It didn't work so well the last time it happened. You can listen to this.
And toss in that Andrew Jackson let the Second Bank of the United States' charter expire as well. That led to a period called the "Free Banking" Era.
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Friday, May 17, 2013
Saturday, December 1, 2012
TED talk on inequality given by Nick Hanauer
Here is the much-talked-about TED talk on inequality given by Nick
Hanauer. We (TED) are posting it here to promote public discussion on an
important issue. For more background on this, see this blog post from
TED Curator Chris Anderson: http://tedchris.posterous.com
In a capitalist economy, the true job creators are middle-class consumers. And taxing the rich, to make investments, that make the middle class grow and thrive, is the single shrewdest thing we can do for the middle-class, the poor, and the rich. Thank you.
Friday, July 13, 2012
Fantasy Economies
since you aren't reading this stuff anyway,. I thought I would post this piece from the Fairness and Accuracy in Reporting (Fair) Blog
Extra! July 2012
Fantasy Economies
Enforcing neoliberalism through myth
Extra! July 2012
Fantasy Economies
Enforcing neoliberalism through myth
When reality fails to confirm the “truths” held by the international financial establishment, the corporate media can be relied on to concoct more cooperative scenarios.
In the real world, Argentina’s economy has been one of the most robust in the world for the past decade. But in the world of corporate journalism, Argentina is an economic rogue on the road to ruin. When its economy is discussed in U.S. corporate media, it’s largely to portray it as an example of national leaders making bad economic choices, a model of what not to do. This is what happened when Argentina recently bucked neoliberal nostrums and renationalized its major oil company, YPF, which had been acquired by the Spanish firm Repsol in a 1999 privatization.
In the New York Times (4/19/12), Latin American correspondent Simon Romero framed the “expropriation” in negative terms, larding his report with critics like the anonymous Latin American “financial experts” who
Mexican President Felipe Calderón, whose own country’s oil industry is nationalized along similar lines as Argentina’s, was quoted saying the YPF nationalization “did no one any good.” Romero also quoted one Brazilian newspaper columnist who wrote that “Argentina’s capacity to err seems unlimited,” and another who referred to Kirchner as a “Crazy Queen.”
Support for Argentina’s move was briefly noted and ominously framed. Cheer-leaders included Venezuela—“where President Chávez has exerted control over dozens of companies, including huge oil projects”—and Uruguayan President José Mujica, “a former member of the Tupamaros guerrilla group.”
Perhaps the most telling comment in the lopsided account was Chilean Economic Minister Pablo Longueira’s claim that Argentina’s action made Latin America a “less trustworthy region.” Longueira was clear about whose trust matters: “Capital flows exit to those places where there is more investor confidence.”
There was the obligatory Washington Post editorial (4/19/12), headlined “Argen-tina’s President Rejects Stepping Into the Future,” which said Kirchner is “continuing to pursue the autocratic populism she practiced before the election.” As NACLA (5/2/12) noted ironically, Post editors find Kirchner autocratic because she “was reelected in an historic landslide, and had the temerity to continue the policies that gave her such strong approval in the first place.” In fact, YPF nationalization is even more popular than Kirchner in Argentina, garnering a 62 percent approval rating (MercoPress, 4/23/12).
Business Week (4/19/12) published a critical story about the nationalization and the recent trade restrictions Argentina has put in place to help bolster exports and protect its workers’ jobs. The piece claimed Kirchner was pursuing “ever more insular economic policies,” under the instructive headline: “Argentina Goes Rogue Again.”
Argentina has been declared a economic rogue many times over, beginning in 2002 when it refused to continue under an IMF austerity regime and purposely defaulted on its debt. For its temerity, IMF official Anne Krueger reportedly dubbed Argentina “the ‘A’ word” (International Herald Tribune, 9/23/05).
Corporate media reporting on Argentina takes its cues from U.S. and global economic elites, whose remarks about Argentina’s economy are routinely critical.
In 2009, then–CIA director Leon Panetta enraged Argentine officials when he suggested that their economy might be unstable (BBC News, 2/27/09). The same year, CATO senior economist Daniel Mitchell attacked U.S. economic policy by equating it to “reckless” Argentina (Washington Times, 5/28/09): “The U.S. has become the Argentina of the industrialized world, with our reckless monetary policy and irresponsible fiscal policy.”
The U.S. should be so lucky.
Since defaulting on its debt in 2002 and extracting itself from an economic regime dictated by the International Monetary Fund (IMF), Argentina’s economy has grown more rapidly than any in the Western Hemisphere (Guardian, 10/23/11). While developing countries are expected to grow more rapidly than developed ones, the gap between Argentine growth since 2002 (a 7.4 percent per year average) is still impressive next to the U.S.’s almost flat 1.7 percent per annum growth rate (IMF World Economic Outlook Database, 4/12). (Some private estimates, such as those of Orlando J. Fererres & Asociados, put Argentina's average annual growth over this period at about 1 percentage point less than the government/IMF data.)
And while Argentina has its share of economic issues—a persistent problem with inflation, to name one—this year the IMF estimates the country’s unemployment rate will fall to 6.7 percent, its lowest point since 1992.
Last year, economics blogger Yves Smith (Naked Capitalism, 10/23/11) noted how Argentina gets little credit in the U.S. media: “Ever notice nothing is ever said in the mainstream media about Argentina’s economy, save that it had a big default?” She pointed out that the country’s economy had grown “nearly twice as fast” as Brazil’s—which is often cited as a positive model in U.S. media—while increasing social spending “from 10.3 percent of GDP to 14.2 percent of GDP,” and decreasing inequality: “Poverty and extreme poverty have fallen by roughly two-thirds.”
The lesson here is that how well you do by your people has little value next to how well you do by bankers. Never mind that its economy has outperformed its better-behaved neighbors; Argentina is a bad example because it flouts international financial interests.
By the same skewed reasoning that finds Argentina’s high-performing economy wanting, the U.S. corporate press presents Ireland’s stagnant economy as a positive model. “Madness in Spain Lingers as Ireland Chases Recovery,” was a Bloomberg headline (5/2/12) over a piece that quoted one European expert, “Ireland faced up to its problems faster than others and we expect growth there rather soon.”
In a Wall Street Journal op-ed (10/10/11), “Lessons of the Irish Come-back,” U.S. bond trader Michael Hasenstab was even more explicit, touting Ireland’s severe austerity measures, including harsh cuts in jobs, wages and spending, along with sharp tax hikes, measures that supposedly made Ireland more competitive. The bond trader’s bullishness on the Irish economy earned him a glowing profile in the New York Times (2/8/12), headlined “A Contrarian Bets Ireland and Hungary Will Rebound”; the report explained that “Mr. Hasenstab has been an evangelist for Ireland’s stoic response to the crisis.”
NPR interviewed European editor of the Economist John Peet (4/30/12), who praised Ireland and recommended its austerity agenda:
Responding to a question about how austerity seems to be forcing some Euro nations into deeper recession, Peet told NPR’s Steve Inskeep:
While acknowledging that some economies didn’t seem to react well to austerity, Peet failed to respond to Inskeep’s question: “I mean, you’re saying that hardly anyone seems to be proposing seriously another way out?”
Do “professional economists” really agree that austerity measures should be more rapidly implemented; that there are no real alternatives; and, most fundamentally, that Ireland’s economy is on the rebound as austerity boosters insist?
The answer on all three counts is no.
