Gloom, Doom, or Boom? Finance and Economics

Now, what news on the Rialto?

Re: Gloom, Doom, or Boom? Finance and Economics

Postby Heracleum Persicum » Sat Oct 17, 2015 6:41 pm





:lol: :lol: :lol: .. funny


That's what Azari sayin since long long time

Look, all this no accident .. Wall Street crooks love it .. totally legal


Thanx for posting it, kmich

.
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Overstock.com's financial apocalypse strategy

Postby Nonc Hilaire » Tue Oct 27, 2015 9:06 pm

“Christ has no body now but yours. Yours are the eyes through which he looks with compassion on this world. Yours are the feet with which he walks among His people to do good. Yours are the hands through which he blesses His creation.”

Teresa of Ávila
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby kmich » Sat Oct 31, 2015 2:00 pm

Some history as to how we got here:

How the U.S. Treasury avoided Chronic Deflation by Relinquishing Monetary Control to Wall Street

by Michael Hudson, Wednesday, October 28, 2015


The Eurozone today is going into the same deflationary situation that the U.S. did under Jackson’s destruction of the Second Bank, and the post-Civil War budget surpluses that deflated the economy. But whereas the Fed’s creation was designed to inflate the U.S. economy, Europe’s European Central Bank is designed to deflate it — in the interest of commercial banks in both cases.

1. Introduction

Deflation was the main U.S. financial problem prior to 1913. To replace the Treasury conducting its fiscal operations independently from the banking system, New York banks urged more power over public finances and to establish the Federal Reserve to increase the supply of money (a more “elastic” issue) in response to banking needs. Monetary policy since the Great Depression that started in 1929 has aimed at re-inflating the economy after downturns, fueling the post-2001 financial bubble and, since 2008, Quantitative Easing to provide banks with liquidity to support asset prices.

By contrast, Europe’s trauma of hyperinflation after World War I gave Europe’s bankers and bondholders a rationale for gaining power over governments to prevent them from monetizing their budget deficits. The rhetoric of fighting inflation has enabled German and French banks to impose tight money policies and smaller public self-funding than in the United States. On both continents, banks gained power over governments. But in America it was by insisting on more money creation and deficit spending, and in Europe by advocating limits on public money to finance deficits.

For most of the 19th century the U.S. Treasury conducted its monetary and fiscal policy in ways that imposed deflationary pressures on the banking system. President Andrew Jackson (1829-1837) of Democratic Party starved the economy of credit by his war on the Second Bank of the United States and removal of government deposits to sub- treasuries around the nation. His Democratic Party policy was backed by Southern plantation owners opposing Northern industry, seeing that its growth would increase urban industrial demand for food and other consumer goods. This would raise prices for the crops that plantation owners needed to feed their slaves.

The opposition Whig Party (1833-1854), followed by Republicans after 1853, was advocating a policy of recycling tax and land-sale receipts into Northern banks to help fund industrial growth. After the Civil War that started in 1861, the United States pursued a pro-industrial high-tariff policy, but this generated budget surpluses, which deflated the economy and drove prices for gold and other commodities back down to their pre-1861 level. That led to the 1873 crash and a depression until 1896, followed by an even greater crash in 1907.

In the wake of America’s 1907 financial panic, the Aldrich-Vreeland Act of 1908 created a “National Monetary Commission … to inquire into and report to Congress at the earliest date practicable, what changes are necessary or desirable in the monetary system of the United States or in the laws relating to banking and currency …”[1] The Commission’s thirty-five monographs provided an exhaustive study of central banking structures and commercial banking policies, laying the groundwork for what in 1913 became the Federal Reserve Act.

Money and banking textbooks typically portray the Act as modernizing the financial system “to correct certain serious shortcomings in the National Bank Act: to provide an elastic currency, efficient clearing, centralized reserves, readily available credit for banks, and unified control of the banking system.”[2] But David Kinley’s 1910 report (Kinley 1910) shows that the National Banking System had neither responsibility nor ability to steer the nation’s monetary course. Prior to 1913 the Treasury performed these functions, including open market bond purchases to provide the banking system with liquidity. It would be more accurate to view the Federal Reserve as shifting to Wall Street the financial power hitherto concentrated in the hands of the Treasury Secretary in Washington.

From the establishment of the Treasury in 1847 through 1914 the Secretary of the Treasury had held responsibility for regulating the money supply by shifting Treasury deposits among the subtreasuries and the national banks to relieve regional credit stringencies, and by engaging in open market operations to cope with cyclical difficulties. In fact, Kinley (1910) observed, the Treasury had come to perform most of the functions of a central bank:

(1) It issues and redeems paper money – United States and Treasury notes; … (4) it transfers money to move the crops; … (6) it acts as a regulator of the rate of discount by contracting and expanding the currency through its operations upon the deposits in banks and in its own vaults; (7) it keeps the gold reserve of the country.

