Employment and Unemployment Rate Both Increase

The news from BLS might sound like a mixed bag:

Nonfarm payroll employment rose by 290,000 in April, the unemployment rate edged up to 9.9 percent, and the labor force increased sharply, the U.S. Bureau of Labor Statistics reported today.

The household survey reports that employment increased by 550,000 in April, which increased the employment-population ratio from 58.6% to 58.8%. So why did the reported unemployment rate increase? The key here is this sharp increase in the labor force with the participation rate rising from 64.9% to 65.2%. Not bad for one month but a long, long way from full employment.

Oil Spill Doublespeak

White House officials stressed again Monday that BP would be held liable for the cost of the cleanup and economic compensation for losses on the Gulf Coast. But Democratic senators said the Oil Pollution Act of 1990, passed in the wake of the Exxon Valdez, caps economic damage liability at $75 million. Democratic Sens. Bill Nelson of Florida and Robert Menendez and Frank Lautenberg of New Jersey introduced legislation to raise that cap to $10 billion.

Ball, Jeffrey, Stephen Power, and Russell Gold. 2010. "Oil Agency Draws Fire: Republican Seeks Scrutiny of Regulator; BP Tries Well Fix." Wall Street Journal (4 May): A 1.

Immaculate Transmission Revisited

Over in VoxEU, Song, Storesletten and Zilibotti treat us to yet another explanation for China’s immense current account surplus, and as usual one that assigns the primary role to that country’s net savings. In this case the culprit is a bifurcated credit market that prevents Chinese investors from sinking their funds into the most profitable domestic enterprises. I will spare you the details; the giveaway/throwaway line is this one: “As a consequence, a growing share of domestic savings is invested abroad and this generates a capital account deficit and matching current account surplus.”

And how exactly does it generate the current account surplus? Why does the export of Chinese finance return in the form of net Chinese exports? Earlier in the article they denied that exchange rates have anything to do with it, so what other channel do they propose?

This is based on a forthcoming article in the AER, which means that a few reviewers there must have been asleep at the wheel. Looks like an easy outlet to publish in; I should give it a try.

Were Bubbles Or Fraud More Important In The Crisis?

This was not explicity the issue at hand at the conference on Consumer Decisionmaking: Insights from Behavioral Economics I attended recently at the Dallas Fed (cosponsored with UT-Dallas), but it emerged as an issue in the final talk by Christopher Foote of the Boston Fed, who tilted to the bubbles side, drawing on the earlier keynote speech by George Akerlof, although George did not pose it this way. For Foote, even though fraud and corruption increased during the bubble (and Akerlof argued that they tend to generally in bubbles), it was the housing bubble that sent everything over the top to come crashing down so disastrously ultimately.

Most of the other talks tended to focus either on misbehaviors by lenders and how to stop them (many participants among the 250 or so being people from many Feds or other govt agencies such as the FTC), or on the many psychological tendencies and limits that afflict consumers making them prey to such fraudulent and misleading activities. A good summary of these was given by the other keynote speaker, Sendhil Mullainathan. These include failures of perception, failures of analysis even when perception is accurate, and then failures to act even when both perceptions and analysis are accurate. I note a few other things reported including by Eckel and Croson of UTD that women, parents with children, and African Americans are too risk-averse for their own financial well-being, but from Jeff Carpenter of Middlebury, that risk preferences are not in general related to income or social class. Also unsurprisingly, people with low numerical ability tend to get into more trouble with their mortgage payments, all other factors held constant.

I support all the moves to educate people better, to regulate the lenders more to be more transparent in their activities, and so on. But in the end I think I agree with Foote that it was the bubble and the psychological tendencies ("animal spirits") to such that led us into this most recent disaster, not the longrunning exploitation of innocent victims by fraudulent lenders that did so.

Making the Most (Which Means Sometimes Making the Least) of PowerPoint

The abuse of PowerPoint has been in the news recently, but it is never far from the thoughts (or deeds) of conference-weary academics like myself. We sit through, and often inflict on others, endless presentations, typically in the form of monotone recitations of vacuous generalizations, or worse, dense paragraphs, plastered on the screen in front of us as bullet points. We squint at giant tables with tiny numbers. Our minds reel as equations fly by. It is enough to make you want to cry out “Chicken, Chicken, Chicken”.

Here is some simple advice I give my students, and try to follow myself, on the proper use of PowerPoint. Some of it was inspired by Edward Tufte, some is my own invention.