New York Times columnist Paul Krugman is one of many well-known economists who say treating recessed or demand-starved economies with austerity is counterproductive. Krugman is fond of quoting John Maynard Keynes, a giant in economic theory, who said, “The boom, not the slump, is the right time for austerity at the Treasury.” Keynes said this just as FDR briefly embraced austerity and brought on the Recession of 1937.
Contrary to the shiny happy media accounts, Ireland is no model of the benefits of austerity. In his New York Times blog (4/30/12), Krugman responded to Peet’s claim that Ireland was “beginning to grow again” with a graph demonstrating an Irish economy still stuck in a prolonged slump.
Wrote Krugman: “To be fair, Peet isn’t alone. The legend of Irish recovery has somehow set in, and nobody on the pro-austerity side seems to feel any need to look at the data, even for a minute, to check whether the legend is true.”
The last quarter of 2011, according to the Irish Central Statistics Office (12/12/11), marked the largest quarterly fall in employment in two years, leaving Ireland with unemployment hovering above 14 percent.
The jobs picture is so dire that large numbers of young Irish workers are leaving the country to seek work abroad. According to the Guardian (3/8/12), unemployment has driven emigration to its highest level in two decades:
Argentina and Ireland are just the most recent examples of corporate media distorting the picture of various national economies to reinforce austerity and neoliberalism. There is no shortage of corporate media stories about how Greece, which is balking at the imposition of ever-harsher IMF/EU austerity measures, should follow the example of Latvia, which has begun to show growth after undergoing a harsh IMF/EU austerity regime (e.g., Wall Street Journal, 5/21/12).
In their quest to dissuade Greece from, say, taking the Argentine path and defaulting on its debt, corporate media usually obscure the fuller picture of Latvia, which has paid enormous economic and social costs for its alleged salvation. According to the Latvian census, from 2001 to 2011, the country’s population has receded from roughly 2.4 million to 2.1 million—losing one of every eight residents—according to the Latvian national statistics office (Baltic News Service, 1/18/12).
Despite recent growth, the country’s GDP is still more than 15 percent below its 2007 peak (Conscience of a Liberal, 3/26/12). And, after all this pain and dislocation, as academics Jeffrey Sommers, Arunas Juska and Michael Hudson point out (Naked Capitalism, 12/6/11), Latvia and its neighbor Lithuania remain in a deep financial hole, even as they are celebrated as models of success:
When corporate media report on other countries, the stories they tell have little to do with the actual functioning of their economies; they serve rather as morality tales that illustrate how those who follow neoliberal prescriptions are rewarded and those who deviate are punished. Reality conveys a quite different message.
In the real world, Argentina’s economy has been one of the most robust in the world for the past decade. But in the world of corporate journalism, Argentina is an economic rogue on the road to ruin. When its economy is discussed in U.S. corporate media, it’s largely to portray it as an example of national leaders making bad economic choices, a model of what not to do. This is what happened when Argentina recently bucked neoliberal nostrums and renationalized its major oil company, YPF, which had been acquired by the Spanish firm Repsol in a 1999 privatization.
In the New York Times (4/19/12), Latin American correspondent Simon Romero framed the “expropriation” in negative terms, larding his report with critics like the anonymous Latin American “financial experts” who
greeted [Argentine President Cristina Fernández de] Kirchner’s abrupt decision with dismay, saying the nationalization and other economic policies were making Argentina more of a hemispheric outlier than a leader in a bold new economic era.
Mexican President Felipe Calderón, whose own country’s oil industry is nationalized along similar lines as Argentina’s, was quoted saying the YPF nationalization “did no one any good.” Romero also quoted one Brazilian newspaper columnist who wrote that “Argentina’s capacity to err seems unlimited,” and another who referred to Kirchner as a “Crazy Queen.”
Support for Argentina’s move was briefly noted and ominously framed. Cheer-leaders included Venezuela—“where President Chávez has exerted control over dozens of companies, including huge oil projects”—and Uruguayan President José Mujica, “a former member of the Tupamaros guerrilla group.”
Perhaps the most telling comment in the lopsided account was Chilean Economic Minister Pablo Longueira’s claim that Argentina’s action made Latin America a “less trustworthy region.” Longueira was clear about whose trust matters: “Capital flows exit to those places where there is more investor confidence.”
There was the obligatory Washington Post editorial (4/19/12), headlined “Argen-tina’s President Rejects Stepping Into the Future,” which said Kirchner is “continuing to pursue the autocratic populism she practiced before the election.” As NACLA (5/2/12) noted ironically, Post editors find Kirchner autocratic because she “was reelected in an historic landslide, and had the temerity to continue the policies that gave her such strong approval in the first place.” In fact, YPF nationalization is even more popular than Kirchner in Argentina, garnering a 62 percent approval rating (MercoPress, 4/23/12).
Business Week (4/19/12) published a critical story about the nationalization and the recent trade restrictions Argentina has put in place to help bolster exports and protect its workers’ jobs. The piece claimed Kirchner was pursuing “ever more insular economic policies,” under the instructive headline: “Argentina Goes Rogue Again.”
Argentina has been declared a economic rogue many times over, beginning in 2002 when it refused to continue under an IMF austerity regime and purposely defaulted on its debt. For its temerity, IMF official Anne Krueger reportedly dubbed Argentina “the ‘A’ word” (International Herald Tribune, 9/23/05).
Corporate media reporting on Argentina takes its cues from U.S. and global economic elites, whose remarks about Argentina’s economy are routinely critical.
In 2009, then–CIA director Leon Panetta enraged Argentine officials when he suggested that their economy might be unstable (BBC News, 2/27/09). The same year, CATO senior economist Daniel Mitchell attacked U.S. economic policy by equating it to “reckless” Argentina (Washington Times, 5/28/09): “The U.S. has become the Argentina of the industrialized world, with our reckless monetary policy and irresponsible fiscal policy.”
The U.S. should be so lucky.
Since defaulting on its debt in 2002 and extracting itself from an economic regime dictated by the International Monetary Fund (IMF), Argentina’s economy has grown more rapidly than any in the Western Hemisphere (Guardian, 10/23/11). While developing countries are expected to grow more rapidly than developed ones, the gap between Argentine growth since 2002 (a 7.4 percent per year average) is still impressive next to the U.S.’s almost flat 1.7 percent per annum growth rate (IMF World Economic Outlook Database, 4/12). (Some private estimates, such as those of Orlando J. Fererres & Asociados, put Argentina's average annual growth over this period at about 1 percentage point less than the government/IMF data.)
And while Argentina has its share of economic issues—a persistent problem with inflation, to name one—this year the IMF estimates the country’s unemployment rate will fall to 6.7 percent, its lowest point since 1992.
Last year, economics blogger Yves Smith (Naked Capitalism, 10/23/11) noted how Argentina gets little credit in the U.S. media: “Ever notice nothing is ever said in the mainstream media about Argentina’s economy, save that it had a big default?” She pointed out that the country’s economy had grown “nearly twice as fast” as Brazil’s—which is often cited as a positive model in U.S. media—while increasing social spending “from 10.3 percent of GDP to 14.2 percent of GDP,” and decreasing inequality: “Poverty and extreme poverty have fallen by roughly two-thirds.”
The lesson here is that how well you do by your people has little value next to how well you do by bankers. Never mind that its economy has outperformed its better-behaved neighbors; Argentina is a bad example because it flouts international financial interests.
