There's substantial research now available as a free PDF from Social Science Research Network (New York) that relates to the question of whether or how wealth is systematically shifted from the middle upwards into global capital held by the few, through inequities in tax law. (The paper is dated November 20, 2011.)
Title: 'Is Capital Gains Tax Law Biased Against Low Income Investors?'
Authors:
Min Dai, National University of Singapore (NUS) - Department of Mathematics
Hong Liu, Washington University in St. Louis - Olin Business School; China Academy of Financial Research (CAFR)
Yifei Zhong, University of Oxford - Mathematical Institute
There's a lot of good stuff on Viable Opposition, and this blog in particular took the author some time and effort to compile. We don't often think about the secondary level of the Fed (the 12 District Banks), and we should give that more attention. Most people don't even give any attention to the composition of the Federal Open Market Committee (FOMC).
For my 2¢, it wouldn't necessarily matter if the appointees were all old white males, or none old white males. I think it's nonsense to suppose that getting rid of old white males represents, in and of itself, any kind of progress. On the other hand, the prevalence of women among the most effective regulators, top advising economists and Fed board members ... is striking and undeniable.
You are correct, we are past the point of no return, but not mathematically...only politically. If our politicians had the gumption to end The Afgan war and downsize the military, legalize and tax drugs and prostitution, institute a VAT and a sur charge on very high incomes, and reform entitlements, this mess could be corrected...but you are right, it won't happen.
IMO, solutions may or may not happen. As Winston Churchill said --
"You can always count on Americans to do the right thing - after they've tried everything else." -- Winston Churchill
One last-but-not-least remark here --
Don't forget fundamental financial-monetary reform as a crucial component of any solution to our economic problems --
You might be wondering why I am ignoring the various reports. I don't buy these numbers frankly, I think it's all hyped out. Not only the "sales", which to me look like those "sales" where the price is jacked up to make it look like one, but we've seen this hyped out numbers reports previously. 2008 Black Friday was off the hook and so on in reported sales, yet Q4 2008 retail sales tanked, as one would expect after millions get fired. 2007 was a black friday record and guess what started in December 2007? Yes, recession, economic tanking.
Also, this is ridiculous. As an example, there was really only one great deal at Best Buy, but the free publicity they get from new interviewing idiots camping outside their store for $300 bucks off, earning basically $1.78/hr. gives the retailer millions in free advertising and hype. The ultimate deal is for Best Buy, not shoppers. Think about that loss, those millions in advertising dollars given away for free by hyping reporters and press.
I'll wait for Q4 results or at least November monthly numbers thank you.
It sure is a puzzlement. Anyway, where or when are the runs on French banks? Around the next corner?
It all makes sense, if we agree that the professors from Wharton have it figured right. If so, EU policy-makers -- including Merkel -- are destined to converge at the analysis and solutions envisioned by the Wharton professors. Their analysis/solution is that Greece takes the drachma road (good news for tourism there), Italy stays in the Euro zone, probably along with Spain. See, EP's FMN (11/26/2011).
Only radical goldbugs will be disappointed. They are waiting, with bated breath, for news of runs on French banks, due to collapse of Italian bonds into junk status ... but, (not to worry), the bank runs may be just around the corner!
Right now [last Wednesday], according to sources I spoke with in Europe, there isn't much of a sign of retail customers withdrawing funds. But hoping that customers don't notice what is happening to every other source of bank funding is not exactly a strategy for stability.
The thing is ... that was no more than a question raised ... and that was last Wednesday ... ancient history.
Today (28 November 2011), I can't find any evidence that the long-predicted bank runs have begun. However, given the right spin, there's still some good news for global goldbuggery. After all, even if the €600B are to be in the form of euro bonds, that's nonetheless a form of "printing" -- which is inflationary and so bolsters perception of imminent currency collapse. Just look at the Rupee! And even better -- I'm sure we'll be reminded any minute now -- the €600B is less than half of what is actually needed!
Meanwhile, here's today from the Bloomberg tape --
Euro is up -- and steadily rising against the USD.
Gold is up, but only moderately ... so far today.
U.S. 10-year is continuing up (effective interest down), although stabilizing.
NYSE looks strong, indexes up about 3%.
Crude oil is still under $100.
No news of 40,000,000 nervous Frenchmen forming long lines around major banks in Paris.
What's to worry? Go on a Buffett buying spree ... and don't forget to book your Christmas vacation in Greece as soon as the New Drachma drops out of sight through the trapdoor.