In 1914 the Federal Reserve System took on these duties, regulating the money supply through open market operations similar to those the Treasury had been conducting since the 1850s to cope with the problems resulting from budget surpluses. The Comptroller of the Currency’s 1907 report noted:

For several years past the revenues of the Government have been largely in excess of expenditures, and there has been a constant problem presented to each successive Secretary of the Treasury as to the best means of replacing in circulation the money which the Government is forced to collect. The method of replacing it by deposit with the banks is probably the only one available and, although it has been handled with unusual skill and ability, is most unsatisfactory, unsystematic, and inefficient. It always is a matter which provokes criticism and complaint. It could be handled with far better results if the Government had under its control a central bank to which all revenues could be paid and through which all disbursements could be made.

The Federal Reserve System dispersed this fiscal management away from Washington. Its twelve regional reserve districts opened the path to abolish the Independent Treasury and its regional subtreasuries in 1921. The main beneficiaries were the leading New York banks. In effect, creation of the Federal Reserve shifted monetary control from Washington to Wall Street – hardly surprising when one looks at the list of attendees at the Jekyll Island meeting of leading bankers in 1910, where J. P. Morgan and Rhode Island Republican Senator Aldrich outlined plans for the Fed (see Griffin, 1994; Chernow, 1997).

2. Origins of the Independent Treasury in Jackson’s War on the Second Bank of the U.S.

Soon after taking presidential office in 1829, Andrew Jackson tried to coerce the bank’s directors of the Second Bank of the United States to perform certain political favors, starting with replacing Jeremiah Mason as the president of the bank’s branch in Portsmouth, New Hampshire. When the Bank’s directors refused to do this, Jackson turned to state banks to deposit government funds. In 1833, Jackson directed his new appointee as Secretary of the Treasury, William J. Duane, not to replenish these deposits as they were drawn down, but to put them in “pet” state banks run by his political supporters.

Duane refused to comply. Claiming that removing government deposits would disrupt the economy, he urged that the issue be decided by Congress, which already had declared the Bank to be safe. Jackson fired him after only four months, and replaced him with Roger B. Taney, whom Congress refused to confirm (the first rejection of a cabinet nominee in U.S. history). But as acting Treasury Secretary, Taney was able to carry out Jackson’s removal of deposits.

The pro-industrial Whigs accused this bank war of centralizing financial power in the hands of the President and whomever he might appoint as Treasury Secretary. As Calvin Colton accused in his biography of Henry Clay, while Jackson was re-depositing Treasury funds in his pet banks, Secretary of State Martin Van Buren was organizing political patronage via the banking system in his native state of New York:

… the old banks found themselves annoyed by unexpected runs upon them for specie, and … while laboring under these inconveniences, hints were passed to them, that, by appointing such and such directors, they would be relieved. The new banks were of course all furnished with suitable director. In this way, it is averred, that the whole banking system of the state of New York, from one of the bank parlors of Albany, was brought under the sway of the dominant political party, and forced to minister to their occasions.

It cannot be denied, that, of all men in the world, they who had accomplished such an achievement, were best qualified to know the power of banks as political engines, and to declaim against them when it should answer their purpose, as an enormity in the social state. Who was better qualified than Mr. Van Buren, when transferred to the state department at Washington, to give advice to the president of the United States on this subject? “Do you not see, sir, how admirably this system works in the state of New York? We govern the state by the banking system there, and force the banks (alias, the people) to pay all the costs of our party in maintaining our ascendency. You have only to adopt the same system with the bank of the United States, get such directors and presidents of the branches as are most suitable, and gradually bring the parent institution under the same discipline, and the politics of the nation will ever afterward be at command.”[3]

The Bank’s fate was sealed when its president, Nicholas Biddle, attempted to compensate for the drawdown of government deposits by a series of speculative business ventures. The Bank’s application for re-charter three years later was revoked. By this time the banking issue had become part of the sectional political conflict between North and South. The Southern slave states advocated monetary deflation for two reasons: to keep the price of cotton low, and hence competitive on world markets; and to thwart northern industrial growth so as to minimize the population voting against extension of slavery. Jackson rewarded the pro-slavery Maryland Democrat Taney by appointing him to the Supreme Court in 1836, where he became notorious for delivering the majority opinion in the 1857 Dred Scott case. His court also declared the Missouri Compromise unconstitutional, opening up the nation’s western territories to slavery. This sectional division colored the Democratic opposition to the Whigs and, after 1853, the Republicans, who advocated protectionism, internal improvements and a national bank.[4]

As for Van Buren, he became Jackson’s Vice President (1833-37) and succeeded him as President (1837-41). His administration started in 1837 with the depression that followed from closing down the Second Bank. Van Buren aggravated the monetary stringency by keeping federal deposits in the independent treasury instead of state banks.

