Hiatus (personal)

Posted on January 5, 2015 by | 24 comments

By Stephanie Kelton

I’m in Washington, D.C. this morning, kicking off the new year in a new job. There are some rules about blogging (and so forth) and, while it is permitted, I think it’s best for me to hand over the reins to my friend and colleague, William K. Black so that I can give my full attention to the tasks ahead.  I appreciate Bill’s willingness to take over as Editor-in-Chief of NEP.

Some of you have wondered whether I’ve left UMKC.  I haven’t.  I’ve simply taken a leave of absence in order to accept a position as Chief Economist on the Senate Budget Committee (minority side).  I’ll be working closely with Senate budget staff, under the direction of ranking member Sen. Sanders (I-VT). And, of course, I’ll be reading NEP.

Onward!

 

 

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The WSJ Is Outraged That Someone Would “Loot a Company”

Posted on January 4, 2015 by | 6 comments

By William K. Black
Washington, DC: January 4, 2015

George Akerlof and Paul Romer’s famous 1993 article “Looting: The Economic Underworld of Bankruptcy for Profit” introduced what criminologists call “accounting control fraud” to the economics literature. The people who control the firm (typically the CEOs) use its seeming legitimacy as a “weapon” to loot shareholders, creditors, and, if the resultant losses are large enough, the U.S. Treasury. Their article discussed several examples of such fraud epidemics, including the savings and loan debacle. Criminologists, the S&L regulators, and over 1,000 successful felony prosecutions of the S&L looters confirmed Akerlof & Romer’s insights.

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Greece, the Troika, and the New York Times

Posted on December 31, 2014 by | 8 comments

By William K. Black
Bloomington, MN: December 29, 2014

As I have explained in prior articles, there is an excellent chance that the Troika’s infliction of austerity on the eurozone’s periphery could, as with the austerity inflicted under the Washington Consensus continue to produce such long-term rolling recessions that it creates a political dynamic that discredits such economic malpractice and brings to power leaders elected on the promise that they will adopt economically literate policies. The first case of this in the eurozone could be Greece. (Hollande won office on a platform of opposing inflicting austerity on France, but purged his government of those that most strongly opposed austerity and implemented policies that moved increasingly toward austerity. The French economy stagnated and Hollande’s approval ratings are dismal.)

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BOOM BUST BOOM: MINSKY AT THE MOVIES

Posted on December 22, 2014 by | 9 comments

By L. Randall Wray

I highly recommend a movie to be released next year (that is, the year that begins next week). Terry Jones, of Monty Python fame, is one of the key developers of the film. It is on the Global Financial Crisis, but also provides a quick history of bubbles and crashes. It is highly entertaining and as good as any that I’ve seen on the crisis.

The movie features Hyman P. Minsky as well as J.K. Galbraith, who appear as life-sized puppets. One of Terry’s crew told me they brought Minsky over from England on a plane as a fare-paying customer. I would have loved to have seen the look on the faces of the flight attendants. I hope they bought him a beer.

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The Faux “Civility” of “Broken Windows”

Posted on December 22, 2014 by | 2 comments

By William K. Black
Bloomington, MN: December 21, 2014

On December 18, 2014, William Bratton and George Kelling published an op ed in the Wall Street Journal decrying “The Assault on ‘Broken Windows’ Policing.” I’ll be writing a broader response to their piece noting their failure to implement “broken windows” enforcement against the elite white-collar criminals who have made Wall Street one of the world’s most destructive criminal “hot spots.” In this column I point out the implications of their attempt to label criticisms of a NYPD policy they developed and favor as an “assault.” They chose the word to be inflammatory and to try to label their critics as inherently illegitimate and pro-crime.

Here, in light of the tragedy of the murder of two NYPD officers and the reactions to that murder I want to point out what Bratton and Kelling asserted explained broken windows policing was effective. “[T]housands of police interventions on the street … restored order and civility across the five boroughs.” Except, of course, for Wall Street, where crime has skyrocketed and rudeness and disorder are defining elements of the corrupt culture. But that’s my next piece.