A recent study by the Government Accountability Office shows that directorships at Federal Reserve Bank Districts are disproportionately held by bankers in contravention of the Fed's own policies which state that directors are to be selected from a wide range of industries as shown here:
With half of the FRB directors having experience at the helm of commercial banks, perhaps their allegiances are more closely aligned with their employers than with those who live on Main Street.
I just scanned the growth rates, they all seem too high, no recessions, treading water. Bloomberg has more for now but significant they blame weaker economic growth on the European crisis.
Gee, how about offshore outsourcing everybody's jobs and letting Goldman Sachs, et. al run amok for years?
has me convinced this is some orchestrated bought and paid for by corporate lobbyists, corporations, special interests, 100% phony thing going on that has no real people involved at all.
Seriously. This site is non-partisan and do you know a single real person, conservative, who agrees with or even likes Newt Gingrich? His positions are like orders up in some fast food corporate lobbyist agenda item restaurant. He's got 'em all, including immigration.
I feel like this is wag the dog, much more than previous "elections" have been.
his comments are literally unbelievable... it is now on record that the GOP truly wants to return the United States of America to the 19th century...as Norquist, their high priest likes to say "... before the socialists took over"
"Supposedly Merkel has reaffirmed "no way" to a Euro bond. But people at the moment are scouring obscure documents trying to find a glimmer of hope for a Euro bond issue." -- Robert Oak
Thinking positive, it makes sense to amortize the sovereign debt, but the devil's in the details. Amortization in of itself cannot eliminate fundamental risk or turn losses into gains. Surely, some 'haircuts' will be required, some write-downs.
Although Merkel has been vehemently opposed to the idea of Euro bond, some within Merkel's governing coalition reportedly are no longer ruling out the introduction of euro bonds. From [major German newspaper] Der Spiegel,
"We never say never. We only say: No euro bonds under the existing conditions," Norbert Barthle, budgetary spokesperson for the conservatives in parliament, told the Financial Times Deutschland.
"There is a lot of misinformation and hype out there on Europe." -- Robert Oak
Yeah, that's for sure. I wish I had a Euro for every media piece I've seen or heard on "what the Euro crisis means for the USA."
Generally, the idea promoted by US corporate media is that Europe's problems are due to high taxes, especially on the rich "job creators," and overextended social safety nets -- public education, medical care for all, and so forth. In other words, the fault is laid at the feet of what in Europe is called "social democracy" and in the USA is called "Communism." (Exactly how that relates to corporate media's endorsement of the People's Republic of China, which continues to be ruled by an autocratic Communist Party, is one of many political peculiarities of the USA.)
Of course, European nations are regularly involved (have been for years) in a tug-of-war between those who want to reign in the institutions of social democracy and those who seek to defend them against erosion. (The socio-political conflict during the last decade also involves immigration issues.)
Americans are not told the whole story that when a "conservative" party or coalition is successful in an election in Europe, that never means that the institutions of social democracy are going to be dismantled and often means people are rejecting further immigration. But the institutions of social democracy are generally much too successful and popular to be scrapped by popular demand!
Something that goes unnoticed in USA corporate media is that the countries with the great problems are NOT those with the most entrenched social safety nets!
Germany, for example, is heavily laden not only with high taxes on high income groups (taxes actually paid), national medical insurance, free higher education for all, amazingly liberal unemployment benefits and a very dense regulatory system ... yet the German economy is doing so much better than the US economy that the idea that we should avoid social democracy in order to avoid a financial meltdown ... is absolutely ludicrous!
The real lessons for the USA that can be drawn from the current European experience (per what the professors explain) are (1) the rich must be effectively taxed to avoid deficits, (2) social democracy can be very effective in promoting long-term growth, and, (3) economic integration across national borders is a very tricky and dangerous process which must be conducted very slowly and carefully. The opposite is what US corporate media seeks to push on us as accepted "conventional wisdom" as to what we can learn from the current European experience.
There are a lot of reports, yet no official announcement of a $600 billion bail out from the IMF to Italy....with the IMF via the U.S. Fed., setting up some sort of rescue fund generally. Rumors and runaways move too fast to be sure, will probably write up a solid update when the European markets open.
Americans should catch on fire if the Fed is indirectly bailing out yet another European domino. Of course they only riot over black Friday.
Many are pinning their hopes on a European bond, a way to put all sovereign debt spread across all Eurozone countries. I'm just giving updates on all of this, supposedly Merkel has reaffirmed "no way" to a Euro bond. But people at the moment are scouring obscure documents trying to find a glimmer of hope for a Euro bond issue.
