Tag Archives: Financial crisis

Humanity’s fight against climate change is failing. One technology can change that.

By Akshat Rathi – The optimism surrounding renewable energy masks some harsh realities. Despite decades of progress, about 80% of the world’s energy still comes from fossil fuels—the same as in the 1970s. Since then, we’ve kept adding renewable capacity, but it hasn’t outpaced the growth of the world’s population and its demand for energy.

Today, about 30% of total world energy (and 40% of the world’s electricity) is supplied by coal, which emits more carbon dioxide per unit of energy produced than nearly any other fuel source.

The hugely valuable oil and gas industries, accounting for 33% and 24% of total world energy use, respectively, are also entrenched. “Based on what we know now, we would need major technological breakthroughs or weak world growth, including for large emerging and developing economies, for oil demand to peak in the next 20 years,” says Gian Maria Milesi-Ferretti of the International Monetary Fund. Despite the growth in electric vehicles, most oil companies agree that peak oil is “not in sight.”

If you’re still not convinced, consider this: there are a handful of industries essential to the modern way of life that generate large amounts of carbon dioxide as a side product of the chemistry of their manufacturing process. These carbon-intensive industries—including cement, steel, and ethanol—produce about 20% of all global emissions.

If we want to keep using these products and reach zero emissions, the only option is to have these industries deploy carbon capture. more>

The new geopolitics

By Bruce Jones – America’s politics are mired in dysfunction and division. Much of the focus is on economic questions, and much of the heat is generated by the culture wars; but real wars—and America’s role in them—are part of the debate too.

While this debate preoccupies America, the world is changing, and rapidly. We have entered a new phase in international affairs, leaving behind us the brief moment characterized by untrammeled American dominance. Many of the changes underway are beyond America’s control. However, some dynamics could still be shaped by concerted and disciplined American policy—and might. Whether we are capable of that in the current moment remains to be seen, as does the price Americans are willing to pay to do so.

To paraphrase Senator Daniel Patrick Moynihan, America is entitled to decide what role we want to play in the world, but we are not entitled to pretend the world is not changing around us.

We are operating in a changing system that has an asymmetric bipolarity at its core, and a fluid, economic multipolarity orbiting around it. It has the following additional features.

First, we are in an undeclared arms race between the United States and China.

Several major countries are debating whether they can rely on the United States to maintain inter-state security in their region (to balance China’s rise in Asia; to contain Iran in the Middle East; to curtail Russian aggression in Europe), at which point those powers seek continued or deeper alignment with Washington.

The tools of renewed geopolitical competition differ depending on the type of state in play. Advanced economies are playing an insidious game of “confront and conceal,” with cyber intrusions, discreet or disguised financial influence, and disinformation to influence or disrupt an opponent’s internal politics.

In less advanced economies, large-scale infrastructure spending combined with political pressure and corruption has emerged as the technique of choice by the great powers, while counter-corruption campaigns are the vehicle for domestic purges. more>

From A Casino Economy To A New Golden Age

By Steve Denning, Carlota Pérez – To simplify and summarize: there have been five technological revolutions over the last 240 years.

What’s interesting for us today is that the historical record reveals a regular pattern in the diffusion process. It takes place in two halves. First, we have the rise of the new technology that occurs during the decline of the previous revolution. It’s like the 1980s, when we had inflation with the old technologies, which were yielding decreasing returns, while the information technology companies were growing fast with steadily increasing returns (and decreasing prices).

That first half is the installation period of the new technology, which leads to and ends with one or more bubble prosperities –as in the late 1990s and mid-2000s– when the financial sector and the casino economy take over.

Then the bubble or bubbles burst and we have a recession, as we have now, that might last anywhere from 2 years to 13 years or more.

Now in 2017, we are in the middle of another turning point, as in the 1930s, and we could have a period of sustained global prosperity if appropriate action is taken. more>

Do Corporations Make Any Sense?

BOOK REVIEW

The Vanishing American Corporation: Navigating the Hazards of a New Economy, Author: Gerald F. Davis.