1. The center of attention for any speech should be the speaker. Speak in a way that connects to your audience. Make gestures and facial expressions. Look at them, not at a screen. A talk should be, above all, a form of human interaction.

2. If you have complex data, like large tables or long equations, put them in a paper handout, and distribute this to your audience. You can put much more on a page than on a computer screen, and your listeners will appreciate the opportunity to examine this information at their own pace. If I must display a table in Powerpoint, I try to have no more than eight cells, less if possible. This often requires ruthless paring and simplification.

3. The main purpose of PowerPoint should be to make the architecture of a talk more transparent to the listeners. The problem with oral communication is that, while it can be extremely engaging on a moment-to-moment basis, it is difficult to follow the structure of a long, complex argument. PowerPoint can help. Begin with a slide or two that presents the roadmap for the talk as a whole. Insert periodic slides that indicate where you are in this journey as you proceed. Most slides should serve to convey the structure of particular sub-points—mini-roadmaps, in a sense.

4. Slides should not be free-standing; they should not convey your argument apart from your verbal presentation. Bullet points, if you use them, should be compressed into as few words as possible, just enough to identify (but not explain) the ideas they refer to. (The bullet point for this recommendation could be “identification, not explanation”.) And never, never, never read the bullet points out loud to your audience. The center of attention should be on you, not the slides.

5. Think of each slide as a two-dimensional space, to be organized in a way that conveys the intellectual structure of your argument. In general, a list with equal indentation conveys logical parallelism. The vertical dimension of a list may convey sequence, but this usually needs to be indicated explicitly, for instance with arrows. A picture in the right column with several brief phrases in the left column says that these phrases pertain in a parallel or perhaps sequential way to the situation depicted in the picture. Indentation, on the other hand, implies either a subset/superset or supporting/supported relationship. When relationships between ideas are more complex than this, consider placing phrases in various locations on your slide, using boxes and arrows to make their interconnections clear.

6. Never, ever make a slide more complex than absolutely necessary. Abjure all of PowerPoint’s fancy bells and whistles. Keep fonts and color schemes as simple as possible. You want to your audience to glance at the slides periodically but pay attention primarily to you.

7. The reason so many PowerPoint presentations are dull is because a content-poor visual medium has become the center of attention. Reading an article or book is much more interesting, because articles and books typically have much more substance than PowerPoint slides. Listening to a lecture without PowerPoint is usually more interesting because of the human engagement audiences can have with a speaker who addresses them directly. So use PowerPoint sparingly: don’t try to replace the role of a written text, and don’t distract audiences from your communication with them. It should add a little clarity and a bit of variety to your talk, nothing more.

Is Economic Theory Going Into Black Hole?

Back from conference at Dallas Fed on "Consumer Decisionmaking: Perspectives of Behavioral Economics." Keynote speaker George Akerlof spoke on his recent book with Robert Shiller, _Animal Spirits_. However, beyond his speech he spoke more forcefully, declaring at one point, "economic theory is going into a black hole," both micro and macro.

David Harvey and Ha Joon Chang

BBC has an discussion with them, which I just downloaded.

http://downloads.bbc.co.uk/podcasts/radio4/ta/ta_20100429-1708a.mp3

Dark Thoughts in the Gathering Peripheral Europe Storm

Back when governments chose to nationalize dubious private debts, paying top dollar to protect major wealth-holders and their institutional vehicles from ruin, two criticisms were voiced—that this would engender moral hazard, and that it would violate all reasonable standards of social justice. Both had merit, but less attention was given to a third, far more serious criticism, that fiscal space was limited, and that using it up to reflate the financial elites would leave us without options in the event of a future financial spasm.

If the events of the last two days continue and escalate, that spasm is upon us. Will governments have the resources to contain it?

Grounded

Now that I am beginning to return to civilized (i.e. Pacific daylight) sleep patterns, I can report that I too was held captive by the fulminations of Eyjafjallajokull. A month late, I experienced Ash Wednesday and also Ash Sunday, Monday and Tuesday. The highlight of my European adventure was a 30-hour bus ride from Sofia to Frankfurt, courtesy of Lufthansa. I had the pleasure of sampling cheese sandwiches from across southeastern and central Europe. (Hungary wins.) My favorite comment on the situation comes from the gifted chess scribe Mig, who writes of “Iceland's last wish to have its ashes scattered over Europe...”

The $3 Trillion Dollar War — Stiglitz & Bilmes Were Too Modest

One of the greatest uncounted US losses in our wars in Iraq and Afghanistan has been the mental damage to the young people who have been exposed to the violence and brutality of our war. The recent Wikileaks release of the young people killing Iraqis as if they were playing video games is a case in point.

