As recovery starts to stall in the US and Europe with echoes of mid-1931, bond experts are once again dusting off a speech by Ben Bernanke given eight years ago as a freshman governor at the Federal Reserve.
Entitled “Deflation: Making Sure It Doesn’t Happen Here”, it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.
The speech is best known for its irreverent one-liner: “The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost.”
Bernanke began putting the script into action after the credit system seized up in 2008, purchasing $1.75 trillion of Treasuries, mortgage securities, and agency bonds to shore up the US credit system. He stopped far short of the $5 trillion balance sheet quietly pencilled in by the Fed Board as the upper limit for quantitative easing (QE).
Investors basking in Wall Street’s V-shaped rally had assumed that this bizarre episode was over. So did the Fed, which has been shutting liquidity spigots one by one. But the latest batch of data is disturbing.
Category: Politics
“The Time We Have is Growing Short”
If we need any further illustration of the potential threats to our own economy from uncontrolled borrowing, we have only to look to the struggle to maintain the common European currency, to rebalance the European economy, and to sustain the political cohesion of Europe. Amounts approaching a trillion dollars have been marshaled from national and international resources to deal with those challenges. Financing can buy time, but not indefinite time. The underlying hard fiscal and economic adjustments are necessary.
As we look to that European experience, let’s consider our own situation. We are not a small country highly vulnerable to speculative attack. In an uncertain world, our currency and credit are well established. But there are serious questions, most immediately about the sustainability of our commitment to growing entitlement programs. Looking only a little further ahead, there are even larger questions of critical importance for those of less advanced age than I. The need to achieve a consensus for effective action against global warming, for energy independence, and for protecting the environment is not going to go away. Are we really prepared to meet those problems, and the related fiscal implications? If not, today’s concerns may soon become tomorrow’s existential crises.
I referred at the start of these remarks to my sense five years ago of intractable problems, resisting solutions. Little has happened to allay my concerns. But, of course, it is not true that our economic problems are intractable beyond our ability to react, to make the necessary adjustments to more fully realize the enormous potential for improving our well-being. Permit me a note of optimism.
A few days ago, I spent a little time in Ireland. It’s a small country, with few resources and, to put it mildly, a troubled history. In the last twenty years, it took a great leap forward, escaping from its economic lethargy and its internal conflicts. Responding to the potential of free and open markets and the stable European currency, standards of living have bounded higher, close to the general European level. Instead of emigration, there has been an influx of workers from abroad.
Wall Street’s War
Congress looked serious about finance reform – until America’s biggest banks unleashed an army of 2,000 paid lobbyists.
t’s early May in Washington, and something very weird is in the air. As Chris Dodd, Harry Reid and the rest of the compulsive dealmakers in the Senate barrel toward the finish line of the Restoring American Financial Stability Act – the massive, year-in-the-making effort to clean up the Wall Street crime swamp – word starts to spread on Capitol Hill that somebody forgot to kill the important reforms in the bill. As of the first week in May, the legislation still contains aggressive measures that could cost once-
indomitable behemoths like Goldman Sachs and JP Morgan Chase tens of billions of dollars. Somehow, the bill has escaped the usual Senate-whorehouse orgy of mutual back-scratching, fine-print compromises and freeway-wide loopholes that screw any chance of meaningful change.
The real shocker is a thing known among Senate insiders as “716.” This section of an amendment would force America’s banking giants to either forgo their access to the public teat they receive through the Federal Reserve’s discount window, or give up the insanely risky, casino-style bets they’ve been making on derivatives. That means no more pawning off predatory interest-rate swaps on suckers in Greece, no more gathering balls of subprime shit into incomprehensible debt deals, no more getting idiot bookies like AIG to wrap the crappy mortgages in phony insurance. In short, 716 would take a chain saw to one of Wall Street’s most lucrative profit centers: Five of America’s biggest banks (Goldman, JP Morgan, Bank of America, Morgan Stanley and Citigroup) raked in some $30 billion in over-the-counter derivatives last year. By some estimates, more than half of JP Morgan’s trading revenue between 2006 and 2008 came from such derivatives. If 716 goes through, it would be a veritable Hiroshima to the era of greed.
Group cites study in push for Google antitrust case
Consumer Watchdog continues to push its case that Google Inc.’s behavior necessitates antitrust scrutiny, releasing a report that alleges that the company is abusing its dominance in online search to direct users to its own services.
