Archive for the ‘Capitalism’ Category
Autonomy, mastery and purpose (of the employee) do increase performance of cognitive skill function.
“They talked a little bit about some possible measures that would spur investment and increase economic growth and they also talked about some measures that could address the long-term fiscal situation in this country.”
Obama plans to give an address on the economy shortly after the U.S. Labor Day holiday, which is Sept. 5. In conjunction with actions to shrink the nation’s long-term deficit, Obama is considering steps to give a quick boost to employment, including an expanded infrastructure spending program, tax incentives for hiring workers, a cut in the payroll tax paid by employers and worker retraining programs. (via)
[C]ourtesy of the WSJ blog, we learn that, for the first time in history, a spokesman for Jean Claude Juncker, the PM of Luxembourg, and the head of the Eurogroup council of eurozone finance ministers, admits openly to having lied to media outlets.
“There was a very good reason to deny that the meeting was taking place.” It was, he said, “self-preservation.””
“When it becomes serious, you have to lie.” – Luxembourg PM Jean-Claude Juncker
It is a tragedy that politicians have mistaken Economics and Finance with … Politics. But only in latter occupation do you still have a pension even when you were full of c*** during your term-time.
Kotlikoff Forecasts `Bond Market Crash’ on Federal Debt
Laurence Kotlikoff, a professor of economics at Boston University and a Bloomberg columnist, talks about the U.S. budget deficit and federal debt, and the likelihood of a “bond market crash” as a result.
We are really engaged in a long-term ponzi scheme; taking money from young people and giving to old people. [...] And the fight between Republicans and Democrats is really just a side show of what is really going on.
Any indicator shows that we are heading into a crisis. [...] It’s time to get out of US Bonds.
[US] had economic growth over 40 years. And the [debt] situation gotten worse and worse.
Kotlikoff wrote about THIS coming storm since the 90′s, see a search on Amazon and his very first account with “Generational Accounting”
‘It is the Weimar Republic; print your money to coverer your expenses.’
Had a good laugh, …
Saturday Night Live (18/04/2011), Opening Sketch;
I kinda agreed with the Republican’s idea of trickle-down economics. That’s why to me the tax cuts for the wealthy aren’t a big problem. They are the best part of the bill. You’ll watch. I predict the rich will use that extra money to go out and create jobs. Millions and millions of jobs.
It’s like Rush [Limbaugh] said on his show the other day.
I never got hired by a poor person.
After watching this analysis, you have to ask what America can afford and what not. Americas tax policy is progressive, and as far as I remember the last numbers right; the top 5% earners of America bring in +50% of aggregate tax revenue on a federal level. If I remember right. Still, Americas top tax rate is lower for the individual than in many other developed countries, ie. United Kingdom. Which hiked their highest income tax rate to 50% in a move of austerity. Because they can’t afford a lower tax rate currently during these time. Though, estimates of how much revenues the UK Treasury can expect from the hike does diverge.
America will have to re-evaluate EVERYTHING, WHEN no creditor turns up. Making a decision between soft- and hard landing for MY generation in the YEARS of stagflation to come.
On a tangent, I might want to point my reader to this;
[T]he rich are getting much, much richer, while regular people (in the developed world, which is what we’re talking about here) are at best treading water. I think that wealth brings power, and the fact that the rich are getting much, much richer relative to everyone else means that the rich also exert increasing influence over the economy, government and society. I think income mobility and equality of opportunity have declined in America over the past 40 years, to the point where America is now more segregated by class divisions than many European countries. I think a major reason for these shifts has been the increasing dominance, since the Reagan era, of an ideology that is indifferent to or actively celebrates inequality of income. I think this ideology is bad: bad for the economy, bad for society, bad for art and culture, bad for the moral character of those who subscribe to it. [And people hoping and are confident] that inequality will eventually lead to a vociferous political reaction against wealthy financial elites in America is misplaced.
[I]f we don’t agree that rich people have more political power than poor people and that they use that power to pursue their economic interests, then we’ve really got a communications problem.
Hope is a dangerous word. And elections have nothing to do with final policy and results.