The number of suicides offers additional evidence.

Maze, Rick. 2010. “18 Vets Kill Themselves Every Day.” Army Times (23 April).

Also, consider the frequent reports of domestic violence and homicides.

The number of troops who have been deployed to Iraq over the last 7 years must have been somewhere around 1 million. Since May 2003, the US has had less than 130,000 in only four months.

Economists like to think of human capital — a stupid expression for the creative capacity of people — as the key to economic growth. Ignoring the economic costs of the war, as well as the consequences for the Iraqis; not even counting the physical destruction of the lives and the bodies of those soldiers who survive, these human losses for the tortured souls and for those who are hurt by them should surely be enough to say that starting such a venture should constitute a crime.

Does Krugman Miss The Point On Epistemic Closure In Macroeconomics?

Paul Krugman has put up a post in which he complains about apparent closed-mindedness of Chicago-Minnesota RBC and ratex macro-modelers who do not like sticky-prices-wages New Keynesian models and are controlling some leading journals. He argues that at saltwater schools students learn about RBC and such like, while those at the freshwater ones do not learn about other approaches. I think there is some truth to this, and, with some exceptions, such as Robert Lucas, some of the people out of the Chicago-Minnesota mafia have made complete fools of themselves with their hysterical attempts at explaining what has gone on, combined with an overbearing arrogance and aggressiveness towards anybody who disagrees with them.

However, I think that once again Krugman is dropping the ball here. In terms of explaining what has gone on the NK sticky-wages-prices gang has not done any better than the fundamentalist loonies out of Chicago and Minnesota (and related places such as Arizona and Rochester and certain regional Feds). They all look pretty silly. After all, the bubble and the crash do not look like they are at all explained by either some exogenous productivity shock or by excessive wage stickiness. Neither is even remotely in the ball park.

Of course, what may have Krugman really upset is that his department at Princeton has hired one of the most overbearing and arrogant of all the Minnesota macro-modelers, Pat Kehoe, who is very loud about stating that "we have all the answers," and reportedly he is attempting to take over grad macro teaching at Princeton. In this case, maybe Krugman has a bone to pick, given that this stuff would probably be displacing the NK stuff, although what they really need to do is get serious about Hyman P. Minsky and agent-based modeling and some other approaches.

Is The MIT Lock On the John Bates Clark Award Overdone?

I happen to think that Esther Duflo's work (with coauthors) on randomized field trials of practical development policies deserves respect, and I have no particular problem with her being this year's recipient of the John Bates Clard Award for 2010, the award given to the best under 40 American (either citizen or working here) economist. As both a current MIT faculty member as well as Ph.D. from there, she continues a streak that has been in place since 1999. Here is the list (the prize was once every two years before this year, starting MIT's Paul Samuelson in 1947).

1999 Andrei Shleifer, MIT Ph.D.
2001 Matthew Rabin, MIT Ph.D.
2003 Steven Levitt, MIT Ph.D.
2005 Daron Acemoglu, current MIT faculty
2007 Susan Athey, formerly received tenure on MIT faculty (now at Harvard)
2009 Emmanuel Saez, MIT Ph.D.
2010 Esther Duflo, MIT Ph.D. and current faculty

I have bigger problems with some of these people than others, but it must be asked if somehow there is a self-feeding control and domination of this selection process going on.

Dr Doom's Rooms

Who lives in an apartment that has "walls indented with plaster vulvas"?

Guess!

A Narrative - The Unfolding of the Global Financial Crisis. Part 1 (Update 3)

In 1980 a series of large apparently engineered [1] increases in the global price of oil [2] led to the destabilisation of the global economy, particularly in debt-dependent third world nations. The resultant inflationary-deflationary spiral (stagflation) ultimately contributed to vulnerability in the US national banking system[3],[4]. Of other notable significance was the issuance of extraordinarily large loans issued by big financial institutions to a very small number of individuals - the Hunt and Saudi royal family[5] - for speculation in commodities.[6] The US-dollar devalued quickly. This situation prompted the Fed to take drastic action. It implemented a general credit squeeze throughout the domestic economy, which (in turn and along with the then usurious level of interest rates[7]) led to a record quarterly economic decline. Transnational corporations evaded this squeeze, however, through their global back-channel loan operations.

The public were left largely unaware that the Fed’s credit squeeze and experiment with monetarism had actually failed to control the US money supply.