The good old fashioned "bankruptcy", i.e. nationalize the banks, cancel the debt should have been done in 2008, this is basically the Swedish solution and their economy is humming. They had a banking crisis before 2008.
I don't know how Europe really gets out of this w/o some haircuts at least and those haircuts upset "investors" because they lose huge on their sovereign CDSes and they then pull out of the sovereign bond markets as well.
The downgrades aren't helping either.
This post, I'm just amplifying warning signs. It sure isn't a recommendation for people to go horde gold.
Gold, like any investment, can be tricky and you sure can get burned as we saw a couple of months ago when Gold crashed.
Don't even get me started on CA and other states. They are busy giving instate tuition to illegals, other special favors, while jacking tuition up to complete unaffordable for all. California is a great example of special interest politics trumping the statistics and economic realities and I sure hope the rest of the nation isn't stuck footing their bill.
But even worse, Newt Gingrich just won the NH newspaper endorsement and is the top of the GOP polls. Either these polls are all rigged or surveyed people are insane. The guy is a walking corporate lobbyist wish list, almost everything out of his mouth has been written by some corporate lobbyist for him to promote. Just unbelievable and the only thing I can think of is the "people" being surveyed are Exxon and Goldman Sachs.
I'm glad people appreciate this series. I find sometimes the comedians, artists get to the meat of the matter better than 5000 words of narrative and they make you laugh on top of it.
Takes a long time to sift through media to find the gems too.
This week's Mark Fiore on contagion is a classic! Probably win another Pulitzer prize for that one. (the first video).
And of course, gold may well be a good bet for professional PM speculators right now, but for people who are looking to hedge against a future USD collapse, this may not be a particularly great time to buy. Nonetheless, it's entirely possible that gold will finally hit it's long-anticipated 2011 highs above $2000. (A couple of months back, a JPMorganChase economist predicted $2100 before end of 2011, after that bank's depository reported increased holding of physical gold.)
Goldbugs are talking along the lines of the ECB will "print" despite every indication that the ECB will not. The essence of goldbuggery is to see everything in terms of the impending collapse of all paper currencies globally (even though there's no evidence of that for the renminbi or the Japanese yen and not all that much evidence for the pound sterling and several others). In the goldbug mindset, the ECB must "print" because that's what governments always do (ignoring possibility that sometimes 'central bank' may not equate to 'government' and the reality that the ECB cannot be equated to any government other than itself). This relates to USA goldbuggery's fundamental belief that the Fed will not be able to resist the overpowering temptations that inevitably and universally lead to hyperinflation.
____
Here's my various 2¢ers all around, just for the record --
(1) GOLD. It's entirely possible now that gold will reach its long-anticipated $2000-and-up levels before the end of 2011, although it may only peak and then fall back into the $1900s.
(2) EURO. The Euro will survive in good condition, and there will be no great "printing" by the ECB -- neither in 2011 nor in 2012.
(3) QE3 and the Fed. Since any further bail-outs in USDs are not in the cards for at least a year, pressure will be on the Fed (from within by some members of the FOMC) for another QE3 in the form of a MBS buy-out (touted as a "solution" to the continuing "jobs recession" by way of promoting a come-back for housing construction). Hopefully, there won't be anything like that, because (IMO) it's just more subsidizing of the bloated international financial sector, but it does seem likely given realities of campaign politics. On the other hand, looking closely at the composition of the FOMC and the stale-mate in Congress, it's possible that there will be no QE3 in any form, at least not before November 2012.
(4) Second Great Depression. The world is definitely headed into the Second Great Depression, or is already there. Even China is and will be heavily impacted. As for the USA, we are already in a period of high inflation. The Fed will not be able to continue much longer in denial of this reality -- another reason why I am not at all sure that there will be a QE3 (at least not before November 2012).
(5) Monetary, political and financial reform. Huge changes are due both for the EU and for the USA, but these probably will not begin to take shape until after 2012.
(6) Stocks and investment in growth. The analysis that stocks are trading entirely on the news cycle or other macro-economic news, rather than on long-term investments in particular companies, is becoming less convincing now. Look at recent actions by Berkshire Hathaway.
(7) Bonds and T-notes. I don't see any reason to presume that T-notes inevitably must fall significantly in 2012, but that probably could happen if there is a QE3. On the other hand, it's becoming more credible that individual states and other jurisdictions (California, for example?) may default and (one way or another) go into bankruptcy.