By the same skewed reasoning that finds Argentina’s high-performing economy wanting, the U.S. corporate press presents Ireland’s stagnant economy as a positive model. “Madness in Spain Lingers as Ireland Chases Recovery,” was a Bloomberg headline (5/2/12) over a piece that quoted one European expert, “Ireland faced up to its problems faster than others and we expect growth there rather soon.”
In a Wall Street Journal op-ed (10/10/11), “Lessons of the Irish Come-back,” U.S. bond trader Michael Hasenstab was even more explicit, touting Ireland’s severe austerity measures, including harsh cuts in jobs, wages and spending, along with sharp tax hikes, measures that supposedly made Ireland more competitive. The bond trader’s bullishness on the Irish economy earned him a glowing profile in the New York Times (2/8/12), headlined “A Contrarian Bets Ireland and Hungary Will Rebound”; the report explained that “Mr. Hasenstab has been an evangelist for Ireland’s stoic response to the crisis.”
NPR interviewed European editor of the Economist John Peet (4/30/12), who praised Ireland and recommended its austerity agenda:
And of the countries that were in trouble, I would say Ireland looks as if it’s the best at the moment, because Ireland has implemented very heavy austerity programs, but is now beginning to grow again. So there are some examples, but when you look at countries like France, Spain, Italy, there’s an awful long way to go.
Responding to a question about how austerity seems to be forcing some Euro nations into deeper recession, Peet told NPR’s Steve Inskeep:
Well, I think the professional economists, what they want to see is much faster implementation of reforms to the labor market, deregulation, liberalization of product markets across Europe, to make the European economies more competitive.
While acknowledging that some economies didn’t seem to react well to austerity, Peet failed to respond to Inskeep’s question: “I mean, you’re saying that hardly anyone seems to be proposing seriously another way out?”
Do “professional economists” really agree that austerity measures should be more rapidly implemented; that there are no real alternatives; and, most fundamentally, that Ireland’s economy is on the rebound as austerity boosters insist?
The answer on all three counts is no.
New York Times columnist Paul Krugman is one of many well-known economists who say treating recessed or demand-starved economies with austerity is counterproductive. Krugman is fond of quoting John Maynard Keynes, a giant in economic theory, who said, “The boom, not the slump, is the right time for austerity at the Treasury.” Keynes said this just as FDR briefly embraced austerity and brought on the Recession of 1937.
Contrary to the shiny happy media accounts, Ireland is no model of the benefits of austerity. In his New York Times blog (4/30/12), Krugman responded to Peet’s claim that Ireland was “beginning to grow again” with a graph demonstrating an Irish economy still stuck in a prolonged slump.
Wrote Krugman: “To be fair, Peet isn’t alone. The legend of Irish recovery has somehow set in, and nobody on the pro-austerity side seems to feel any need to look at the data, even for a minute, to check whether the legend is true.”
The last quarter of 2011, according to the Irish Central Statistics Office (12/12/11), marked the largest quarterly fall in employment in two years, leaving Ireland with unemployment hovering above 14 percent.
The jobs picture is so dire that large numbers of young Irish workers are leaving the country to seek work abroad. According to the Guardian (3/8/12), unemployment has driven emigration to its highest level in two decades:
Young people, particularly men in their late teens and early 20s, are turning to other European countries, Australia and the Middle East for work. There are now 356,000 Irish nationals living in the UK, latest Office for National Statistics figures show, with the number of arrivals second only to Polish immigrants.
Argentina and Ireland are just the most recent examples of corporate media distorting the picture of various national economies to reinforce austerity and neoliberalism. There is no shortage of corporate media stories about how Greece, which is balking at the imposition of ever-harsher IMF/EU austerity measures, should follow the example of Latvia, which has begun to show growth after undergoing a harsh IMF/EU austerity regime (e.g., Wall Street Journal, 5/21/12).
In their quest to dissuade Greece from, say, taking the Argentine path and defaulting on its debt, corporate media usually obscure the fuller picture of Latvia, which has paid enormous economic and social costs for its alleged salvation. According to the Latvian census, from 2001 to 2011, the country’s population has receded from roughly 2.4 million to 2.1 million—losing one of every eight residents—according to the Latvian national statistics office (Baltic News Service, 1/18/12).
Despite recent growth, the country’s GDP is still more than 15 percent below its 2007 peak (Conscience of a Liberal, 3/26/12). And, after all this pain and dislocation, as academics Jeffrey Sommers, Arunas Juska and Michael Hudson point out (Naked Capitalism, 12/6/11), Latvia and its neighbor Lithuania remain in a deep financial hole, even as they are celebrated as models of success:
But one hears only celebratory praise from the neoliberal lobbyists whose policies have deindustrialized and stripped the Baltic economies of Lithuania and Latvia, leaving them debt-ridden and uncompetitive. It is as if their real estate collapse from bubble-level debt leveraging, that left their basic infrastructure in the hands of kleptocrats, is a free-market success story.
When corporate media report on other countries, the stories they tell have little to do with the actual functioning of their economies; they serve rather as morality tales that illustrate how those who follow neoliberal prescriptions are rewarded and those who deviate are punished. Reality conveys a quite different message.
See FAIR's Archives for more on:
Economy
Friday, May 18, 2012
Saturday, April 21, 2012
Friday, December 2, 2011
Debtocracy
Here's the Greek Documentary that explains the causes of the debt crisis and proposes solutions, hidden by the government and the dominant media. Aris Hadjistefanou and Katerina Kitidi talk to economists, journalists and celebrities from around the world outlining the steps that led Greece to the debt trap, the chreokratia.
Debtocracy International Version by BitsnBytes
Debtocracy International Version by BitsnBytes
Wednesday, November 9, 2011
Saturday, October 29, 2011
Thursday, October 27, 2011
Extra Credit???
American financier Jay Gould. After hiring strikebreakers, he said
What was Black Friday (1869)?
"I can hire one-half of the working class to kill the other half."Discuss.
What was Black Friday (1869)?
Robbing Peter to pay Paul
One of my neighbours is a German (husband) and Greek (wife) couple, family arguments about finance have been over the topic of the Euro and Greek debt for the past couple of years rather than the usual financial arguments!
Anyway, there may be some peace in the household today with the announcement that this has been addressed. Although, it's amusing how its been addressed, which is why I've titled this "Robbing Peter to Pay Paul". One of the question I asked on my first quiz was:
And anyone who was dim enough to have lent money to these countries is getting a fraction of their investment.
The thing is that both government and the private sector are having to take a hit in this "solution". "Solution" since it offers more questions than answers. Not to mention the failure of a few countries will effect the world economy. Which gets back to my too big to fail comment.
Who is too big to fail: Governments or the private sector?
I've wanted to post Michael Peston's BBC Documentary Britain's Banks: Too Big to Save? Although another good documentary is Inside Job. Ireland and Iceland were both brought to their knees by the excesses of their banking industries, yet the public ended up bailing them out.
Regulation is needed, but that means that we have another question which is who should regulate the banking/financial industry: the public or private sector? For most of its existence, the Bank of England was a private institution (nationalised in 1946) that worked to regulate the British economy. So, a private body can act as a "reserve" bank.
Of course, there are issues of control and transparency when one discusses whether such a body should be public or privately run.
Anyway, we now have a patch job of a solution to the Euro crisis--how long before another crisis occurs?
