Behavioural Economics / Finance. William Lazonick: How High CEO Pay Hurts the 99 Percent. By William Lazonick, professor of economics and director of the UMass Center for Industrial Competitiveness. His book, “Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States” (Upjohn Institute, 2009) won the 2010 Schumpeter Prize. Cross posted from Alternet Corporations are not working for the 99 percent. But this wasn’t always the case. In a special five-part series, William Lazonick, professor at UMass, president of the Academic-Industry Research Network, and a leading expert on the business corporation, along with journalist Ken Jacobson and AlterNet’s Lynn Parramore, will examine the foundations, history and purpose of the corporation to answer this vital question: How can the public take control of the business corporation and make it work for the real economy?
In effect, U.S. top executives rake in obscene sums by not doing their jobs. The Runaway Compensation Train Unfortunately Clinton chose the wrong pay target.
Zombie Economics. This Is Where "The Money" Really Is - Be Careful What You Wish For. We have long shown that "investors" whatever that term means in the New Normal - those gullible enough to put their money in Bennie Madoff, pardon Bennie Bernanke Asset Management? - have been not only reluctant to put their money into stocks, but despite week after week of artificial, low volume highs, driven entirely by Primary Dealers (and now European banks post the $1.3 trillion in LTROs, not to mention even foreign Central Banks recently buying high beta stocks) spiking the market ever higher courtesy of record reserves, but in fact continue to pull their cash out of the stock market with every thrust higher. Why, just last week another $1.4 billion in cash was pulled from domestic equity funds, nominal Dow 13,000 be damned. Indicatively, this consolidated number was a modest $5.9 trillion the week when Lehman failed.
And therein lies the rub. As a reference, America currently has about $1 trillion of currency in circulation. Adrift in a Sea of Economic Data. Yves here. This post from MacroBusiness provides a good point of departure, and I’ll provide some comments further down. By Sell on News, a global macro equities analyst. Cross posted from MacroBusinessA little known fact about John Maynard Keynes, detailed in Jane Gleeson-White’s book “Double Entry” is that he was responsible for the development of national economic statistics and that he expected them to be aggregated only on a temporary basis.It was being done for the war effort, and would, he reasoned, not be necessary afterwards.
This certainly puts “Keynesianism” in a different perspective, and poses the intriguing question: where would we be without economic statistics? The Economist recently had a leader “Don’t Lie to Me Argentina” in which it accused Argentina of some kind of unforgivable treachery for politicising its economic statistics. Yves here. And perhaps the most important habit to adopt is to be aware of the limits of your knowledge. Hawtrey on the Interwar Gold Standard « Uneasy Money. Hawtrey on the Interwar Gold Standard I just got a copy of Ralph Hawtrey’s Trade Depression and the Way Out (1933 edition, an expanded version of the first, 1931, edition published three days before England left the gold standard).
Just flipping through the pages, I found the following tidbit on p. 9. The banking system of the world, as it was functioning in 1929, was regulated by the gold standard. Formerly the gold standard used to mean the use of money made of gold. Gold coin was used as a hand-to-hand medium of payment. Thus, for Hawtrey, the key formal difference between the interwar and the prewar gold standards was that gold coins were did not circulate as hand-to-hand money in the interwar gold standard (hence the reference to gold exchange standard), gold coins having been withdrawn almost universally from circulation during World War I to enable the belligerent governments to control the monetary reserves they needed to obtain war supplies.
Back to Hawtrey: Like this: The influence of macroeconomic ideas. Polly Toynbee says something very sad in the Guardian today. In talking about the Labour opposition in the UK, she writes They have lost the Keynesian argument (for now): the paradox of thrift is just too paradoxical for the public. I agree that the line that the recession was caused by everyone (public and government) borrowing too much, and that just as consumers are now having to tighten their belts, so should government, plays well because it seems virtuous. On the other hand the idea that if consumers and government start to save more at the same time there will not be enough demand and so output will fall seems fairly intuitive, and certainly not rocket science. Obviously Toynbee is not implying that every macroeconomic idea that is incomprehensible to the layperson will be ignored by policymakers. Is this true? Now imagine another country where there is a small minority of economists who are prepared to support this view.
