Economists, Liquidity Mongers and the Banker Assault on Financial Reform

Eine ziemliche Katastrophe, die Yves hier beschreibt (hfk)

Author: Yves Smith · May 6th, 2012 · RGE EconoMonitor

Yves here. I’m posting a Real News interview with Gerry Epstein on the same theme, that of the dubious arguments and methods bankers are putting forward to stymie reforms, at the end of this post. If you have time, I’d suggest watching that as well as reading this post, since they don’t overlap much. Otherwise, pick your preferred medium!

By Gerry Epstein, Professor of Economics and a founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. Cross posted from TripleCrisis

This has been a bad stretch for advocates of financial reform – and therefore for the economy as a whole. One after the other, new financial regulations contained in the Dodd-Frank law are being gutted or delayed by regulators and Congress, while the bankers – escorted by a phalanx of paid economists, lawyers and lobbyists – are squealing “wee, wee, wee” all the way home.

Bankers and their lobbyists and economists help grease the skids not just with money – but with terms of “econ-speak” such as “cost-benefit analysis”, and most commonly, “liquidity”. Used and manipulated by the wrong hands, such boring and innocuous sounding concepts can turn dangerous, even fatal in the banker battle against safer financial regulation.

Paul Krugman: Austerity Is So Wrong!

Date: 06-05-2012
Source: NewsWeek

In a new book, ‘End This Depression Now!,’ Nobel Prize–winning economist Paul Krugman says the current economic problems can be fixed both more easily and more quickly than anyone imagines. But politicians’ desire to slash spending is deeply destructive, and he details why austerity is so appealing even to Very Serious People—and why it’s such a bad idea.

Everything that helps to increase the confidence of households, firms and investors in the sustainability of public finances is good for the consolidation of growth and job creation. I firmly believe that in the current circumstances confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.

—Jean-Claude Trichet, president of the European Central Bank, interviewed in the Italian newspaper La Repubblica, June 2010

In the scary months that followed the fall of Lehman Brothers, just about all major governments agreed that the sudden collapse of private spending had to be offset, and they turned to expansionary fiscal and monetary policy—spending more, taxing less, and printing lots of monetary base—in an effort to limit the damage. In so doing, they were following the advice of standard textbooks; more important, they were following the hard-earned lessons of the Great Depression.

A Graphic Review of the Strategic Investment Conference

John Mauldin, 5/5

Now let’s look at a few charts that caught my eye, out of the several hundred we saw (quite the graphic experience) at my conference. This first one is from David Rosenberg, who was in classic form. I get to be with him again Monday morning in Chicago, where we are on a panel together at the International CFA Conference. This puts a 27-year perspective on how poorly wage growth is doing.

Next we have a chart shared with us by Niall Ferguson, showing how the US and Japan (and to some extent Germany) have seen their share of world GDP fall relative to China and India. He argued (as did several speakers) that the relative growth in the world is moving from Europe, Japan, and the US to the emerging markets. This is estimated data through 2016 from the IMF.

Euro Anti-Austerity Votes Pose Dangers for Britain

 

Author: David Smith · May 6th, 2012 · RGE EconoMonitor

This weekend is a big one in the eurozone saga, with both the second round of the French presidential election and Greece’s parliamentary elections.

In both we are likely to see a vote against austerity and, by implication, eurozone bailout plans. It could be make or break.

And yet the markets have been eerily and surprisingly calm, with no repeat of the kind of panic we saw last autumn, either in eurozone sovereign debt markets or currencies. The European Central Bank, which decamped to Barcelona for its regular meeting last week, sat on its hands.

Markets reacted adversely to the first round of the French presidential elections but that passed. What about this time?

The key question, assuming the polls are right and Nicolas Sarkozy is replaced by Francois Hollande as French president is what kind of relationship he strikes up with Angela Merkel, the German chancellor. Will the end of “Merkozy” be followed by a Paris-Berlin stand-off?

I suspect not. Some of Hollande’s pre-election bark, even his tax plans, may be worse than his bite. When he talks about reorientating the eurozone towards growth, he is reviving a familiar argument.