Anyway, there may be some peace in the household today with the announcement that this has been addressed. Although, it's amusing how its been addressed, which is why I've titled this "Robbing Peter to Pay Paul". One of the question I asked on my first quiz was:
How much national debt is too much?Which was a trick question, but entirely relevant to this solution. I would toss in the concept of "too Big To fail" as well, but the question ultimately is "who is too big to fail: the Governments or Banks?" Governments are adding more money to the pot, and banks have been told to increase their reserves in this solution to the Euro crisis.
And anyone who was dim enough to have lent money to these countries is getting a fraction of their investment.
The thing is that both government and the private sector are having to take a hit in this "solution". "Solution" since it offers more questions than answers. Not to mention the failure of a few countries will effect the world economy. Which gets back to my too big to fail comment.
Who is too big to fail: Governments or the private sector?
I've wanted to post Michael Peston's BBC Documentary Britain's Banks: Too Big to Save? Although another good documentary is Inside Job. Ireland and Iceland were both brought to their knees by the excesses of their banking industries, yet the public ended up bailing them out.
Regulation is needed, but that means that we have another question which is who should regulate the banking/financial industry: the public or private sector? For most of its existence, the Bank of England was a private institution (nationalised in 1946) that worked to regulate the British economy. So, a private body can act as a "reserve" bank.
Of course, there are issues of control and transparency when one discusses whether such a body should be public or privately run.
Anyway, we now have a patch job of a solution to the Euro crisis--how long before another crisis occurs?
It's quiz time again!
OK, one of the byproducts of the Occupy movement is that it is getting people to discuss economics. In this case, this quiz was designed to get you thinking about economic history (particularly US, but also includes world economic history) and some economic concepts that might help you grasp what exactly is going on.
of course, I think most people are pretty confused as to what is going on and what a reasonable solution would be.
There are "answers" to this, but I was hoping to get some discussion going. So, let's see comments!
of course, I think most people are pretty confused as to what is going on and what a reasonable solution would be.
There are "answers" to this, but I was hoping to get some discussion going. So, let's see comments!
What was colonial scrip?
What were the Currency Acts of 1751, 1764, and 1773?
What was the economic complaint mentioned in the Declaration of Independence (not tax related).
What were two economic results of the North American Independence Movement?
What was Shays' Rebellion?
If a factory closed, and the laid off workers bought it, sold shares proportional to their investments and reopened the factory: Would that be communism or capitalism?
What do Brook Farm, the Harmony Society (New Harmony, IN), the Shakers, the Amana Colonies, the Oneida Community, The Icarians, Bishop Hill Commune,Aurora, Oregon, and Bethel, MO have in common? I'm going to toss in who were the Diggers and Levellers as well even though I am not sure if they had much influence in the Massachusetts Colony.
What is behavioural economics?
What is the Psychology of the Bubble.
Were there any financial crashes prior to the existence of the Federal Reserve Bank?
What was tulip mania?
What is the intrinsic (natural? Real?) value of gold? Silver?
What are Rai Stones? Tally Stick? (see this interesting blog post for a good answer, which also apples to 12)
- If we were still on the gold standard, we would have dollars that were worth $1600 in buying power: discuss.
What is the Big Mac Index (Wikipedia and the people who produce the index have a couple of good pieces on it--wikipedia being the more accessible of the two?)
What are some theories of financial crises?
What are the types of financial crisis?
- This comment which is a paraphrase from the TV show Jute City:
Money is great when it's used as an accounting tool, but it becomes evil when it becomes a commodity.
Discuss
Tuesday, October 25, 2011
The Answers to my Economic Quiz
The Answers to my Economic Quiz
1. How much of the money supply exists as physical currency?
3%
BTW, Banks only need to keep 5% in cash reserves under the fractional reserve system. Thus the inability to repay account holders if there is a run on the bank.
2. How exactly does Quantitative Easing work (hint--printing money is a failing answer)
Primary deficit,
total deficit
debt
10. What is full reserve banking?
11. What are some of the potential policy solutions for budget deficits and critiques of each?
1. How much of the money supply exists as physical currency?
3%
BTW, Banks only need to keep 5% in cash reserves under the fractional reserve system. Thus the inability to repay account holders if there is a run on the bank.
2. How exactly does Quantitative Easing work (hint--printing money is a failing answer)
A central bank buys financial assets to inject a pre-determined quantity of money into the economy. This is distinguished from the more usual policy of buying or selling government bonds to keep market interest rates at a specified target value.3. What are the two types of government debt?
A central bank implements quantitative easing by purchasing financial assets from banks and other private sector businesses with new electronically created money. This action increases the excess reserves of the banks, and also raises the prices of the financial assets bought, which lowers their yield.
In simple words, the government buys back the bonds it issued, instead of printing money.
Government debt can be categorized as internal debt (owed to lenders within the country) and external debt (owed to foreign lenders).4. What is a budget deficit?
the amount by which some measure of government revenues falls short of some measure of government spending.5. What is the difference between government deficit and government debt?
Debt is the difference between all the money that a government6. Define in relation to each other:
has ever spent and all the revenue that it has ever collected. (is the net accumulated indebtedness by a government.)
Deficit is the difference between what the government expenditures and
the revenue it receives during a particular year.
So each year's deficit is added to the existing debt. When revenue exceeds spending,it's called a surplus, which subtracts from the debt.
Primary deficit,
total deficit
debt
The primary deficit is defined as the difference between current government spending on goods and services and total current revenue from all types of taxes net of transfer payments. The total deficit (which is often called the fiscal deficit or just the 'deficit') is the primary deficit plus interest payments on the debt.7. What is a Structural deficit?
Structural deficit issues can only be addressed by explicit and direct government policies: reducing spending, increasing the tax base, and/or increasing tax rates. It can be described as more "chronic" or long-term in nature hence needing government action to remove it.8. What are the forms of Government Indebtedness?
Governments usually borrow by issuing securities, government bonds and bills.9. What is fractional reserve banking?
Public loans, the characteristic form of government debts in modern times, may be in the form of short-term instruments, e.g., tax warrants, treasury certificates, treasury notes, and other notes such as those of the Federal Reserve System; of long-term government bonds; and of various notes that promise yearly payment of interest but do not specify a date for payment of principal. Although governments in times of stress have often converted bonds to issues carrying lower interest rates, have depreciated the value of currency, or have defaulted entirely on their obligations, with disastrous results for the bondholders, the number of those holding government obligations has increased in recent history. Default on obligations held by foreigners has been a reason offered for past intervention by major powers in Latin America, Africa, and elsewhere.
Less creditworthy countries sometimes borrow directly from supranational institutions.
A banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal.
10. What is full reserve banking?
100% of deposits are kept in reserve. It would be like a chequing account, there must be enough money present to pay obligations.
11. What are some of the potential policy solutions for budget deficits and critiques of each?
- Increase Taxes--while increasing prices works in the private sector, people get upset if they have to pay more in taxes.
- Reduce Government Spending--cuts in services can upset various segments of the population.
- Increase Taxes and Reduce Government Spending: the best solution if you are inclined this way, but also has the two problems above.
- Changes in Tax Code--anything to do with taxes will have one segment or another of the population upset.
- Reduce Debt Service Liability: paying down the debt, or reducing the debt payments requires income.
I forgot to ask what are the sources of government "income", or revenue: Taxes of various kinds, Fees for services, and issuance of debt (bonds). The amount of the US government revenue which comes from taxes is 96%. Unfortunately, that was an important question. Government revenue is an important part of fiscal policy. Oh well!