All this is very pessimistic from my point of view. Prospects for the World Economy in 2012. C.P. Chandrasekhar and Jayati Ghosh There is a palpable sense of gloom and impending doom in most discussions of the world economy today. Even before, several economists had argued that the excessive optimism about ”V shaped recovery” that was being used to describe the economic revival in 2010 was premature and misplaced, especially as none of the fundamental contradictions of global capitalism that led to the previous crisis had been adequately addressed.
But they were once again written off as Cassandras by the financial media, which desperately sought sources of ”good news” and future engines of growth particularly among the emerging markets. Now even the most stalwart establishment voices are expressing growing concern and pessimism. This has already created a self-reinforcing cycle of contraction in the eurozone, and as long as European leaders (and incidentally the IMF) continue to press for fiscal austerity, this will continue. Olivier Blanchard didn't learn anything from the crisis. Olivier Blanchard, top economic honcho at the IMF (not the impossible mission force), says things are bleak and here are his four lessons from the crisis (brace yourself): "First, post the 2008-09 crisis, the world economy is pregnant with multiple equilibria—self-fulfilling outcomes of pessimism or optimism, with major macroeconomic implications.
Second, incomplete or partial policy measures can make things worse. Third, financial investors are schizophrenic about fiscal consolidation and growth. Fourth, perception molds reality. " As you can see it all depends on market mood. No lesson about the problems with fiscal consolidations leading to recessions (no matter what people may think about it). Bastiat's Insight on Government Inaction. I've noticed in discussions--in person, on Facebook, and in blogs--how hard it is for most people to see that opposition to having the government subsidize or require activity X does not mean that one opposes activity X. Frederic Bastiat addressed this in his classic article, "What is Seen and What Is Not Seen. " He wrote [Paragraph 1.63]: But, by an inference as false as it is unjust, do you know what the economists are now accused of? When we oppose subsidies, we are charged with opposing the very thing that it was proposed to subsidize and of being the enemies of all kinds of activity, because we want these activities to be voluntary and to seek their proper reward in themselves.
Thus, if we ask that the state not intervene, by taxation, in religious matters, we are atheists. If we ask that the state not intervene, by taxation, in education, then we hate enlightenment. Wow! Of course, they tell me what I left out and many of them look at me as if I'm an idiot. Economists and Democracy by Dani Rodrik. Exit from comment view mode. Click to hide this space CAMBRIDGE – I have been presenting my new book The Globalization Paradox to different groups of late.
By now I am used to all types of comments from the audience. But at a recent book-launch event, the economist assigned to discuss the book surprised me with an unexpected criticism. “Rodrik wants to make the world safe for politicians,” he huffed. Lest the message be lost, he then illustrated his point by reminding the audience of “the former Japanese minister of agriculture who argued that Japan could not import beef because human intestines are longer in Japan than in other countries.”
The comment drew a few chuckles. But the remark had a more serious purpose and was evidently intended to expose a fundamental flaw in my argument. This criticism reflects a serious misunderstanding of how markets really function. Consider all that is required. Once we recognize that markets require rules, we must next ask who writes those rules. The Big Lie. Trustee to Seize and Liquidate Even the Stored Customer Gold and Silver Bullion From MF Global.
MF Global Transferred $200 Million Cash to JP Morgan in London Three Days Before Bankruptcy. MF Global Client Attorney Explains In 1 Sentence Why JP Morgan's Involvement In MF Global Is Suspicious. James Koutoulas, one of the founders of the Commodity Customer Coalition—which represents the interests of over 8,000 MF Global customers, was just on CNBC to talk about the recent blitz of news on the investigation into MF Global's missing customer money. Koutoulas addressed a bank that's been popping up a lot in the investigation: JP Morgan. Reports this morning addressed emails that were sent between JP Morgan and MF Global in the brokerage firm's last days, and also the legality of a previously reported $200 million transfer from MF Global to JP Morgan. Last week, it was announced that JP Morgan's involvement in the MF Global debacle would be investigated. MF Global chief missing $1.2B is financial adviser to EPA.
Video: Sims and Sargent Nobel Lectures. Mr. Market's Rorschach Test. Last Thursday, the ECB announced that it would not be raising the policy interest rate, and hinted strongly that it would not be raising the rate in June either. This latter was a surprise, and Mr. Market did not like it much, as reflected in the slide of the euro against the dollar. (Here is an interview I did about the ECB decision that was taped Thursday morning.) Now comes news of private meetings on Friday night at which the Greek debt problem was discussed in the context of a possible Greek departure from the euro, news that presumably factored in to the ECB decision on Thursday.
