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View: Opinions & Blogs on Finance, Politics and Economy

View: Opinions & Blogs on Finance, Politics and Economy

Ripping Off College Students Economic Future Previously, I had written on Fair Market Value and its use by the CBO’s Douglas Elmendorf to rate the risk of Student Loans as advocated by both The New America Foundation and the Heritage Foundation. A rebuttal answer to a partisan CBO, the right-leaning New America Foundation, and the conservative Heritage Foundation on the usage of Fair Market Valuation methodology in the same manner as what I would have used it for to rate the return on a piece of capital equipment is simple. It is inappropriate for student Loans as there is little or no risk to loaning students money which can not be discharged through bankruptcy. What is threatening the future wealth and income of college students is the increasing debt taken on by students seeking the education necessary to have a chance in a global economy where investments are seeking fewer Labor intensive opportunities. Student Debt has quadrupled from 2003 to 2013 going from ~$240 billion to > $1,000,000,000. References:

Food Stamp Cuts Add to Walmart’s Troubles Big Pharma’s focus on blockbuster cancer drugs squeezes out cheaper treatments. The result, one researcher says: ‘If we’re winning the war on cancer, we’re not winning that fast.’ Michael Retsky awoke from surgery to bad news. The tumor in his colon had spread to four of his lymph nodes and penetrated the bowel wall. When Retsky showed the pathology report to William Hrushesky, his treating oncologist, the doctor exclaimed, “Mamma mia.” “Michael had a mean-looking cancer,” Hrushesky remembers. Retsky didn’t need anyone to tell him his prognosis. In the absence of chemotherapy, there was an 80 percent chance of relapse. Like many cancer patients, Retsky didn’t much like the odds. Seventeen years later and cancer-free, Retsky cannot be entirely sure the treatment cured him, but he believes it likely did. Take Michelle Holmes, an associate professor of medicine at Harvard Medical School. The newer drugs have in some cases shown dramatic life-extending results for patients.

Heading toward a Cliff Heading toward a Cliff By Andy Xie 11.05.2013 The global economy is likely experiencing a bigger bubble than the one that unleashed the 2008 crisis, and should it burst the ensuing recession would be mammoth The U.S. Federal Reserve is unlikely to taper its quantitative easing in 2013. The recent improvement in the global economy is due to its surprise decision in September to not taper. The resulting return of hot money or increase in leverage for speculation boosted the economy. The market is again increasing the odds for Fed tightening. The Fed’s QE policy has caused a gigantic liquidity bubble in the global economy, especially in emerging economies and asset markets. Only inflation will force the Fed to tighten. As the economy is so sensitive to the Fed’s tightening, its pace will be slow, even when forced by inflation. U.S. inflation would trigger the bursting of the bubbles in emerging markets, similar to what occurred in the 1980s. Return of the Dotcom Bubble Bubble Globalization

The US Government is not “$16 trillion in the hole” Total – Treasury-Owned Gold 261,498,926.247 $11,041,059,958.16 Department of the Treasury Financial Management Service STATUS REPORT OF U.S. TREASURY-OWNED GOLD September 30, 2013 Summary Fine Troy Ounces Book Value Gold Bullion 258,641,878.074 $10,920,429,098.79 Gold Coins, Blanks, Miscellaneous 2,857,048.173 120,630,859.37 Total 261,498,926.247 11,041,059,958.16 Mint-Held Gold – Deep Storage Denver, CO 43,853,707.279 1,851,599,995.81 Fort Knox, KY 147,341,858.382 6,221,097,412.78 West Point, NY 54,067,331.379 2,282,841,677.17 Subtotal – Deep Storage Gold 245,262,897.040 10,355,539,085.76 Mint-Held Treasury Gold – Working Stock All locations – Coins, blanks, miscellaneous 2,783,218.656 117,513,614.74 Subtotal – Working Stock Gold 2,783,218.656 117,513,614.74 Grand Total – Mint-Held Gold 248,046,115.696 10,473,052,700.50 Federal Reserve Bank-Held Gold

Report: An Unfinished Mission: Making Wall Street Work for Us | Roosevelt Institute A Report by Americans for Financial Reform and the Roosevelt Institute Edited by Mike Konczal and Marcus Stanley Published November 12, 2013 More than five years after the financial crisis, there is still an open debate about what it would mean to have a financial sector that works for the benefit of the real economy, and how close we are to achieving that. In An Unfinished Mission: Making Wall Street Work For Us, Americans for Financial Reform and the Roosevelt Institute explore the policy questions that remain, both within and beyond the scope of the Dodd-Frank reforms. Contributors include co-editors Mike Konczal (Roosevelt Institute) and Marcus Stanley (Americans for Financial Reform); John E. Click here to download the full report (PDF) For a news round of the report and event click here. To view Senator Elizabeth Warren's keynote click here. Table of Contents:

