Gowex Shows Why Lending is the Best Venue for Accounting Control Fraud

By William K. Black
(Cross posted on Benzinga.com)

A classic accounting control fraud, Gowex, has collapsed in Spain.  Gowex was a wi-fi firm.  It was able to run its scam for at least four years.  It was a crude scam that involved simply making up contracts and borrowing to grow rapidly.

“The US firm Gotham City Research had described Gowex as a ‘charade’ and said that its revenues were ‘at most’ 10% of those reported.”

As soon as Gotham City Research blew the whistle on Gowex it made it impossible for Gowex to borrow additional funds and avoid collapse.

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Obama Consults a “Wide Variety of Economists” – Just Not Those Who Got it Right

By William K. Black

In a PR effort that aptly illustrates his approach to governance, President Obama has revealed that he is meeting with a “wide variety of economists” to try to figure out what economic policies he should follow.  “Obama Seeks Advice From Wide Variety of Economists.”

Obama is already well into the lame duck phase of his presidency, so this is simply a PR exercise.  The message Obama wants to send is the same one he has sounded throughout his presidency.  He is open to economic views from the parts of the political spectrum that range from the hard right to the mild left.

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“Debt-Free Money” and “ZIRP Forever”

By Scott Fullwiler

I wrote a while back about how neoclassical economists don’t realize their view that interest on reserves (IOR) stops “printing money” from being inflationary also means that it’s impossible to create inflation by “printing money.”  See here.

I’m not 100% sure on this one (and please feel free to correct me if you know better than I do) because I admittedly haven’t given the literature a thorough read, but from what I can tell, it appears “debt-free money” advocates may not realize they are similarly overlooking the actual operations of the monetary system.  So, apologies in advance if I’ve misinterpreted.

From what I’ve seen, “debt-free money” (DFM) advocates want a world in which the government spends via cash (i.e., paper money).  They are against government issuing bonds or any interest on the debt, since that would suggest the government’s money isn’t “debt free” (again, please correct me if I’m wrong in this description).

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Matteo Renzi Puts the Lie to “There is not alternative” (TINA) to Austerity

By William K. Black

In a recent column I responded to a conservative scholar’s (Victor David Hanson) claim that U.S. “employment rates for college graduates are dismal” by showing that the employment rate for college graduates seeking employment was 96.8% – and rising.

Employment rates for recent college graduates are far worse than “dismal” in the periphery of Europe because the EU troika (the ECB, the EU Commission, and the IMF) have inflicted austerity on these nations.  This produced a gratuitous second Great Recession in the Eurozone as a whole, but it also caused Great Depression levels of unemployment in Spain, Greece, and Italy.  Those three nations have over 100 million in total population – roughly one-third of the eurozone’s total population.  College graduates in these nations have unemployment rates ten times greater than in the U.S.  (Hanson is a big fan of austerity, so he managed to get everything – the facts and the cause – reversed in his fable.)

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DEBT-FREE MONEY: A NON-SEQUITUR IN SEARCH OF A POLICY

By L. Randall Wray

While we are on the topic of monetary cranks, I thought it might be useful to quickly address a cranky idea that often comes up in comments to my blogs and also during Q&A after presentations: so-called “debt-free money”.

The first time I heard it, my immediate reaction was “Say what?”, and the second was puzzlement at the non-sequitur.

I am not sure exactly which of the crank approaches explicitly adopt the notion, but it seems common to a lot of them. I’m not going to address any particular approach but instead will address only the idea that we can have a “money” that is not a “debt”.

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Implicitly Assuming that the CEO is Not a Crook Misses the Problem

By William K. Black

Gretchen Morgenson has brought a revealing study to the attention of the public in her article entitled “The CEO is My Friend, So Back Off.”  Here’s the bad news – the situation is vastly worse than the authors of the study conclude and the policy advice that experts offered Morgenson in response to the findings would fail where they were most needed.

Morgenson begins her article by describing a recent speech by the head of the SEC to an audience containing many board directors.

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Something is Rotten in the State of Denmark: The Rise of Monetary Cranks and Fixing What Ain’t Broke

By L. Randall Wray

Horatio:  He waxes desperate with imagination.

Marcellus:  Let’s follow. ‘Tis not fit thus to obey him.

Horatio:  Have after. To what issue will this come?

Marcellus:  Something is rotten in the state of Denmark.

Horatio:  Heaven will direct it.

Marcellus:  Nay, let’s follow him.

 Hamlet Act 1, scene 4

Marcellus is right, the Fish of Finance is rotting from the head down. It stinks. As Hamlet remarked earlier in the play, Denmark is “an unweeded garden” of “things rank and gross in nature” (Act 1, scene 2).   The ghost of the dead king appears to Hamlet, beckoning him to follow. In scene 5, the ghost tells Hamlet just how rotten things really are.

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More on Consolidating or Not

By Scott Fullwiler

As Randy’s recent post on consolidating vs. not explained, a number of critics argue that consolidation doesn’t “really” happen.  Of course, that’s not the point MMT is making, as we’ve noted numerous times, including Randy’s post. Regardless, though, there are real-world governments that do publish consolidated reports.

The UK posted its report here

Neil Wilson has reviewed it for those that don’t want to read through the whole thing here.

Hat tips both to Neil Wilson and Economonitor commenter acornus

To Consolidate or Not To Consolidate, that is the Question (or maybe it isn’t)

By L. Randall Wray

This is another short post on MMT, a sort of follow-up to my post from a couple of days ago. There was an interesting response to various comments on my piece, which was posted up on Mike Norman’s website.

We got the typical: “oh you MMTers always want to consolidate the Fed and Treasury, but really the Fed is a private institution that is not a part of government”, and “in reality the Treasury cannot spend unless the Fed will allow it to spend, otherwise it must get tax revenue before it can spend”, and hence “really government spending is constrained by its revenue, just like a household or firm”.

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Democratizing Government Spending in an Era of Climate Change: Decision Criteria and Spending Priority Lists – Pt. 2

By Michael Hoexter

General Goals and Decision Criteria for Government Fiscal Policy

In the era of climate change, a worldwide social and economic disaster, the valuation of real resources, especially atmospheric resources and energy resources must change in order for human civilization to survive.  Government fiscal policy is a critical element of that change in valuation, both on the spending and the taxation side.  In addition, in a planning role, government becoming the architect or co-architect of new energy, transportation and land use realities.  As I have written before, making atmospheric resources or the permission to use them, a tradable commodity does not adequately and properly engage our most powerful instrument in addressing climate change and adaptation to climate change, the institutions and fiscal policy of government itself.  However, government leaders are human beings with interests and varying ethical commitments to the common good of their people and humanity in general.  In order to hold them accountable in their spending and taxation decisions it will help to make a part of public political discourse those criteria by which they make spending and taxation decisions.  These public criteria can in turn be modified by political discussion as well as scientific measurement of the results of those policies, which then can either be refined or discarded depending on their outcomes.

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