3. Treasury surpluses drain the economy of liquidity

The sale of public lands during Jackson’s second term soared from $4 million in 1833 and $5 million the following year to $15 million in 1835 and $25 million in 1836, producing a large Treasury surplus. Jackson’s extermination of Native Americans cleared a vast territory for slavery in the South and colonization of the West. Most purchases during 1835-36 were made by land speculators, largely with borrowed funds.

The Treasury deposited proceeds from these land sales in state banks, which were assured that the government would not draw them down. New bank credit extended on the basis of these deposits fueled land speculation, which increased federal receipts from these sales by enough to liquidate virtually all the national debt, while maintaining a large cash surplus deposited in state banks.

Much as Whigs had warned, privileged banks were nurtured and bribery was not infrequent. States founded and operated their own banks, issuing notes to finance their budget deficits much as the Treasury would issue greenbacks during the Civil War. This basically corrupt chaos of private and state banking led to Jackson’s Specie Circular of July 1836, requiring all payments for public lands to be made in gold or silver bullion.

This pricked the inflationary bubble of speculative land grabbing. It helped terminate the government’s losses sustained from being obliged to accept worthless banknotes at their face value in payment for public lands, and also helped save the western states from largely non-resident proprietorship. But the Specie Circular also distressed the nation’s industrial finances by leading to widespread bank failures. Van Buren used this to justify his proposal the following year to keep government funds “safely” in subtreasury vaults across the nation.

4. Democratic versus Whig and Republican monetary policy

A party battle around the constitutionality of the subtreasury scheme set the free-trade Democrats as literal constitutionalists against the Whigs, who were federalist on the tariff and internal improvement issues but sought to “separate the power of the purse from the power of the sword.” The “independent” treasury scheme, they argued, was not true federalism but a form of monarchism (the popular Whig term for Jackson’s presidency) centralizing financial power in the Executive and his appointed bureaucracy. In its place, Whigs advocated using government finances to provide the credit base for northern industry. Whig Presidential candidate Henry Clay’s “American System” advocated protective industrial tariffs, internal improvements and a national bank to fund industry.

Recognizing that deflation would result from the subtreasury scheme, Southern plantation owners sought to support their slaves at a low enough cost to maintain the South’s dominant export position in cotton and tobacco. Creditors on the Northeast Seaboard also supported deflation. The result was a deflationary agrarianism aimed at countering the growth of northern industrial power. “The avowed object of the administration and its advisers,” asserted the protectionist Reverend Calvin Colton, associate and biographer of Henry Clay popularizing economic discussion of his “American System” of a national bank, protective tariffs and internal improvements, “was to suppress the paper medium of the country, and introduce a metallic currency; and the independent or sub-treasury, was to be the means of accomplishing the end, although, as shown by Mr. Clay, it must necessarily fail, and itself establish a paper medium of a most dangerous tendency.”[5] The Treasury’s drafts upon its public depositories, Clay argued in 1840, would soon circulate as money, driving state bank notes out of circulation.

There thus existed a sectional polarity to the Democratic-Whig controversy over whether the United States should be characterized by a deflationary monetary system segregating federal finances from the commercial banking sector, or by using government funds as the basis for a national banking system responsive to industrial needs, as was being done in France and Germany.

5. Treasury surpluses necessitate open market bond purchases

“Under the terms of the law establishing the independent treasury,” Kinley describes, “the Government was expected to keep its own money and have no connection with the banking institutions of the country.”[6] This policy proved impractical. Long before Civil War financing necessitated the National Bank Act to provide a means of recirculating government deposits into the banking system, the growing volume of Treasury finances necessitated compensatory activity following re-establishment of the Independent Treasury in 1847.

The main compensatory Treasury activity was to purchase government bonds from the banks. Thanks to the California gold rush, the Treasury ran its largest surplus yet by 1853, “so that there was a considerable accumulation of money in the treasury. To prevent any stringency that might be caused thereby the Secretary issued a circular, on the 30th of July, offering to buy $5,000,000 worth of 6 per cent bonds. He secured them by paying a premium of 21 per cent.”[7] This was the beginning of federal open market operations, often hailed by monetary historians as an accidental “discovery” of the Federal Reserve in the 1920s.[8]

Democratic Treasury Secretary James Guthrie’s used the budget surplus to pay down the national debt from $63 million in 1853 to $25 million in 1857. However, budget surpluses drain monetary resources from the economy. Guthrie’s report of December 1856 observed that the subtreasury might “exercise a fatal control over the currency, the banks, and the trade of the country, and will do so whenever the revenue shall greatly exceed the expenditures.” Furthermore, he noted: “If there had been no public debt, and no means of disbursing this large sum [$45 million since March 1853 by Treasury bond repurchases] and again giving it to the channels of commerce, the accumulated [sterilized] sum would have acted fatally on the banks and on trade. The only remedy would have been a reduction of the revenue, there being no demand and no reason for increased expenditure.”[9] The Democrats’ opposition to high tariffs and spending on internal improvements would indeed have reduced federal tax revenue.