Oh well, maybe I'm wrong about everything. We'll see.
The professors from Wharton provide a very clear picture, including differences from one country to another -- which are substantial. They agree that there's an inevitable global contraction to result from the Euro crisis, and the size of the inevitable contraction is "at a minimum, another 2008."
Considering such liquidity holes as the Fed's mysterious $88Billion (see, Saturday Reads Around the Internet, 11/26/2011) ... can there be any doubt as to a global double dip? And, as I have suggested before, "a recession here, a recession there, pretty soon it adds up to a Second Great Depression." (Whatever the technical definitions may be.)
I found very interesting Professor Cameron's remark that leaders of the core member-states are considering a two-tier or three-tier Euro zone or EU. The Wharton professors appear to agree that only the Germans believe that now is the time for their "more Europe" solution. Rather, the professors report, some kind of two-tier or three-tier solution is not only something being considered at top levels of EU policy-makers, but is actually inevitable in one form or another. (Probably the Euro zone or EU "in its current form is a jump to far.") That's because of cultural differences from north to south, plus endemic trade imbalances and failure of member-states in southern Europe to collect taxes from the rich. ("There's a social contract of some kind [in italy and Greece] that the rich don't pay taxes.")
I had not realized how large, how central and how crucial the debt problems of Italy are. The game comes down to that if Italy stabilizes economically -- and it definitely can, assuming political stabilization, say the professors -- then probably Spain will be manageable. THEN, with Italy's and Spain's bond prices stabilizing, it would be possible for Greece (at that point) to do an Argentina. The Wharton professors apparently believe (although stopping short of actually saying it) that Greece ultimately may leave the Euro zone, issue a new drachma and default, even though it seems likely that Greece will take the latest deal offered by the ECB.
(Is that contradictory, that Greece will take the deal in December, only to default eventually anyway? -- maybe not since, after all, the rules of investment in junk bonds are not the same as the rules of investment in "risk-free" bonds! Anyway, nothing is certain, and Greece's fundamentals are evaluated very differently by the two Wharton professors, who are not agreed on prospects for Greece in the event of a default.)
The problem is in the timing -- if Greece defaults in the current context (December 2012), that could easily destabilize Italy and cause the great melt-down that everyone sees as the dire risk. On the other hand, even that would not mean that the Euro is going down, because it seems unlikely that QE will or can be done by the ECB -- even it Italian bonds tank, resulting in nationalization of French banks. However, we did hear last Thursday that the ECB "is considering a dramatic extension of its longest loans to commercial banks." (See, Wall Street Journal online story by Stephen Fidler, 25 November 2011.) My presumption is that these long-term loan extensions would be mainly for French banks, allowing them to amortize their exposure at least to some of their holdings in Italian bonds.
IMO, that's what goldbugs are waxing enthusiastic about (see, Saturday Reads Around the Internet, 11/26/2011) ... namely, possibility of runs on French banks due to collapse of Italian bonds due to a default by Greece in December. That seems to be the narrative at half-time for this latest bulls vs. bears game.
Finding objective documentaries on what's really going on, the history of the EU/ECB is near impossible, that's the closest I could come. Basically due to their system, there aren't a lot of easy answers. One common currency yet sovereign debt/bonds and sovereign economic management.
I think they still, in concert, should "pull a Sweden", nationalize the banks, cancel the debt. One big painful swallow.
This is a side note, but one of the things the EU shows is what happens when strong national economies are mixed with weaker ones. The weaker one pulls down the stronger one. Case in point was the reunification of Germany, took them this long to integrate.
I mention this because people "believe" unlimited migration is just fine and we should more integrate with Mexico. That, would be an/is a labor/economic disaster.
I agree. "Cleaning out the banking casino hall is the way to go"!
For the USA, I favor the American Monetary Reform Act (incorporated into Rep. Kucinich's NEEDS Act), per recommendations of American Monetary Institute. So, I would tend to favor something similar for Europe.
The thing is that the EU is an unprecedented experiment, and who knows how it's going to evolve or even if it's going to survive?
Thanks to Angry Bear's Taxprof blog for this item.
There's substantial research now available as a free PDF from Social Science Research Network (New York) that relates to the question of whether or how wealth is systematically shifted from the middle upwards into global capital held by the few, through inequities in tax law. (The paper is dated November 20, 2011.)
Title: 'Is Capital Gains Tax Law Biased Against Low Income Investors?'
