You could almost feel a "sigh" in Keen's words at the end of his speech. Ya know, the neoclassical BS fails AGAIN! Man, we need an anti-Reagan who will start saying whatever the antithesis of neoclassical doctrine is and start re-programming everyone's mind. Sometimes I think it has leeched into our DNA.
The bottom line though,
This is unfortunately the good news: the bad news is that this model only considers an economy undergoing a “credit crunch”, and not also one suffering from a serious debt overhang that only a direct reduction in debt can tackle. That is our actual problem, and while a stimulus will work for a while, the drag from debt-deleveraging is still present. The economy will therefore lapse back into recession soon after the stimulus is removed.
So, as staggering as everything is that has transpired to date (and many of us are clutching our hearts mightily), Helicopter Ben and Tiny Tim have only begun to spit in the ocean.
BTW, I ran across this analysis of the The Dollar Carry Trade which has a lot to do with the dollar slide. Be sure to read it to the end.
My impression on the bail out results is they are playing shell game and kick the can down the road.
But because there is so much non-transparency, from the relaxing mark-to-market to strange "treasury guarantees" never ending changing story on the PPIP to the Fed's $2 trillion we don't know who got it or what...
it's hard to say what's really going on.
I just saw NC has a post on BoA losing $40B in junk bonds by 2013.
In terms of debt being wrongly classified, I'll try to check him out, on surface that sure seems to be the case, but on overall deflation, well, I can feel those speculators hovering over oil esp. just waiting to inflate commodities.
I find it kind of compelling that it's the heterodox economists like Minsky, Keen and Hudson that have the best analysis of the problem, IMO. Everyone else is either winging it or trying to fit a square peg in a round hole, so to speak.
I highly recommend looking at some of Steve's research at the link I gave. It is way too wonkish for me, but it looks and sounds very elegant. Plus, he's managed to condense his thesis into words that doesn't require an advanced degree to understand and therefore, I catch his drift.
What is the date of this? Also, the actual interview starts on the 2nd clip.
For the plan to really nationalize the banks, bankrupt them, write off the debt and "Restart" is basically what Sweden did and something we wrote up here as well as COP seriously hinted at....as well as many others.
Of course all of that was ignored and here we are...
with lots of claims the banks will "make money" and the government "will get profits" on the money given to the TARP banks.
We have reports that banks are making profits by foreclosing in fees and so forth, so all they need to watch out for is falling prices and not being able to resell the property.
So far, and one can see this from the foreclosure rates plus the reports that the "programs" are pure spin, run around, end up getting higher payments etc. "no help in reality" that one group who isn't winning are homeowners.
I don't have any answers either because if someone signed up to buy a $500k house when there is no way their income can support the normal 30 yr. fixed payments...
Well, this bothers me. To me that's individual responsibility to know one cannot afford that basic home price.
This could get interesting. Uncle Ben spoke at Brookings this week and remarked about federal actions to "save homeowners from foreclosure," when he might more accurately have called them programs to save the banks from foreclosures. The wave of defaults leaves banks facing ugly alternatives. If they foreclose, they are stuck with deteriorating properties with a string of costs (security, insurance, taxes, rehab, legal fees), whereas forbearance means they might be able to carry the debt into the future and perhaps get some revenue out of it. A distant relative of mine was in default over payments of about $800 per month; they reduced her payment to $275. Sure, the principal gets kicked down the road, but the house stays inhabited and maintained. Foreclosures are way beyond the banks' staffing and this next wave of resets should be handled creatively by banks that, after all, have no desire to be in the real estate business. If the loans are performing at interest-only, why invite problems by demanding principal?
Frank T.
Fidelity Investments and Vanguard Group Inc. are among firms planning to set up an emergency pool of cash aimed at preventing a repeat of the run on money-market funds a year ago, said two people familiar with the plan.