Milton Friedman, the promoted idealogue of the 1970s, presented economic theories on inflation control. Friedman insisted that monetary authorities should adopt long-run targets for monetary growth and allow interest rates to go where they may in the attempt. The Federal Reserve followed his recipe, targeting effects rather than causes.

Several developments in the world economy confounded the monetarists. First, the velocity of money proved to have created an unreliable trajectory for M-1[8]. Secondly the existence of the large, concentrated[9] and unregulated Eurocurrency markets made domestic control over the US dollar supply unviable for the Fed[10]. Finally, it was observed that the US monetary supply continued to increase under the monetarist regime; in the context of a recession. The CPI index showed a drop in 'inflation', however. Friedman's theories were discarded. No public announcements were made to this effect.

The global shadow banking and finance system had been fueled by the overseas expansion of US banks along with the enormous supply of petrodollars[11] and the invention of new financial instruments . The Euromarket had increased eightfold since 1970 and was already forcing US domestic banks to bear the burden of the Fed’s restrictive policies and “shifting the responsibility of combating inflation to non-international banks and their customers.”[12] These stateless currencies[13] were largely a product US hegemonic control of the global reserve currency[14]. Their oversupply was exacerbated by a number of new developments in the global economy, for example, a mania for the discriminative deregulation of large businesses disguised as ‘neoliberalism’, bigness in capitalism[15] and uncontrolled global currency speculation. The latter was significantly worsened when floating exchange rates were introduced in 1973[16] .

Large corporations continued to borrow on a huge scale. Speculation increased through the leveraged buyouts of weaker corporations.[17] TNCs moved to reduce their costs in response to high input and credit costs and the associated poor consumer demand. US manufacturing labour was discarded through the process of automation and operations were moved offshore where ever feasible to take advantage of low-priced third world wages and resources along with relatively lax environmental regulations[18] . Within the US family farmers were pushed to the wall. In the US Great Plains the negative returns on real goods complicated debt problems for farmers who faced extraordinarily high real interest rates. An inexorable squeeze between farm prices and the price of credit resulted in tens of thousands of farmers experiencing bankruptcy.

Credit drained the resources of the more productive uses of money within the US domestic economy. The process of globalisation as well as the forced deflation in farm, forestry and labour prices covered for excessive inflation caused by debt, speculation and artificial demand around the world.

Prices for consumer items were kept down because governments negotiated below-cost royalties for their nation’s resources directly with transnational corporations. These businesses were permitted to exhaust local supplies of timber, water, minerals and nutrients and then go elsewhere. Production was stepped up to a faster pace and profits became short-term in nature. Local businesses that had to wait for resources to regenerate found themselves disadvantaged. They were forced to compete with privileged corporations that were permiited to “discount waiting time through going elsewhere.” The latter thus quickly gained a stranglehold over regional resources.

[To be continued…]

REFERENCES:
The Fake Oil Crisis of 1973
James Akins (US Ambassador to Saudi Arabia) testimony to Congress
"U.S. Ambassador to Saudi Arabia, James Akins, later testified in congress on the fact that when, in 1975, the Saudis went to Iran to try to get the Shah to roll back the price of oil, they were told that Kissinger told the Iranians that, “the United States understood Iran’s desire for higher oil prices.”[51] Akins was removed from Saudi Arabia in 1975, “following policy disputes with Secretary of State Henry Kissinger.”[52]

[51] [51] V.H. Oppenheim, Why Oil Prices Go Up (1) The Past: We Pushed Them. Foreign Policy: No. 25, Winter, 1976-1977: page 44

[52] Time, The Cast of Analysts. Time Magazine: March 12, 1979: http://www.time.com/time/magazine/article/0,9171,948424,00.html

As quoted in: Controlling the Global Economy: Bilderberg, the Trilateral Commission and the Federal Reserve
Aug 04, 2009 - 03:10 AM
By: Andrew G. Marshall,Global_Research.
http://www.marketoracle.co.uk/Article12509.html
References to this article are found at:
http://www.bikernews.net/index.cfm/d/news/p/read/newsid/12905

+
In 1974, when a White House official suggested to the Treasury to force OPEC to lower the price of oil, his idea was swept under, and he later stated that, “It was the banking leaders who swept aside this advice and pressed for a ‘recycling’ program to accommodate to higher oil prices.” In 1975, a Wall Street investment banker was sent to Saudi Arabia to be the main investment adviser to the Saudi Arabian Monetary Agency (SAMA), and “he was to guide the Saudi petrodollar investments to the correct banks, naturally in London and New York.”[56]