The study cites online traffic data that the Santa Monica group claims show the Mountain View Internet giant seized large portions of market share in areas like online maps, video and comparison shopping after its search engine began highlighting links to its products in results.
Google called the report’s methodology and premise flawed and said its practices are designed to benefit users.
Ukraine Agriculture: Investment climate will determine yield
Amid all the doom and gloom, one sector in the country’s economy has a bright future and promises high yields.
Despite a deep recession that sent gross domestic product plunging 15 per cent last year, some budding domestic agribusinesses reported double-digit growth.
Agriculture was one of the few economic sectors to grow, albeit a small 0.2 per cent rise.
But to see the real potential, one must look further ahead. Global demand for food is expected to surge in coming decades. And Ukraine is well positioned to benefit.
With its rich black soil, favourable climate and proximity to markets, experts say the country could go far beyond regaining its position as the breadbasket of Europe.
“Ukraine is already among the top five grain exporters in the world,” says Andriy Yarmak, an agribusiness expert. “With investment, it could double its recent annual harvests and “become one of the top exporters of meat in about 10-15 years”.
Google has mapped every WiFi network in Britain
Google has mapped every wireless network in Britain in order to use the information for commercial purposes, it has emerged.
Every WiFi wireless router – the device that links most computer owners to the internet – in every home has been entered into a Google database.
The information was collected by radio aerials on their Street View cars, which have now photographed almost every home in the country.
The data is then used on Google’s Maps for Mobile application to locate mobile phones such as iPhones in order for users to access information relevant to the area such as restaurants, cinemas, theatres, shops and hotels.
The project had remained secret until an inquiry in Germany earlier this month in which Google was forced to admit that it “mistakenly” downloaded emails and other data from unsecured wireless networks where they we
Feingold for Senate Campaign @ the Madison Farmer’s Market
I’ve appreciated a number of Russ’s votes, but found his recent vote to kill the Washington, DC voucher program unpalatable. No K-12 program is perfect, but given the very challenging District K-12 climate, it is difficult to see the status quo improving on its own.
Russ Feingold will likely face Republican Ron Johnson this fall.
Identity cards scheme will be axed ‘within 100 days’
The National Identity Card scheme will be abolished within 100 days with all cards becoming invalid, Home Secretary Theresa May has said.
Legislation to axe the scheme will be the first put before parliament by the new government – with a target of it becoming law by August.
The 15,000 people who voluntarily paid £30 for a card since the 2009 roll out in Manchester will not get a refund.
The fate of a generation of workers: Foxconn undercover fully translated
Richard Lai: I know of two groups of young people.
One group consists of university students like myself, who live in ivory towers and kept company by libraries and lake views. The other group works alongside steel machineries and large containers, all inside a factory of high-precision manufacturing environment. These guys always address their seniors as “laoban” (boss), and call their own colleagues — regardless of familiarity — the rude “diaomao” (pubic hair) in loud.
After going undercover in Foxconn for 28 days, I came back out. I’ve been trying to tie the two pictures together. But it’s very difficult. Even with people living in these two places sharing the same age, the same youth dream.
My undercover was part of Southern Weekend’s investigation on the then six Foxconn suicides. We soon found out that most of Southern Weekend’s reporters were rejected due to age — Foxconn only recruits people around the age of 20. In comparison, being just under 23 years old, I was quickly brought into Foxconn.
The 28-day undercover work made a strong impact on me. It wasn’t about finding out what they died for, but rather to learn how they lived.
Understanding the Greek Aftershocks
Given the tragic events in Greece and the financial contamination of other eurozone peripheral countries, most people now recognize that sovereign risk matters and it matters a great deal. Unfortunately, the recognition lag has already caused significant damage, including forcing the current approach to European integration to an historical juncture.
What is less well understood at this stage is that the externalities, negative and positive, are not limited to Europe. It is only a matter of time when this issue, too, becomes a driver of policies and market valuations and correlations.
The general context is critical here, and should never be forgotten. As argued in my March 11 FT commentary, the sovereign debt explosion in industrial countries involves a regime shift with consequential long-lasting effects. And what is happening in Europe is yet another illustration how, in our highly interconnected world, previously unthinkable phenomena can become reality in a surprising and highly disruptive manner.
Rather than just observe, other countries are well advised to understand the debt dynamics at play. They should draw the appropriate policy implications given their own debt burdens, maturity profiles and funding sources.
They must also go well beyond this.