Here's my Top 10 links from around the Internet at 7.30 pm in association with NZ Mint.
I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
I'll pop the extras into the comment stream. See all previous Top 10s here.
I blame Ayn Rand for all sorts of wrongs...
1. All together now - Tom Friedman writes at the New York Times about the synchronised crises affecting large parts of the global economy and political world.
He's right to point out things are going wrong in quite a few places all at the same time.
This latest crisis somehow seems more dangerous than the one in 2008.
Back then the central banks and governments of the world had ammunition to fire at the problems.
They had room to run big budget deficits and room to cut interest rates. The Chinese also were able to invest and expand their way out of a consumption slump. The euro was thought to have a future.
Things aren't so benign now. Budget deficits have blown out. The Chinese are sitting on a bunch of bad loans on ghost cities. The euro is in crisis. Rates have been cut to zero and money printed without success, except to fuel inflation.
Here's Friedman with a nice summary of the problems:
HOLD onto your hats and your wallets. Since the end of the cold war, the global system has been held together to a large degree by four critical ruling bargains. Today all four are coming unstuck at once and will need to be rebuilt. Whether and how that rebuilding happens — beginning in the U.S. — will determine a lot about what’s in your wallet and whether your hat flies off.
Now let me say that in English: the European Union is cracking up. The Arab world is cracking up. China’s growth model is under pressure and America’s credit-driven capitalist model has suffered a warning heart attack and needs a total rethink. Recasting any one of these alone would be huge. Doing all four at once — when the world has never been more interconnected — is mind-boggling.
2. Bernanke out of ammo - William Cohan spoke to Andrew Patterson at Radio Live Sunday after Bernanke's speech.
"He's saying: I have no more arrows in my quiver".
3. 'Don't mourn: organise' - Left wing film director Ken Loach tells The Guardian the riots in Britain were a reaction by nihilist youth abandoned by the older, ruling classes. HT Rob.
"It's the ruling class cracking the whip, isn't it? It's disgusting. We've got to organise. In the words of the old American trade unionist Joe Hill: don't mourn, organise."
He continues, apologising occasionally for "lecturing" me. "I think the underlying factors regarding the riots are plain for anyone with eyes to see … It seems to me any economic structure that could give young people a future has been destroyed. Traditionally young people would be drawn into the world of work, and into groups of adults who would send the boys for a lefthanded screwdriver, or a pot of elbow grease, and so they'd be sent up in that way, but they would also learn about responsibilities, and learn a trade, and be defined by their skills. Well, they destroyed that. Thatcher destroyed that. She consciously destroyed the workforces in places like the railways, for example, and the mines, and the steelworks … so that transition from adolescence to adulthood was destroyed, consciously, and knowingly.
"I don't recall the nihilism among kids now, 40 or 50 years ago," he says. "Now there is no place for kids, period. So I think despite the material advances, we're worse off."
4. 10.4 million lost jobs - Northwestern University Economics Professor Robert Gordon writes at VoxEu about how bonus-focused CEOs are now much more aggressive at cutting jobs than they were before the mid 1980s.
When the economy begins to sink – like the Titanic after the iceberg struck – firms begin to cut costs any way they can; tossing employees overboard is the most direct way. For every worker tossed overboard in a sinking economy prior to 1986, about 1.5 are now tossed overboard. Why are firms so much more aggressive in cutting employment costs? My “disposable worker hypothesis” (Gordon, 2010) attributes this shift of behaviour to a complementary set of factors that amount to “workers are weak and management is strong.” The weakened bargaining position of workers is explained by the same set of four factors that underlie higher inequality among the bottom 90% of the American income distribution since the 1970s – weaker unions, a lower real minimum wage, competition from imports, and competition from low-skilled immigrants.
But the rise of inequality also has boosted the income share of the top 1% relative to the rest of the top 10%. In the 1990s corporate management values shifted toward more emphasis on shareholder value and executive compensation, with less importance placed on the welfare of workers, and a key driver of this change in attitudes was the sharply higher role of stock options in executive compensation. When stock market values plunged by 50% in 2000-02, corporate managers, seeing their compensation collapse with profits and the stock market, turned with all guns blazing to every type of costs, laying off employees in unprecedented numbers.
