Tag Archives: Financial crisis

The dangers of ultra-long-term bonds

By Judd Gregg – The dollar is the key to world commerce. It is used by most nations as their reserve currency. It is essentially other countries’ insurance against their governments pursuing profligate fiscal policy.

This fact would possibly make the sale of 50- or 100-year U.S. bonds acceptable in the world market. But it should also give us significant pause.

If we want our currency to be the reserve currency of choice around the world, then we need that currency to be respected.

If we start issuing general obligation bonds that have 50- or 100-year terms, we will inevitably call into question the long-term integrity of our nation’s fiscal house. Financing current expenses for 5, 10 or even 30 years may be an accepted practice, but to go out 50 or 100 years is not. more> https://goo.gl/t5bjEg

Adequate Housing: Global Financial Institutions Hold the World to Ransom

By Aisha Maniar – Global real estate is valued at around USD 217 trillion, representing 60% of all global assets.

At a recent press conference, the UN Special Rapporteur on the Right to Adequate Housing, Leilani Farha, stated that “Residential real estate is valued at $USD 163 trillion or more than twice the world’s total GDP.” She added, “Imagine if that capacity was harnessed for the realization of the right to housing instead of speculation and profit.’

In presenting a new hard-hitting report on 1 March, which “focuses on the “financialization of housing” and its impact on human rights”, Farha stated that “Housing has lost its currency as a human right” and “has been financialized: valued as a commodity rather than a human dwelling.”

The housing crisis, which “has not often been considered from the standpoint of human rights,” is global.

Many Western governments have adopted a “let them eat cake” response to the crisis. Rather than address the question of affordable and adequate housing, governments have acquiesced to market forces, with the governments of the UK and Ireland, for example, seeing a solution in building more private homes, to the benefit of developers, even though many properties lie empty in both states.

The Australian government continues to grant tax concessions to developers. more> https://goo.gl/5vYwcy

The Only Thing, Historically, That’s Curbed Inequality: Catastrophe

By Walter Scheidel – The pressures of total war became a uniquely powerful catalyst of equalizing reform, spurring unionization, extensions of voting rights, and the creation of the welfare state. During and after wartime, aggressive government intervention in the private sector and disruptions to capital holdings wiped out upper-class wealth and funneled resources to workers; even in countries that escaped physical devastation and crippling inflation, marginal tax rates surged upward.

Concentrated for the most part between 1914 and 1945, this “Great Compression” (as economists call it) of inequality took several more decades to fully run its course across the developed world until the 1970s and 1980s, when it stalled and began to go into reverse.

This equalizing was a rare outcome in modern times but by no means unique over the long run of history. Inequality has been written into the DNA of civilization ever since humans first settled down to farm the land.

Throughout history, only massive, violent shocks that upended the established order proved powerful enough to flatten disparities in income and wealth. They appeared in four different guises:

  1. mass-mobilization warfare,
  2. violent and transformative revolutions,
  3. state collapse, and
  4. catastrophic epidemics.

Hundreds of millions perished in their wake, and by the time these crises had passed, the gap between rich and poor had shrunk. more> https://goo.gl/b2D6Dj

Economists Get Too Much Credit — and Blame

By Victoria Bateman – Now, with the threat of deglobalization hanging over us, economists stand on the sidelines, feeling ignored.

This recent turn of events might leave us wondering: Do economists have the power and influence required to affect political and policy outcomes, or is it politics that determines which strains of economics are cherry-picked and ultimately championed?

Were John Maynard Keynes alive today, he would no doubt argue that the global financial crisis, Brexit and the election of Donald Trump are all a result of a failed free-market economic agenda, resulting in rising inequality and a slowdown in economic growth, leaving the general public reeling. Economists would be squarely in the dock.

As far as that great rival to Keynesian thinking, Milton Friedman, was concerned, it is the public’s experiences and not the writings of economists that drive economic and policy revolutions. more> https://goo.gl/4J5c2x

Economics is fundamentally flawed

By David Spencer – Economics should be in crisis. But in reality it is not. Rather, economics remains largely the same as it was before the financial crisis – in effect, it remains just as problematic now as in the past. This is an issue not just for economics but for society as a whole, given the enduring power and influence of the discipline on policy and public life.

To think of economics in terms of forecasting is to limit its nature and scope. Economics ought to be about explanation. It should be able to make sense of the world beyond forecasts of the future. It is not clear that as it exists now, economics is able to understand the world in its present form. To this extent, it cannot help understand the frequency and depth of crises.

As things stand, there is little chance that economics will open up to the ideas and methods of other disciplines. Instead, the discipline has embraced a project of “economic imperialism” seeking to colonize other social sciences. Genuine interdisciplinary debate has lost out in this process. more> https://goo.gl/xDk2Mv

A General Logic of Crisis

BOOK REVIEW

How Will Capitalism End? Author: Wolfgang Streeck.
Buying Time, Author: Wolfgang Streeck.
The Deluge: The Great War and the Remaking of Global Order 1916-31, Author: Adam Tooze.

By Adam Tooze – The core of Streeck’s crisis theory is non-Marxian. It does not rest on the violence of original primitive accumulation, or on the alienation or exploitation inherent to the productive process, or even primarily on the declining rate of growth or accumulation.