Government revenue may also include reserve bank currency which is printed. This is recorded as an advance to the retail bank together with a corresponding currency in circulation expense entry. The income derives from the Official Cash rate payable by the retail banks for instruments such as 90 day bills.There is a question as to whether using generic business based accounting standards can give a fair and accurate picture of government accounts in that with a monetary policy statement to the reserve bank directing a positive inflation rate. The expense provision for the return of currency to the reserve bank is largely symbolic in that to totally cancel the currency in circulation provision all currency would have to be returned to the reserve bank and cancelled.
Some countries and other jurisdictions with government owned industries can include profits from those as revenue.The problem is that the relationship of revenue to spending was sort of the point of this quiz. US Government revenue is pretty much limited to taxes and fees. How can one provide the the same amount of services (or who pays for the services) is one of the points I was trying to make.
- Increase the tax base: this is the best solution in my opinion, but it requires getting more people working and being productive citizens. While some conservatives have mentioned this, they neglect the most important part--getting more people to work and who creates the jobs.
In private industry, the seller can raise prices (or decrease the quality of the products or service). The public sector is limited in its ability to increase revenue without sacrificing services.
12. What is the difference between Gross Domestic Product (GDP) and Gross National Product (GNP)?Gross domestic product (GDP) refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living.13. How much national debt is too much?
Gross National Product (GNP) is the market value of all products and services produced in one year by labor and property supplied by the residents of a country. Unlike Gross Domestic Product (GDP), which defines production based on the geographical location of production, GNP allocates production based on ownership.
GNP does not distinguish between qualitative improvements in the state of the technical arts (e.g., increasing computer processing speeds), and quantitative increases in goods (e.g., number of computers produced), and considers both to be forms of "economic growth".Trick question--some economists say there is no such thing as too much national debt. The real answer is that it is what the public will accept.
14. Is inflation a bad thing for an economy?Another trick question, while it has adverse effects on an economy, some inflation is considered the sign of a healthy economy.15. What is a commodity based monetary system?It is one where the money is a certain amount of a commodity--e.g gold or silver.16. What is a share of stock?
Where the money is represented by a commodity, the currency is called representative. That is the monetary system in which the standard economic unit of account is a fixed mass of a commodity. But that can still suffer from inflation.
The difference between the two is that one is the actual commodity, the other the money is based on the commodity: hence representative.
In the early 1930s, the Federal Reserve defended the fixed price of dollars in respect to the gold standard by raising interest rates, trying to increase the demand for dollars. Its commitment and adherence to the gold standard explain why the U.S. did not engage in expansionary monetary policy. To compete in the international economy, the U.S. maintained high interest rates. This helped attract international investors who bought foreign assets with gold. Higher interest rates intensified the deflationary pressure on the dollar and reduced investment in U.S. banks. Commercial banks also converted Federal Reserve Notes to gold in 1931, reducing the Federal Reserve's gold reserves, and forcing a corresponding reduction in the amount of Federal Reserve Notes in circulation. This speculative attack on the dollar created a panic in the U.S. banking system. Fearing imminent devaluation of the dollar, many foreign and domestic depositors withdrew funds from U.S. banks to convert them into gold or other assets.
Some economic historians, such as American professor Barry Eichengreen, blame the gold standard of the 1920s for prolonging the Great Depression. Others including Federal Reserve Chairman Ben Bernanke and Nobel Prize winning economist Milton Friedman place some blame at the feet of the Federal Reserve. The gold standard limited the flexibility of central banks' monetary policy by limiting their ability to expand the money supply, and thus their ability to lower interest rates. In the US, the Federal Reserve was required by law to have 40% gold backing of its Federal Reserve demand notes, and thus, could not expand the money supply beyond what was allowed by the gold reserves held in their vaults.
A return to the Gold Standard would increase government regulation of the economy. With no Fed, inexpert Congress will bear the onus of alleviating economic suffering. With deeper, longer recessions, Congressmen will inevitably succumb to pressure for more spending and regulation of the economy--as they did during the Great Depression.
Indeed, Fed management of the money supply was originally meant to stave off calls for socialism by rendering free-market capitalism more resilient, flexible, and humane. Switching back to gold would breathe new life into anti-capitalist politics.
It would increase our reliance on foreign credit and ship yet more jobs overseas. Adopting the gold standard would actually exacerbate the problem of reliance on foreign credit, not alleviate it.
Assuming we're not in a recession, economic growth would then continually cause deflation, making domestically-produced products more expensive and foreign imports cheaper--increasing consumption of imports. The trade deficit would continue to balloon at the expense of American jobs. In a recession, this would be catastrophic.
Insofar as it helps anybody, the gold standard would favour Wall Street bankers over entrepreneurs, businesses, and workers. The major economic gains would be made by such big gold producers as Russia and South Africa.
The inflexibility of the gold standard during the 1890s spawned the anti-Washington Populist movement, led by William Jennings Bryan (read his eloquent attack on the gold standard here).It is debt. While it is defined as a fractional share of ownership in a business--it still represents an obligation to pay for money granted as part of investment in the business.Extra Credit--Why does Ron Paul dislike the Federal Reserve Bank?Among other reasons. The Bretton Woods system officially ended and the dollar became fully "fiat currency," backed by nothing but the promise of the federal government: he favours the gold standard. Additionally, he dislikes the fractional reserve system of banking for creating money from nothing.Sort of economically related: In the the Westminster, or Parliamentary, system, the defeat of an appropriations bill (a bill that solely concerns taxation or government spending) has what result? Why does this not have the same effect under the US Constitution?
BTW, The Nixon Shock of 1971 ended the direct convertibility of the United States dollar to gold. Since then all reserve currencies have been fiat currencies, including the dollar and the euro.It results in the resignation of the government and/or dissolution of Parliament, much like a non-confidence vote, since a government that cannot spend money is hamstrung. This is called loss of supply. Since the executive is not the head of government, the government does not collapse.
The points I was trying to make with this quiz were:
- Not much money physcially exists--in fact, most people are surprised by the limited amount of currency that is REALLY out there.
- Most of the Capitalist system runs on debt: things would grind to a halt if everyone got out of debt.
- The difference between government revenue and spending.
- the difference between who addresses economic issues: government or private industry.
- that the New Deal Programmes which are being dismantled were intended to PREVENT Socialism.
- That a lot of the things economists say are mumbo-jumbo.
Wednesday, October 19, 2011
Captialism explained
Actually, capital can refer to a lot of things, but I agree with Marx that it basically refers to investment. That is it is used to buy something only in order to sell it again, or to use it for production, to realize a financial profit (i.e. the difference between buying a cow for meat or to milk). For Marx capital only exists within the process of economic exchange—it is wealth that grows out of the process of circulation itself and forms the basis of the economic system of capitalism.
In other words, capital is basically money used for investment and create more money. In other words, it is Financial capital, which represents obligations, and is liquidated as money for trade, and owned by legal entities. It is in the form of capital assets, traded in financial markets. Its market value is not based on the historical accumulation of money invested but on the perception by the market of its expected revenues and of the risk entailed.
Hence, it creates an obligation, debt.
Your investment in my factory means I am indebted to you based upon your share of investment. That also applies in the case of a privately held corporation where the liability is shared, which is a major reason for incorporation.