To avoid the deflationary effects of high tariff duties under the Independent Treasury system, Clay and other protectionists advocated abolition of the subtreasuries and a return to government financial operations such as had characterized the 1816-36 period dominated by the Second Bank of the United States.

When panic broke out in 1857 and dragged many banks under, Republicans (who had replaced the Whigs in 1853) accused the Treasury of having brought it on and contributed to its depth. But Democrats defended the Independent Treasury system by pointing to the safety of government finances achieved by virtue of their having been divorced from the banking system. The Treasury made bond purchases of nearly $5 million in 1858, but federal spending deficits fueled the recovery.

6. Civil War financing needs lead to greenbacks and the National Bank Act

The ultimate break between Republicans and Democrats occurred in 1860 over the slavery question, which threw presidential and congressional power to the Republicans. The outbreak of Civil War increased the government’s financial needs, and effectively ended Treasury “independence” from the banking and private sector.

The new Secretary of the Treasury, Salmon P. Chase, was appointed by Lincoln largely in recognition of his anti-slavery stance. The Civil War quickly derailed the country’s finances. If Chase kept the loans made by the New York banks locked up “in the government vaults in the form of specie … the banks could not keep it as a reserve against their notes.” The problem was that “the Government, under independent treasury law, was obliged to be independent of the banks in the sense that it must not use their notes. If, therefore, the Treasury was to get money to carry on its now extensive operations it must use specie or issue Treasury notes.”[10]

The Treasury became a bank of issue, monetizing its war debt. Bankers urged Chase to stop issuing greenbacks, which were driving their notes out of circulation and draining their specie. They pressed the Treasury to use their bank notes instead. When he refused to do this, the banks were forced to suspend specie payments in December 1861. “Had the Secretary withdrawn the treasury notes and accepted the bank issues” in lieu of gold, Kinley (1910) observed, “it would have been a departure from the independent treasury law.” Instead, Congress and the Treasury forced suspension by “trying to meet the expenses of the war by loans, with as slight an increase of taxation as possible.”[11]

The deflationary pattern of government finances under the independent treasury law made the National Bank Act a necessity. In order to enable the Treasury to recirculate government funds into the banking system to stabilize the currency and float further national debt, the National Bank Act permitted it to deposit all receipts with the newly chartered national banks as well as with the subtreasuries.[12] All national bank notes were to be received at par in all parts of the United States in all payments to or by the government, except for customs duties, which legally had to be paid in coin. These actions restored the circular flow of liquidity in the banking-fiscal system, but gold convertibility remained suspended until 1879.

Terminating much of the Treasury’s “independence” from the banking system drew criticism for its “interference.” The Commercial and Financial Chronicle warned in 1868: “The Treasury, so far as being severed from the banks, may now at certain critical periods take away their legal-tender reserves by sale of gold, by sales of bonds, or by drawing down the balances in the national bank depositories.”[13] This was the gist of criticism of the Treasury through 1914. It was a protest by bankers against government’s power over the banking and financial system. And the main concern was that the Treasury might once again pursue monetary deflation, not inflation.

Over the balance of the 19th century the Treasury helped stabilize the country’s finances by increasing its deposits in national banks (especially those in New York City) in times of credit stringency, and moving its deposits around the country each autumn to provide national banks in the farming districts with the reserve base necessary to finance the harvesting, transportation and sale of crops.

Meanwhile, protective tariffs increased to over half of the federal revenues. The Treasury used the resulting surpluses to buy its bonds from the banking system, severely depleting the stocks of these debt instruments. By 1903, Theodore Roosevelt’s Secretary of the Treasury, Leslie M. Shaw, departed from established policy and accepted “other than United States bonds as security for public deposits, and told the banks that they need not keep a reserve against them.”[14] This freed $100 million in credit for New York City banks alone. Four years later, in 1907, the laws were amended to allow the Treasury to deposit customs receipts in the national banks, effectively terminating the distinction between the subtreasuries and national banks as depositories for public funds.

By this time the Treasury’s role had vastly “increased, if not changed in character, by the growth of the fiscal operations of the Government,”[15] influencing prices “depending on the extent of its absorption, retention and disbursement of money.”[16] This impact obliged the Secretary of the Treasury to work actively to help stabilize the nation’s finances. “There have been times when the autumnal drain would all have fallen on the banks but for the subtreasury. Two channels were open for the Government to put out its accumulated surplus: the purchase of bonds, which was the usual policy in the autumn for some years before 1890, and making deposits of public money in the banks.” However, the contraction of the government debt had reduced the volume of Treasury bonds outstanding, severely restricting its open market operations.

