On April 13, 2010, in Background and Research, by Joe Costello

I tried but I could not find a way
Looking back all I did was look away
Next time is the best time we all know
But if there is no next time where to go?

The first rule of bubbleology is, you don’t know when they will pop, and in fact, they can expand a lot longer than you think. Or as Mr. Keynes said, markets can stay irrational a lot longer than you can stay solvent. The second rule of bubbleology is — bubbles always pop. In the last year, we’ve watched as “man of the year” Mr Bernanke flooded the world with liquidity and it has had an impact, most importantly “inflating” global currency markets, what that means over time, well, we’ll see. Doug Noland is a bubbleologist extraordinaire, he writes at the Asia Times:

The markets’ perception of “too big to fail” has for years been an integral facet of bubble dynamics. And despite all the talk of trying to rid the marketplace of this notion, the markets remain more persuaded than ever: the unfolding global government finance bubble is much too gigantic for policymakers to risk letting it come anywhere close to failing.

So, the real question is how long policymakers can keep things afloat. In the end, that depends on the real economy, and looking at that has become a Rorschach test, unless you’re unemployed, it just looks one way, pretty shitty. It certainly seems deflationary trends are fairly entrenched. The most recent inventory numbers in the US show they remain down a whopping 10% from last year. While the FT reports regulators are telling US banks to hold onto their money “until political and economic uncertainty surrounding the industry dissipates.”

Over in Europe, the roulette wheel turns to see which sovereign debt problem makes it to the front page next —

Portugal, Spain, Italy, the Brits, or back on red with the Greeks once more? Ed Harrison has good piece on the not looking too good European economy. Can everyone really export and devalue their way out of this mess?

There is one bright spot and that is Asia. And China is moving, but where? The problem with command and control economies is they push on the thing that is working until it doesn’t work anymore, and then there’s great problems. The FT reports the Chinese are indeed exporting and certainly from last year’s cratered numbers things look better, but in the last paragraph the FT notes:

The “new export orders” component of China’s official PMI fell from 53.2 in January to 50.3 in February, while the import component dropped from 53.4 to 49.1. The PMI readings are forward looking and a level above 50 indicates expansion while a level below 50 indicates contraction.

Cross-posted from Archein:  remake/remodel

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On political economy culture

On April 13, 2010, in The Public, by Joe Costello
Oh God save history

God save your mad parade
Lord God have mercy
All crimes are paid!
God Save the Queen

Culture’s are powerful forces, bending physical reality to their own ends. Today in the United States, we have a decadent political and economic culture, bordering on nihilism. We have the trappings, symbols, pageants, and even institutions of the old republic, that is democracy, but the political culture, is in opposition to its professed ends. The majority are led to believe politics works for their interests, yet nothing is further from the truth.

Satyajit Das has an excellent piece at Naked Capitalism on the culture of economics and modern finance. It reveals our last several decades cult of liquidity, which is an extremely important underlying factor to our financial mess, and yet there is little understanding. Draining liquidity from the system, that is making things less trade-able, is in fact, a most necessary step to making a sounder financial system, yet it is completely absent from the debate. Our response to the financial mess to date has been exactly the opposite. Das extrapolates further, trying to understand what the cult of liquidity has meant not just for finance but the larger culture:

In contrast with its ‘solid’ shape, ‘liquid’ modernity created new and unprecedented challenges. Social forms and institutions no longer had enough time to solidify into accepted frames of reference for human actions and long-term plans. Individuals now had to be flexible and adaptable, pursuing available opportunities. Liquid modernity required calculation of the likely gains and losses of acting (or failing to act) under conditions of endemic uncertainty.

The rise of financial markets and financialisation of everyday life is the irresistible result of liquid modernity. The rise of debt fuelled consumption and speculation derives directly from an uncertain world where risk taking is an essential survival strategy.

This doesn’t diminish the importance of the culture of outright fraud endemic to finance, but it is necessary thinking in how we create a more stable system.

Speaking of cultures or more appropriately cults, the New York Times seems a little discombobulated these days. In the last week, they seemed to go full gear promoting the economy was coming back to…uhm…”normal”. David Brooks had a piece how the 2000s weren’t so bad, everybody was makng a 100K

a year. Flyod Norris had a piece asking “Why So Glum,” the recovery was in full swing, pointing to all the other post-war recoveries as example. They even had a big completely unreadable piece by their economic Nobel Prize winner claiming the same system creating our environmental problems, of which he is an expert, was going to solve those problems. I guess that means our corporate Democrats are getting ready to take on energy, morning in America, once again.

But, it was today’s editorial on the financial mess that belies a great air of confusion. The Times claims apologies from our financial titans aren’t enough, more importantly stating:

Congress’s efforts at financial reform appear to be weakened daily by politicians who are more concerned with campaign donations than regulating the financial system. This week, for instance, a Senate committee is expected to propose new regulations for derivatives that are more loophole than rule.

Well, that’s news right? The role of the NYT in our political culture is to set the limits of sanctioned political debate in this country, you know, what’s acceptable dinner conversation in DC and Manhattan. One thing that remains unacceptable to our establishment political culture, despite all the physical evidence, is that our politics are broken, and our elected officials are subservient to Wall Street and our mega-corporations, and really, anyone who wants to write a big enough check. That maybe true, but it’s damn impolite to talk about. But don’t worry, if the Democrats manage to get a finance bill, the front page of the NYT will call it historic, same as with an energy bill. We have one sick political culture.

Archein: On political economy culture

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On January 26, 2010, in The Public, by Tiffiniy Cheng

It’s actually very watchable, pro real economy, anti-bailouts, libertarian. The winner in the video, Hayek, said, “probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all of the principle of laissez-faire capitalism”. In the book, Hayek writes that the government has a role to play in the economy through the monetary system, work-hours regulation, and institutions for the flow of proper information.

I can’t agree more that this is another inconsistency introduced by limousine liberals and we can’t support a “broke bank system”. I believe that individual freedom must be maximized in society as libertarians believe, but big business and the elites often keep individual freedom from being possible for most. I do think libertarians must address a major phenomenon in society in order to genuinely fight for individual freedoms — that those with a leg up get further ahead because they already are established (freedome begets power, which begets power) and these “haves” change the political system to benefit them more and therefore take away greater freedom from other individuals. Ideology and principle should not blindly be devoted to, but rather requires a review of the process that can actually bring about such high ideals and important states such as personal freedom.

Fear the “Boom and Bust”, here it goes: