Saturday, March 25, 2017

Brian Romanchuk — Can't Anybody Here Play This Game?

Is this cycle topping out?

Bond Economics

Friday, March 24, 2017

Michael J. Sainato — Bernie Sanders’ Economic Advisor [Stephanie Kelton] Shreds Trumponomics

Stephanie Kelton.

Bernie Sanders’ Economic Advisor Shreds Trumponomics
Michael J. Sainato

Publius Tacitus — Was this a Soft Coup?

Mr. Nunes received information earlier this week from a whistleblower, but not you typical whistleblower. The "normal" whistleblower takes information, usually classified, to a member of the press in order to bring attention to wrong doing or lies by the government. He or she goes outside of channels. In this regard the Nunes' whistleblower is different. This person passed classified material to a person cleared for the classified material, i.e. Nunes [as chair of the House Intelligence Committee].…

… there will be more information coming out today that will buttress the claims Nunes made earlier this week. This could be the start of the worm turning and former member of the Obama intelligence community and White House staff could find themselves facing legal peril.….
Who is lawyering up?

Sic Semper Tyrannis 
Was this a Soft Coup?
Publius Tacitus

Hayley Peterson — The retail apocalypse has officially descended on America

Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013, according to the real-estate research firm Cushman & Wakefield.
Not just Sears.

Business Insider
The retail apocalypse has officially descended on America
Hayley Peterson

John Helmer — The US War Has Been Good for President Vladimir Putin, and the Russian Economy Looks Stable Through the Presidential Election. So if You Are a Us Warfighter, What Is the Regime Change Opportunity Now?

A look at the relationship between the Russian economy and Russian politics.

Russian economic policy seems to be too focused on fighting inflation and not enough on addressing demand. Inflation in Russia is not running at about 4.5% and the central bank's target is 4%. The fiscal stance is tight since the Russian government appears to think it has to get rubles when it actually issues the ruble.

Dances with Bears
The US War Has Been Good for President Vladimir Putin, and the Russian Economy Looks Stable Through the Presidential Election. So if You Are a Us Warfighter, What Is the Regime Change Opportunity Now?
John Helmer

Surveillance State Goes After Trump — Dennis J Bernstein interviews Coleen Rowley

Dennis Bernstein: A former high-level FBI whistleblower says Trump is vindicated on his claims of being surveilled by the previous administration. Joining us to take a close look at what’s been going on, what’s been unfolding in Washington, D.C. is Coleen Rowley. She’s a former FBI special agent and division council. She wrote a May 2002 memo to the FBI director that exposed some of the FBI’s pre-9/11 failures, major failures. She was Time magazine’s person of the year in 2002. … Help us explain what chairman Nunes reported in terms of the collecting process and Trumps innocence or guilt?...
Consortium News
Surveillance State Goes After Trump
Dennis J Bernstein, host of “Flashpoints”, interviews ex-FBI special agent Coleen Rowley

Gabriel Sherman — Why Steve Bannon Might Be the Winner of the GOP’s Health-Care Civil War

The failure to repeal and replace Obamacare would be a stinging defeat for Trump. But it would be an even bigger defeat for Paul Ryan, who has all but staked his Speakership on passing this bill. And in the hall of mirrors that is Washington, the big winner to emerge out of the health-care debacle could be Steve Bannon. That’s because Bannon has been waging war against Ryan for years. For Bannon, Ryan is the embodiment of the “globalist-corporatist” Republican elite. A failed bill would be Bannon’s best chance yet to topple Ryan and advance his nationalist-populist economic agenda.…
Palace intrigue.

New York Magazine
Why Steve Bannon Might Be the Winner of the GOP’s Health-Care Civil War
Gabriel Sherman

Joel B. Pollak — Health Care Bill’s Failure: Just Part of the ‘Art of the Deal’

You see, the Great Dealmaker planned to appear to lose this round in crafting the deal.

Breitbart News
Health Care Bill’s Failure: Just Part of the ‘Art of the Deal’
Joel B. Pollak | Senior Editor-at-Large at Breitbart News


Report: Steve Bannon Says American Health Care Act ‘Written by the Insurance Industry’

Charlie Spiering — Donald Trump Blames Democrats for Health Care Failure, Promises Better Plan in the Future

President Donald Trump signaled he was finished with trying to repeal and replace Obamacare, telling reporters at the White House he was ready to move to tax reform.
The purpose of the Ryan Plan was supposedly to make space for tax reform.

Breitbart News
Donald Trump Blames Democrats for Health Care Failure, Promises Better Plan in the Future
Charlie Spiering


Exclusive — Discussion About GOP Replacement to Paul Ryan as Speaker of the House Intensifies in White House, Congress
Matthew Boyle

Asia Unhedged — Russian central bank cuts rates against expectations

Despite analyst expectations that the Russian central bank (CBR) would hold steady, the bank cut the key rate by 25bps to 9.5%.…
Asia Times
Russian central bank cuts rates against expectations
Asia Unhedged

Jon Perr — CBO: GOP Health Care "Plans" May Not Count as "Insurance"

As Vox and The Hill among others have reported, Republicans are trying to reduce premiums by eliminating the ACA's list of 10 mandated benefits insurers must provide. These provisions regarding prescription drug coverage, hospitalization, out-patient treatment, mental health care, pregnancy and maternity care and much more not only set a baseline for insurance offerings under Obamacare, but also help spread the risk for insurers across a much larger pool of policyholders. And that, CBO warned Obamacare repealers in December, is a big problem as far as the agency is concerned...
CBO: GOP Health Care "Plans" May Not Count as "Insurance"
Jon Perr

Don Quijones — Italy’s Multi-Headed Hydra Predicament

Unlike many other Eurozone economies like Spain, Ireland Portugal, Italy did not experience a real estate or stock market bubble in the 2000s; nor were its banks heavily exposed to the financial derivatives that helped spread the fallout from the U.S. subprime crisis all around the world. As such, Italy has not had cause to bail out its financial system — until now.… 
Italy’s current predicament is a multi-headed hydra: a banking crisis, an economic crisis, a debt crisis, and a political crisis all rolled into one, and all coming to a head at the same time. It’s the reason why economists including Deutsche Bank AG’s Marco Stringa are calling Italy, not France or Greece, the “main risk” to euro-area stability....
Wolf Street
Italy’s Multi-Headed Hydra Predicament
Don Quijones, Spain & Mexico, editor at WOLF STREET

Andrew Jackson — Reflections on the Social Democratic Tradition

The purpose of this paper is to provide a political history, overview and critical evaluation of the social democratic tradition in Western politics with some reference to the Canadian experience. It serves as a starting point for the Broadbent Institute’s new initiative exploring social democratic renewal in Canada, a project that will feature essays from a wide range of left perspectives on the future of social democracy in this critical moment of upheaval, inequality and erosion in democracies around the globe.
Broadbent Institute
Reflections on the Social Democratic Tradition
Andrew Jackson | Senior Policy Advisor to the Broadbent Institute

Brad DeLong — Caitlin MacNeal: Mulvaney: If Your State Doesn’t Mandate Maternity Care, Change Your State

I am starting to think that the politics in the US is so divisive ideologically that it may be necessary to subdivide with those more oriented toward the welfare state moving to places like the West Coast and New England, and those more oriented toward the market state moving to the South and West, with the Midwest proving a middle ground.

There would still be the question of funding, however, with the federal government as the currency issuer. Perhaps the way to deal with this is to break the US into several countries issuing their own currency and operating on different economic policy.

Otherwise permanent paralysis or even civil war? 

Actually, the US is returning to a political situation similar to that which led up to the Civil War.

Caitlin MacNeal: Mulvaney: If Your State Doesn’t Mandate Maternity Care, Change Your State
Brad DeLong | Professor of Economics, UCAL Berkeley

Yilmaz Akyuz — How to Understand Globalization: Not Nations, But Class

South Centre Chief Economist Yilmaz Akyuz explains why a correct understanding of contemporary globalization requires class, rather than nation, as the central unit of analysis.
The global ownership class is vacuuming up the bulk of income and wealth. This is inherent in the institutional design of capitalism, which favors owners (capital) over workers (labor) and the environment (land).

