Monthly Archives: June 2012

Why Latvia’s Austerity Model Can’t Be Exported

Posted on June 22, 2012 by | 12 comments

By Michael Hudson and Jeffrey Sommers
(Cross-posted from FT)

Austerity’s advocates depict Latvia as a plucky country that can show Europe the way out of its financial dilemma – by “internal devaluation”, or slashing wages. Yet few of the enthusiastic commentators have spent enough time in Latvia to understand what happened. Its government has chosen austerity, its people have not. Finding no acceptable alternative, much of the labour force has elected to emigrate. This is a major factor holding down its unemployment rate to “just” 15 per cent today. Continue reading →

12 Comments

Posted in Michael Hudson

Tagged , ,

Dimon Lambastes Loans and Expresses His Devotion to Derivatives

Posted on June 20, 2012 by | 11 comments

By William K. Black

The ongoing U.S. crisis was driven largely by financial derivatives.  Nine of America’s systemically dangerous institutions (SDIs) failed or had to be bailed out – Bear Stearns, Lehman, Merrill Lynch, Fannie, Freddie, AIG, Countrywide, Wachovia, and Washington Mutual (WaMu).  The SDI failures were primarily due to losses caused or aided by the sale and purchase of enormous amounts of fraudulent derivatives, and deregulation, desupervision, and de facto decriminalization proved exceptionally criminogenic.  The Commodities Futures Modernization Act of 2000 and the Gramm, Leach, Bliley Act of 1999, respectively, made credit default swaps (CDS) into a regulatory black hole and repealed the Glass-Steagall Act’s prohibition against banks mixing commercial and investment banking. Continue reading →

11 Comments

Posted in William K. Black

Tagged , , , , ,

How Many MBD Do We Need to be Geniuses?

Posted on June 19, 2012 by | 1 comment

By William K. Black

Jamie Dimon is the smartest U.S. banker – as he, the Senate banking committee, the media, and President Obama told us.  They told us this in the context of Dimon’s bank, JPMorgan, suffering a huge loss due to (if Dimon is to be believed) his top lieutenants’ stupidity.  We are told that Dimon is the smartest banker because he ordered JPMorgan to sell its collateralized debt obligations (CDOs) (“green slime” “backed” primarily by endemically fraudulent “liar’s” loans) at the end of 2006 and close its special investment vehicle (SIV). Continue reading →

1 Comment

Posted in William K. Black

Tagged ,

Greece and the Rest of the Eurozone Remain on the Road to Hell

Posted on June 18, 2012 by | 12 comments

By Marshall Auerback

So for the short term, it appears we won’t have a “Grexit”, which has led many commentators to suggest (laughably) that a crisis has been averted. Typical of this sentiment is a headline in Bloomberg today  “Greece avoids chaos; Big Hurdles Loom”. To paraphrase Pete Townsend, meet the new chaos, same as the old chaos. It is worth pondering how acceptance of the Troika’s program (even if cosmetic adjustments are made) will help hospitals get access to essential medical supplies (see here), whilst the government persists in enforcing a program which is killing its private sector by cutting spending and not paying legitimate bills, and an unemployment rate creeps towards 25 per cent and 50 per cent for youth.  Continue reading →

12 Comments

Posted in Marshall Auerback

Tagged , , ,

Dimon’s Dictum: “Poorly underwritten loans represent income today and losses tomorrow.”

Posted on June 18, 2012 by | 2 comments

By William K. Black

The aphorism is by Jamie Dimon. I took it from his March 30, 2012 Letter to shareholders (p. 8).  The immediately preceding sentence was: “Low-quality revenue is easy to produce, particularly in financial services.” Continue reading →

2 Comments

Posted in William K. Black

MMP Blog #51: The Efficiency Fairy and Inflation Goblins

Posted on June 17, 2012 by | 94 comments

By L. Randall Wray

The main objection to MMT is the belief that adoption of a fiat money necessarily leads to high inflation if not to hyperinflation. Those who adopt this critique usually see MMT as a proposal, although some (like Paul Samuelson) recognize that MMT actually describes the system we already have. The latter group fears that if we tell the truth about the existing monetary system, then elected officials will “run the printing presses” to create high inflation. Hence, best to adopt what Samuelson described as the “old time religion” of lies about the fiscal options open to sovereign government to keep the inflation goblins at bay. Continue reading →

94 Comments

Posted in L. Randall Wray, MMP

Germany’s Constitutional Conundrum

Posted on June 13, 2012 by | 22 comments

By Marshall Auerback

Hans-Werner Sinn, President of Germany’s Ifo Institute and the Director of the Center for Economic Studies at the University of Munich, has taken to the pages of the NY Times to explain why Berlin is balking on a further bailout for Europe. Amongst the points that Sinn makes against German sharing in the debt of the euro zone’s southern nations is a legal one: “For one thing, such a bailout is illegal under the Maastricht Treaty, which governs the euro zone. Because the treaty is law in each member state, a bailout would be rejected by Germany’s Constitutional Court.”

Continue reading →

22 Comments

Posted in Uncategorized

Marshall Auerback’s Latest Appearance on BNN

Posted on June 13, 2012 by | Comments Off on Marshall Auerback’s Latest Appearance on BNN

Click here to view Marshall’s latest appearance on BNN’s Business Day.

Comments Off on Marshall Auerback’s Latest Appearance on BNN

Posted in Marshall Auerback

Hedge Fund Managers: Sex Talk and Prostitutes

Posted on June 12, 2012 by | 7 comments

By Janet Tavakoli

When performing due diligence, investors consider capacity, capital, and character.  Investors will develop a subjective opinion of character informed by their own standards and those of the society in which they live.  Continue reading →

7 Comments

Posted in Uncategorized

Tagged , , ,

House Republicans Try to Create the World’s Worst Criminogenic Environment

Posted on June 11, 2012 by | 9 comments

By William K. Black
(Cross-posted from Benzinga.com)

In criminology, we recognize that one of the leading restraints on the effectiveness of law enforcement is “systems capacity.”  Indeed, my mentor, Henry Pontell (UC Irvine), defined the concept.  In the context of crimes of the street (other than Wall Street), there is normally no lobby trying to allow the typically lower class criminals to commit their crimes with impunity.  In crimes of the business suites, however, it is the norm that there are well-funded, powerful, and seemingly legitimate lobbyists for the elite criminals who seek to allow them to commit their crimes with impunity.  Similarly, it is rare for street criminals to consult a lawyer before they commit their crimes.  Elite white-collar criminals often consult with expert legal counsel before, during, and after they commit their crimes in order to try to minimize the risk of being sanctioned. Continue reading →

9 Comments

Posted in William K. Black

Tagged , , ,