Rule altogether. If the latest proposal goes through, we’ll be nearly back to where we were before the crash of 2008. more>
Posted in Banking, Business, CONGRESS WATCH, Economy, History, Leadership, Media, Net, Regulations
Tagged Banking reform, Capital, Congress Watch, Credit, Debt, Financial crisis, Regulations, United States
By Simon Wren-Lewis – Or maybe the middle ages, but certainly not anything more recent than the 1920s. Keynes advocated using fiscal expansion in what he called a liquidity trap in the 1930s. Nowadays we use a different terminology, and talk about the need for fiscal expansion when nominal interest rates are stuck at the Zero Lower Bound or Effective Lower Bound.
When monetary policy loses its reliable and effective instrument to manage the economy, you need to bring in the next best reliable and effective instrument: fiscal policy.
The Eurozone as a whole is currently at the effective lower bound. Rates are just below zero and the ECB is creating money for large scale purchases of assets: a monetary policy instrument whose impact is much more uncertain than interest rate changes or fiscal policy changes (but certainly better than nothing). The reason monetary policy is at maximum stimulus setting is that Eurozone core inflation seems stuck at 1% or below. Time, clearly, for fiscal policy to start lending a hand with some fiscal stimulus.
You would think that causing a second recession after the one following the GFC would have been a wake up call for European finance ministers to learn some macroeconomics. Yet what little learning there has been is not to make huge mistakes but only large ones: we should balance the budget when there is no crisis. more>
Posted in Banking, Business, Economy, Leadership
Tagged Banking reform, Capital, Credit, Currency, Debt, Financial crisis, Government, Monetary policy
By Hans Kundnani – There are two quite different ways of thinking about the Commission’s proposals. For Macron, they were part of a vision for a “Europe qui protege” in which there would be greater “solidarity” between citizens and member states.
In the context of this vision, the new European Monetary Fund would be a kind of embryonic treasury for the eurozone. But many in Germany, including Wolfgang Schäuble, seem to support the same idea for entirely different reasons. They see it as a way to increase control over EU member states’ budgets and more strictly enforce the eurozone’s fiscal rules and thus increase European “competitiveness”. If that vision were to prevail, “more Europe” would mean “more Germany” – as many of the steps that have been taken in the last seven years since the euro crisis began have.
These different visions illustrate the way that deepening European integration is not automatically or inherently a good thing. In fact, steps such as turning the ESM (European Stability Mechanism) into a European Monetary Fund may form part of a troubling transformation of the EU that goes back to the beginning of the euro crisis.
It is as if the EU is in the process of being remade in the image of the IMF. It increasingly seems to be a vehicle for imposing market discipline on member states – something quite different from the project that the founding fathers had in mind and also quite different from how most “pro-Europeans” continue to imagine the EU.
Indeed, it is striking that, in discussions about debt relief for crisis countries, the European Commission has often been even more unyielding than the IMF. As Luigi Zingales put it in July 2015: “If Europe is nothing but a bad version of the IMF, what is left of the European integration project?” more>
Posted in Banking, Business, Economic development, Economy, History, Leadership, Media
Tagged Banking reform, Business improvement, EU, Financial crisis, Government, Leadership, Organization, Super regions
Cornered: The New Monopoly Capitalism & The Economics of Destruction, Author: Barry Lynn.
By Nick Cassella – The year was 1904, and Lizzie Maggie wanted to create a board game that acted as “a harsh criticism of wealth disparity.” Upset by the the inequality around her, Maggie aspired to ridicule and condemn the dire outcomes of unbridled capitalism. So she constructed the Landlord’s Game, which intended to educate players on the rules and regulations of realty and taxation. Eventually, it ended up being the precursor to the game-which-nobody-ever-finishes, Monopoly.
A long time has passed since then and it’s safe to say that Maggie’s hope has not been realized. Monopoly’s creator would look at today’s economic landscape and be disheartened.
It appears as if Hasbro is trying to draw attention to Monopoly’s original purpose by releasing a new “cheaters edition” this autumn.
The cheaters edition follows the rules of classic Monopoly, except this version encourages players to break them…They encourage players to cheat in various ways, from collecting rent on another player’s property or stealing money from the bank.
Posted in Banking, Book review, Business, Economic development, Economy, History, Leadership, Media, Net, Regulations
Tagged Banking reform, Capital, Debt, Financial crisis, Game, Government, Internet, Leadership