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Greek Debt Restructuring Could Get Snared in Trade Treaties

from Kevin P. Gallagher

Greece may have managed to kick the can down the road once again, but will eventually have to restructure its debt. If Greece or any other nation restructures, they will find that one of the most glaring gaps in global economic governance is the lack of an agreed-upon regime for resolving debt crises. New research shows that in the absence of conscious global economic governance, we may be left with a de facto regime: the thousands of international trade and investment treaties that have jurisdiction over government debt. Just ask Argentina. Read more…

Greece: Odds and Ends

June 28, 2011 3 comments

from Peter Radford

The deluge of news and opinions on the Greek crisis has surely exhausted all the options. I don’t intend to add much more. But I do want to say:

  1. Piling on more pain is useless. A default is both inevitable and desirable. Inevitable because austerity will push the Greek economy down and could easily create a volatile political situation which would overwhelm the limited sensibilities of traditional economics. Read more…

Bank capital: more please

from Peter Radford

Our banks remain chronically undercapitalized. That is to say they run on too narrow a cushion of equity capital that can be extinguished by losses before they have to be bailed out or allowed to fail. There seem to be two causes for this. Read more…

Greece: a new low

June 18, 2011 13 comments

from Peter Radford

Count me among those who expect Greece to default on its debt. I see no viable alternative. The Greek experience is unique. Other troubled Euro zone nations are less culpable for their demise. At least from a distance it is well known that Greece has a major problem with aspects of modern society: for one thing its citizenry seem to think they can cheat endlessly on their taxes, and yet still benefit from some of the most generous government programs in the entire world. Getting something for nothing has become a national pastime. That would be fun and quite fitting for a small marginal banana republic. It is not at all fitting when you are tethered to the German mother ship.  Read more…

What Ever Happened to the Stiglitz Commission?

from Kevin Gallagher

At the onset of the financial crisis the United Nations put together an all-star group of global economists and economic policy-makers, chaired by Nobel Laureate Joseph Stiglitz, to assess the causes and consequences of the financial crisis and to make a set of recommendations to make sure such a crisis never happens again. The commission’s report was published with great fanfare and fed into a 2009 UN conference on the financial crisis that was met with little fanfare outside the UN system.  Read more…

Robert Samuelson’s troubled TARP arithmetic

March 28, 2011 3 comments

from Dean Baker

We know that arithmetic is not the strong suit of the Washington Post and Robert Samuelson drives this point home again today with his discussion of the TARP. Samuelson tells us that TARP is now projected to cost just $19 billion and that the final cost may actually be lower. He also tells us that the alternative to TARP, bank nationalization would have been far more costly. And, he said that without TARP the unemployment rate “would be 11 percent or 14 percent; it certainly wouldn’t be 8.9 percent.”

Okay, let’s take these in turn. Read more…

Buffett tells country, TARP gave over $1 billion to Goldman Sachs

March 21, 2011 3 comments

from Dean Baker

At a time when all the tough guys in Washington are making plans to cut Social Security and Medicare benefits for high-living seniors and to cut Head Start for low-income kids, it was generous of Warren Buffett to point out that we taxpayers gave over $1 billion to Goldman Sachs through TARP. Buffett probably didn’t intend to point out this fact to the country, but it is an unavoidable implication of his $2 billion profit on his loans to Goldman.  Read more…

Four important truths

February 22, 2011 2 comments

from Edward Fullbrook

There is a worth-reading review by Jonathan Kirshner of four books on financialization in the just-released current issue of the Boston Review.  Kirshner writes:

But the collective sigh of relief and overconfident pronouncements emanating from Wall Street and Washington obscure the fact that we have done little to avert an even worse crisis in the future. We may have stanched the bleeding, but the underlying disease—a culture, ideology, and political economy of uninhibited finance—remains. Indeed, by tiptoeing around the real issues we may ultimately make things worse.

The reviewed books are: Read more…

Mubarak and the bankers

February 14, 2011 7 comments

from David Ruccio

My reading of the final report of the Financial Crisis Inquiry Commission was interrupted by the protests in Egypt. As it turns out, there are other connections between the two events.

The fortune of the Mubarak family was amassed through their ties to EFG-Hermes, the largest investment bank in Egypt, and then stashed in British and Swiss bank accounts (as well as properties around the world). Hosni Mubarak told Egyptians he lived for the nation but, as Ian Birrell explains, Read more…

The FCIC Report: Sound and fury, signifying nothing

February 7, 2011 4 comments

from Steve Keen

I’ve just wasted a perfectly good day reading the report of the Financial Crisis Inquiry Commission–the body appointed by Congress allegedly to inquire into what caused the Financial Crisis.