Investment, or capital accumulation, in classical economic theory, is the production of increased capital. Investment requires that some goods be produced that are not immediately consumed, but instead used to produce other goods as a means of production. Investment is closely related to saving, though it is not the same. As Keynes pointed out, saving involves not spending all of one's income on current goods or services, while investment refers to spending on a specific type of goods, i.e., capital goods.
Capitalism is an economic system in which the means of production are privately owned and operated for profit from investment, usually in competitive markets. That is the means of production are owned for the benefit of the owner/shareholder. The system requires that there are winners and losers: debtors and creditors.
There are some who believe that Marxism would make the owner/shareholders not just the bosses, but those who work in the factory. Kind of a popular capitalism, where the investment of labour counts as much as the investment of money. Workers are given more of a voice under this system than being seen as capital in the form of labour cost.
Many religions have criticized, or opposed, specific elements of capitalism. Traditional Judaism, Christianity, and Islam forbid lending money at interest, although alternative methods of banking have been developed. Some Christians have criticized capitalism for its materialist aspects and its inability to account for the wellbeing of all people.
Recent criticism of Capitalism relates to the late-2000s financial crisis, as seen in the Occupy Wall Street movement in the Autumn of 2011. While the movement has not formalised its criticism of capitalism or demands for reforms, political scholars have, nevertheless, begun to identify common themes such as objections to the "ruling economic class", or "the richest 1%", having undue influence on government policies and that this situation reflects a "failure of democratic representation" for the middle and lower classes, or the "other 99%".
The real effect of the Occupy Wall Street Movement is that it is raising awareness and opening up the discussion about the economic system. How does it function and who benefits.
In other words, capital is basically money used for investment and create more money. In other words, it is Financial capital, which represents obligations, and is liquidated as money for trade, and owned by legal entities. It is in the form of capital assets, traded in financial markets. Its market value is not based on the historical accumulation of money invested but on the perception by the market of its expected revenues and of the risk entailed.
Hence, it creates an obligation, debt.
Your investment in my factory means I am indebted to you based upon your share of investment. That also applies in the case of a privately held corporation where the liability is shared, which is a major reason for incorporation.
Investment, or capital accumulation, in classical economic theory, is the production of increased capital. Investment requires that some goods be produced that are not immediately consumed, but instead used to produce other goods as a means of production. Investment is closely related to saving, though it is not the same. As Keynes pointed out, saving involves not spending all of one's income on current goods or services, while investment refers to spending on a specific type of goods, i.e., capital goods.
Capitalism is an economic system in which the means of production are privately owned and operated for profit from investment, usually in competitive markets. That is the means of production are owned for the benefit of the owner/shareholder. The system requires that there are winners and losers: debtors and creditors.
There are some who believe that Marxism would make the owner/shareholders not just the bosses, but those who work in the factory. Kind of a popular capitalism, where the investment of labour counts as much as the investment of money. Workers are given more of a voice under this system than being seen as capital in the form of labour cost.
Many religions have criticized, or opposed, specific elements of capitalism. Traditional Judaism, Christianity, and Islam forbid lending money at interest, although alternative methods of banking have been developed. Some Christians have criticized capitalism for its materialist aspects and its inability to account for the wellbeing of all people.
Recent criticism of Capitalism relates to the late-2000s financial crisis, as seen in the Occupy Wall Street movement in the Autumn of 2011. While the movement has not formalised its criticism of capitalism or demands for reforms, political scholars have, nevertheless, begun to identify common themes such as objections to the "ruling economic class", or "the richest 1%", having undue influence on government policies and that this situation reflects a "failure of democratic representation" for the middle and lower classes, or the "other 99%".
The real effect of the Occupy Wall Street Movement is that it is raising awareness and opening up the discussion about the economic system. How does it function and who benefits.
Tuesday, October 18, 2011
Economics Quiz Time!
A fun little quiz to see how much of the basics of the topic of the economy some of the people posting comments here understand.
Sort of economically related: In the the Westminster, or Parliamentary, system, the defeat of an appropriations bill (a bill that solely concerns taxation or government spending) has what result? Why does this not have the same effect under the US Constitution?
I will say that there is more than one trick question on this quiz!
I'll post my answers in a few days.
- How much of the money supply exists as physical currency?
- How exactly does Quantitative Easing work (hint--printing money is a failing answer)?
- What are the two types of government debt?
- What is a budget deficit?
- What is the difference between government deficit and government debt?
- Define in relation to each other:
- Primary deficit,
- total deficit
- debt
- Primary deficit,
- What is a Structural deficit?
- What are the forms of Government Indebtedness?
- What is fractional reserve banking?
- What is full reserve banking?
- What are some of the potential policy solutions for budget deficits and critiques of each?
- What is the difference between Gross Domestic Product (GDP) and Gross National Product (GNP)?
- How much national debt is too much?
- Is inflation a bad thing for an economy?
- What is a commodity based monetary system?
- What is a share of stock?
Sort of economically related: In the the Westminster, or Parliamentary, system, the defeat of an appropriations bill (a bill that solely concerns taxation or government spending) has what result? Why does this not have the same effect under the US Constitution?
I will say that there is more than one trick question on this quiz!
I'll post my answers in a few days.
Tuesday, September 27, 2011
Class War--You lose!
Elizabeth Warren, candidate for U.S. Senate in Massachusetts, made the following statement to the blathering right-wingers at a recent political event.
“I hear all this, you know, Well, this is class warfare. No it isn’t. There is nobody in this country who got rich on his own. Nobody.” She went on:Economic policy in the United States and Europe has failed, and people are suffering.
“You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.
“Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
Economic policy failed for three reasons: (1) policymakers focused on enabling offshoring corporations to move middle class jobs, and the consumer demand, tax base, GDP, and careers associated with the jobs, to foreign countries, such as China and India, where labor is inexpensive; (2) policymakers permitted financial deregulation that unleashed fraud and debt leverage on a scale previously unimaginable; (3) policymakers responded to the resulting financial crisis by imposing austerity on the population and running the printing press in order to bail out banks and prevent any losses to the banks regardless of the cost to national economies and innocent parties.
As reported by Manufacturing and Technology News (September 20, 2011) the Quarterly Census of Employment and Wages reports that in the last 10 years, the US lost 54,621 factories, and manufacturing employment fell by 5 million employees. Over the decade, the number of larger factories (those employing 1,000 or more employees) declined by 40 percent. US factories employing 500-1,000 workers declined by 44 percent; those employing between 250-500 workers declined by 37 percent, and those employing between 100-250 workers shrunk by 30 percent. http://www.manufacturingnews.com/
US politicians, such as Buddy Roemer, blame the collapse of US manufacturing on Chinese competition and “unfair trade practices.” However, it is US corporations that move their factories abroad, thus replacing domestic production with imports. Half of US imports from China consist of the offshored production of US corporations.
The wage differential is substantial. According to the Bureau of Labor Statistics, as of 2009 average hourly take-home pay for US workers was $23.03. Social insurance expenditures add $7.90 to hourly compensation and benefits paid by employers add $2.60 per hour for a total labor compensation cost of $33.53.
In China, as of 2008 total hourly labor cost was $1.36, and India’s is within a few cents of this amount. Thus, a corporation that moves 1,000 jobs to China saves $32,000 every hour in labor cost. These savings translate into higher stock prices and executive compensation, not in lower prices for consumers who are left unemployed by the labor arbitrage.
