Monthly Archives: May 2014

Three Principles for a Democratic Capitalism

Posted on May 14, 2014 by | 20 comments

By Brian Andersen

In my previous posts I stated several times that a currency should be equally spendable, savable and earnable. But I never tried to justify that idea, or explain why we should pursue those features as opposed to others. So the purpose of this post and the next is to explain that position. It is impossible to say what features the currency should have without some underlying value system to motivate the existence of currency in the first place. So in this post I will lay down the values I think should guide a sound currency administration. And in the next post I will use those values to explain my view that an equally spendable, savable and earnable currency should be our primary objective.

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“COST” & CONFUSION

Posted on May 13, 2014 by | 12 comments

By J.D. Alt

Even the most progressive proponents of climate change mitigation frame their argument with the proposition that the “cost” of mitigation today is far less than what the “cost” of climate change will be down the road if we fail to act now. While it sounds compelling, this argument perpetrates a deep confusion about what “cost” means when applied to the idea of inventing, designing and building the carbon-neutral infrastructure and energy systems that climate mitigation will require. This confusion, in turn, makes it more difficult for the political process to make rational decisions.

To illustrate, we need look no further than the recent United Nations IPCC report which, for the first time, not only details the potential catastrophe of climate change by the end of this century, but projects a “cost” for preventing that catastrophe from unfolding. This “cost” is calculated as a percentage of annual global GDP.

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DO WE NEED TAXES? THE MMT PERSPECTIVE

Posted on May 13, 2014 by | 40 comments

By L. Randall Wray

What do you get when you drop taxes? Well, Bitcoins.

Sometimes the only appropriate response to critics is embarrassment. For them.

Witness the following exchange on twitter:

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Geithner’s Other Ad Hominem Attacks on Barofsky

Posted on May 12, 2014 by | 7 comments

By William K. Black

In my first article on Timothy Geithner’s book entitled “Stress Test” I exposed the revealing and disgusting nature of his bizarre ad hominem attack on Neil Barofsky, the Special Inspector General for the Troubled Assets Relief Program (SIGTARP) for the great sin of providing his law enforcement officers (LEOs) with side arms and protective vests – an action any responsible leader of SIGTARP would make a priority.  In this second article I discuss very briefly his other two ad hominem attacks on Barofsky and his staff.

Geithner Damns Barofsky for Lack of Expertise

This attack constitutes further proof of our family rule that it is impossible to compete with unintentional self-parody.  Geithner complains:

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Geithner’s Single Most Revealing Sentence

Posted on May 12, 2014 by | 18 comments

By William K. Black

Timothy Geithner has a great deal of competition for the title of worst Treasury Secretary of the United States, but he has swept the field as worst President of Federal Reserve Bank of New York (NY Fed).  Geithner is a target rich environment for critics and he has a gift for saying things that are obviously depraved, but which he thinks are worthy of a public servant.

He did vastly more harm to the Nation as the President of the New York Fed than he did as Treasury Secretary.  He was supposed to regulate most of the largest (and most criminal) bank holding companies – and failed so completely that he testified to Congress that he had never been a regulator and that the problem in banking leading up to the crisis was excessive regulation.  His statement that he was never a regulator was truthful – but you’re not supposed to admit it, and you’re certainly not supposed to be proud of it.  Geithner, Greenspan, and Bernanke are the three Fed leaders who could have prevented the entire crisis by being even modestly effective regulators.

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The General Pattern: Risk-Free Nominal Assets

Posted on May 8, 2014 by | 18 comments

By Brian Andersen

It only makes sense to compare ETF issuers to currency issuers if issuing currency is like issuing ETFs. In my other posts I assumed that to be the case. But perhaps that isn’t obvious. So the question becomes, what do ETFs and currency have in common that make one an appropriate model for the other?

The answer is that ETFs and currency are both examples of risk-free nominal assets. The language stems from philosophy where there are thought to be things and names, and the names are used to retrieve the things. So nominal assets are the names and real assets are the things that they retrieve. Just as it is unhelpful to have multiple names referring to the same thing, it is unhelpful to have too many nominal assets trying to make claim on a given pool of real assets. While interesting from an etymological point of view, it is not entirely accurate to think of nominal assets as names referring to specific things.

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Fundamentals of Shadow Banking: Dealer Model

Posted on May 7, 2014 by | 1 comment

Dr. Perry Merhling presented this seminar at UMKC on 4/30/14. He presented on the Shadow Banking System, in particular, the Dealer Model. The slides are immediately below the video.

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Economists vs What Works: Lessons from the ETF Market

Posted on May 7, 2014 by | 20 comments

By Brian Andersen

In my previous post I outlined the strategy used by Exchange Traded Funds (ETFs) to create financial assets that offer both price stability and high liquidity. I defined price stability as the ability to hold the asset without gaining or losing purchasing power. And liquidity as the ability to buy or sell the asset on demand. Since this mechanism has been shown to work very well in the equity markets, I think it could be instructive for issuers of fiat currency, because fiat currency are also financial assets that are supposed to offer price stability and liquidity.

To that end I extracted four guidelines for a currency issuer to follow, based on what is already known about successful ETF operations:

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Those who the gods wish to destroy: Bernanke’s Triumphal Pride

Posted on May 6, 2014 by | 3 comments

By William K. Black

Greetings form Guayaquil, Ecuador where I’m teaching a mini-course at ESPOL.  The course introduces students to the great economic debates of theory that shaped our dominant fiscal, monetary, and anti-regulatory policies in the decades before the financial crisis.  Memory can be a tricky and misleading guide, so I went back to what the key decision makers and theorists were saying in the years before the crisis.  My focus is on Ben Bernanke and Alan Greenspan, but I also discuss extensively John Williamson, who coined the phrase “the Washington Consensus.”  (My readers know that I attribute many of the most damaging anti-regulatory policies to the Clinton-Gore administration and its evisceration of effective regulation through its “Reinventing Government” program.)  I wanted readers to see what was being said by the Fed’s leadership (which would soon transition from Greenspan to Bernanke) as the financial world was exploding into an orgy of “accounting control fraud” (the most destructive in history) that was hyper-inflating the largest financial bubble in history, and about to cause a global financial crisis that produced the Great Recession and (if Bernanke is to be believed) would have produced another Great Depression but for the largest financial bailout in history.

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Let’s Fight Poverty, Not the Poor

Posted on May 6, 2014 by | Comments Off on Let’s Fight Poverty, Not the Poor

By Fadhel Kaboub
(cross posted from freepress.org)

This year marks the 50th anniversary of the so-called “War on Poverty” that President Lyndon B. Johnson declared when the official poverty rate was at 19%. Five decades later, the poverty rate stands at 15% with 46.5 million people living below the official poverty line, which is about $23,000 for a family of four (2012 Census Data). More than 20 million people earn less than half the poverty line, in other words, they live in extreme poverty in the richest country in the history of the world. The statistics are even more depressing when we consider that the child poverty rate (under age 18) is an alarming 21.8%. Even worse, for children under the age of 5, some states register poverty rates of up to 36%.

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