Triple Crisis
How to Understand Globalization: Not Nations, But Class
Yilmaz Akyuz | South Centre Chief Economist 

Rick Salutin — Can we come out now that deficit hysteria is over?

Another news article on MMT. Positive.

The Star (Canada)
Can we come out now that deficit hysteria is over? Salutin
Rick Salutin, columnist

Miguel Navascués— The huge fallacy of the Modern Monetary Theory: money is not free

Critique of MMT by a Bank of Spain economist.

The Corner (Spain)
The huge fallacy of the Modern Monetary Theory: money is not free
Miguel Navascués, economist at the Bank of Spain for 30 years, focusing on international and monetary economics

Fed now holds record amount of Treasuries. There was no "avalanche of selling" like so many Wall St. morons predicted.

When the Fed started raising interest rates 15 months ago you had a lot of Wall Street idiots predicting massive Treasury sales. One dope, Scott Minerd, predicted $1 trillion in sales. I wrote about that stupid call, here.

The Fed is currently holding a record amount of Treasuries, with the new heights in its holdings coming recently, after not one, not two, BUT THREE RATE HIKES!

These dopes don't understand that the Fed pays interest on reserves, making the need to manage reserves in order to maintain their target rate, a thing of the past.

Malpractice. That's what they idiots engage in. All the time. If it were any other industry they'd be sued or shut down. And networks like CNBC disseminate their crap, regularly.

Fed holdings of Treasuries: $2.463974 trillion.

Thursday, March 23, 2017

Michael J. Sainato — Cybersecurity Firm That Attributed DNC Hacks to Russia May Have Fabricated Russia Hacking in Ukraine

The cyber security firm outsourced by the Democratic National Committee, CrowdStrike, reportedly misread data, falsely attributing a hacking in Ukraine to the Russians in December 2016.…
The report sheds further skepticism on CrowdStrike’s findings and objectivity in their conclusions, which several cyber security experts and former CIA and NSA officials have cast doubt on, especially given that several media outlets reported in early January 2017 that the DNC never allowed the FBI to examine their servers themselves, rather the FBI relied on forensic data gathered by CrowdStrike.
The investigation methods used to come to the conclusion that the Russian Government led the hacks of the DNC, Clinton Campaign Chair John Podesta, and the DCCC were further called into question by a recent BuzzFeed report by Jason Leopold, who has developed a notable reputation from leading several non-partisan Freedom of Information Act lawsuits for investigative journalism purposes. On March 15 that the Department of Homeland Security released just two heavily redacted pages of unclassified information in response to an FOIA request for definitive evidence of Russian election interference allegations. Leopold wrote, “what the agency turned over to us and Ryan Shapiro, a PhD candidate at MIT and a research affiliate at Harvard University, is truly bizarre: a two-page intelligence assessment of the incident, dated Aug. 22, 2016, that contains information DHS culled from the internet. It’s all unclassified — yet DHS covered nearly everything in wide swaths of black ink. Why? Not because it would threaten national security, but because it would reveal the methods DHS uses to gather intelligence, methods that may amount to little more than using Google.”
In lieu of substantive evidence provided to the public that the alleged hacks which led to Wikileaks releases of DNC and Clinton Campaign Manager John Podesta’s emails were orchestrated by the Russian Government, CrowdStrike’s bias has been cited as undependable in its own assessment, in addition to its skeptical methods and conclusions. The firm’s CTO and co-founder, Dmitri Alperovitch, is a senior fellow at the Atlantic Council, a think tank with openly anti-Russian sentiments that is funded by Ukrainian billionaire Victor Pinchuk, who also happened to donate at least $10 million to the Clinton Foundation.
In 2013, the Atlantic Council awarded Hillary Clinton it’s Distinguished International Leadership Award. In 2014, the Atlantic Council hosted one of several events with former Ukrainian Prime Minister Arseniy Yatsenyuk, who took over after pro-Russian President Viktor Yanukovych was ousted in early 2014...
Cybersecurity Firm That Attributed DNC Hacks to Russia May Have Fabricated Russia Hacking in Ukraine
Michael J. Sainato