[56] F. William Engdahl, A Century of War: Anglo-American Oil Politics and the New World Order. London: Pluto Press, 2004: page 137

As quoted in:
Controlling the Global Economy: Bilderberg, the Trilateral Commission and the Federal Reserve
Global Power and Global Government: Part 3 by Andrew Gavin Marshall
Global Research, August 3, 2009
http://www.globalresearch.ca/index.php?context=va&aid=14614
+
MA Adelman (MIT, 1990)
In 1990 MA Adelman from the Massachusetts Institute of Technology wrote:

“A journalist, who was on a first-name basis with Secretary Kissinger, writes: "Nixon gave the Shah carte blanche to purchase any amount of military equipment short of nuclear weapons. This...led him to instigate the steep rise in the price of oil in 1973 to make it possible for him to finance his purchases." [Brandon 1988, p.354].”

MA Adelman observes that it wasn't credible that the Shah of Iran would have no wish for extra revenues in the absence of the purchase of arms by his Government. This, however, does not contradict Brandon's statements. Another reference to Kissinger, Iran and arms sales relating to 1974 makes it clear that the claimed arrangement between Iran and US was for the purpose of bailing out US defence contractors rather than being a response to the Shah of Iran's desire for more and expensive US armaments.

THE FIRST OIL PRICE EXPLOSION 1971-1974
M. A. Adelman
MIT-CEPR 90-013WP
May 1990
M. A. Adelman
Department of Economics and
Energy Laboratory
Massachusetts Institute of Technology
Cambridge, Massachusetts 02139
http://dspace.mit.edu/bitstream/handle/1721.1/50146/28596081.pdf?sequence=1
..\..\..\EconomicHistory\Oil_History\FirstOilPriceExplosion1971-1974.PDF
+
The Fake Oil Crisis of 1973 (QuestionsQuestions.Net)
The Fake Oil Crisis of 1973
From QuestionsQuestions.Net
http://www.engdahl.oilgeopolitics.net/1973_Oil_Shock/1973_oil_shock.html

Some "peak oil" writers have opined that the crisis of 1972-73 was a kind of "rehearsal" for what is supposedly in our very near future. It is startling to consider, in light of this, the evidence that that crisis was likely a completely contrived affair.

In "A Century of War -- Anglo American Oil Politics and the New World Order" (1992), petroleum industry expert and economist F. William Engdahl presents evidence that the 1973 OPEC "oil shock" and the accompanying oil "shortage" were secretly planned by the highest levels of the US and British elites, with Henry Kissinger playing a key role: more
[http://how-the-world-really-works.prosperitydoctor.com/output.php?ChapterID=38&BookID=5]
THIS LINK DOES NOT WORK (JUNE 2009)

A concise summary of the entire book can be found here:
http://how-the-world-really-works.prosperitydoctor.com/output.php?ChapterID=38&BookID=5
THIS LINK DOES NOT WORK (JUNE 2009)

Corroboration of Engdahl's account was provided a few years ago by Sheikh Ahmed Zaki Yamani, who was Saudi Arabia's OPEC minister at the time:

“I am 100 per cent sure that the Americans were behind the increase in the price of oil. The oil companies were in in real trouble at that time, they had borrowed a lot of money and they needed a high oil price to save them.”

He says he was convinced of this by the attitude of the Shah of Iran, who in one crucial day in 1974 moved from the Saudi view, that a hike would be dangerous to Opec because it would alienate the US, to advocating higher prices.

“King Faisal sent me to the Shah of Iran, who said: ‘Why are you against the increase in the price of oil? That is what they want? Ask Henry Kissinger - he is the one who wants a higher price’.”

Yamani contends that proof of his long-held belief has recently emerged in the minutes of a secret meeting on a Swedish island, where UK and US officials determined to orchestrate a 400 per cent increase in the oil price.
+
Henry CK Liu in 2005:
OPEC had been permitted to assume an effective cartel role only at the pleasure of the United States. The existence of OPEC serves several convenient US geopolitical purposes. It deflects political opposition to the international oil regime from the US toward a mostly Arab/Islamic organization, yet the health of OPEC is inseparably tied to the health of the energy corporations of the West that control all the downstream operations. OPEC is an example of how economic nationalism can be co-opted into Western-dominated neo-imperialist globalization….. One of the chief weaknesses of non-US producers is their exclusion from downstream operations.
The real problems with $50 oil
By Henry C K Liu. May 26, 2005
http://www.atimes.com/atimes/Global_Economy/GE26Dj02.html
_____________________

