Tuesday, July 24, 2012

Krugman Claims No Debt Crisis

Krugman Claims No Debt Crisis
Paul "hurricanes are good for the economy" Krugman has been making the rounds promoting his new book "End This Depression Now", a work that, as you might suspect, advocates massive Keynesian spending as a "solution" to the interminable economic depression. (As if that hasn't already been tried.) Krugman recently gave an interview to Business Insider in which the former deficit hawk claimed to have "seen the light" in terms of deficit spending and the national debt. BI's Joe Weisenthal explains:
"Somebody has to spend more than their income, and, for the time being, that has to be the government," says Krugman.

But what about the deficit, that so many people are concerned about? After all, Krugman was something of a deficit hawk during the Bush administration.

He notes two things: One is that the deficit spending under Bush was totally wasteful, and that that should have been time to pay down debts. But he also says he's learned from watching the US and Japan that it's much harder for a country to have a debt crisis than he previously appreciated.

"My thinking has evolved," says Krugman. "If you haven't updated your views in the face of new experiences, you're not doing your job."

The fact that the US has its own currency makes a big difference, as evidenced by the crisis in Europe, where the countries without their own currencies are getting into so much trouble.

He still thinks a debt crisis is theoretically possible, but the evidence of the last several years shows it's much harder than he realized.
In reality, the last several years have shown that a debt crisis is easier to create than previously thought. Last year, S&P demonstrated to the world that the "good faith and credit" of the U.S. isn't iron-clad. The U.S. lost its AAA credit rating for the first time ever and faces the threat of additional downgrades. The reduction in rating increases Uncle Sam's cost of borrowing and makes it that much more difficult for Washington to get its fiscal house in order. This is significant because government debt becomes a drag on an economy after passing 90% of GDP, and it recently rocketed past 100%. A moribund economy further burdened by debt yields less revenue to the Uncle Sam, which makes it more difficult for Uncle Sam to pay his debt, which becomes even more difficult to pay back as borrowing expenses increase.

And consider this: for the first time, debt-to-GDP has rocketed past 100% in a peacetime economy. Washington has already thrown the kitchen sink at the economy.

Sunday, July 22, 2012

Comprehensive List Of The Big Banks' Improprieties

Comprehensive List Of The Big Banks' Improprieties
Washington's Blog recently published an impressive list of the recent improprieties of the Big Banks. This humble blogger is awestruck by what the Big Banks have been able to get away with, but not at all surprised that essentially no one has been brought to justice. Clearly, the banks, the Fed, and the SEC are part of the same cabal.
Here are some recent improprieties by the big banks:
  • Engaging in mafia-style big-rigging fraud against local governments. See this, this and this
  • Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, here and here
  • Pledging the same mortgage multiple times to different buyers.  See this, this, this, this and this.  This would be like selling your car, and collecting money from 10 different buyers for the same car
  • Committing massive fraud in an $800 trillion dollar market which effects everything from mortgages, student loans, small business loans and city financing
  • Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this
  • Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this
  • Participating in various Ponzi schemes. See this, this and this
  • Bribing and bullying ratings agencies to inflate ratings on their risky investments
The executives of the big banks invariably pretend that the hanky-panky was only committed by a couple of low-level rogue employees.  But studies show that most of the fraud is committed by management.
Indeed, one of the world’s top fraud experts – professor of law and economics, and former senior S&L regulator Bill Black – says that most financial fraud is “control fraud”, where the people who own the banks are the ones who implement systemic fraud.  See this, this and this.
But at least the big banks do good things for society, like loaning money to Main Street, right?
  • The big banks have slashed lending since they were bailed out by taxpayers … while smaller banks have increased lending. See this, this and this
And our democracy and republican form of government as well.

Gun Control Futile: Supply Will ALWAYS Meet Demand

Gun Control Futile: Supply Will ALWAYS Meet Demand
Due to calls for gun control that have been spurred by the recent tragedy in Aurora, CO, I believe it's a good time to talk about the futility of gun prohibition. As is with demand for anything, demand for guns will always be met with supply from some source, be it legal or black market. Frontline recent reported that only 8% of guns used in crimes are obtained legally. The remaining 92% of guns used in crimes are purchased off the black market from the consumer level of the supply chains of criminal organizations such as Mexican drug cartels, the Russian mob, and Hezbollah. Criminals will always carry guns because 1) demand for guns is inelastic, meaning that it remains relatively constant despite increases in price (often a result of increased law enforcement efforts), and 2) as long as there Mexican drug cartels, a Russian mob, and Hezbollah, there will be a supply of guns to meet demand.

Aurora, CO has strict gun laws that don't prevent criminals from obtaining guns, but do prevent law-abiding citizens from defending themselves in situations such as the massacre at the movie theater. And, because of the recent tragedy, Aurora will unfortunately likely pass even stricter gun laws, perhaps even banning private ownership of guns all together. But it won't keep guns out of the hands of criminals. Because criminals will always demand guns, and criminal organizations will always supply criminals with guns.