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Absentee Governance by the “Captains of Solvency”

Posted on December 21, 2014 by | 4 comments

By John Nicolarsen

Recent events surrounding the bill passed for the funding of the United States Government for most of 2015, especially viewed in light of the bailouts throughout the financial crisis, prompt this piece, a brief reminder of the prescience with which the contributions of Thorstein Veblen stand up to vividly contouring the “credit system” of his day and, I argue, of our times presently. In addition to Veblen we benefit in seeing the past and future rescue measures from the work of János Kornai, in re-affirming and slightly filling out the “social process” of the extents taken as a result of the “soft budget constraint” syndrome. [1]

For Veblen, the “effectual control of the economic situation, in business, industry, and civic life, rests on the control of credit.” [2] The extension and control of the “fabric of credit” in determining production and output and “what the market will bear” is undertaken by a “conscientious withdrawal of efficiency, as dictated by the law of balanced return,”[3] and “Balanced Return involves Balanced Unemployment.” [4]

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Holder and Obama Never Miss an Opportunity to Miss an Opportunity v the Banksters

Posted on December 19, 2014 by | 7 comments

By William K. Black
Bloomington, MN: December 18, 2014

Holiday greetings! Today’s semi-sermon considers verses from tracts many consider sacred.

John 3:20 (KJV) For every one that doeth evil hateth the light, neither cometh to the light, lest his deeds should be reproved.

Talmud: Here I will simply summarize the Miracle of the Lights. When the temple was restored to Jewish control its sanctified olive oil for the lamps had been profaned. Only one portion, enough to last one night was still pure. That portion, however, miraculously continued to light the temple for over a week until new sanctified oil could arrive.

The common theme, of course, is the blessings that light brings in making it much easier for good to prevail over evil. In the financial world we use a related concept – transparency. In finance, we implicitly assume that transparency also involves providing light. (Anyone who has walked into a glass door on a very dark night knows that transparency without light is no great protection.) John 3:20 is also about accountability – the desire of the evil to use darkness to avoid having their evil “deeds” “reproved.” A related verse, from our semi-sacred secular texts, was doubtless influenced by these religious themes – Supreme Court Justice Louis Brandeis’ famous phrase was that “Sunlight is the best disinfectant.”

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The Technology Solution to the Democracy Crisis

Posted on December 18, 2014 by | 12 comments

By Joe Firestone

The spectacular intrusion of special interests into the passage of the $1.1 trillion government spending bill on December 13, 2014 was breathtaking as bankers and lobbyists whipped the vote by calling Congressional representatives directly to demand a host of special interest provisions, including the following:

  • Repealing the Dodd-Frank prohibition on locating derivatives trading activities in the same bank subsidiary company as their depositories containing checking, savings, and other accounts insured by the FDIC.
  • Raising individual campaign contribution limits by roughly 10 times the present limit.
  • Allowing businesses to default by as much as 1/3 of their private pension obligations.
  • Preventing the EPA from introducing new climate protections. 

So it is now abundantly clear that what we have is government by minority rule in which special interests reign supreme. Clearly, this cannot continue. It is for this reason that we are sharing the post below describing the only solution to the democracy crisis of which we are aware that can be implemented in the near future. It is long and we do not expect many readers to get through it in one sitting, or even at all. But if it piques your interest, you can re-locate it here at a more opportune time. 

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Obama Imports and Immunizes Banksters Who Donate to the Democratic Party

Posted on December 17, 2014 by | 4 comments

By William K. Black
Bloomington, MN: December 17, 2014

President Obama and then Secretary of State Clinton decided that America has a critical shortage of banksters and decided to import some from Ecuador. The banksters showed their gratitude by showing the Democratic Party with “donations.” Sometimes a small story reveals the core truth of large public policy issues far better than the big overall story can. The New York Times has just published an article entitled “Ecuador Family Wins Favors After Donations to Democrats.” The short-version is that Obama has decided to give what amounts to asylum to a family from Ecuador after it made large campaign donations to Democrats.

“It was one of several favorable decisions the Obama administration made in recent years involving the Isaías family, which the government of Ecuador accuses of buying protection from Washington and living comfortably in Miami off the profits of a looted bank in Ecuador.

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What’s Wrong with Heterodox Economics Journals?

Posted on December 17, 2014 by | 7 comments

By L. Randall Wray

I just came across a very interesting bit of research, A Guide to Paradigmatic Self-Marginalization: Lessons for Post-Keynesian Economists by Leonhard Dobusch and Jakob Kapeller; you can find it here.

I realize this is not going to be of interest to many of our readers, as it is a sort of “inside the halls of academia” analysis. What the authors do is to look at the strategies of editors running the top orthodox and the top heterodox journals in economics. Actually it might be a bit unfair to label these strategies, as the authors do not mean to imply that editorial policy knowingly pursues the strategies. Instead, the article looks at the ex post results.

In a nutshell, what they find is that the articles published in orthodox journals do not cite the research published in heterodox journals. NO SURPRISE THERE! But they also find some startling self-defeating practices pursued by heterodox journals.

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