Funds would pay a fee to an entity called the Liquidity Exchange Bank, building a cash reserve that would help them handle investor withdrawals during a crisis like the one last September, said the people, who asked not to be named because the information wasn’t public. The bank, which would buy securities at face value from the funds, could also apply for emergency support from the Federal Reserve discount window.
On surface this sounds pretty damn responsible of them...at least. although that "emergency support" I'd like to hear more but pooling resources for a small "insurance" fee to make sure that doesn't happen again, sure sounds better than forcing the Fed to step in and guarantee all money market funds on first pass read.
Now there have been major studies, experts in both executive compensation and corporate governance who have identified how bonuses create incentives to literally destroy a company, do risky moves (AIGFP anyone) or bad mergers due to bonuses (HP being a great example with Compaq), so the entire compensation structure is decoupled from corporate performance. Or if it is not decoupled, the bonuses only go to very short term stock performance, even just quarter by quarter.
That is bad! Bad for the national economy, bad for the U.S. worker, bad for systemic risk, bad for shareholders, bad for long term corporate strategy....
i.e. bad for all involved except....those few collecting those compensation packages.
So, why is it so hard to get this modified? They could still get filthy rich as incentives if this entire structure was modified to tie into the long term corporate performance.
Lots of emotions cursing through me after watching these videos. I would have to say anger and shame are the most dominant.
I have to admit that I could only take 15 minutes of the first film, and that was a stretch. If ever there was a case for a "consumption tax", well there's your evidence.
As a contrast to your exhibits of greed and avarice, as well as the reality of our permanent underclass, I offer this bit from Hellasious this morning:
. . . the following facts about Denmark:
Denmark has the rich world's (OECD-18) second-highest total taxation burden at 48.8% of GDP (USA at #17 at 29.6%).
It probably has the highest environmental and energy taxes of any country.
There are taxes on drinking water and the disposal of waste water.
Every company pays waste disposal charges and households are charged for garbage collection.
Packaging is taxed.
Danes pay 25% VAT (Value-Added Tax) on all goods and services.
...and yet...
Forbes magazine - you know, the Capitalist Tool - just rated Denmark as the #1 country in the world for business. For the second year in a row.
Economist magazine just did the same and added that this is to be so for another five years.
Danes are #1 in life satisfaction (USA #11).
Since 1980 Danish GDP has grown 70% while total energy consumption has remained flat.
Obviously, low taxes don't make for an enviable economy and it follows that lowering taxes does not make for infallible public policy, as Bush II and his incompetent gang proclaimed.
The problem with America is that it has too much infrastructure, and that it is crumbling is a benefit.
Cities are raped by having to constantly rebuild and repair and fix structures that are often redundant. They are sold on "one more bridge" or a "new tunnel" that will solve all traffic jams (in the same way that light rail is sold as a panacea) only to see it fail. Then they wait a generation until everyone forgets, and start up the process again.
There is, however, a desparate need for one type of infrastructure. Exubian, rural and suburban highways. With sprawl, many people are forced into driving on what were once country roads that now serve as thoroughfares. While the Liberal Urban Planners drained all the capital into building and rebuilding the tiny 10 square blocks of urban downtowns, the places where most Americans live and work in the 21st centuries, the vast sprawl between the coasts, was left high and dry.
State income tax for individuals is prohibited by Florida constitution and I believe it takes a 60% majority of voters to change that. So state revenues are constrained -- a 6% sales tax (some localities add a penny, by consent of their voters). Various other revenue streams from gasoline tax, tourism-related taxes, federal funds, fees, etc. Property taxes are local and dropping pretty fast on non-homesteaded properties (mine down 20% in past year due to falling assessments). Perversely, homesteaded property taxes drop more slowly due to an arcane feature of the "Save our homes" cap. For years, Florida depended on development and increasing real estate prices, with governmental budgets expanding with rising revenue. Now, they are feeling the pinch, but no big deterioration in infrastructure yet -- reserves, rainy day funds, etc. plus stimulus dollars. It is not a pretty picture. Unemployment is 10.7% and rising; about 17% of population is 65 and over. We may see lagged effects of deterioration in tax base, but overbuilding was evident for some time. I believe we are seeing part of a national reset, and the pinch may continue even as recovery sets in.
the money market funds are fairly stable, so this makes sense to me and really won't affect much, it was a "confidence" thing when the rates went negative right after the Lehman Brothers collapse.
What difference does it make to whether it was a demoncrat or a wicked republicant !!?? These guys are destroying our economy and will be successful in destroying 100's of millions of Americans and put us into their slave and FEMA camps!!
We have a new phrase, plus a new dimension to the move by some Barclay's executives to move toxic assets plus re-incorporate plus pay themselves gobs of money by overting U.K. regulation and moving to the Cayman Islands.
James Kwak is titling this regulatory Arbitrage 2.0, which is a fantastic titling for this "let's re-incorporate in another nation" to avoid everything from taxes to corporate governance laws to now this...and esp. to take write downs on toxic assets from the books or have them categorized so we must acknowledge them and abide by traditional capital leveraging rules.
well, that is what is it, regulatory arbitrage.
Now I kind of screwed up and didn't catch this overview paper on the practice of "repacking" toxic investments to avoid regulation as well as "Island hopping" to avoid regulations but more to the point is....how does one stop this entire playing of nation-states against each other to avoid playing by the rules?
It's a great read, great titling on how investments were "repackaged" to go into the "shadow banking system" to avoid regulatory oversight (dumped into structured investment vehicles, or SIVs).
Check it out, regulatory arbitrage which we can add to our terminology of labor arbitrage, wage arbitrage.
If anyone is wondering, in order to highlight particularly damning information (like the above graph) buried in some 200 page GAO report, I use photoshop and a tool to capture images from PDFs in Foxit reader, which is an alternative to the Adobe plugin for pdfs.
How are those original graphs are being created by other sites? They are downloading excel spreadsheet data, creating a graph from it and uploading the image to their sites. I have some of this "how to" info in the admin forum, in case anyone's interested.
We have the ability to upload images and host them on EP. If you click on the rich text editor and click on the image button, that's how you do it (or host them at an image hosting site and write raw HTML in your posts).
Sounds almost exactly like what Lehman Bros. did right before their fall, except they used their own office space, and some traders resigned, then went to the set aside Lehman office space and set up a new hedge fund with their toxic stuff in it.
Didn't seem to work too well for them, although this Barclays setup should make their valuation appear better to the market investors.
You could almost feel a "sigh" in Keen's words at the end of his speech. Ya know, the neoclassical BS fails AGAIN! Man, we need an anti-Reagan who will start saying whatever the antithesis of neoclassical doctrine is and start re-programming everyone's mind. Sometimes I think it has leeched into our DNA.
The bottom line though,
So, as staggering as everything is that has transpired to date (and many of us are clutching our hearts mightily), Helicopter Ben and Tiny Tim have only begun to spit in the ocean.
BTW, I ran across this analysis of the The Dollar Carry Trade which has a lot to do with the dollar slide. Be sure to read it to the end.
What a crazy world we live in.
I just spied this, he goes into a lot of the economic theory details....
Keen out thinks Larry Summers.
Nice amplification to your post!
My impression on the bail out results is they are playing shell game and kick the can down the road.
But because there is so much non-transparency, from the relaxing mark-to-market to strange "treasury guarantees" never ending changing story on the PPIP to the Fed's $2 trillion we don't know who got it or what...
it's hard to say what's really going on.
I just saw NC has a post on BoA losing $40B in junk bonds by 2013.
In terms of debt being wrongly classified, I'll try to check him out, on surface that sure seems to be the case, but on overall deflation, well, I can feel those speculators hovering over oil esp. just waiting to inflate commodities.
but is the dollar being devalued? I suspect so.