This problem was aggravated by the federal budget surplus in the fact of an inelastic currency. The quantity of U.S. Notes (greenbacks) was fixed by law. The amount of gold specie depended on foreign trade surpluses and domestic mine output, and the volume of national bank notes was being diminished as the federal debt was retired (since the Treasury bonds were the sole legal backing for these notes). Such rigidities led successive Secretaries to relax the limitations of the Treasury’s law and spirit. “When the power to receive checks and to check against bank deposits is conferred on the Secretary,” Kinley concluded, “then, indeed, the repeal of the independent treasury will hardly be necessary. For the various amendments, made in recent years, which permit the use of the banks for practically all the business of the Government, have already virtually abolished the system.”[17]

Nonetheless, “the independent treasury system does not have such an automatic connection, so to speak, with business, as to make its operation responsive to the exigencies of the mercantile community.”[18] In the panic of 1873, “the support of the public purse was tardy, timid, and insufficient.”[19] Kinley concluded:

“the Secretary of the Treasury is not the proper person to determine these points. He is not in immediate touch with business matters. He must get his information of the situation largely at second hand from bankers and others. He is likely to be less experienced in judging such matters than men whose business it is constantly to watch them and care for them.”

The National Monetary Commission was convened to draw up recommendations for a banking system that would not fall heir to the existing reliance on discretionary Treasury activities. Its ultimate Report, released in January 1912, concluded:
The provision of law under which the Government acts as custodian of its own funds results in irregular withdrawals of money from circulation and bank reserves in periods of excessive Government revenues, and in the return of these funds into circulation only in periods of deficient revenues. Recent efforts to modify the Independent Treasury system by a partial distribution of the public moneys among national banks have resulted, it is charged, in discrimination and favoritism in the treatment of different banks.

All parties were agreed that the major aim of the new banking act must be to provide greater elasticity to the currency. This was achieved two years later by granting the Federal Reserve System authority to issue its notes against commercial paper, not only government bonds. This made it primarily responsive to business financing needs.

7. Banks argue for more control over Treasury policy

During 1908-13 many political aspects of the Federal Reserve System were fought out between Democrats and Republicans. The Aldrich Bill, an early Republican draft of the
Federal Reserve Act, called for a National Reserve Association to be dominated by bankers. They had used populist rhetoric to urge that government finance be removed from politics by removing discretionary monetary authority from Washington to the greatest extent possible. The Federal Reserve Act set staggered terms for the Federal Reserve Board members (selected by local business and financial leaders, not Washington politicians) so that the President could not “pack the bench” as Jackson had done in 1833 by removing Secretary Duane in favor of Taney.

Democrats sought to maintain some government regulatory oversight by insisting that the Federal Reserve be situated in Washington rather than New York City, and that its board include the Secretary of the Treasury. Pledged against the “Federal Reserve Association,” they won the 1912 elections behind Wilson and thus had the major say in the Federal Reserve’s structure.

Wilson agreed to leave control of the district banks to the local leadership of private banking and business interests, but urged that the system’s national Board of Governors be appointed entirely by the President rather than by the member banks as ultimately was the case. (The Secretary of the Treasury remained an official member of the Board of Governors until 1935, when he was dropped from the board along with the Comptroller of the Currency.) Once the Federal Reserve began its operations, however, Wilson remained strictly aloof from it.

To divorce the banking system from political influence, the Federal Reserve Board’s financial activities were exempt from reliance on Congressional appropriations. Finally, twelve district banks were established, whose bankers and businessmen possessed the balance of power in the early years of Federal Reserve operations, with New York quickly emerging as the policy-making center. Roosevelt shifted policy making to the Board and its Federal Open Market Committee in 1935, and the Fed remained largely under the thumb of the Treasury until the Accord of 1951 “freed” it from having to keep interest rates low to minimize the Treasury’s borrowing costs.

But apart from the Accord, the trend under the Democratic administrations of John F. Kennedy and Lyndon Johnson was to shift monetary power back toward the Treasury and the President. The Kennedy Administration in the early 1960s saw proposals to revamp the structure of the Federal Reserve by making the terms of the Governors coterminous with that of the President, returning to him the direct authority and control that he possessed prior to 1914, reappointing the Secretary of the Treasury as a permanent member of the Board of Governors, and even replacing the Board of Governors with a single head, as well removing district directors from the regional Federal Reserve Banks. Republicans replied with Milton Friedman’s proposal to remove discretionary “interference” altogether by increasing the money supply at a fixed rate each year.[20]

Regarding the latter proposal of “automaticity” by establishing a rigidly fixed growth in the money supply, Kinley’s study illustrates that this must soon lead to more active political control to avoid monetary instability. The question is, who will manage financial crises – Wall Street in its own interest, or Washington ostensibly in the public interest favoring debtors more than creditors?

8. Final comments and conclusion

By the 2008 banking crisis there no longer was a partisan political difference between Republicans and Democrats in the United States, or between social democratic and neoliberal parties in Europe. Today’s Federal Reserve has shifted financial and fiscal planning to Wall Street. Presidents of both U.S. parties rely on Wall Street for major political campaign contributions, as do heads of the key Senate and Congressional banking and finance committees. Leaders of both parties appointed Wall Street consultant-lobbyist Alan Greenspan as Federal Reserve Chairman, and promoted New York Federal Reserve President Tim Geithner to Treasury Secretary. In contrast to Jackson’s and Van Buren’s political patronage via banking privilege, the line of control now runs the other way around, from banking to politics.

