Economists generally focus on increasing productivity as the driver of development. Among the most troubling economic developments in the West in the last decade is the weak gains in productivity, particularly in a time of rapid technological advances. Neoclassical economics pictures firms as engaged in a fierce, endless battle for survival where failure is certain for firms that are even slightly less efficient that their rivals. This struggle is supposed to produce relentless, rapid advances in productivity. Something has gone very wrong with the neoclassical narrative of competition, productivity, and growth.
Weak productivity and efficiency is supposed to remedy itself. The neoclassical (and Austrian) economics claim is that it creates a profit opportunity for entrepreneurs to enter who either will run a more productive firm or serve as consultant to explain to existing firms’ CEOs the secret of improving efficiency. This series of articles focuses on one of these supposed examples of Austrian “spontaneous order” – executive coaching.
Even though Goldman Sachs and Morgan Stanley failed the so-called ‘stress test,’ to determine whether these banks can weather a financial crisis, the Fed allowed them to pay billions in dividends and stock buybacks to investors. Former financial regulator and NEP’s own Bill Black explains the consequences. You can view with transcript here.
A major Supreme Court ruling, Ohio vs American Express, was completely ignored by most media outlets, even though it will have potentially devastating repercussions for consumers in the so-called ‘platform economy’: Uber, Lyft, AirBnB, Facebook, etc. NEP’s Bill Black explains the consequences. You can view with transcript here.
There is a common misconception that the cryptocurrency Bitcoin is safe and secure and will protect those who trade in it from fraud. However, NEP’s Bill Black explains, Bitcoin is just as susceptible to fraud as any other type of transaction and complacency makes the likelihood of fraud only greater. You can view with transcript here.
The House Speaker is the answer to the trick question: “Who is the second most powerful elected official in the United States.” The importance of the Speaker is obvious to anyone with even a modestly sophisticated understanding of U.S. politics and government.
One of the reasons for this astonishing level of sycophancy of Republican House candidates that run for office by presenting themselves as moderate conservatives is the ‘Hastert rule.’ They run as moderates, but they vote consistently in favor of legislation that creates the most radically right policies in modern American history. If you have never heard of the Hastert rule or do not know what it is, blame the Democrats (and the media). The fact that the Hastert rule is not infamous with the public proves (again) the ineptness of Democrats as politicians (and the failure of most of the media as journalists). The rule bears the name of then-Speaker of the House Dennis Hastert, who decreed and implemented the rule. If you do not know that Hastert is infamous, and why he is infamous, blame the Democrats (and the media).
One of the prime myths that white-collar criminologists have to refute repeatedly is that blockchain makes fraud impossible. Blockchain, in some settings, is a costly means of making some frauds much more difficult. Blockchain is useless against the most important frauds. The primitive worship of blockchain as a supposed garlic capable of warding off evil breeds complacency, and complacency produces increased fraud and greatly extends the life of fraud.
The difference between making fraud impossible and (in a few specialized settings) ‘much more difficult’ brings to mind the critical difference explained in The Princess Bride between ‘dead’ and ‘mostly dead.’ Blockchain is useless in stopping, for example, any or the three epidemics of ‘control fraud’ that drove the 2008 financial crisis and the Great Recession. Lenders’ executives extorted appraisers to inflate appraised values of homes, creating a Gresham’s dynamic in which bad ethics tends to drive good ethics out of the markets and professions. The second fraud epidemic in loan origination was ‘liar’s’ loans, which were designed to aid lenders and their agents to inflate the incomes of borrowers. Note that both of these primary fraudulent loan origination schemes involve lenders deliberately seeking to provide false (inflated) data designed to inflate the market value of homes. The third fraud epidemic that drove the U.S. financial crisis was the fraudulent sale of these mortgages to the secondary market through false “reps and warranties” about loan underwriting – principally the fraudulently inflated appraisal values and borrowers’ incomes.
Citing national security issues to get around WTO rules, Trump ordered tariffs of 25 percent on steel and 10 percent on aluminum imports from Canada and EU countries. NEP’s William Black and Gerald Epstein discusses the implications of these tariffs on the different economies. You can view transcript here.
Ben Bernanke recently gave a speech predicting that President Trump’s deficits will cause the economy to “go off a cliff in 2020.” Many Democratic Party politicians, of course, will rush to embrace the criticism and prove that they are the true party of fiscal responsibility. They can then get back to pushing for increased taxation and cuts to the safety net “to save it” from collapse – and feeling virtuous. These Democrats will glory in their supposed virtue and gravitas as they oppose ‘excessive’ stimulus, cut the safety net to ‘save it,’ oh-so-judiciously cut funding for social programs, and push for higher taxes. They know this is bad politics, but that adds to their faith that the more bitter the medicine the greater the curative properties. Faith-based federal deficit phobia, however, is terrible economics and terrible politics.
(Third in a series of articles on Italy, Austerity, and the euro)
The New York Times’ editorial board published a May 29, 2018 editorial about Italy’s ongoing political and financial issues that praised austerity in Italy. The board cheered the anti-democratic appointment of “Carlo Cottarelli, a solidly pro-Europe and pro-austerity economist and former official of the International Monetary Fund, to form a nonelected government.” In particular, the board expressed its horror that Italy (which continues to have unemployment levels one expects to find in a severe recession) would have adopted “grandiose spending plans” (fiscal stimulus) if the Italian establishment had not sought to block the results of the recent Italian election.