Authors:
Min Dai, National University of Singapore (NUS) - Department of Mathematics
Hong Liu, Washington University in St. Louis - Olin Business School; China Academy of Financial Research (CAFR)
Yifei Zhong, University of Oxford - Mathematical Institute
PDF download currently available at webpage --
papers.ssrn.com/sol3/papers.cfm?abstract_id=1962118
If you register at EP, you can use the RT formatter to put up real live links -- a convenience to others.
Here's link to blog from Viable Opposition (24 October 2011), 'The Federal Reserve: A Bunch of Old, White, Male Bankers'
There's a lot of good stuff on Viable Opposition, and this blog in particular took the author some time and effort to compile. We don't often think about the secondary level of the Fed (the 12 District Banks), and we should give that more attention. Most people don't even give any attention to the composition of the Federal Open Market Committee (FOMC).
For my 2¢, it wouldn't necessarily matter if the appointees were all old white males, or none old white males. I think it's nonsense to suppose that getting rid of old white males represents, in and of itself, any kind of progress. On the other hand, the prevalence of women among the most effective regulators, top advising economists and Fed board members ... is striking and undeniable.
BTW: there's a great blog currently at the Viable Opposition front page on USA's sovereign debt situation, 'United States Debt Interest Scenarios - Have We Reached the Point of No Return?'
Also, there's also a great comment by 'Carl Jones' --
IMO, solutions may or may not happen. As Winston Churchill said --
One last-but-not-least remark here --
Don't forget fundamental financial-monetary reform as a crucial component of any solution to our economic problems --
Check it out at --
American Monetary Institute
www.monetary.org
There's a growing body of explanatory videos, webpages and print publications about fundamental financial-monetary reform, for example --
You might be wondering why I am ignoring the various reports. I don't buy these numbers frankly, I think it's all hyped out. Not only the "sales", which to me look like those "sales" where the price is jacked up to make it look like one, but we've seen this hyped out numbers reports previously. 2008 Black Friday was off the hook and so on in reported sales, yet Q4 2008 retail sales tanked, as one would expect after millions get fired. 2007 was a black friday record and guess what started in December 2007? Yes, recession, economic tanking.
Also, this is ridiculous. As an example, there was really only one great deal at Best Buy, but the free publicity they get from new interviewing idiots camping outside their store for $300 bucks off, earning basically $1.78/hr. gives the retailer millions in free advertising and hype. The ultimate deal is for Best Buy, not shoppers. Think about that loss, those millions in advertising dollars given away for free by hyping reporters and press.
I'll wait for Q4 results or at least November monthly numbers thank you.
It sure is a puzzlement. Anyway, where or when are the runs on French banks? Around the next corner?
It all makes sense, if we agree that the professors from Wharton have it figured right. If so, EU policy-makers -- including Merkel -- are destined to converge at the analysis and solutions envisioned by the Wharton professors. Their analysis/solution is that Greece takes the drachma road (good news for tourism there), Italy stays in the Euro zone, probably along with Spain. See, EP's FMN (11/26/2011).
Only radical goldbugs will be disappointed. They are waiting, with bated breath, for news of runs on French banks, due to collapse of Italian bonds into junk status ... but, (not to worry), the bank runs may be just around the corner!
See, CNBC's NetNet story by John Carney (23 November 2011), 'Has the Bank Run Begun in Europe?'
The thing is ... that was no more than a question raised ... and that was last Wednesday ... ancient history.
Today (28 November 2011), I can't find any evidence that the long-predicted bank runs have begun. However, given the right spin, there's still some good news for global goldbuggery. After all, even if the €600B are to be in the form of euro bonds, that's nonetheless a form of "printing" -- which is inflationary and so bolsters perception of imminent currency collapse. Just look at the Rupee! And even better -- I'm sure we'll be reminded any minute now -- the €600B is less than half of what is actually needed!
Meanwhile, here's today from the Bloomberg tape --
Euro is up -- and steadily rising against the USD.
Gold is up, but only moderately ... so far today.
U.S. 10-year is continuing up (effective interest down), although stabilizing.
NYSE looks strong, indexes up about 3%.
Crude oil is still under $100.
No news of 40,000,000 nervous Frenchmen forming long lines around major banks in Paris.
What's to worry? Go on a Buffett buying spree ... and don't forget to book your Christmas vacation in Greece as soon as the New Drachma drops out of sight through the trapdoor.
This is interesting, the day this story breaks, Barney Frank, who was head of the financial services committee at that time, is retiring.
Frank was the least of the worst though in terms of chairs on that committee, that said, that's not a badge of honor.