Since 2008, Wall Street investment banks have obtained much more wealth by capital gains (asset-price gains for real estate, bonds and stocks) and investment fees than from interest. This has led them to press the government for policies to inflate asset sheets more than provide credit for industry. Europe has followed suit. The upshot is that banks both in Europe and America have gained control over government policy to become the main suppliers of the economy’s money and receive public subsidy and favors. Their capture of the government’s financial, regulatory and policy-making institutions has led to a policy bias favoring creditors over debtors. In terms of monetary policy, creditors always have advocated downward commodity prices and wages. But since the 1980s they also have favored debt-leveraged inflation of real estate, stock and bond prices to create “capital” gains via low-interest “soft money” policies.

The European Central Bank’s withdrawal of credit to Greek banks under the Syriza government is reminiscent of Jackson’s war against banks not favorable to his own political control. And the European Central Bank’s support of the largest banks and bondholders at the cost of domestic taxpayers has imposed monetary deflation on Eurozone countries, reminiscent of America’s 19th-century deflation before and after the Civil War.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Typhoon » Sun Nov 01, 2015 5:40 pm

WSJ | The Dangers Ahead if Tech Unicorns Get Gored

Some venture capitalists are sounding the alarm about mega-startups and the terms under which these tech companies are financed.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Simple Minded » Sun Nov 01, 2015 6:06 pm

Typhoon wrote:WSJ | The Dangers Ahead if Tech Unicorns Get Gored

Some venture capitalists are sounding the alarm about mega-startups and the terms under which these tech companies are financed.


good article. The kids are going to re-learn what Grampa & Gramma knew about debt, and find out that what Mom & Dad said about "debt being good" is not true for very long.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Typhoon » Sun Nov 01, 2015 7:15 pm

Simple Minded wrote:
Typhoon wrote:WSJ | The Dangers Ahead if Tech Unicorns Get Gored

Some venture capitalists are sounding the alarm about mega-startups and the terms under which these tech companies are financed.


good article. The kids are going to re-learn what Grampa & Gramma knew about debt, and find out that what Mom & Dad said about "debt being good" is not true for very long.


Those terms, or “liquidation preferences,” are written so as to guarantee that investors get their money back, and then some, even if the company doesn’t perform as promised. It is these terms that led Mr. Moritz to call many unicorns “subprime”—an analogy that works perfectly if you look at these investments as debt with usurious interest rates, as in the subprime housing crisis, rather than investments that happen to have fine print attached.


This bit puzzles me. How exactly does one get "get one's money back, and then some" if the company and it's assets are worth far less than what one invested.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Simple Minded » Mon Nov 02, 2015 4:35 pm

Typhoon wrote:
Those terms, or “liquidation preferences,” are written so as to guarantee that investors get their money back, and then some, even if the company doesn’t perform as promised. It is these terms that led Mr. Moritz to call many unicorns “subprime”—an analogy that works perfectly if you look at these investments as debt with usurious interest rates, as in the subprime housing crisis, rather than investments that happen to have fine print attached.


This bit puzzles me. How exactly does one get "get one's money back, and then some" if the company and it's assets are worth far less than what one invested.


During manias, the herd demands magic. Where demand exists, someone will surface to sell what is in demand.
Last edited by Simple Minded on Mon Nov 02, 2015 4:38 pm, edited 1 time in total.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Heracleum Persicum » Mon Nov 02, 2015 6:21 pm




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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Heracleum Persicum » Wed Nov 04, 2015 4:29 am

.


White, middle-aged, uneducated and dying
Drugs and suicide drive surge in US deaths for those aged 45-54



Drug and alcohol abuse and mental health issues in the US are contributing to an alarming surge in deaths among white middle-aged peopl ..

..

The authors argued that while this “epidemic of pain, suicide and drug overdoses” preceded the financial crisis, it is possible that economic insecurity is playing a part in the problem. “Although all education groups saw increases in mortality from suicide and poisonings, and an overall increase in external cause mortality, those with less education saw the most marked increases,” the researchers said.
Jonathan Skinner, a Dartmouth economist who co-wrote a commentary on the analysis, said the findings were significant. “That this paper finds an increase in mortality among the middle aged is evidence that the combination of poor economic prospects, coupled with widespread use (and abuse) of opioids, has serious health consequences.”




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Re: Gloom, Doom, or Boom? Finance and Economics

Postby noddy » Wed Nov 04, 2015 5:24 am

its barely started yet - these are the canary in the coal mine white guys who are popping themselves quietly and politely, wait till conditions deteriorate enough to trigger the loose nut angry ones.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Zack Morris » Thu Nov 05, 2015 4:54 am

noddy wrote:its barely started yet - these are the canary in the coal mine white guys who are popping themselves quietly and politely, wait till conditions deteriorate enough to trigger the loose nut angry ones.