[2] The oil price increases appeared to have been engineered to counter the huge US balance of payments deficit that resulted from the Vietnam War. Economist Michael Hudson claims that “the war was single-handedly responsible for pushing the [US] balance of payments into deficit.” [See: Super Imperialism - The Origin and Fundamentals of U.S. World Dominance. Second Edition
Michael Hudson. http://www.soilandhealth.org/03sov/0303critic/030317hudson/030317.imperialism.pdf ]
______________________

[3] 'Bigness' in capitalism provides the open invitation for economic corruption because the lines drawn between ‘private’ and ‘public’ became sufficiently blurred.
______________________
[4] The US Fed requested that banks not loan for speculation but compliance was voluntary with its President, Paul Volcker, claiming that the Fed lacked the regulatory power to force compliance of the banks.
______________________
[5] “In February and March of 1980 according to former Representative Henry Reuss, the Hunts consumed about 9 percent of all new bank credit in the United States. They consumed nearly 13 percent of new business loans.
‘The World’s Money – International Banking from Bretton Woods to the Brink of Insolvency’ by Michael Moffit. A touchstone book published by Simon and Schuster, New York. 1984. ISBN 0-671-50596-3 Pbk Page 186
______________________
[6] Hunt Silver-Related Borrowings
(August 1979 – March 1980)
($ Millions)

Principal Lenders Loan balance Loan balance Loan balance
8/1/1979 1/17/80 (3/27/80)
ACL International $29.8 $80.5 $134.2
Bache $38 $43.7 $235.5
Swiss Bank Corp $70 $150 $200
First Chicago $30 $10 $100*
EF Hutton $100.5 $100
Citibank $25 $90
First National
Bank of Dallas $79.2
Merrill Lynch $54 $169
Placid Oil $110