.... everybody is forgetting here that the real problem is the Social Security trust fund, which will go broke in another half-century.
Bloomberg? Naked Capitalism? ZeroHedge? People just need to watch more FAUX news!
A recent study by the Government Accountability Office shows that directorships at Federal Reserve Bank Districts are disproportionately held by bankers in contravention of the Fed's own policies which state that directors are to be selected from a wide range of industries as shown here:
http://viableopposition.blogspot.com/2011/10/federal-reserve-bunch-of-ol...
With half of the FRB directors having experience at the helm of commercial banks, perhaps their allegiances are more closely aligned with their employers than with those who live on Main Street.
I just scanned the growth rates, they all seem too high, no recessions, treading water. Bloomberg has more for now but significant they blame weaker economic growth on the European crisis.
Gee, how about offshore outsourcing everybody's jobs and letting Goldman Sachs, et. al run amok for years?
has me convinced this is some orchestrated bought and paid for by corporate lobbyists, corporations, special interests, 100% phony thing going on that has no real people involved at all.
Seriously. This site is non-partisan and do you know a single real person, conservative, who agrees with or even likes Newt Gingrich? His positions are like orders up in some fast food corporate lobbyist agenda item restaurant. He's got 'em all, including immigration.
I feel like this is wag the dog, much more than previous "elections" have been.
his comments are literally unbelievable... it is now on record that the GOP truly wants to return the United States of America to the 19th century...as Norquist, their high priest likes to say "... before the socialists took over"
i can't believe i'm living thru this goddamn mess
"Supposedly Merkel has reaffirmed "no way" to a Euro bond. But people at the moment are scouring obscure documents trying to find a glimmer of hope for a Euro bond issue." -- Robert Oak
Thinking positive, it makes sense to amortize the sovereign debt, but the devil's in the details. Amortization in of itself cannot eliminate fundamental risk or turn losses into gains. Surely, some 'haircuts' will be required, some write-downs.
From EconMatters blog at ZeroHedge (27 November 2011), Euro Bond: Europe's Only Way Out For Now
"There is a lot of misinformation and hype out there on Europe." -- Robert Oak
Yeah, that's for sure. I wish I had a Euro for every media piece I've seen or heard on "what the Euro crisis means for the USA."
Generally, the idea promoted by US corporate media is that Europe's problems are due to high taxes, especially on the rich "job creators," and overextended social safety nets -- public education, medical care for all, and so forth. In other words, the fault is laid at the feet of what in Europe is called "social democracy" and in the USA is called "Communism." (Exactly how that relates to corporate media's endorsement of the People's Republic of China, which continues to be ruled by an autocratic Communist Party, is one of many political peculiarities of the USA.)
Of course, European nations are regularly involved (have been for years) in a tug-of-war between those who want to reign in the institutions of social democracy and those who seek to defend them against erosion. (The socio-political conflict during the last decade also involves immigration issues.)
Americans are not told the whole story that when a "conservative" party or coalition is successful in an election in Europe, that never means that the institutions of social democracy are going to be dismantled and often means people are rejecting further immigration. But the institutions of social democracy are generally much too successful and popular to be scrapped by popular demand!
Something that goes unnoticed in USA corporate media is that the countries with the great problems are NOT those with the most entrenched social safety nets!
Germany, for example, is heavily laden not only with high taxes on high income groups (taxes actually paid), national medical insurance, free higher education for all, amazingly liberal unemployment benefits and a very dense regulatory system ... yet the German economy is doing so much better than the US economy that the idea that we should avoid social democracy in order to avoid a financial meltdown ... is absolutely ludicrous!
The real lessons for the USA that can be drawn from the current European experience (per what the professors explain) are (1) the rich must be effectively taxed to avoid deficits, (2) social democracy can be very effective in promoting long-term growth, and, (3) economic integration across national borders is a very tricky and dangerous process which must be conducted very slowly and carefully. The opposite is what US corporate media seeks to push on us as accepted "conventional wisdom" as to what we can learn from the current European experience.
There are a lot of reports, yet no official announcement of a $600 billion bail out from the IMF to Italy....with the IMF via the U.S. Fed., setting up some sort of rescue fund generally. Rumors and runaways move too fast to be sure, will probably write up a solid update when the European markets open.
Americans should catch on fire if the Fed is indirectly bailing out yet another European domino. Of course they only riot over black Friday.