5. Aussie ski resort fire sale - The Sydney Morning Herald reports on a fire sale of ski resort properties in Australia. Something ugly is brewing over there. HT Andrew via email
THE Victorian property market went on a downhill run yesterday when dozens of properties in the ski village of Falls Creek sold for a fraction of their retail price at a single ''no reserve'' auction that, at times, resembled a fire sale.
Developer and publisher of The Monthly Morry Schwartz made a dramatic exit from the alpine property market at the first ''no reserve'' Helmsman auction of real estate held in Australia.
Conventionally used to sell livestock, Helmsman auctions are a method where everything is put on sale simultaneously and individuals bid against each other and the clock.
6. Clinton admits he was wrong - Bill Clinton fesses up to allowing too much deregulation of derivatives in this ABC interview. HT Iain via email.
7. The disillusion is growing - Gretchen Morgenson writes at the New York Times about how Main St in America is incredulous at the revelations about how the Fed bailed out Wall St during the Lehman Crisis and how it has done little to help the economy.
Walker F. Todd, a research fellow at the American Institute for Economic Research and a former assistant general counsel and research officer at the Federal Reserve Bank of Cleveland, said these details from 2008 confirm that institutions, not citizens, were aided most by the bailouts. "What is the benefit to the American taxpayer of propping up a Belgian bank with a single New York banking office to the tune of tens of billions of dollars?" he asked.
"It seems inconsistent ultimately to have provided this much assistance to the biggest institutions for so long, and then to have done in effect nothing for the homeowner, nothing for credit card relief."Mr. Todd also questioned the Fed's decision to accept stock as collateral backing a loan to a bank.
"If you make a loan in an emergency secured by equities, how is that different in substance from the Fed walking into the New York Stock Exchange and buying across the board tomorrow?" he asked. "And yet this, the Fed has steadfastly denied ever doing."If these rescues were intended to benefit everyday Americans, as Mr. Paulson contended, they have failed.
Main Street is in a world of hurt, facing high unemployment, rampant foreclosures and ravaged retirement accounts.
8. Rational economics - Yves Smith at NakedCapitalism points to an archival interview that Ayn Rand, the hero of libertarians everywhere, gave to Mike Wallace in 1959. The videos are worth watching. Click through the link to the two other videos. It's a full half hour interview with the fountainhead of the Neo Liberal movement.
I wish I'd seen this a long time ago. She inspired Allan Greenspan and all types of laissez faire economists that went on to dominate policy making for the last 30 years.
The other amazing thing is that this long interview about philosophy and ideas was broadcast on US national network television in prime time. It would never happen today.
She (Yves) makes some good points about Rand's failure:
I must confess to not realizing that Rand’s philosophy was rooted in the counterfactual belief that people are rational. Every social science (ironically, save mainstream economics) puts human irrationality and inconsistency front and center.
Nobel prize winner Herbert Simon studied how woefully limited human cognitive capacities. More Nobels have been awarded for behavioral economics, which (among other things) has catalogued numerous cognitive biases.
One of the world's leading economists said Wednesday that the very structure of the Federal Reserve system is so fraught with conflicts that it's "corrupt." Nobel laureate Joseph Stiglitz, a former chief economist at the World Bank, said that if a country had applied for World Bank aid during his tenure, with a financial regulatory system similar to the Federal Reserve's -- in which regional Feds are partly governed by the very banks they're supposed to police -- it would have raised alarms.
"If we had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure," Stiglitz said during a conference on financial reform in New York. "It's time for us to reflect on our own structure today, and to say there are parts that can be improved."