SOURCE: Securities and Exchange Commission, ‘The Silver Crisis of 1980, October 1982.
*This actually understates the extent of First Chicago’s involvement with the Hunts. The bank had a total of $223 million in loans to Hunt interests, plus another $75 million loan to Bache which lent the money to the Hunts.
‘The World’s Money – International Banking from Bretton Woods to the Brink of Insolvency’ by Michael Moffit. A touchstone book published by Simon and Schuster, New York. 1984. ISBN 0-671-50596-3 Pbk Page 186-187.
_____________________
[7] These record-high levels of interest rates were made possible by the Carter administrations deregulation of interest rates. They did this because a prolonged period of negative real interest rates arose as a result of the oil-price-driven inflation on the 1970s. The rhetoris in government was for defending the small saver – “the very people the Democratic Party had always spoken for. This was not quite the case, as Senator Robert Morgan of North Carolina and the handful of other dissenters pointed out. “The majority of consumers, with or without savings, particularly families of low income, including one-half of the elderly families, would probably suffer a net economic loss,” Morgan predicted [13]. The “small savers” whom Democrats wished to help were actually a limited group, mostly abvove the median income. First of all, 37 percent of American families had no savings account at all. Another 29 percent had savings balances below $2,000. If these families received another 1 to 3 percent interest on their accounts, that would return at most only $60 a year in additional income. Meanwhile, as borrowers, they would of course pay higher interest rates. As consumers, they would also pay higher prices since business was a major beneficiary of the hidden subsidy of interest-rate controls. When businesses had to pay more for credit, the costs would be passed on to their customers…”
‘Secrets of the Temple – How the Federal Reserve Runs the Country’ by William Greider. Simon and Schuster, 1987. ISBN 0-671-675556-7 pbk. Pages 165-166.
____________________
[8] “M-1 was a reliable measure…only if velocity [of money] followed its predicted trend line. If people abruptly changed their spending and money-handling habits, for whatever reasons, then velocity changed unexpectedly and M-1 became grossly misleading. The government, including the Federal Reserve, could do nothing to control this wild card in the economics of money. Perople were not, after all, compelled to circulate their money at a prescribed speed. Velocity was the Achilles’ heel in Friedman’s theory – the uncontrollable variable that could throw his confident prescriptions about money totally offtrack. Nor was this insight particularly new. For years, the critics of monetarism (including those at the Fed) had pointed out that Friedman was assigning a constancy to money relationships that did not, in fact, exist. The alluring simplicity of Friedman’s doctrine – control M-1 and forget about everything else – was also its central fallacy. Except now M-1’s reliability was more than a theory for debate amongst economists. The Federal Reserve was relying on the same fallacy to regulate the entire economy….”
‘Secrets of the Temple – How the Federal Reserve Runs the Country’ by William Greider. Simon and Schuster, 1987. ISBN 0-671-675556-7 pbk. Page 480.
________________________
[9] “…The highly concentrated nature of Eurolending magnifies the dangers of failure. Whereas the capital base of all U.S. banks may be sufficient to carry the liabilities involved in the process of recycling petrodollars-- one of the major forces behind the growth of the Euromarket--recycling is largely the province of a select group of international banks. Of the 14,000 banks chartered in the U.S., for instance, only 130 participate in Eurocurrency dealings. And the ten most active, such as Citibank, Chase Manhattan and the Bank of America, account for fully 70 percent of all foreign lending by U.S.' banks. With composite capital-to-asset ratios of only 3.6 percent, there is real question whether the capital bases of these ten giant international banks have been stretched too thin. Given the intertwined nature of Eurobanking, there is even greater question whether the few foreign institutions involved are not even more precariously balanced….”
The Multinational Monitor
APRIL 1980 - VOLUME 1 - NUMBER 3
V I E W P O I N T
Regulate the Euromarket
A U.S. Congressman calls on Western governments to cooperate in supervising the $1 trillion Eurocurrency market.
by Jim Leach
______________________
[10] In April 1980, Jim Leach, reported in the Multinational Monitor that “The Eurocurrency market has expanded so rapidly in the last 'two decades that in gross size it now dwarfs every other national banking system and is about the same size as our own. Its growth is largely a function of the overseas expansion of U.S. banks. In 1960, for example, only eight U.S. banks operated international branches, with overseas assets totalling $3.5 billion. By early 1979, over 130 U.S. banks had established operations outside the country, with foreign assets of $306 billion….”
The Multinational Monitor
APRIL 1980 - VOLUME 1 - NUMBER 3
V I E W P O I N T
Regulate the Euromarket
A U.S. Congressman calls on Western governments to cooperate in supervising the $1 trillion Eurocurrency market.
by Jim Leach
http://multinationalmonitor.org/hyper/issues/1980/04/leach.html
______________________
[11] “While oil importers accumulated huge bills they could not pay, oil exporters accumulated large amounts of U.S. dollars - more than they knew how to use. These dollars were known as "petrodollars."
Is there such a thing as TOO MUCH money?
Oil-exporting countries found themselves with so much money, they could not spend it fast enough. Some had small populations; many were still at early stages of industrialization. They could not import enough from the countries that bought their oil to keep from piling up enormous dollar surpluses.”
Reinventing the System (1972-1981)
Part 4 of 7
Recycling Petrodollars
https://www.imf.org/external/np/exr/center/mm/eng/rs_sub_3.htm
__________________________
[12] The Multinational Monitor
APRIL 1980 - VOLUME 1 - NUMBER 3
V I E W P O I N T
Regulate the Euromarket
A U.S. Congressman calls on Western governments to cooperate in supervising the $1 trillion Eurocurrency market.
by Jim Leach
http://multinationalmonitor.org/hyper/issues/1980/04/leach.html
_________________________
[13] “…What is now considered the Euromarket encompasses banking activities not only in Western Europe but also in other industrialized countries and offshore centers such as the Bahamas, the Cayman Islands, Hong Kong and Singapore. There, the world's leading private banks hold deposits in and lend the world's major currencies outside their countries of origin. It is largely a -Eurodollar market: about three-fourths of the market's stateless currencies are U.S. dollars, while half of the remainder are German marks….”
The Multinational Monitor
APRIL 1980 - VOLUME 1 - NUMBER 3
V I E W P O I N T
Regulate the Euromarket
A U.S. Congressman calls on Western governments to cooperate in supervising the $1 trillion Eurocurrency market.
by Jim Leach
http://multinationalmonitor.org/hyper/issues/1980/04/leach.html
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[14] “As long as Saudi Arabia accepts payment for oil in dollars, other countries must first buy dollars before they buy oil.” Thus, oil price rises tended to strengthen the US dollar’s value in international currency markets.
‘The World’s Money – International Banking from Bretton Woods to the Brink of Insolvency’ by Michael Moffit. A touchstone book published by Simon and Schuster, New York. 1984. ISBN 0-671-50596-3 Pbk. Page 166.
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[15] “Between 1950 and 1971 the 200 leading U.S. corporations increased their control of all U.S. manufacturing assets from 46 to 87 percent.” Quoted from: American Global Enterprise and Asia
Journal article by Mark Selden; Bulletin of Concerned Asian Scholars, Vol. 7, 1975
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[16] The neoclassical economists and free-traders Gottfried Haberler and Milton Friedman campaigned for a regime of national fiat currencies linked to another by flexible exchange rates. Haberler the resident scholar at the American Enterprise Institute for Public Policy Research [a Republican think-tank in Washington DC] “denounced labour unions as the primary cause of inflation and urged a flood of cheap imports to undercut wages as well as the repeal of minimum wage laws and other ‘privileges’, as he called them, that workers enjoyed.”