Many are pinning their hopes on a European bond, a way to put all sovereign debt spread across all Eurozone countries. I'm just giving updates on all of this, supposedly Merkel has reaffirmed "no way" to a Euro bond. But people at the moment are scouring obscure documents trying to find a glimmer of hope for a Euro bond issue.
The good old fashioned "bankruptcy", i.e. nationalize the banks, cancel the debt should have been done in 2008, this is basically the Swedish solution and their economy is humming. They had a banking crisis before 2008.
I don't know how Europe really gets out of this w/o some haircuts at least and those haircuts upset "investors" because they lose huge on their sovereign CDSes and they then pull out of the sovereign bond markets as well.
The downgrades aren't helping either.
This post, I'm just amplifying warning signs. It sure isn't a recommendation for people to go horde gold.
Gold, like any investment, can be tricky and you sure can get burned as we saw a couple of months ago when Gold crashed.
Don't even get me started on CA and other states. They are busy giving instate tuition to illegals, other special favors, while jacking tuition up to complete unaffordable for all. California is a great example of special interest politics trumping the statistics and economic realities and I sure hope the rest of the nation isn't stuck footing their bill.
But even worse, Newt Gingrich just won the NH newspaper endorsement and is the top of the GOP polls. Either these polls are all rigged or surveyed people are insane. The guy is a walking corporate lobbyist wish list, almost everything out of his mouth has been written by some corporate lobbyist for him to promote. Just unbelievable and the only thing I can think of is the "people" being surveyed are Exxon and Goldman Sachs.
I'm glad people appreciate this series. I find sometimes the comedians, artists get to the meat of the matter better than 5000 words of narrative and they make you laugh on top of it.
Takes a long time to sift through media to find the gems too.
This week's Mark Fiore on contagion is a classic! Probably win another Pulitzer prize for that one. (the first video).
IMO, what goldbugs are waxing enthusiastic about is possibility of runs on French banks due to collapse of Italian bonds due to a default by Greece. (See, my comment at FMN blog on videos of professors' analyses of Euro zone crisis.)
And of course, gold may well be a good bet for professional PM speculators right now, but for people who are looking to hedge against a future USD collapse, this may not be a particularly great time to buy. Nonetheless, it's entirely possible that gold will finally hit it's long-anticipated 2011 highs above $2000. (A couple of months back, a JPMorganChase economist predicted $2100 before end of 2011, after that bank's depository reported increased holding of physical gold.)
Goldbugs are talking along the lines of the ECB will "print" despite every indication that the ECB will not. The essence of goldbuggery is to see everything in terms of the impending collapse of all paper currencies globally (even though there's no evidence of that for the renminbi or the Japanese yen and not all that much evidence for the pound sterling and several others). In the goldbug mindset, the ECB must "print" because that's what governments always do (ignoring possibility that sometimes 'central bank' may not equate to 'government' and the reality that the ECB cannot be equated to any government other than itself). This relates to USA goldbuggery's fundamental belief that the Fed will not be able to resist the overpowering temptations that inevitably and universally lead to hyperinflation.
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Here's my various 2¢ers all around, just for the record --
(1) GOLD. It's entirely possible now that gold will reach its long-anticipated $2000-and-up levels before the end of 2011, although it may only peak and then fall back into the $1900s.
(2) EURO. The Euro will survive in good condition, and there will be no great "printing" by the ECB -- neither in 2011 nor in 2012.
(3) QE3 and the Fed. Since any further bail-outs in USDs are not in the cards for at least a year, pressure will be on the Fed (from within by some members of the FOMC) for another QE3 in the form of a MBS buy-out (touted as a "solution" to the continuing "jobs recession" by way of promoting a come-back for housing construction). Hopefully, there won't be anything like that, because (IMO) it's just more subsidizing of the bloated international financial sector, but it does seem likely given realities of campaign politics. On the other hand, looking closely at the composition of the FOMC and the stale-mate in Congress, it's possible that there will be no QE3 in any form, at least not before November 2012.
(4) Second Great Depression. The world is definitely headed into the Second Great Depression, or is already there. Even China is and will be heavily impacted. As for the USA, we are already in a period of high inflation. The Fed will not be able to continue much longer in denial of this reality -- another reason why I am not at all sure that there will be a QE3 (at least not before November 2012).
(5) Monetary, political and financial reform. Huge changes are due both for the EU and for the USA, but these probably will not begin to take shape until after 2012.
(6) Stocks and investment in growth. The analysis that stocks are trading entirely on the news cycle or other macro-economic news, rather than on long-term investments in particular companies, is becoming less convincing now. Look at recent actions by Berkshire Hathaway.