10. The Daily Show explains The Tea Party movement.
34 Comments
Here's Wolfgang Munchau at FT.com about the future of the euro and the need for a eurobond. He nails it, as he does so often:
http://www.ft.com/cms/s/0/0c3709ac-cf2d-11e0-b6d4-00144feabdc0.html#ixzz1WOxVEuY9
The crisis now has such force that it renders the existing resolution mechanisms defunct. The European financial stability facility was set up to handle small countries, such as Greece, Portugal and Ireland; it is useless as a mechanism to protect Italy or Spain. If you raised its lending ceiling to, say €2,000bn, France would stand to lose its triple A rating. That in turn would affect the EFSF’s own lending capacity, which equals the share of the triple A rated countries.
If you really wanted to provide a backstop for Italy or Spain, the only long-term solution is what is known in legal jargon as joint and several liability – in other words, a eurobond. There is no way Germany could guarantee Italy or France could guarantee Spain. The problem has become so big that the only credible guarantees are joint.
Here's Fareed Zakaria at Time on the problem with America's Conservatives. Again Ayn Rand has an awful lot to answer for.
http://www.time.com/time/nation/article/0,8599,2077943,00.html#ixzz1WOzbrLTE
Many Republican businessmen have told me that the Obama Administration is the most hostile to business in 50 years. Really? More than that of Richard Nixon, who presided over tax rates that reached 70%, regulations that spanned whole industries, and who actually instituted price and wage controls?
In fact, right now any discussion of government involvement in the economy — even to build vital infrastructure — is impossible because it is a cardinal tenet of the new conservatism that such involvement is always and forever bad. Meanwhile, across the globe, the world's fastest-growing economy, China, has managed to use government involvement to create growth and jobs for three decades. From Singapore to South Korea to Germany to Canada, evidence abounds that some strategic actions by the government can act as catalysts for free-market growth.
Of course, American history suggests that as well. In the 1950s, '60s and '70s, the U.S. government made massive investments in science and technology, in state universities and in infant industries. It built infrastructure that was the envy of the rest of the world. Those investments triggered two generations of economic growth and put the U.S. on top of the world of technology and innovation.
#5. "..(they) paid a little more than $330,000 for a three-bedroom, three-bath unit they had previously seen advertised for more than twice that sum" Cool...in more ways than one.....
"Economics is not a technique in search of problems but a set of problems in need of solution. Such problems are varied and the solutions will inevitably be eclectic. Such pragmatic thinking requires not just deductive logic but an understanding of the processes of belief formation, of anthropology, psychology and organisational behaviour, and meticulous observation of what people, businesses and governments do.
The belief that models are not just useful tools but are capable of yielding comprehensive and universal descriptions of the world blinded proponents to realities that had been staring them in the face. That blindness made a big contribution to our present crisis, and conditions our confused responses to it. Economists – in government agencies as well as universities – were obsessively playing *Grand Theft Auto while the world around them was falling apart."
Kay wrote that last sentence, not me. Question is, have they stopped "obsessively playing Grand Theft Auto" and got to work on stopping New Zealand falling apart, in our context, as a small open economy with an export trade imperative? (Personally, I don't think so.)
* He was referring back to the following comparison in a section where he was making the point that (obsessive, puritanical?) application of one aspect (consistency and rigour) of, 'the scientific method' blinds us to the inadequacies the whole approach can generate, or has generated. That comparison reads, "The only descriptions that fully meet the requirements of consistency and rigour are completely artificial worlds, such as the “plug-and-play” environments of DSGE – or the Grand Theft Auto computer game."
As for what DSGE means, for us Friday afternoon economists - "Macroeconomics deals with growth and business cycles. Its dominant paradigm is known as “dynamic stochastic general equilibrium” (thankfully abbreviated to DSGE) – a complex model structure that seeks to incorporate, in a single framework, time, risk and the need to take account of the behaviour of many different companies and households."
It's that simple ....
Cheers, Les.
There's a good expose of Ayn Rand in the BBC Adam Curtis doco series All Watched Over By Machines Of Loving Grace. It's a 3 parter, the first two are available here:
It covers a lot of ground, economics, trading, the net, etc.
--
If you consider the breadth of the bailouts and buyouts and government intervention in the markets, the US essentially has a centrally planned economy now, albeit with misallocation of capital that dwarfs that of even China - as it's geared towards preserving the wealthy.