I don’t have any enthusiasm for…trying to shrink the relative importance of the financial system in our economy as a test of reform, because we have to think about the fact that we operate in the broader world…It’s the same thing for Microsoft or anything else. We want US firms to benefit from [the growing emerging market]…Now, financial firms are different because of the risk, but you can contain that through regulation. *TIM GEITHNER 2011 – via
Regulators will always be behind the curve of what the free market is up to or where things are heading; they were, they have been, they will. ‘[I]t is unlikely … it is contained.’‘ That were the words of Ben Bernanke when questioned in June 2005 on CNBC about the property market and the steady rise of prices, especially the sub-prime market and whether or not it will affect the economy. And Henry Paulson always affirmed the nation that the economy is sound and strong through out 2007 and 2008. Words. Just words.
Have nothing to add to Simon Johnson thoughts and reflections on the matter of contagion.
1 Letter and the Euro!
*Patiently waiting for the first details on the deal they struck … it is now 6:15pm BST*
… and a comprehensive bailout package and the loss of sovereignty.
Update Monday 1:30pm BST (Statement from Sunday evening below)
Kicking the can down the road.
“Ministers unanimously agreed today to grant financial assistance in response to the Irish authorities’ request on 22 November 2010. Ministers concur with the Commission and the ECB that providing a loan to Ireland is warranted to safeguard financial stability in the euro area and the EU as a whole.
Euro-area and EU financial support will be provided on the basis of a programme which has been negotiated with the Irish authorities by the Commission and the IMF, in liaison with the ECB.
Ministers welcome the staff-level agreement on a three year joint EU/IMF financial assistance programme for Ireland. The Irish Government approved the programme on 28 November. Ministers unanimously endorse the measures announced today.
Building on the strong fundamentals of the Irish economy, the programme rests on three pillars [conditions of the bailout]:
- An immediate strengthening and comprehensive overhaul of the banking system
- An ambitious fiscal adjustment to restore fiscal sustainability, including through the correction of the excessive deficit by 2015
- Growth enhancing reforms, in particular on the labour market, to allow a return to a robust and sustainable growth, safeguarding the economic and social position of its citizens.
The financial package of the programme will cover financing needs up to 85 billion euros, including 10 billion euros for immediate recapitalisation measures, 25 billion euros on a contingency basis for banking system supports and 50 billion euros covering budget financing needs. Half of the banking support measures (17.5 billion euros) will be financed by an Irish contribution through the Treasury cash buffer and investments of the National Pension Reserve Fund.
The remainder of the overall package should be shared equally amongst:
- (i) the European Financial Stabilisation Mechanism (EFSM),
- (ii) the European Financial Stability Facility (EFSF) together with bilateral loans from the UK, Denmark and Sweden, and
- (iii) the IMF (22.5 billion euros each).
The main elements of policy conditionality, as endorsed today, will be enshrined in Eurogroup and Council Decisions to be formally adopted on 6 and 7 December. The Eurogroup will rapidly examine the necessity of aligning the maturities of the financing for Greece to that of Ireland. [meaning Greece got an extra four-and-a-half years to repay the emergency loans totaling 110 billion euros to match the seven-year term under Ireland’s deal.]”Annex : Distribution of the Loan to Ireland Total Programme Volume (Billions of euro) Contribution by Ireland 17.5 External support 67.5 Total 85.0External Support Breakdown IMF (One-Third)* 22.5 Europe (Two-Thirds) 45.0 Total 67.5European Breakdown EFSM 22.5 EFSF (Plus Bilaterals) 22.5 Total 45.0EFSF (Plus Bilaterals) Breakdown EFSF (Effective) euro area 17.7 United Kingdom 3.8 Sweden 0.6 Denmark 0.4 Total 22.5
And while Irish finance minister bargained on the conditions of the bailout (12.5% corporate tax rate will be untouched), Germany and France pressed further ahead to ‘introduce “collective action clauses” for debt issued after a temporary crisis facility (EFSF) expires in 2013′. So that investors share rescue costs with taxpayers for future bailouts.
Talking heads (Bloomberg)
Bloomberg’s Elliott Gotkine reports on Ireland’s 85 billion-euro ($113 billion) bailout package
4 years of Austerity to repay bailout package, principal plus interest (5.8%).
Ireland’s government plans to cut spending by about 20 percent and raise taxes over the next four years to reduce its budget deficit to 3 percent of gross domestic product by 2014, from 32 percent this year, [...]