I'm not worried. This trend peaked during the early years of the Bush administration. It'll be Democrats from here on out, which should alleviate most of the country's medical and economic problems.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby noddy » Thu Nov 05, 2015 12:15 pm

Zack Morris wrote:
noddy wrote:its barely started yet - these are the canary in the coal mine white guys who are popping themselves quietly and politely, wait till conditions deteriorate enough to trigger the loose nut angry ones.


I'm not worried. This trend peaked during the early years of the Bush administration. It'll be Democrats from here on out, which should alleviate most of the country's medical and economic problems.


sounds likely mr z!
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Simple Minded » Thu Nov 05, 2015 1:06 pm

noddy wrote:
Zack Morris wrote:
noddy wrote:its barely started yet - these are the canary in the coal mine white guys who are popping themselves quietly and politely, wait till conditions deteriorate enough to trigger the loose nut angry ones.


I'm not worried. This trend peaked during the early years of the Bush administration. It'll be Democrats from here on out, which should alleviate most of the country's medical and economic problems.


sounds likely mr z!


I was wondering if Zack Morris is Mr. Perfect when he forgets to take his meds, or if Mr. Perfect is Zack Morris when he forgets to take his meds.
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Postby Nonc Hilaire » Mon Nov 09, 2015 8:18 pm

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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Heracleum Persicum » Wed Nov 18, 2015 7:34 pm

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Re: Gloom, Doom, or Boom? Finance and Economics

Postby YMix » Mon Nov 30, 2015 4:01 pm

The secret bribes of big tobacco

A BBC investigation has uncovered evidence of bribery at one of the UK's biggest companies.

Panorama found British American Tobacco illegally paid politicians and civil servants in countries in East Africa.

The payments were revealed when a whistleblower shared hundreds of secret documents.

BAT told the BBC: "The truth is that we do not and will not tolerate corruption, no matter where it takes place."

Paul Hopkins, who worked for BAT, a British company, in Kenya for 13 years, said he had begun paying bribes after being told it was the cost of doing business in Africa.

"BAT is bribing people, and I'm facilitating it," he said.

"The reality is if... they have to break the rules, they will break the rules."

Emails now shared by Mr Hopkins reveal BAT made illegal payments to two members and one former member of the World Health Organization's (WHO) Framework Convention on Tobacco Control (FCTC), a United Nations campaign supported by 180 countries, aimed at reducing deaths from tobacco-related illness.

An FCTC representative from Burundi, Godefroid Kamwenubusa, and a representative from the Comoros Islands, Chaibou Bedja Abdou, were both paid $3,000 (£2,000). A former representative from Rwanda, Bonaventure Nzeyimana, was paid $20,000. All three men deny taking bribes from BAT.

Dr Vera Da Costa e Silva, from the WHO, said BAT "is irresponsible to say the least".

"It is using bribery to profit at the cost of people's lives, simple as that," he said.

"BAT should be investigated by the government and should be punished accordingly."
Secret recording

The secret documents also show the company paid bribes to undermine anti-smoking legislation.

In return for the illegal payment to Mr Kamwenubusa, a Burundian senior civil servant, BAT also wanted a draft copy of the country's Tobacco Control Bill.

And an email from a contractor working for BAT says Mr Kamwenubusa would be able to "accommodate any amendments before the president signs".

Under the UK Bribery Act, British companies can be prosecuted for bribery anywhere in the world if they fail to take steps to prevent it.

BAT could also face prosecution and huge fines in the US.

Bribery expert Jeremy Carver said: "It will set inquires in train about their operations globally, so that suddenly everything they're doing all over the world is now being scrutinised and not just by prosecutors in this country but in the United States and anywhere they are operating."

BAT said any company could fall victim to an employee acting inappropriately.

"We are rightly proud that any alleged breach of our very high expectations of transparency and honesty is swiftly investigated," its statement added.

"Any proven transgression will lead to appropriate disciplinary action.

"Our accusers in this programme left us in acrimonious circumstances and have a vendetta against us, clearly demonstrated by the false picture they present of how we do business."

Shortly before he left the company, Mr Hopkins secretly recorded a discussion with a BAT lawyer about making final payments to his informants.

He can be heard telling the lawyer some contacts would need paying "to keep their mouths shut".

The lawyer, Naushad Ramoly, is recorded saying: "That is what we are going to be paying. Yeah, OK, fine. Anything else that you think we will need to be paying for?"

Mr Ramoly, who no longer works for BAT, said he had never been involved in illegal activities or with bribes and he had reported Mr Hopkins to senior BAT management.

Mr Hopkins plans to meet with investigators from the Serious Fraud Office in the UK this week.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Heracleum Persicum » Mon Dec 07, 2015 3:07 am

.