Chart of the Day: No Inflation in the Developed World Despite QE By Marc Chandler, Global Head of Currency Strategy, Brown Brothers Harriman After several years of asset purchases by central banks, and in other ways, extremely easy monetary policy, general price levels have not shown the kind of inflation that many observers have feared. In fact, the opposite is a more potent force presently. This Great Graphic, composed on Bloomberg shows Japanese (white), US, (yellow) and euro zone (green) inflation. The BOJ is pursuing aggressive QE (so aggressive it is called QQE) to push inflation higher. On Friday, the euro area will confirm the Oct inflation, likely in line with the preliminary 0.7% Japan’s Sept national CPI was 1.1% and the US Sept CPI was 1.2%. The euro area has the lowest inflation of the three and the 25 bp rate cut is unlikely to have much impact on arresting the disinflationary forces. Marc Chandler More Posts - Website

Listen Keynesians, It’s the System! Response to Palley John Bellamy Foster (jfoster [at] is editor of Monthly Review, professor of sociology at the University of Oregon, and author (with Fred Magdoff) of The Great Financial Crisis (Monthly Review Press, 2009). Robert W. McChesney (rwmcches [at] is Gutgsell Endowed Professor of Communications at the University of Illinois at Urbana-Champaign, and author of The Political Economy of Media (Monthly Review Press, 2008) and (with John Nichols) The Death and Life of American Journalism (2010). Thomas I. Palley sent John Bellamy Foster this article in October 2009 for publication in Monthly Review, accompanied by the following note: “I’m hoping it might provoke some discussion and also generate some dialogue and consensus between Marxists (like yourself) and structural Keynesians (like myself).” Palley’s piece addressed (along with much else) the article “Monopoly-Finance Capital and the Paradox of Accumulation” by John Bellamy Foster and Robert W. —The Editors

A study in the dynamics of international flows… #2 In part #1 of this series on international flows, Norway’s trade deficit of the 1960′s was associated with foreign investment coming into their country. So the net trade deficit of the Current Account was matched by the net foreign investment surplus of the Capital and Financial Account. There is a principle in international income accounting… A country’s Current Account balance is matched by Net Foreign Investment. But we need to look at the relationship more closely. Which one is driving the other? Does a trade deficit simply determine the amount of net foreign investment? You might find someone saying that the US trade deficit is financed by the US receiving loans and investments from abroad. So what happens when China runs a Current Account surplus? If we don’t like receiving so many funds from China, what can we do about it? Savings and Investment The Current Account balance is equal to the net savings and net borrowing, public and private, within a country.

A study in the dynamics of international flows… #3 Mr. Krugman said yesterday that the economy is “awash in excess savings with nowhere to go”. If we are awash in excess savings, why do we borrow from foreigners? Let’s look at this equation to determine net borrowing from foreigners… Current Account deficit (net borrowing from abroad) is… (M – X) = (G – T) + (I – S) M = imports X = exports (M – X) = net borrowing from abroad G = govt spending T= tax revenues (G – T) = net public borrowing I = private investment S = private saving (I – S) = net private borrowing For US data from the 2nd quarter of 2013, I get this equation… (in billions of $) Current Account deficit $422 = $893 + $2529 – $3000 (M – X) = $422 (G – T) = $893 (I – S) = -$471 I = $2529 S = $3000 (labor and capital private savings combined) We do not have enough domestic savings to cover domestic investment and net govt borrowing. If we were awash in “excess” savings, would we be borrowing from abroad? And also, what does he mean that the savings have nowhere to go? So when Mr.

A study in the dynamics of international flows… #4 Part 1, Part 2, Part3 Yesterday I criticized Mr. Krugman for saying that savings were in excess. I start with a story yesterday from Spiegel Online International that pointed to Germany’s very large trade surplus, which is higher than China’s. “The Treasury’s semiannual currency report criticized Germany’s over-reliance on exports, a high current-account surplus and weak domestic demand. Why is Germany’s high Current Account surplus a problem? To answer these questions, I refer to an article written by Michael Pettis back on May 21st, 2013. National Savings vs. Here is a statement from his article, which is long, and should be read. “One of the reasons that it is been so hard for a lot of analysts, even trained economists, to understand the imbalances that were at the root of the current crisis is that we too easily confuse national savings with household savings.” So I criticized Mr. One can also use the % of total consumption to GDP to assess national savings. But let’s keep moving.