According to Jared Diamond this is one of the hallmarks of a society in collapse. The few at the top accumulate wealth in an attempt to insulate themselves from decline as the population slides into misery.
Hey thanks mucho for that link, been trying to track down a copy of that BBC series.
Ayn Rand laid bare for sure, in all her poisonous, malevolent arrogance - almost as frightening is the first interview with one of her female cultists - 'We can tame nature' - what the feck is that?
Rand is so obviously an idealogue, looking back it's all pretty weird - seems like another world.
She was part of a broader shift towards rationalism... it's a bit lazy to scapegoat her for articulating the zeitgeist.
bleep - ditto wot Andy said, very interesting. I wonder what weaknesses Greenspan had* that he was so entralled by the flawed Rand? Amazing. Greenspan's acolytes should rise from bowing, at least for a while.
* He didn't understand greed, and he has said as much. However, isn't it so dumb that CB's around the world still chant the mantra.
Chomsky on The Evolving Global Order: Prospects and Opportunities
Ta.... Shame such a moderate telling of history is now viewed as extreme.
FYI from The West Australian on a speech by the RBA's Glenn Stevens:
http://au.news.yahoo.com/thewest/business/a/-/wa/10124836/high-price-of…
Baby boomers are stealing the futures of their children and grandchildren through high house prices that have stopped young people buying their own part of Australia, Reserve Bank governor Glenn Stevens has warned.
Baby boomers and Gen Xers that had benefited from the lift in home prices in the early parts of this decade were now sitting on huge capital gains.
"There's a very big inequality between generations building up and I think that's a social problem as much as any economic point," he said.
Bernard... have u been ghost writing for Glenn stevens..?? :)
FFS, really:
"Baby boomers are stealing the futures of their children and grandchildren through high house prices that have stopped young people buying their own part of Australia, Reserve Bank governor Glenn Stevens has warned."
No, it's pricks like Stevens, and many a central bank governor, who have stood by and allowed this to happen. How 'kin disingenuous of Stevens, and all like him. Why did they stand by and do zip? It wasn't just him. Look around, why don't ya.
Finger pointing twonk.
They let it happen, and baby boomers made it happen. Culpability all 'round.
How the British Aristocracy survived and thrived was in no small way due to their attitudes to reproduction, marrage and inheritance. They often married within the family, had fewer children (even allowing for massive infant mortality that affected everyone) and of course as a patriarcial society allowed for inheritance to pass only to the eldest male heir. If Australians follow these sorts of rules, they can pass on their wealth to future generations then they too can have the wonderful society that exists in Britain to this day.
And it's time to dump the Doha round. Fair enough. This from a former US Trade Diplomat.
http://www.realclearmarkets.com/articles/2011/08/25/time_to_dump_the_do…
Susan Schwab, who headed the office of the U.S. Trade Representative under President Bush, has asserted bluntly: "The Doha Round has failed. It is time for the international community to acknowledge this sad fact and move on." She is backed by all U.S. business sectors. The Doha Round for the service industries "holds no promise," states Robert Vastine of the U.S. Coalition of Service Industries: "Why are we wasting our time?" His views are echoed by the U.S. manufacturing industry, whose spokesman, Frank Vargo, of the National Association of Manufacturers, asserts "The Doha Round has failed miserably in generating new market access."
What good news. Now for fair trade (with tarrifs where necessary) not this free trade bullshit.
Hi Iain - re. your first link, it is the "flaw" that more people should concentrate on, mentioned about 9.42'ish, that also questions a key premise in Randism, Libertarianism, thence Neo'liberalism - Greenspan admits he was wrong, in doing so he admits ....
Shame really, there are kernels of useful thinking in what he eventually, inevitiabley denies. I mean who doesn't want freedom? It's just so marketable.
Cheers, Les.
The US is the perfect example of why FPP is a crap political system, people are divided up between two parties, and they'll hate any policy that the other party brings in, simply because it's from the party they hate, whether they actually like the policy or not.