I find it kind of compelling that it's the heterodox economists like Minsky, Keen and Hudson that have the best analysis of the problem, IMO. Everyone else is either winging it or trying to fit a square peg in a round hole, so to speak.
I highly recommend looking at some of Steve's research at the link I gave. It is way too wonkish for me, but it looks and sounds very elegant. Plus, he's managed to condense his thesis into words that doesn't require an advanced degree to understand and therefore, I catch his drift.
What is the date of this? Also, the actual interview starts on the 2nd clip.
For the plan to really nationalize the banks, bankrupt them, write off the debt and "Restart" is basically what Sweden did and something we wrote up here as well as COP seriously hinted at....as well as many others.
Of course all of that was ignored and here we are...
with lots of claims the banks will "make money" and the government "will get profits" on the money given to the TARP banks.
We have reports that banks are making profits by foreclosing in fees and so forth, so all they need to watch out for is falling prices and not being able to resell the property.
So far, and one can see this from the foreclosure rates plus the reports that the "programs" are pure spin, run around, end up getting higher payments etc. "no help in reality" that one group who isn't winning are homeowners.
I don't have any answers either because if someone signed up to buy a $500k house when there is no way their income can support the normal 30 yr. fixed payments...
Well, this bothers me. To me that's individual responsibility to know one cannot afford that basic home price.
This could get interesting. Uncle Ben spoke at Brookings this week and remarked about federal actions to "save homeowners from foreclosure," when he might more accurately have called them programs to save the banks from foreclosures. The wave of defaults leaves banks facing ugly alternatives. If they foreclose, they are stuck with deteriorating properties with a string of costs (security, insurance, taxes, rehab, legal fees), whereas forbearance means they might be able to carry the debt into the future and perhaps get some revenue out of it. A distant relative of mine was in default over payments of about $800 per month; they reduced her payment to $275. Sure, the principal gets kicked down the road, but the house stays inhabited and maintained. Foreclosures are way beyond the banks' staffing and this next wave of resets should be handled creatively by banks that, after all, have no desire to be in the real estate business. If the loans are performing at interest-only, why invite problems by demanding principal?
Frank T.
Bloomberg:
On surface this sounds pretty damn responsible of them...at least. although that "emergency support" I'd like to hear more but pooling resources for a small "insurance" fee to make sure that doesn't happen again, sure sounds better than forcing the Fed to step in and guarantee all money market funds on first pass read.
Firstly, G20 hasn't even happened and they are already "compromise"
Bloomberg, G20, compromise
Then, Obama has more rhetoric, when we know the policy is to not set limits
here.
Now there have been major studies, experts in both executive compensation and corporate governance who have identified how bonuses create incentives to literally destroy a company, do risky moves (AIGFP anyone) or bad mergers due to bonuses (HP being a great example with Compaq), so the entire compensation structure is decoupled from corporate performance. Or if it is not decoupled, the bonuses only go to very short term stock performance, even just quarter by quarter.
That is bad! Bad for the national economy, bad for the U.S. worker, bad for systemic risk, bad for shareholders, bad for long term corporate strategy....
i.e. bad for all involved except....those few collecting those compensation packages.
So, why is it so hard to get this modified? They could still get filthy rich as incentives if this entire structure was modified to tie into the long term corporate performance.
But at minimum these super rich should be deincentivized to make these working poor poorer, which is what just happened.
Thanks for contributing to EP generally.
Lots of emotions cursing through me after watching these videos. I would have to say anger and shame are the most dominant.
I have to admit that I could only take 15 minutes of the first film, and that was a stretch. If ever there was a case for a "consumption tax", well there's your evidence.
As a contrast to your exhibits of greed and avarice, as well as the reality of our permanent underclass, I offer this bit from Hellasious this morning:
Enjoy your weekend!
The problem with America is that it has too much infrastructure, and that it is crumbling is a benefit.
Cities are raped by having to constantly rebuild and repair and fix structures that are often redundant. They are sold on "one more bridge" or a "new tunnel" that will solve all traffic jams (in the same way that light rail is sold as a panacea) only to see it fail. Then they wait a generation until everyone forgets, and start up the process again.