(7) Bonds and T-notes. I don't see any reason to presume that T-notes inevitably must fall significantly in 2012, but that probably could happen if there is a QE3. On the other hand, it's becoming more credible that individual states and other jurisdictions (California, for example?) may default and (one way or another) go into bankruptcy.
Oh well, maybe I'm wrong about everything. We'll see.
It's important in times like these to keep our sense of humor!
Excellent videos! Kudos all around!
The professors from Wharton provide a very clear picture, including differences from one country to another -- which are substantial. They agree that there's an inevitable global contraction to result from the Euro crisis, and the size of the inevitable contraction is "at a minimum, another 2008."
Considering such liquidity holes as the Fed's mysterious $88Billion (see, Saturday Reads Around the Internet, 11/26/2011) ... can there be any doubt as to a global double dip? And, as I have suggested before, "a recession here, a recession there, pretty soon it adds up to a Second Great Depression." (Whatever the technical definitions may be.)
I found very interesting Professor Cameron's remark that leaders of the core member-states are considering a two-tier or three-tier Euro zone or EU. The Wharton professors appear to agree that only the Germans believe that now is the time for their "more Europe" solution. Rather, the professors report, some kind of two-tier or three-tier solution is not only something being considered at top levels of EU policy-makers, but is actually inevitable in one form or another. (Probably the Euro zone or EU "in its current form is a jump to far.") That's because of cultural differences from north to south, plus endemic trade imbalances and failure of member-states in southern Europe to collect taxes from the rich. ("There's a social contract of some kind [in italy and Greece] that the rich don't pay taxes.")
I had not realized how large, how central and how crucial the debt problems of Italy are. The game comes down to that if Italy stabilizes economically -- and it definitely can, assuming political stabilization, say the professors -- then probably Spain will be manageable. THEN, with Italy's and Spain's bond prices stabilizing, it would be possible for Greece (at that point) to do an Argentina. The Wharton professors apparently believe (although stopping short of actually saying it) that Greece ultimately may leave the Euro zone, issue a new drachma and default, even though it seems likely that Greece will take the latest deal offered by the ECB.
(Is that contradictory, that Greece will take the deal in December, only to default eventually anyway? -- maybe not since, after all, the rules of investment in junk bonds are not the same as the rules of investment in "risk-free" bonds! Anyway, nothing is certain, and Greece's fundamentals are evaluated very differently by the two Wharton professors, who are not agreed on prospects for Greece in the event of a default.)
The problem is in the timing -- if Greece defaults in the current context (December 2012), that could easily destabilize Italy and cause the great melt-down that everyone sees as the dire risk. On the other hand, even that would not mean that the Euro is going down, because it seems unlikely that QE will or can be done by the ECB -- even it Italian bonds tank, resulting in nationalization of French banks. However, we did hear last Thursday that the ECB "is considering a dramatic extension of its longest loans to commercial banks." (See, Wall Street Journal online story by Stephen Fidler, 25 November 2011.) My presumption is that these long-term loan extensions would be mainly for French banks, allowing them to amortize their exposure at least to some of their holdings in Italian bonds.
IMO, that's what goldbugs are waxing enthusiastic about (see, Saturday Reads Around the Internet, 11/26/2011) ... namely, possibility of runs on French banks due to collapse of Italian bonds due to a default by Greece in December. That seems to be the narrative at half-time for this latest bulls vs. bears game.
Finding objective documentaries on what's really going on, the history of the EU/ECB is near impossible, that's the closest I could come. Basically due to their system, there aren't a lot of easy answers. One common currency yet sovereign debt/bonds and sovereign economic management.
I think they still, in concert, should "pull a Sweden", nationalize the banks, cancel the debt. One big painful swallow.
This is a side note, but one of the things the EU shows is what happens when strong national economies are mixed with weaker ones. The weaker one pulls down the stronger one. Case in point was the reunification of Germany, took them this long to integrate.
I mention this because people "believe" unlimited migration is just fine and we should more integrate with Mexico. That, would be an/is a labor/economic disaster.
I agree. "Cleaning out the banking casino hall is the way to go"!
For the USA, I favor the American Monetary Reform Act (incorporated into Rep. Kucinich's NEEDS Act), per recommendations of American Monetary Institute. So, I would tend to favor something similar for Europe.
The thing is that the EU is an unprecedented experiment, and who knows how it's going to evolve or even if it's going to survive?
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