Michael Hudson — Wall Street First

Trump is Obama’s Legacy. Will this Break up the Democratic Party?
Michael Hudson
Wall Street First
Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

Reuters — Uncertain fate of Obamacare causes some hospitals to halt projects, hiring —

Uncertainty surrounding the Republican plan to replace Obamacare is forcing some U.S. hospitals to delay expansion plans, cut costs, or take on added risk to borrow money for capital investment projects, dealing an economic blow to these facilities and the towns they call home.…Across the country, hospitals are shifting to a more conservative stance as they await sweeping changes to the nation's healthcare law that for the first time in U.S. history would reverse a government healthcare entitlement program. The Affordable Care Act, commonly known as Obamacare, provided coverage to 20 million Americans and brought higher revenues to many hospitals. 

The law's likely overhaul puts many hospitals in a uniquely daunting position of being unable to predict how many of their patients will be insured and what type of coverage they will have in the future. As a result, many are more wary than in years past to invest in expensive capital projects, issue debt, or expand into new regions, said healthcare experts and hospital executives....
Hospital jobs increased after the Affordable Care Act expanded coverage. Now, amid increasing uncertainty around the nation’s healthcare law, hospital jobs are on the decline.
But, but, but, we are "saving money."

Uncertain fate of Obamacare causes some hospitals to halt projects, hiring

Matthew Allen — Greece to Surrender Gold, Utilities and Real Estate in Exchange For Pieces of Paper Printed in Brussels

It’s official: The Germans will not allow debt relief for Greece. Instead, Berlin wants to send in the repo man.
The untold story of the Greek “bailouts” is that it wasn’t a “bailout” — it was an auction of Greek assets. Real, tangible things with real, tangible value were seized in exchange for pieces of paper that guarantee Athens will be chained to Berlin and Brussels for the foreseeable future.
It’s your basic extortion racket....
A bit too melodramatic? We forgot — we are supposed to use the friendly neoliberal term for this policy of national enslavement and communal suicide: “voluntary privatization.”...
Events prove Michael Hudson right again about predatory lending funneling assets from the periphery to the core. Neoliberalism implies neo-imperialism and neocolonialism.
A perfect crime. After all, Deutsche Bank and Goldman Sachs helped cook the books so Greece could join the eurozone.
This really is a golden age for international criminal cabals. Al Capone was a chump.
Defend Democracy Press
Greece to Surrender Gold, Utilities and Real Estate in Exchange For Pieces of Paper Printed in Brussels
Matthew Allen

Kevin Robillard — Koch network pledges to defend Republicans who vote against GOP health bill

The Koch brothers' network of well-funded outside groups says it will spend millions to protect Republicans who oppose the party's health care bill from political fallout.
Americans for Prosperity and Freedom Partners, the Koch network's big budget grass-roots activism and advertising groups, are teaming up to create a "seven-figure" reserve fund to support lawmakers who buck President Donald Trump and House Speaker Paul Ryan on the health care vote, as the threat of primaries looms over some opponents of the bill. The Koch groups will spend the money on paid media, direct mail and grass-roots canvassing.

Freedom Partners called the GOP bill "Obamacare 2.0" and said it falls short of truly repealing the 2010 law....
The Koch groups argue that the GOP's bills refundable tax credits to make health coverage more affordable are a new entitlement….
The GOP goes to war with itself over purity versus practicality.

Kevin Robillard

Philip Arestis and Malcolm Sawyer — Quantitative Easing vs. Fiscal Policy

… when people pay taxes their bank accounts are debited and correspondingly the government account at the central bank is replenished. During an accounting period, government expenditure will have been funded by tax revenues received, sale of bonds to the private sector, plus the increase in central bank money....
I am not sure from reading this whether the authors hold that taxes fund spending and debt issuance finances deficits in the accounting sense of "fund" and "finance," or that such funding/financing is operationally necessary before spending can take place. The former is consistent with the MMT view, but not the latter.

From the MMT point of view, the central bank creates government liabilities by crediting accounts with bank reserves, which increases the monetary base. Funds in the Treasury's general account (TGA) do not count toward either the monetary base or the money supply. 