Richard Parker’s Bio of John Kenneth Galbraith. Hardcover. Page 483. In the Chapter entitled ‘Galbraith and Nixon: Two Keynesian Presidents.”
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[17] 1981 - a large share of the funds raised by US firms in the Euromarket in 1981 consisted of mammoth loan syndications by corporate giants like Mobil, US Steel and DuPont to finance mergers and acquisitions, such as the fabled Conoco and Marathon Oil takeovers. The surge of borrowing to support M&A as it is known on Wall Street, was particularly strong in the summer of 1981

In the three years since the adoption of the October 6 [1979] measures, that is exactly what has happened. The multinationals have had access to all the credit they need, whereas small businesses, home buyers and consumers have been clobbered. Despite the astronomical rise in interest rates, new corporate borrowing has continued at high levels. Moreover, a large share of the funds raised by US firms in the Euromarket in 1981 consisted of mammoth loan syndications by corporate giants like Mobil, US Steel and DuPont to finance mergers and acquisitions, such as the fabled Conoco and Marathon Oil takeovers. The surge of borrowing to support M&A as it is known on Wall Street, was particularly strong in the summer of 1981. though only half of the credit lines were actually drawn
[‘The World’s Money – International Banking from Bretton Woods to the Brink of Insolvency’ by Michael Moffit. A touchstone book published by Simon and Schuster, New York. 1984. ISBN 0-671-50596-3 Pbk. Page 210]
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[18] "The 1979 visit of Deng Xiaoping to the US was followed in June 1980 by the equally significant encounter in Wall Street of Rong Yiren, chairman of CITIC, and David Rockefeller. The meeting, held in the penthouse of the Chase Manhattan Bank complex, was attended by senior executives of close to 300 major US corporations. A major agreement was reached between Chase, CITIC, and the Bank of China, involving the exchange of specialists and technical personnel to "identify and define those areas of the Chinese economy most susceptible to American technology and capital infusion."
The people with the endless bios - An introduction to the world we live in. Project for the Exposure of Hidden Institutions website. http://www.pehi.eu/introduction.htm
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[19] ‘Globalisation and its Terrors – Daily Life in the West’ by Teresa Brennan. Routledge, USA and Canada. ISBN 0-415-28522-4. 2003 Page 15

Thoughts on the Tea Party

I was asked by our weekly paper to give some thoughts on the Tea Party movement. Here is what I came up with:

The Tea Party movement combines ignorance, anger, and justifiable indignation. For some, this ignorance reflects a degree of racism and ethnic hostility.

The anger has been nurtured by the demise of journalism along with a cynically crafted rhetoric of hate. Former Speaker of the House Newt Gingrich was a master of this mode of communication. In 1990, four years before Gingrich ascended to his leadership position, his organization, GOPAC circulated a memo instructing Republicans about the most effective method of communication in the political arena. The memo recommended that his fellow travelers adopt a vocabulary built upon confrontational words, such as "decay, sick, unionized bureaucracy, greed, corruption, radical, permissive, and bizarre." Without a responsible media, this strategy went largely unchallenged until it became common practice.

The Tea Party, crafted by Republican interests, cleverly managed to whip the resulting anger into an Astroturf movement. At the same time, the Tea Party anger made sense, although it was misdirected. As I tried to show in the Confiscation of American Prosperity, since 1970 the United States has undergone a more massive transfer of wealth than either the Chinese or Soviet Revolutions. Damn right, people should be angry -- but not at the poor immigrants or racial and ethnic minorities, who are made out to be causing all the trouble.

One of the big complaints of the Tea Party is taxes. Their complaints are partially justified. The partiers are largely middle-class. Poverty precludes the very poor from paying much in taxes, while influence allows the very rich to avoid paying their share. The burden of taxes largely falls on the middle class.

In addition, people are alienated. They know that they have virtually no say in the way the system works. They are absolutely right to call for a more democratic way of governing. Ironically, of course, the same forces that are behind the conditions that generate this anger are manipulating the Tea Party to serve their own ends.