There is, however, a desparate need for one type of infrastructure. Exubian, rural and suburban highways. With sprawl, many people are forced into driving on what were once country roads that now serve as thoroughfares. While the Liberal Urban Planners drained all the capital into building and rebuilding the tiny 10 square blocks of urban downtowns, the places where most Americans live and work in the 21st centuries, the vast sprawl between the coasts, was left high and dry.
State income tax for individuals is prohibited by Florida constitution and I believe it takes a 60% majority of voters to change that. So state revenues are constrained -- a 6% sales tax (some localities add a penny, by consent of their voters). Various other revenue streams from gasoline tax, tourism-related taxes, federal funds, fees, etc. Property taxes are local and dropping pretty fast on non-homesteaded properties (mine down 20% in past year due to falling assessments). Perversely, homesteaded property taxes drop more slowly due to an arcane feature of the "Save our homes" cap. For years, Florida depended on development and increasing real estate prices, with governmental budgets expanding with rising revenue. Now, they are feeling the pinch, but no big deterioration in infrastructure yet -- reserves, rainy day funds, etc. plus stimulus dollars. It is not a pretty picture. Unemployment is 10.7% and rising; about 17% of population is 65 and over. We may see lagged effects of deterioration in tax base, but overbuilding was evident for some time. I believe we are seeing part of a national reset, and the pinch may continue even as recovery sets in.
Frank T.
I noticed that also so nice way to reduce global debt huh...
hmmmm....
the money market funds are fairly stable, so this makes sense to me and really won't affect much, it was a "confidence" thing when the rates went negative right after the Lehman Brothers collapse.
What difference does it make to whether it was a demoncrat or a wicked republicant !!?? These guys are destroying our economy and will be successful in destroying 100's of millions of Americans and put us into their slave and FEMA camps!!
econbrowser has some "projections" implying total lending will rebound.
We have a new phrase, plus a new dimension to the move by some Barclay's executives to move toxic assets plus re-incorporate plus pay themselves gobs of money by overting U.K. regulation and moving to the Cayman Islands.
James Kwak is titling this regulatory Arbitrage 2.0, which is a fantastic titling for this "let's re-incorporate in another nation" to avoid everything from taxes to corporate governance laws to now this...and esp. to take write downs on toxic assets from the books or have them categorized so we must acknowledge them and abide by traditional capital leveraging rules.
well, that is what is it, regulatory arbitrage.
Now I kind of screwed up and didn't catch this overview paper on the practice of "repacking" toxic investments to avoid regulation as well as "Island hopping" to avoid regulations but more to the point is....how does one stop this entire playing of nation-states against each other to avoid playing by the rules?
It's a great read, great titling on how investments were "repackaged" to go into the "shadow banking system" to avoid regulatory oversight (dumped into structured investment vehicles, or SIVs).
Check it out, regulatory arbitrage which we can add to our terminology of labor arbitrage, wage arbitrage.
Good find James.
If anyone is wondering, in order to highlight particularly damning information (like the above graph) buried in some 200 page GAO report, I use photoshop and a tool to capture images from PDFs in Foxit reader, which is an alternative to the Adobe plugin for pdfs.
How are those original graphs are being created by other sites? They are downloading excel spreadsheet data, creating a graph from it and uploading the image to their sites. I have some of this "how to" info in the admin forum, in case anyone's interested.
We have the ability to upload images and host them on EP. If you click on the rich text editor and click on the image button, that's how you do it (or host them at an image hosting site and write raw HTML in your posts).
Sounds almost exactly like what Lehman Bros. did right before their fall, except they used their own office space, and some traders resigned, then went to the set aside Lehman office space and set up a new hedge fund with their toxic stuff in it.
Didn't seem to work too well for them, although this Barclays setup should make their valuation appear better to the market investors.
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