Why we're wired to make bad investment decisions. Michael Mauboussin, via Big Think.
The G-20's China bet. Simon Johnson, NYT.
Three market valuation indicators. Doug Short.
How Goldman Sachs gambled on starving the poor - and won. Huffington Post.
Time to shut down the Fed? Ambrose Evans-Pritchard, Telegraph.
Rosenberg: sub-2% bond yields. Credit Writedowns.
Rob Parenteau gets sector balances right. Steve Waldman.
SW quoting RP:
"Remember the global savings glut you keep hearing about from Greenspan, Bernanke, Rajan, and other prominent neoliberals? Turns out it is a corporate savings glut. There is a glut of profits, and these profits are not being reinvested in tangible plant and equipment. Companies, ostensibly under the guise of maximizing shareholder value, would much rather pay their inside looters in management handsome bonuses, or pay out special dividends to their shareholders, or play casino games with all sorts of financial engineering thrown into obfuscate the nature of their financial speculation, than fulfill the traditional roles of capitalist, which is to use profits as both a signal to invest in expanding the productive capital stock, as well as a source of financing the widening and upgrading of productive plant and equipment.
What we have here, in other words, is a failure of capitalists to act as capitalists. Into the breach, fiscal policy must step unless we wish to court the types of debt deflation dynamics we were flirting with between September 2008 and March 2009. So rather than marching to Austeria, we need to kill two birds with one stone, and set fiscal policy more explicitly to the task of incentivizing the reinvestment of profits in tangible capital equipment."
Are we "IT" yet? Steve Keen.
a long paper with lots of charts --- and these notable excerpts, (as chosen by Yves Smith):
Firstly, the contribution to demand from rising private debt was far greater during the recent boom than during the Roaring Twenties—accounting for over 22% of aggregate demand versus a mere 8.7% in 1928. Secondly, the fall-off in debt-financed demand since the date of Peak Debt has been far sharper now than in the 1930s: in the 2 1/2 years since it began, we have gone from a positive 22% contribution to negative 20%; the comparable figure in 1931 (the equivalent date back then) was minus 12%.5 Thirdly, the rate of decline in debt-financed demand shows no signs of abating: deleveraging appears unlikely to stabilize any time soon.
Finally, the addition of government debt to the picture emphasizes the crucial role that fiscal policy has played in attenuating the decline in private sector demand (reducing the net impact of changing debt to minus 8%), and the speed with which the Government reacted to this crisis, compared to the 1930s. But even with the Government’s contribution, we are still on a similar trajectory to the Great Depression.
What we haven’t yet experienced—at least in a sustained manner—is deflation. That, combined with the enormous fiscal stimulus, may explain why unemployment has stabilized to some degree now despite sustained private sector deleveraging, whereas it rose consistently in the 1930s….
Whether this success can continue is now a moot point: the most recent inflation data suggests that the success of “the logic of the printing press” may be short-lived. The stubborn failure of the “V-shaped recovery” to display itself also reiterates the message of Figure 7: there has not been a sustained recovery in economic growth and unemployment since 1970 without an increase in private debt relative to GDP. For that unlikely revival to occur today, the economy would need to take a productive
turn for the better at a time that its debt burden is the greatest it has ever been..
Debt-financed growth is also highly unlikely, since the transference of the bubble from one asset class to another that has been the by-product of the Fed’s too-successful rescues in the past means that all private sectors are now debt-saturated: there is no-one in the private sector left to lend to.
must see:
Crises of capitalism. David Harvey, YouTube. (hat tip Yves Smith)
BP links of the day:
Avertible catastrophe. Financial Post.
Should BP nuke its leaking well? Scientific American.
but there's no point nuking the main well leak if there are multiple leaks:
Hidden truths BP and the White House are hiding from the American public. OpEd News.
other fare:"And this is where I'm very angry with President Obama, the government, the Coast Guard, and everybody involved. They are still leading people to believe that there's only one leak from a single wellhead when in fact we have a multitude of leaks. Several leaks, one three or four miles west, have been confirmed."...
"So you have three separate toxins that are flooding into the Gulf. I and a few others were a month ahead of people saying this leak is not 5,000 barrels a day. It's closer to 100,000, and of course we finally confirmed that. So now you have the oil at an unknown rate, let's say 100,000 barrels which is safe at this point. You have methane. This is a very high volume methane well and methane at those depths deoxygenates the water. It reacts with the water and creates huge dead zones from seabed to sea surface killing all life because ocean life still needs oxygen to survive. And then you have the Corexit."
Hall of shame: divers in football.
On burning cop cars and stagecraft. The League of Ordinary Gentlemen.
the anarchists might as well be employed by Stephen Harper, ribbing them as his useful idiots. But the criticism could be made of the rest of us- after all, we pay a fortune in taxes, put our civil liberties on hold, and close our businesses for a few days; all so our governments and a handful of hooligans can come together and make the same didactic theatrical point each year: people who criticize the economic decisions of the ruling class can be embodied by a stupid thug burning a cop carCanadian, please. YouTube.
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