In one disarming passage he describes capitalism as a ‘a non-violent, civilized mode of material self-enrichment through market exchange’. What makes capitalism toxic is its expansiveness, its relentless colonization of the rest of society. Drawing on Karl Polanyi, Streeck insists that capitalism destroys its own foundations.

It undermines the family units on which the reproduction of labor depends; it consumes nature; it commodifies money, which to function has to rest on a foundation of social trust. For its own good, capitalism needs political checks.

The significance of 2008 and what has happened since is that it is now clear these checks are no longer functioning. Instead, as it entered crisis, capitalism overran everything: it forced the hand of parliaments; it drove up state debts at taxpayers’ expense at the same time as aggressively rolling back what remained of the welfare state; the elected governments of Italy and Greece were sacrificed; referendums were canceled or ignored. more> https://goo.gl/T9bS8i

How the Profound Changes in Economics Make Left Versus Right Debates Irrelevant

BOOK REVIEW

The Origin of Wealth, Author: Eric Beinhocker.
The Gardens of Democracy, Authors: Eric Liu and Nick Hanauer.

By Eric Beinhocker – Economic thinking is changing. If that thesis is correct – and there are many reasons to believe it is – then historical experience suggests policy and politics will change as well. How significant that change will be remains to be seen.

It is still early days and the impact thus far has been limited. Few politicians or policymakers are even dimly aware of the changes underway in economics; but these changes are deep and profound, and the implications for policy and politics are potentially transformative.

For almost 200 years the politics of the west, and more recently of much of the world, have been conducted in a framework of right versus left – of markets versus states, and of individual rights versus collective responsibilities.

New economic thinking scrambles, breaks up and re-forms these old dividing lines and debates. It is not just a matter of pragmatic centrism, of compromise, or even a ‘third way’. Rather, new economic thinking provides something altogether different: a new way of seeing and understanding the economic world. When viewed through the eyeglasses of new economics, the old right–left debates don’t just look wrong, they look irrelevant. more> https://goo.gl/80n0Ke

Shaping the Future of Production

A. T. Kearney – The world of production is one that we define as the full chain of activities to “source-make-deliver-consume-reintegrate” products and services, from origination of inputs, product design, manufacturing and distribution to customer/consumer use and return/reuse.

Production fundamentally impacts our economic structure at a global, regional, national and local scale, on the levels and nature of employment, and is now inextricable from environmental and sustainability initiatives.

Collectively, the sectors comprising production have been an important source of economic growth for developed and emerging nations alike, providing well paid jobs for an increasingly skilled workforce, and they continue to be the dominant focus of innovation and development efforts in most countries.

Disruptive technologies from additive manufacturing to artificial intelligence are transforming global production systems and unleashing a new wave of competition among both producers and countries. They impact and alter all end-to-end steps of the production process and, as a result, transform the products that consumers demand, factory processes and footprints, and the management of global supply chains, in addition to industry dynamics and countries’ access to value chains. Just as we look back at the invention of the spinning jenny, steam engine or the assembly line as turning points in history which changed society, the economy and environment, our descendants are likely to look back on today’s technological advances as the start of a new industrial revolution. more> https://goo.gl/zB86hS

Related>

The Crisis Of Market Fundamentalism

BOOK REVIEW

The Communist Manifesto, Authors: Karl Marx and Friedrich Engels.
Capitalism 4.0, Author: Anatole Kaletsky.

By Anatole Kaletsky – When a particular model of capitalism is working successfully, material progress relieves political pressures. But when the economy fails – and the failure is not just a transient phase but a symptom of deep contradictions – capitalism’s disruptive social side effects can turn politically toxic.

That is what happened after 2008. Once the failure of free trade, deregulation, and monetarism came to be seen as leading to a “new normal” of permanent austerity and diminished expectations, rather than just to a temporary banking crisis, the inequalities, job losses, and cultural dislocations of the pre-crisis period could no longer be legitimized – just as the extortionate taxes of the 1950s and 1960s lost their legitimacy in the stagflation of the 1970s.

If we are witnessing this kind of transformation, then piecemeal reformers who try to address specific grievances about immigration, trade, or income inequality will lose out to radical politicians who challenge the entire system. And, in some ways, the radicals will be right.

The disappearance of “good” manufacturing jobs cannot be blamed on immigration, trade, or technology. But whereas these vectors of economic competition increase total national income, they do not necessarily distribute income gains in a socially acceptable way. To do that requires deliberate political intervention on at least two fronts. more> https://goo.gl/ozay5m

How Bad Can It Get? Prepare For Economic Nationalism

By Kurt Huebner – 2016 was already quite miserable in so many respects; 2017 promises to get even worse. Looking at the chamber of horrors President-elect Trump is putting together and assuming that he will indeed prove at any price that he is the maverick President he promised to be during the campaign, then Washington D.C. will turn into the capital of evil, kind of.

For a long time, political observers from the left analyzed political and economic developments through the lenses of neoliberalism. This concept had at its core the idea that only unfettered markets can deliver growth, jobs, income and wealth. Getting rid of ‘red tape’ not only in the realm of product regulation but also and more importantly in that of environment, labor markets and financial industries was the hallmark for any neoliberal project in the world of western capitalism. This project has come to an end.

2017 will be about economic nationalism where crude elements of growth-enhancing fiscal policy programs go hand in hand with mercantilist and protectionist policies that will erect barriers not only for the flow of goods and services but also for labor. more> https://goo.gl/rroMAl

Related>