Republican economists blame “high” US wages for the current high rate of unemployment. However, US wages are about the lowest in the developed world. They are far below hourly labor cost in Norway ($53.89), Denmark ($49.56), Belgium ($49.40), Austria ($48.04), and Germany ($46.52). The US might have the world’s largest economy, but its hourly workers rank 14th on the list of the best paid. Americans also have a higher unemployment rate. The “headline” rate that the media hypes is 9.1 percent, but this rate does not include any discouraged workers or workers forced into part-time jobs because no full-time jobs are available.
The US government has another unemployment rate (U6) that includes workers who have been too discouraged to seek a job for six months or less. This unemployment rate is over 16 percent. Statistician John Williams (Shadowstats.com) estimates the unemployment rate when long-term discouraged workers (more than six months) are included. This rate is over 22 percent.
Most emphasis is on the lost manufacturing jobs. However, the high speed Internet has made it possible to offshore many professional service jobs, such as software engineering, Information Technology, research and design. Jobs that comprised ladders of upward mobility for US college graduates have been moved offshore, thus reducing the value to Americans of many university degrees. Unlike former times, today an increasing number of graduates return home to live with their parents as there are insufficient jobs to support their independent existence.
All the while, the US government allows in each year one million legal immigrants, an unknown number of illegal immigrants, and a large number of foreign workers on H-1B and L-1 work visas. In other words, the policies of the US government maximize the unemployment rate of American citizens.
Republican economists and politicians pretend that this is not the case and that unemployed Americans consist of people too lazy to work who game the welfare system. Republicans pretend that cutting unemployment benefits and social assistance will force “lazy people who are living off the taxpayers” to go to work.
To deal with the adverse impact on the economy from the loss of jobs and consumer demand from offshoring, Federal Reserve chairman Alan Greenspan lowered interest rates in order to create a real estate boom. Lower interest rates pushed up real estate prices. People refinanced their houses and spent the equity. Construction, furniture and appliance sales boomed. But unlike previous expansions based on rising real income, this one was based on an increase in consumer indebtedness.
There is a limit to how much debt can increase in relation to income, and when this limit was reached, the bubble popped.
When consumer debt could rise no further, the large fraudulent component in mortgage-backed derivatives and the unreserved swaps (AIG, for example) threatened financial institutions with insolvency and froze the banking system. Banks no longer trusted one another. Cash was hoarded. Treasury Secretary Paulson, browbeat Congress into massive taxpayer loans to financial institutions that functioned as casinos. The Paulson Bailout (TARP) was large but insignificant compared to the $16.1 trillion (a sum larger than US GDP or national debt) that the Federal Reserve lent to private financial institutions in the US and Europe.
In making these loans, the Federal Reserve violated its own rules. At this point, capitalism ceased to function. The financial institutions were “too big to fail,” and thus taxpayer subsidies took the place of bankruptcy and reorganization. In a word, the US financial system was socialized as the losses of the American financial institutions were transferred to taxpayers.
European banks were swept up into the financial crisis by their unwitting purchase of the junk financial instruments marketed by Wall Street. The financial junk had been given investment grade rating by the same incompetent agency that recently downgraded US Treasury bonds.
The Europeans had their own bailouts, often with American money (Federal Reserve loans). All the while Europe was brewing an additional crisis of its own. By joining the European Union and (except for the UK) accepting a common European currency, the individual member countries lost the services of their own central banks as creditors.
In the US and UK the two countries’ central banks can print money with which to purchase US and UK debt. This is not possible for member countries in the EU.
When financial crisis from excessive debt hit the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) their central banks could not print euros in order to buy up their bonds, as the Federal Reserve did with “quantitative easing.” Only the European Central Bank (ECB) can create euros, and it is prevented by charter and treaty from printing euros in order to bail out sovereign debt.
In Europe, as in the US, the driver of economic policy quickly became saving the private banks from losses on their portfolios. A deal was struck with the socialist government of Greece, which represented the banks and not the Greek people. The ECB would violate its charter and together with the IMF, which would also violate its charter, would lend enough money to the Greek government to avoid default on its sovereign bonds to the private banks that had purchased the bonds. In return for the ECB and IMF loans and in order to raise the money to repay them, the Greek government had to agree to sell to private investors the national lottery, Greece’s ports and municipal water systems, a string of islands that are a national preserve, and in addition to impose a brutal austerity on the Greek people by lowering wages, cutting social benefits and pensions, raising taxes, and laying off or firing government workers.
In addition, in America today savings earn nothing. Indeed, they produce an ongoing loss as the interest rate is below the inflation rate. The Federal Reserve has interest rates so low that only professionals who are playing arbitrage with algorithm-programmed computer models can make money. The typical saver and investor can get nothing on bank CDs, money market funds, municipal and government bonds. Only high risk debt, such as Greek and Spanish bonds, pay an interest rate that is higher than inflation.
For four years interest rates, when properly measured, have been negative. Americans are getting by, maintaining living standards, by consuming their capital. Even those with a cushion are eating their seed corn. The path that the US economy is on means that the number of Americans without resources to sustain them will be rising. Considering the extraordinary political incompetence of the Democratic Party, the right wing of the Republican Party, which is committed to eliminating income support programs, could find itself in power. If the right-wing Republicans implement their program, the US will be beset with political and social instability. As Gerald Celente says, “when people have nothing left to lose, they lose it.”
Wednesday, September 14, 2011
How to turn recession into depression.
A new IMF report finds that austerity is only the answer if the question is “How can we reduce income, raise long-term unemployment, and make the recession even more painful for everyone?” Of course, that isn't stopping the Republicans, especially the Tea Party Crowd, from proposing more cuts!
The belief that cutting spending in the face of high unemployment would actually create jobs has been shown to be delusional, if that isn't apparent from the way the economy has been slowly declining for the past 30 odd years. A record 46.2 million Americans are now below the poverty line, the Census Bureau reported yesterday, and the numbers appear to be growing.
On the other hand, Economic equality equals happiness. So suggests a new study to be published in a forthcoming issue of Psychological Science. In order for Americans to be truly blissed out, it finds, we need to close the gap between our wealthiest and poorest citizens.
The study, lead by Shigehiro Oishi of the University of Virginia, took into account economic and psychological factors when examining data taken from 50,000 individuals between 1972 and 2008. Not surprisingly it was the lower-income participants—those in the bottom 40 percent of the U.S. population—who expressed reduced happiness during periods of greater economic disparity, but their reasons for dissatisfaction were unexpected. Expains Sobczak:
Oishi offers this formula to fix our happiness dilemma: “If the ultimate goal of society is to make its citizens happy, then it is desirable to consider policies that produce more income equality, fairness, and general trust.”
Of course, we can keep going down the road to ruin. The Republicans have shown that they don't mind trashing the economy by creating fake crises over the deficit and debt ceiling. The problem is that Obama has been caving in to the right and not proposing any real world solutions to this problem. People voted for change with Obama, not more of the same.
Read more:
The belief that cutting spending in the face of high unemployment would actually create jobs has been shown to be delusional, if that isn't apparent from the way the economy has been slowly declining for the past 30 odd years. A record 46.2 million Americans are now below the poverty line, the Census Bureau reported yesterday, and the numbers appear to be growing.
The reduction in incomes from fiscal consolidations is even larger if central banks do not or cannot blunt some of the pain through a monetary policy stimulus. The fall in interest rates associated with monetary stimulus supports investment and consumption, and the concomitant depreciation of the currency boosts net exports. Ireland in 1987 and Finland and Italy in 1992 are examples of countries that undertook fiscal consolidations, but where large depreciations of the currency helped provide a boost to net exports.