More or less simultaneously with all of this, silver retreated in the context of rising margin requirements, but so did a wide range of other non-monetary commodities in what soon got called a commodity rout. The Rorschach test is this: Is this inkblot a picture of speculators trying to figure out which of the major currencies is least weak? In the first perception, Mr. Remember the crisis.
Recession, Restructuring, and the Ring Fence - October 3, 2011. October 3, 2011 Recession, Restructuring, and the Ring Fence John P. Hussman, Ph.D. All rights reserved and actively enforced. Reprint Policy In recent months, our recession models have forcefully shifted to warning of oncoming recession. On Friday, Lakshman Achuthan of the Economic Cycle Research Institute reviewed the weight of ECRI's research, observing "Now it's a done deal.
For us, the ECRI is an important source of analysis to confirm or question our own views, as it is undoubtedly the best private economic research group we know. The way you spot a thoughtful economist, in my view, is to listen for an understanding of both data analysis and equilibrium. "This is a done deal. "A recession is a process, and I think a lot of people don't understand that; they're looking for two negative quarters of GDP. "Failure" and Restructuring Think of restructuring this way. Look at Bank of America's balance sheet, for example. Now take a look at Citigroup's balance sheet. The Ring-Fence.
Trendy economic subjects. Crise islandaise. Why Black Market Entrepreneurs Matter to the World Economy | Magazine. Soon, two-thirds of the world's workers will be part of street economies, Neuwirth says.Photo: Jessica Dimmock Not many people think of shantytowns, illegal street vendors, and unlicensed roadside hawkers as major economic players. But according to journalist Robert Neuwirth, that’s exactly what they’ve become. In his new book, Stealth of Nations: The Global Rise of the Informal Economy, Neuwirth points out that small, illegal, off-the-books businesses collectively account for trillions of dollars in commerce and employ fully half the world’s workers. Further, he says, these enterprises are critical sources of entrepreneurialism, innovation, and self-reliance. And the globe’s gray and black markets have grown during the international recession, adding jobs, increasing sales, and improving the lives of hundreds of millions.
It’s time, Neuwirth says, for the developed world to wake up to what those who are working in the shadows of globalization have to offer. Neuwirth: Not at all. Réflexions sur la création monétaire. Modèle scandinave. Is the Near-Trillion-Dollar Student Loan Bubble About to Pop? September 21, 2011 | Like this article? Join our email list: Stay up to date with the latest headlines via email. “If you want to take a relation of violent extortion, sheer power, and turn it into something moral, and most of all, make it seem like the victims are to blame, you turn it into a relation of debt.” -- Economic anthropologist David Graeber, author of Debt: The First 5,000 Years Tarah Toney worked two full-time jobs to put herself through college, at McMurry University in Abilene, Texas, and still has $75,000 in debt.
“Right about the time I graduated, Texas severely cut funding to our education system—thanks, Perry--and school districts across the state stopped hiring and started firing. She continued, “In August my post-graduation grace period was up and all of the payments on my student loans amount to $500/month. Max Parker (not his real name) enrolled at Texas A&M in College Station, Texas to get a BA in economics and a BS in physics. The False Dichotomy of Greed. By Sell on News, a macro equities analyst. Cross posted from MacroBusiness The Euro crisis appears to be developing into something similar to the 1980s Latin American debt crisis when the idea that, to quote Walter Wriston, who ran First National City/ Citibank from the 1960s into the 1980s it was assumed that: “countries don’t go out of business.” The Latin American leadership demonstrated that they, in effect, could, by defaulting.
As a number of bloggers at MacroBusiness have pointed out, government finances are not like household finances, although they are often seen that way. That much is well understood in the financial community, although perhaps not as well in the wider public. What is not acknowledged in the financial community is the assumption implicit in Wriston’s comment: that governments can be seen like a business. It is the conflation of the two that is at the heart of the growing problems in the financial system, and it is driven mainly by political prejudice. Famous Quotations on Banking. Goldman, JP Morgan Have Now Become A Commodity Cartel As They Slowly Recreate De Beers' Diamond Monopoly | zero hedge. A Moment Among the Minskians. The Banking Oligopoly.