In the US, when the Treasury spends in accordance with appropriations, it directs the Fed to credit bank's account in the payments system with settlement balances aka "bank reserves." This increases base money. When taxes are paid, base money is reduced by that amount and taxpayers deposit accounts at banks are reduced. The spending and taxation are reflected in the government fiscal balance.

Similarly, when government securities are issues, the auction is paid for with settlement balances, the monetary base is reduced by that amount, and purchasers's deposit accounts at banks are reduced.

This simply involves crediting and debiting various accounts on the government's books (Treasury and central bank), banks' books, and bank customers books. There is no operational need for funding for the government to spend prior to spending than for banks to secure funding before extending credit by making loans and crediting deposit accounts. 

In the process, the LHS and RHS balance, which is what "funding" means in an accounting sense. For banks, the corresponding entry in a deposit account "funds" the loan. For government, the entries in accounts recording tax payments and debt issuance "fund" spending. 

With respect to government, the ratio between money creation that adds to the monetary base and money withdrawal through taxation and securities issuance that reduces the money base determines the fiscal balance. 

The difference between taxation and securities issuance is that taxation "destroys" money in the sense  that the monetary based and M1 are reduced, decreasing non-government net financial wealth in aggregate, while securities issuance shifts funds from the monetary base and deposit accounts to government securities without changing non-government net financial wealth in aggregate. Only the term changes and not the amount. 

MMT calls the issuance of government securities "draining the monetary base." It is a monetary operation that is not necessary operationally, but rather it is an optional tool operationally that is convenient for conducting monetary policy when the central bank chooses to set the interest rate above zero and is not paying interest on excess reserves. Draining the monetary base with securities issuance reduces the needs to open market operations (OMO) using repurchase agreements (repo).

However, instead of the Treasury issuing securities, the central bank could simply book loans to the Treasury directly. This is permitted in some jurisdiction, but it is prohibited politically in the US. This is a voluntary political choice that doesn't involve the US government needing to obtain funding from nongovernment in order to spend. In actuality, spending funds both tax payments in aggregate and securities purchases in aggregate, since the funds that government spends are offset on the governments' books by taxes and sale of government securities, both of which reduce the monetary base. The monetary base consists of government liabilities that only the central bank can create and that must already be available for tax payment and securities purchases. 

In this sense, government spends first which creates the funding for it similar to the way that the extension of a loan as an account receivable that is bank asset creates the corresponding funding in the form of a credit to a customer deposit account, which is a bank liability. Similarly, when government spends, the money base as a liability of the central bank increases and the TGA is debited. Debiting the TGA doesn't affect any of the measures of money.  When taxes are paid, monetary based decreases, which is the same as saying that the central banks' liabilities decrease. The TGA is credited but this credit doesn't count toward any measure of money. Thus tax payments "destroy money." The Treasury does not have money to spend. It simply has a credit that is used in determining the fiscal balance.

Based on spending appropriations and tax policy determined by the fiscal authority, generally the legislative branch, the Treasury and central bank coordinate operations to accommodate both the fiscal operations of the Treasury conducted by the central bank as the government's fiscal agent with the monetary operations of the central bank. This is coordinated so that all accounts stay in balance, which means that spending is always funded using government liabilities as the spending occurs.

The key to understanding this is that "the government neither has not does not have money." The government as monetary and fiscal authority issues the currency, determines monetary and fiscal policy, using its agents, the Treasury and central banks to carry it out in accordance with law and regulation.

Central banks are usually delegated as the fiscal agent of government having the authority and responsibility for issuing the currency. This means that the central bank is not limited in the amount it can credit to its liabilities. That is, as the currency issuer the central bank does not have to get money elsewhere. 

The Treasury does not have money either since credits to its account at the central bank do not count toward any measure of money. Moreover, the doesn't have to get money from the central bank to spend. The Treasury directs the central bank to credit non-government accounts in accordance with the government appropriations. Like the liabilities of the central bank that constitute bank reserves, the numbers in the TGA are simply accounting entries used to compute the fiscal balance from the income statement and balance sheet and show sources and uses of funding. 