What it has delivered reads more like an unedited thesis by a journalism student (who is about to receive a “C” grade). There are plenty of quotes, lots of detail, some nice section headings and a few pretty graphs, but absolutely no analysis worthy of the name. Read more…

Video: Bank bailouts explained

January 29, 2011 Leave a comment

Graph: Debt driven-demand and unemployment, USA

January 5, 2011 1 comment

from Steve Keen

The pivotal role of the change in private debt in determining economic activity is easily seen in the graph, which correlates the debt-driven fraction of aggregate demand with the unemployment rate. This graph shows why it is not hyperbole to compare the current crisis to the Great Depression, since this is the only time since then that the debt-contribution to aggregate demand has turned negative Read more…

Upside down Financial Crisis

December 16, 2010 5 comments

from Peter Radford

I had the misfortune to read an article by William Cohan in the New York Times. It was about the impending fiscal crisis. It was about how we all have to tighten our belts. It was awful, and a testimony to the upside down group think now dominating our debate about the budget.

It made me think the following: Read more…

TARP repayment and legalized counterfeiting

December 14, 2010 Leave a comment

from Dean Baker

The news outlets that insisted Congress approve TARP or the world will end have been anxiously touting the prospect of repayments and possible profits for the taxpayers from one-time basket cases like Citigroup and AIG. It is worth noting that the question of the government showing a profit or loss on its loans to these companies has little to do with whether the bailout was a net benefit to taxpayers.

Suppose the government uncovered a counterfeiting operation. Read more…

Thought for the Dutch: “don’t mention the houses!”

November 27, 2010 9 comments

from Merijn Knibbe

The Netherlands will be next. Everybody is thinking and writing about the problems of Ireland and Spain. Soon, they will be thinking and writing about the Netherlands. Check it out: Read more…

Capitalist Wimps: Ireland buckles under

November 26, 2010 9 comments

from Peter Radford

One of the stark lessons we have learned from the financial crisis here and abroad is that old fashioned capitalists are hard to find. Perhaps they always were. At least in banking.

I am amazed at the severity of the new budget squeeze Ireland is being put through by its government. Here we have a perfect example of a democratically elected government, whose duty, presumably, is to the people of Ireland, imposing crushing cuts and increased taxes on those very people.

Why?

To avoid upsetting bankers. Most of whom don’t live in Ireland. 

Here is a classic confrontation between democracy and capitalism, and the capitalists are winning.  Read more…

USA congressional report: “concealed deeper problems in the mortgage market that could potentially threaten financial stability”

November 17, 2010 1 comment

A USA congressional report on the “robo-signed” foreclosures scandal was released yesterday. It explains how the scandal poses a new threat to the US financial system. Here is the press release that came with it.  It contains a link to the full report. Read more…

A sobering graphic

November 16, 2010 6 comments

from David Ruccio

Read more…

Gender and the Financial Crisis: Maybe not what you think

November 15, 2010 2 comments

from Julie Nelson

I got a call yesterday from a German TV station, asking me for ideas for a program on “Is the economy becoming female?” The two women reporters were particularly interested in the hypothetical question, “If there had been more women on Wall Street, would the financial crisis have occurred?” I’m afraid I gave them rather a more complicated and subtle response than would fit into a TV sound bite, and one that goes deeply into our assumptions about economic life.

The story they wanted—preferably with great visuals!—was about how (as they see it) women’s greater communicative and social “soft” skills are more suited to contemporary business needs than men’s (as they see it) propensities to greater aggression and risk-taking. This drives me nuts, for two reasons. Read more…

Timothy Geithner has a new fairy tale

October 21, 2010 Leave a comment

from Dean Baker

Treasury Secretary Timothy Geithner is good at telling fairy tales. Mr. Geithner first became known to the general public in September of 2008. Back then he was head of the New York Federal Reserve Board. He was part of the triumvirate, along with Federal Reserve Board Chairman Ben Bernanke and then Treasury Secretary Henry Paulson, who told Congress that it had to pass the TARP or the economy would collapse.

This was an effective fairy tale, since Congress quickly handed over $700 billion to lend to the banks with few questions asked. Read more…