Unfortunately, these pain relievers are not easy to come by in today’s environment. In many economies, central banks can provide only a limited monetary stimulus because policy interest rates are already near zero (see “Unconventional Behavior” in this issue of F&D). Moreover, if many countries carry out fiscal austerity at the same time, the reduction in incomes in each country is likely to be greater, since not all countries can reduce the value of their currency and increase net exports at the same time.
Simulations of the IMF’s large-scale models suggest that the reduction in incomes may be more than twice as large as that shown in Chart 2 when central banks cannot cut interest rates and when many countries are carrying out consolidations at the same time. These simulations thus suggest that fiscal consolidation is now likely to be more contractionary (that is, to reduce short-run income more) than was the case in past episodes.
On the other hand, Economic equality equals happiness. So suggests a new study to be published in a forthcoming issue of Psychological Science. In order for Americans to be truly blissed out, it finds, we need to close the gap between our wealthiest and poorest citizens.
The study, lead by Shigehiro Oishi of the University of Virginia, took into account economic and psychological factors when examining data taken from 50,000 individuals between 1972 and 2008. Not surprisingly it was the lower-income participants—those in the bottom 40 percent of the U.S. population—who expressed reduced happiness during periods of greater economic disparity, but their reasons for dissatisfaction were unexpected. Expains Sobczak:
People weren’t unhappy just because their income was lower. Instead, the authors’ analysis revealed that greater inequality was linked to reductions in trust and perceived fairness—and it was drops in those attitudes that made people feel less happy.... Oishi and his colleagues argue that their results may explain why economic growth has not been accompanied by increases in happiness in the United States, unlike in other developed nations. The problem, they suggest, is that gains in national wealth in the U.S. haven’t been distributed equally, and this inequality has caused Americans’ happiness to suffer.
Oishi offers this formula to fix our happiness dilemma: “If the ultimate goal of society is to make its citizens happy, then it is desirable to consider policies that produce more income equality, fairness, and general trust.”
Of course, we can keep going down the road to ruin. The Republicans have shown that they don't mind trashing the economy by creating fake crises over the deficit and debt ceiling. The problem is that Obama has been caving in to the right and not proposing any real world solutions to this problem. People voted for change with Obama, not more of the same.
Read more:
- The Happiness Equation
- The Death of the Confidence Fairy
- The Broken Theory of Growth Through Austerity and Deficit Reduction
- Deficit-Obsessed Media Misinform on Causes
- GOP's Debt-Ceiling Games Have Raised the Prospect of a 'Crunching Global Recession'
- Why all the wrangling over the debt ceiling? A lesson for Obama fans
- Does Inequality Make Us Unhappy?
- Shigehiro Oishi, Selin Kesebir, and Ed Diener--Income Inequality and Happiness
Friday, April 24, 2009
The Rise and Fall of the Microsoft Empire
CNN reports on the recent difficulty faced by Microsoft, a difficulty they've not experienced in their entire 23-year history.
Do you raise a silent cheer at reading a story like this? Are you one of those iconoclastic types who roots for the downfall of the leader, especially one which has monopolized the market like Microsoft? Do you like companies like Google, Amazon and Yahoo, who although they aren't in direct competition with a software giant like Microsoft, represent the underdog, the come-from-behind, more tenacious competitor?
One area in which they do all compete is advertising. Even there, poor old Microsoft is taking a beating.
What's your opinion? What operating systems and IT products have you used? I myself have used almost exclusively Microsoft products. It just went that way, not so much by design, but more by default. I guess that's what a monopoly is all about.
Please leave a comment.
Microsoft Corp. said Thursday that declining PC sales hurt revenue, as the software giant reported quarterly sales that fell for the first time in its 23-year history as a public company.
The company has had a difficult time combating slumping demand for its Windows operating system, as the economic slowdown has dragged PC sales down 7% to 9%, according to Microsoft's estimates.
In January, Microsoft announced its first mass job cuts in its 34-year history in an effort to bolster its bottom line The company slashed 1,400 position during the quarter with another 3,600 expected to be cut by mid-2010. At that time, the company said it was also adding a few thousand positions, mainly in its online advertising division.
Do you raise a silent cheer at reading a story like this? Are you one of those iconoclastic types who roots for the downfall of the leader, especially one which has monopolized the market like Microsoft? Do you like companies like Google, Amazon and Yahoo, who although they aren't in direct competition with a software giant like Microsoft, represent the underdog, the come-from-behind, more tenacious competitor?
One area in which they do all compete is advertising. Even there, poor old Microsoft is taking a beating.
Microsoft has also continued to struggle to compete with rivals Google and Yahoo in the online advertising business. Microsoft's Online Services division, which includes the online portal MSN and its Internet advertising sales, lost $575 million in the quarter, and sales in the division were down 14% from the same quarter a year earlier. Microsoft said the loss in its ad sales division was due to the significant decline of average rates in display advertising.
What's your opinion? What operating systems and IT products have you used? I myself have used almost exclusively Microsoft products. It just went that way, not so much by design, but more by default. I guess that's what a monopoly is all about.
Please leave a comment.
Tuesday, October 7, 2008
Multiple Murder / Suicide in California
CNN reports on the latest tragedy to strike.
A man distraught because he could not find work shot and killed his mother-in-law, his wife and three sons and then killed himself inside a home in an upscale San Fernando Valley neighborhood, police said.
How depressed would one have to be to do something like that? Although the article says there was no history of mental illness, could that man have appeared normal in the days preceding the tragedy? Do you think he would have killed his entire family of six people with a kitchen knife if he'd had no gun? I say the availability of the gun was a factor, and although I don't preach banning guns as a solution, I would suggest that gun proponents by their philosophy alone are, if not responsible for this, at least involved in it somehow.
On the site Kezins, there's a post today called How Bad Is the Economy. He says, "There’s a fundamental problem with society when people with MBAs can’t find jobs. I’m sure we’ll be reading about more suicides caused by the economy over the next year or two."
On Steve White's blog, Static and the Radio, there's a post accusing CNN of going too far.
On The Gun Guys blog, there's a bit of information that I didn't see on CNN.
Karthik Rajaram, 45, used a handgun he purchased on Sept. 16th to murder his family before killing himself.
A man distraught because he could not find work shot and killed his mother-in-law, his wife and three sons and then killed himself inside a home in an upscale San Fernando Valley neighborhood, police said.
How depressed would one have to be to do something like that? Although the article says there was no history of mental illness, could that man have appeared normal in the days preceding the tragedy? Do you think he would have killed his entire family of six people with a kitchen knife if he'd had no gun? I say the availability of the gun was a factor, and although I don't preach banning guns as a solution, I would suggest that gun proponents by their philosophy alone are, if not responsible for this, at least involved in it somehow.
On the site Kezins, there's a post today called How Bad Is the Economy. He says, "There’s a fundamental problem with society when people with MBAs can’t find jobs. I’m sure we’ll be reading about more suicides caused by the economy over the next year or two."
On Steve White's blog, Static and the Radio, there's a post accusing CNN of going too far.
On The Gun Guys blog, there's a bit of information that I didn't see on CNN.
Karthik Rajaram, 45, used a handgun he purchased on Sept. 16th to murder his family before killing himself.
Suicide is a permanent solution to a temporary problem. I'm very sorry for the relatives and friends of the Rajaram family.
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