Finland to pay every citizen $1,100 per month
and scrap all other benefits to reduce unemployment rate



Finland’s government is drawing up plans to pay every citizen a basic income of euros 800 ($1,165) each month, scrapping benefits altogether.

..

More than 10 per cent of Finland’s workforce is unemployed, rising to 22.7 per cent among younger workers.

Detractors caution that a basic income would remove people’s incentive to work and lead to higher unemployment. Those in favour point to previous experiments where a basic income has been successfully trialled. The Canadian town of Dauphin experimented with a basic income guarantee in the Seventies and the results – both social and economic – were largely positive.

Juha Sipila, the Finnish prime minister, supports the idea, saying: “For me, a basic income means simplifying the social security system.”





Means cancelling unemployment insurance.

Bad idea.

.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby YMix » Mon Dec 07, 2015 7:28 pm

Billionaire Jeff Greene Says Technology Will Kill White-Collar Jobs, Hosts Conference On Inequality

Touch-screen ordering at fast food restaurants, robots welding car parts at Tesla factories, apps like Uber taking a bite out of the taxi and limo industry: They’re all good for innovation but perhaps not so great for the workers whose jobs are on the line, according to real estate billionaire Jeff Greene.

“What globalization did to blue collar jobs and the working class economy over the past 30 or 40 years, big data, artificial intelligence and robotics will do to the white collar economy — and at a much, much faster pace,” says Greene.

[...]
“There are a lot of killers. We’ve got a lot of killers. What, do you think our country’s so innocent? Take a look at what we’ve done, too.” - Donald J. Trump, President of the USA
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Mr. Perfect » Tue Dec 08, 2015 12:23 am

Liberals now say the economy is at full employment and everything is going great. So time for the goal posts to shift and new phony narratives.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby YMix » Wed Dec 09, 2015 3:18 pm

German robots to make first Adidas running shoes in 2016

HERZOGENAURACH, Germany (Reuters) - A German factory operated largely by robots will make its first 500 pairs of running shoes for Adidas early next year as the sportswear company seeks to cut labor costs and speed up delivery to fashion-conscious consumers.

[...]

The next stage of the project will be to develop machines that can produce custom-made shoes in its stores with the same kind of attention to personal requirements as Adidas currently offers top athletes like soccer player Lionel Messi.

Manz said Adidas is not trying to replicate existing models, but to create new products as it experiments with technologies to color its shoes and new methods to join sole to upper.

Adidas is also seeking to find ways to remove machine tools from the manufacturing process as they can take weeks to prepare. It has already used 3-D printing to create futuristic-looking soles made from webs of criss-crossed fibers.

[...]
“There are a lot of killers. We’ve got a lot of killers. What, do you think our country’s so innocent? Take a look at what we’ve done, too.” - Donald J. Trump, President of the USA
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Mr. Perfect » Thu Dec 10, 2015 2:54 am

Robophobics.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Typhoon » Wed Dec 30, 2015 1:03 am

All the world's a stage.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Typhoon » Sun Jan 03, 2016 5:44 am



Watched the movie. Riveting.

Along with govt encouragement, there were lots of private sectors crooks, none of whom were prosecuted.

Rather, they were rewarded instead.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Typhoon » Mon Jan 04, 2016 2:55 pm

FT | Chinese shares plunged on the first trading session of the new year, with the Shenzhen market suffering its worst day in nine years and the blue-chip CSI 300 index slumping 7 per cent on weak manufacturing data, triggering newly minted circuit breakers.

Monday’s slide came after an official factory survey showed China's manufacturing sector shrank for a fifth consecutive month in December.

Investors were also nervous about the imminent expiration of a ban on stock sales by large shareholders, imposed at the height of last year’s market meltdown.


The purpose of a market is price discovery.

So-called circuit breakers and bans on stock sales only interfere with this process and can lead to additional panic.

Such actions are not unlike locking the doors in an auditorium after someone yells "Fire".
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Nonc Hilaire » Mon Jan 04, 2016 6:35 pm

Typhoon wrote:FT | Chinese shares plunged on the first trading session of the new year, with the Shenzhen market suffering its worst day in nine years and the blue-chip CSI 300 index slumping 7 per cent on weak manufacturing data, triggering newly minted circuit breakers.

Monday’s slide came after an official factory survey showed China's manufacturing sector shrank for a fifth consecutive month in December.

Investors were also nervous about the imminent expiration of a ban on stock sales by large shareholders, imposed at the height of last year’s market meltdown.


The purpose of a market is price discovery.

So-called circuit breakers and bans on stock sales only interfere with this process and can lead to additional panic.

Such actions are not unlike locking the doors in an auditorium after someone yells "Fire".


Agree on market closing but not circuit breakers. Those limit damage from the hft crowd from sniffing out stop loss orders and then capitalizing on the phony price cascade.
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