A completely useless sytem doomed to failure.
For any of it's faults MMP is still way better.
You should be gettin' worried about yourself there Bernie, youre showing signs of obsessive-compulsive disorder symptons. You're obsessed with attacking BB's and have a compulsion to write a weekly article with relentless religiosity. In 52 weeks you have written 50 articles laying into them and not one counter-balancing article. That's obsessive.
That is in spite of the fact a number of your contributors (you call them bloggers) have declared their status as GenXers and presented incontrovertible written evidence you are wrong. I've listed them in previous posts for you. Yet you persist.
He doesn't feel the need to provide counter-balance to the notion that Earth isn't flat, either.
Ayn Rand Interviews: Great stuff - something to do with the lighting maybe...
'Face to Face with John Freeman' has a similar quality (Edith Sitwell springs to memory - can't find a link).
Ayn Rand seemed to be positing 'enlightened self interest' , almost as a rebuttal of 'the meek shall inherit the Earth' and "Love thy neighbour' dictums. Not really a full blown political system, more a principled morality that depends on individuals realising that it may serve their own interests to accomodate others...
Hegel's Phenomenology of Mind maybe (summary)
Can't yet see how she can honestly be villified.
A question for Bernard: Please can you post the weighted index that is used to make up the CPI number. It would be important to be able to see how and when this index has been changed over the years.
AND (Bernard)
Would you please publish the top 5 non-discretionary expenditures of the 'average' household alongside the index, (or at least give it a bash).
Quite right doubleH...a far better way to expose the debasement being engineered by Bollard, would be to just show the price increases on the stuff families NEED to buy and pay for.
Electricity...fuel....food..dunny paper..rent....rates...school uniforms...school fees...gas...water bills....insurance....road user charges....wof..vehicle reg......have I missed any out?
"German Chancellor Angela Merkel no longer has enough coalition votes in the Bundestag to secure backing for Europe's revamped rescue machinery, threatening a consitutional crisis in Germany and a fresh eruption of the euro debt saga"
"Cabinet agreed in 2008 that better weapons were needed and voted $36 million for 10 new and modified weapon systems. Not a single project has been completed yet.
"The prime reasons for the delays in project progress are shortages of project staff and that none of the army project personnel, including the programme manager, were fully project trained," the study said."
http://www.stuff.co.nz/national/5528764/Soldiers-rifles-fail-to-hit-their-target
Utter shite.....if any one of the Army senior staff are incapable of identifying a suitable weapon and ordering enough to provide the needed arms to frontline troops..then they should be busted to the rank of private.
What was it that Lange called them...."geriatric generals"...
Amazing aint it....dont these clowns realise there is a war on?????
Perhaps they need to model their purchasing programme on the one the taliban use's..seems to be quite effective..
The report is more about the failure of the General Army Staff...utterly incompetent on this matter...probably the tip of the iceberg. Perhaps the minister should subcontract out the task to the gobshite enemy...couldn't do any worse!
Or hand the matter over to the 'staff sargeant' booting the RWC cameramen in the bum....haha
This is the "general staff" FFS, if they cant organise a project, how the hell would they organise a war/battle/fight?
regards
#8: Ayn Rand. Sort of rational, but in a very scary way. Reminds me of Marx
No wonder they talk about the Rabid Right and the Loony Left.
Avoid them. Sorry Hone & Don, no offence intended
Cheers
very true (rabid right - loony left)......though Im not sure Marx was that "left" as in a marxist, he spawned a complete...uh....disaster, sure....
Ayn R on the other hand was a complete loon....
regards
I'd worry more about the 'disciples' than the brains/experiences that someone like Rand/Marx had - I respect their honesty/individuality/eccentricity more than that of those that chose to 'follow'.
Greenspan in spite of his preaching of the free market was one of the greatest interventionist of all time. He repeatedly intervened and cynically manipulated the markets by slashing interest rates and maintaining them at artificially low levels for “extended periods”, recklessly creating tsunamis of credit which engulfed the whole world inflating assets markets in its path, hence sowing the seeds of today’s mess.
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