By Rick Paulas – On the last day of the year of 1600, the East India Company was created. It was the precursor to the modern corporation, an organizational idea that’s lasted more than 400 years. But will the corporation continue to be dominant forever?

To Gerald F. Davis, signs of the corporation’s futility began in the 1980s and ’90s, as the rise of financialization—in which financial services account for a higher share of national income than other sectors—transformed the American economy.

The transformation came through a dismantling of New Deal-era protections, including decades of court decisions that chipped away at the Glass-Steagall Act, the 1933 legislation separating investment and commercial banking. As Suzanne Burger, a political science professor at the Massachusetts Institute of Technology, put it in a 2014 piece: “[S]ince the 1980s, financial market pressures have transformed U.S. corporate structure itself.” Instead of manufacturing or services, Wall Street became the economy’s driving force.

Davis says the future of the economy can go in two directions, depending on how quickly and powerfully masses organize. The first is the nightmare scenario: A few chief executive officers from a handful of companies (Davis suggests technology giants Google, Facebook, and Amazon as the likely trio) wielding unchecked power.

“If Mark Zuckerberg wanted to sell Facebook to Vladimir Putin for one trillion dollars, he has the power to do so,” Davis says. “It’s a concentration of control we haven’t seen in American history before.” more>

Economic Growth Is No Longer Enough

By Manuel Muñiz – Macroeconomic data from the world’s advanced economies can be mystifying when viewed in isolation. But when analyzed collectively, the data reveal a troubling truth: without changes to how wealth is generated and distributed, the political convulsions that have swept the world in recent years will only intensify.

Most of the wealth created since the 2008 crisis has gone to the rich.

Employment, too, seems to be performing in anomalous ways. For example, most employment growth has been in high-skill or low-skill occupations, hollowing out the middle. Many of the people who once comprised the Western middle class are now part of the middle-lower and lower classes, and live more economically precarious lives than ever before.

The fundamental consequence of this is that wages are no longer performing the central re-distributive role they have played for decades. Simply put, gains in capital productivity are not being translated into higher median incomes, a breach of the social contract on which liberal economies rest.

The debate about solutions has only just begun. Reducing economic inequality will require reforms of education and taxation, with the tax burden shifting decisively from labor to capital. more>

Money And Credit: Paradigm Shift Is Overdue, Part I

By John M. Balder – All of us were taught in Economics 101 that central banks determine the money supply by using their high-powered (base) money and the multiplier. Both of these concepts should be tossed in the trash can. These notions are in error, as both the BOE and the Federal Reserve have recognized. In fact, central banks passively accommodate bank demand for reserves (as doing otherwise could prove disruptive to financial stability).

The influence central banks exert over money and credit creation is achieved via their control of short-term interest rates, and not via quantitative restrictions.

A quick aside here, I have always been curious as to why economists tend to focus so exclusively on the real economy, while choosing to ignore the financial system entirely. Similarly, my work in banking regulation in the early 1990s indicated that most regulators tended to ignore macroeconomic variables.

Is this a case of “where you stand on an issue is often a function of where you sit?” As one who participated in both endeavors, I have perpetually felt a need to connect macro with finance. This may be happening more today than it was 10 or 20 years ago, but it still has a long way to go. more>

America Has a Monopoly Problem—and It’s Huge

The Nobel Prize winner argues that an economy dominated by large corporations has failed the many and enriched the few.
By Joseph E. Stiglitz – There is much to be concerned about in America today: a growing political and economic divide, slowing growth, decreasing life expectancy, an epidemic of diseases of despair. The unhappiness that is apparent has taken an ugly turn, with an increase in protectionism and nativism. Trump’s diagnosis, which blames outsiders, is wrong, as are the prescriptions that follow.

There is a widespread sense of powerlessness, both in our economic and political life. We seem no longer to control our own destinies. If we don’t like our Internet company or our cable TV, we either have no place to turn, or the alternative is no better.

Some century and a quarter ago, America was, in some ways, at a similar juncture: Political and economic power seemed concentrated in a few hands, in ways that were inconsonant with our democratic ideals. We passed the Sherman Anti-Trust Act in 1890, followed in the next quarter-century by other legislation trying to ensure competition in the market place. Importantly, these laws were based on the belief that concentrations of economic power inevitably would lead to concentrations in political power.

Antitrust policy was not based on a finely honed economic analysis, resting on concurrent advances in economics. It was really about the nature of our society and democracy.

But somehow, in the ensuing decades, antitrust was taken over by an army of economists and lawyers. They redefined and narrowed the scope, to focus on consumer harm, with strong presumptions that the market was in fact naturally competitive, placing the burden of proof on those who contended otherwise. more> https://goo.gl/VPfvdC

Economists: Too Much Ideology, Too Little Craft

By Simon Wren-Lewis – One of the features of mainstream economics today is the huge diversity of models that are around. Academic prestige tends to come to those who add to that number. But how do you decide which model to use when investigating a particular problem? The answer is by looking at evidence about applicability. That is not a trivial task because of the probabilistic and diverse nature of economic evidence, and Dani Rodrik describes that process as more of a craft than a science.

So, in the case of the GFC (Global Financial Crisis), good craft was in seeing that new methods of spreading risk were vulnerable to system wide events. Good craft was to see, if you had access to the data, that rapid increases in bank leverage should always be a concern. And more generally that arguments that start with ‘this time was different’ do not generally end well.

If you do not apply the craft well, then what can replace it is ideology, politics or simple groupthink. This is not just an issue for some individual economists, but can sometimes be a concern for the majority. more> https://goo.gl/k8oUcD

The next financial crisis is probably around the corner—we just don’t know from where

By John Detrixhe – The German bank’s study of developed markets uses this criteria to define a financial crisis: on a year-over-year basis, a 15% drop in stock markets, 10% decline in foreign-exchange, 10% fall in bonds, 10% increase in inflation, or a sovereign default.

Deutsche Bank argues that crises have been increasingly frequent since the breakdown of the Bretton Woods system, which, after World War II, fixed exchange-rates and essentially linked them to the price of gold. That coordination ended in the 1970s when the US broke the dollar’s peg to the yellow metal. The link to a finite commodity helped limit the amount of debt that could be created.

As strategists at the Frankfurt-based lender see it, the resulting fiat money system has encouraged rising budget deficits, higher debts, global imbalances, and more unstable markets. At the same time, banking regulations have been loosened. In the US, the industry may soon have fewer restrictions and less oversight, a mere 10 years since the last worldwide crisis. more> https://goo.gl/vDnQ2w

How Does Fascism Sneak Into Pop Culture?

BOOK REVIEW

Against the Fascist Creep, Author: Alexander Reid Ross.

By Elizabeth King – Donald Trump’s rise from real-estate businessman and washed-up reality television star to United States president has many people thinking anew about fascism.

The fascist tradition of using the arts as vehicles for expanding the movement is visible in the U.S. today, in some cases in eerily similar ways to the original rise of European fascism in the early 20th century.

In Futurism, we see some early examples of “cultural fascism,” if you will. Filippo Marinetti, founder of the Futurist movement, would be a good place to start. Futurism was founded in Italy in the early 1900s, and was one of the earliest proto-fascist and, in some cases, fascist movements. The idea [of Futurism] was to return to the noble myth [of] the new man who stands for family and tradition, but in a super-powered world of dynamism and adventure.

But if you look at the emergence of fascism and the development of fascism in its original form, one of the interesting things that you see in cultural avenues is that they are often primarily interested in disruption.

And, inevitably, there are liberals in mainstream institutions who accept the expressions of [fascist disruptors] insofar as it is expression, and insofar as it’s good to explore the arts and humanities. So there’s a tendency to accept these movements to some degree, and perhaps even adopt some of their mindsets under this position. This is incredibly dangerous, because fascism is so vitriolic and mercurial that it’s difficult to contain. more> https://goo.gl/gSRBwt

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