The Treasury and central bank coordinate operations to ensure that accounts balance as operations are conducted. From the logical point of view, spending must precede taxation and securities purchases, since government only accepts its own liabilities in the payments system operated by the central bank. Currency users have to get these liabilities, whereas government is the currency issuer. From the temporal point of view, accounts are debited and credited simultaneously so that they are always in balance. There is some intra-day leeway but all accounts must balance at the close. 

Another key point is that government liabilities held by non-government are non-government financial assets. Since the liability is on the side of government, these financial assets held by non-government constitute non-government net financial assets in aggregate, that is to say, non-government financial wealth the funding of which is government liabilities.

Triple Crisis
Quantitative Easing vs. Fiscal Policy
Philip Arestis and Malcolm Sawyer

Asia Unhedged — Blackwater’s Eric Prince to open bases in China

US private military company Frontier Services Group (FSG) is planning operations in China’s Xinjiang Province that will support the One Belt, One Road initiative, Chinese state media reported Wednesday.
FSG’s chairman, Eric Prince, is better known as the founder of the Blackwater military company, which played a large role in the US-Iraqi war. Prince told China’s Global Times that “FSG has expanded its geographic focus from purely Africa to include the Northwest corridors of the One Belt and One Road initiative.”
Seemingly at odds with plans to provide military services in China, Prince has close ties to the White House. His sister is a member of the president’s cabinet, Education Secretary Betsy DeVos, and he was a frequent radio guest of White House chief strategist Steve Bannon’s Breitbart....
Asia Times
Blackwater’s Eric Prince to open bases in China
Asia Unhedged

Wednesday, March 22, 2017

Jon Schwarz — Congressman’s Trump Surveillance Claims Have an Obvious, Mundane Explanation

It's complicated. Jon Schwarz unpacks it for us.

Edward Harrison — You should be concerned about falling car prices and Ally’s profit warning

Yesterday, Ally Financial warned that profits would underperform expectations. Now, they dd not say that profits would fall or that they were taking credit writedowns. Neverthless, the warning is an important marker and should be of grave concern. Here’s why....
Credit Writedowns
You should be concerned about falling car prices and Ally’s profit warningEdward Harrison

Biz Carson — Apple just bought the app it once crowned 'most innovative' and made it free for everyone

Free is good.

Business Insider
Apple just bought the app it once crowned 'most innovative' and made it free for everyone
Biz Carson

Here's another new product from Apple.

Bill Mitchell — More evidence that the US labour market is not at full employment

Regular readers will recall a few of my blogs where I have demonstrated that the US economy is still nowhere near to what one might call full employment, even though that concept is highly contested and can span a range of outcomes depending on the ideological disposition one takes. I have also done some research decomposing the marked decline in the US participation rate since around 2000 into age-related effects and what I call the discouraged worker effects (workers giving up looking for jobs because of the slow employment growth). This week (March 20, 2017), research published by the Federal Reserve Bank of San Francisco bears on this topic –
How Tight Is the U.S. Labor Market? – and they essentially concur with my previous assessments. There work is interesting because it reaches the same conclusion from a variety of methods, which is always a good sign because it means the result is not method-specific. However, there are those who for their own ideological reasons want to argue that the US economy is already at full employment. If they were correct, it would mean the quality of that ‘full employment’ had shifted markedly – lower – as a consequence of the GFC and its aftermath and that the associated underutilisation levels had risen.

Bill Mitchell – billy blog
More evidence that the US labour market is not at full employment
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Sputnik — Russia Secures Financial System From Potential SWIFT Shutoff - Central Bank Head

Russia has introduced safeguards against the risk of being shut out of international transaction systems such as Society for Worldwide Interbank Financial Telecommunication (SWIFT) after anti-Russian sanctions introduced by the West, Russian Central Bank Governor Elvira Nabiullina said Wednesday.…
"There was the threat of being shut out of SWIFT. We updated our transaction system, and if anything happens, all SWIFT-format operations will continue to work, we created an analogous system," Nabiullina said during a meeting with Russian President Vladimir Putin.