FT’s Wolf Interview on Ireland’s Aid Package, Euro Outlook
Bailout = 50% of GDP. Bank problem is now fiscal problem. This will come to haunt them. EFSF probaply have to be increased, and PIIGS nightmare is still unravelling. “It can spread to everybody except Germany.” EURO will exits for much longer but not in current form and with its current member states.
Callow on Irish Bailout (Chief European economist at Barclays Capital)
Bailout package might be able to defuse the situation in Ireland, takes out some degree of uncertainty. But Portugal and Spain are still up for debate. Portugal got difficult task at hand. Fiscal tightening might push Portugal back into recession. Spain very different. Large challenges ahead, not dissipating very soon.
Nomura’s Maloney on Irish Bailout (Sean Maloney, an interest rate analyst at Nomura)
Bailout for banks mean better than last week, calming down the situation in the short-term (2013). Politicians/Officials buying time, liquidity and solvency. Portugal will not challenge EFSF, but Spain could.
Other good commentary and analysis via Zero-Hedge
- The move [Ireland using pension fund assets to foot the bill] reflects a willingness by governments to use long-term assets to fill short-term deficits,
- Ireland would save the world from much misery by defaulting now and driving the vampire banks into liquidation,
- policy announcements made today testify the Eurozone’s authorities’ ongoing resolve to address the repercussions of the credit crisis. As we wrote last week, however, investors are likely to continue to focus on the Iberian peninsula, namely Portugal’s chronic twin deficits, and the potential unrecorded losses in the non-listed Spanish banks.
At the cost of future generations!
And A Fistful of Euros blog asserts correctly that “the EFSF’s powder has been kept dry in case it’s needed elsewhere”, and that “[m]ost of the Irish contribution to the package comes from the [Ireland's] National Pension Reserve Fund (NPRF), which was sold at inception as pre-funding public sector pensions from 2025 onwards. In truth, the NPRF had already become a banking sector intervention vehicle since 2008. [...] So the pension money goes to the banks, and it’s left to a future Irish government to sort it out with Ireland’s 2nd most effective lobby group (the public sector unions, after the banks) how this gets paid for. The current government, its time horizon limited by an inevitable 2011 election loss, was happy enough to oblige. The current opposition, and likely future government, wasn’t at the table. That’s another EU democracy deficit.” Short-term thinking at it’s best because of the lack of accountability.
Means that after many years of austerity, taxes have to be increased considerably to cover the gaping hole in the public pension fund. The future lack of growth in OECD countries is a self-fulfilling prophecy. Oh joy.
If anyone needs any confirmation that investors are now fully aware repayments at maturity of sovereign debt issues will likely not occur, ever, is today’s announcement that Mexico is in the market with a $500 million century issue (100 year maturity). Lead underwriters on this brilliant piece of paper are Deutsche Bank and Goldman.
Mexico plans to sell $500 million of bonds due in 100 years in the country’s longest-maturity debt issue.
The government will sell the bonds as soon as today, said a person familiar with the transaction. Deutsche Bank AG and Goldman Sachs Group Inc. are arranging the sale, said the person, who declined to be identified because terms aren’t set.
Mexico sold 850 million euros ($1.08 billion) of seven-year bonds July 8 in its first European offering since 2005. It has raised $4.1 billion in international markets this year, according to data compiled by Bloomberg. Mexico’s 6.05 percent bond due in 2040 is currently the country’s longest-maturity security, Bloomberg data show.
The extra yield investors demand to own Mexican debt instead of U.S. Treasuries narrowed one basis point, or 0.01 percentage point, to 1.51 percentage points at 12:08 p.m. in New York, according to JPMorgan Chase & Co.’s EMBI index. (via Bloomberg)
And that’s why smart money goes elsewhere (BRIC, Next 11) where the grass is greener.
The last major GE factory making ordinary incandescent light bulbs in the United States is closing this month, marking a small, sad exit for a product and company that can trace their roots to Thomas Alva Edison’s innovations in the 1870s. (via Washington Post)
[I]nvented by one of America’s Greatest inventors (if not THE greatest), of which the US was the premiere manufacturer, now being manufactured ENTIRELY overseas — Asia. More via zero-hedge.
“If you want to be indispensable, do something indispensable. If want to be exceptional, do something exceptional. [...] The USA has so little to offer. [...] The world is getting fed up by this oppression.”