Here's my Top 10 links from around the Internet at 7.30 pm in association with NZ Mint.
I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
I'll pop the extras into the comment stream. See all previous Top 10s here.
I blame Ayn Rand for all sorts of wrongs...
1. All together now - Tom Friedman writes at the New York Times about the synchronised crises affecting large parts of the global economy and political world.
He's right to point out things are going wrong in quite a few places all at the same time.
This latest crisis somehow seems more dangerous than the one in 2008.
Back then the central banks and governments of the world had ammunition to fire at the problems.
They had room to run big budget deficits and room to cut interest rates. The Chinese also were able to invest and expand their way out of a consumption slump. The euro was thought to have a future.
Things aren't so benign now. Budget deficits have blown out. The Chinese are sitting on a bunch of bad loans on ghost cities. The euro is in crisis. Rates have been cut to zero and money printed without success, except to fuel inflation.
Here's Friedman with a nice summary of the problems:
HOLD onto your hats and your wallets. Since the end of the cold war, the global system has been held together to a large degree by four critical ruling bargains. Today all four are coming unstuck at once and will need to be rebuilt. Whether and how that rebuilding happens — beginning in the U.S. — will determine a lot about what’s in your wallet and whether your hat flies off.
Now let me say that in English: the European Union is cracking up. The Arab world is cracking up. China’s growth model is under pressure and America’s credit-driven capitalist model has suffered a warning heart attack and needs a total rethink. Recasting any one of these alone would be huge. Doing all four at once — when the world has never been more interconnected — is mind-boggling.
2. Bernanke out of ammo - William Cohan spoke to Andrew Patterson at Radio Live Sunday after Bernanke's speech.
"He's saying: I have no more arrows in my quiver".
3. 'Don't mourn: organise' - Left wing film director Ken Loach tells The Guardian the riots in Britain were a reaction by nihilist youth abandoned by the older, ruling classes. HT Rob.
"It's the ruling class cracking the whip, isn't it? It's disgusting. We've got to organise. In the words of the old American trade unionist Joe Hill: don't mourn, organise."
He continues, apologising occasionally for "lecturing" me. "I think the underlying factors regarding the riots are plain for anyone with eyes to see … It seems to me any economic structure that could give young people a future has been destroyed. Traditionally young people would be drawn into the world of work, and into groups of adults who would send the boys for a lefthanded screwdriver, or a pot of elbow grease, and so they'd be sent up in that way, but they would also learn about responsibilities, and learn a trade, and be defined by their skills. Well, they destroyed that. Thatcher destroyed that. She consciously destroyed the workforces in places like the railways, for example, and the mines, and the steelworks … so that transition from adolescence to adulthood was destroyed, consciously, and knowingly.
"I don't recall the nihilism among kids now, 40 or 50 years ago," he says. "Now there is no place for kids, period. So I think despite the material advances, we're worse off."
4. 10.4 million lost jobs - Northwestern University Economics Professor Robert Gordon writes at VoxEu about how bonus-focused CEOs are now much more aggressive at cutting jobs than they were before the mid 1980s.
When the economy begins to sink – like the Titanic after the iceberg struck – firms begin to cut costs any way they can; tossing employees overboard is the most direct way. For every worker tossed overboard in a sinking economy prior to 1986, about 1.5 are now tossed overboard. Why are firms so much more aggressive in cutting employment costs? My “disposable worker hypothesis” (Gordon, 2010) attributes this shift of behaviour to a complementary set of factors that amount to “workers are weak and management is strong.” The weakened bargaining position of workers is explained by the same set of four factors that underlie higher inequality among the bottom 90% of the American income distribution since the 1970s – weaker unions, a lower real minimum wage, competition from imports, and competition from low-skilled immigrants.
But the rise of inequality also has boosted the income share of the top 1% relative to the rest of the top 10%. In the 1990s corporate management values shifted toward more emphasis on shareholder value and executive compensation, with less importance placed on the welfare of workers, and a key driver of this change in attitudes was the sharply higher role of stock options in executive compensation. When stock market values plunged by 50% in 2000-02, corporate managers, seeing their compensation collapse with profits and the stock market, turned with all guns blazing to every type of costs, laying off employees in unprecedented numbers.
5. Aussie ski resort fire sale - The Sydney Morning Herald reports on a fire sale of ski resort properties in Australia. Something ugly is brewing over there. HT Andrew via email
THE Victorian property market went on a downhill run yesterday when dozens of properties in the ski village of Falls Creek sold for a fraction of their retail price at a single ''no reserve'' auction that, at times, resembled a fire sale.
Developer and publisher of The Monthly Morry Schwartz made a dramatic exit from the alpine property market at the first ''no reserve'' Helmsman auction of real estate held in Australia.
Conventionally used to sell livestock, Helmsman auctions are a method where everything is put on sale simultaneously and individuals bid against each other and the clock.
6. Clinton admits he was wrong - Bill Clinton fesses up to allowing too much deregulation of derivatives in this ABC interview. HT Iain via email.
7. The disillusion is growing - Gretchen Morgenson writes at the New York Times about how Main St in America is incredulous at the revelations about how the Fed bailed out Wall St during the Lehman Crisis and how it has done little to help the economy.
Walker F. Todd, a research fellow at the American Institute for Economic Research and a former assistant general counsel and research officer at the Federal Reserve Bank of Cleveland, said these details from 2008 confirm that institutions, not citizens, were aided most by the bailouts. "What is the benefit to the American taxpayer of propping up a Belgian bank with a single New York banking office to the tune of tens of billions of dollars?" he asked.
"It seems inconsistent ultimately to have provided this much assistance to the biggest institutions for so long, and then to have done in effect nothing for the homeowner, nothing for credit card relief."Mr. Todd also questioned the Fed's decision to accept stock as collateral backing a loan to a bank.
"If you make a loan in an emergency secured by equities, how is that different in substance from the Fed walking into the New York Stock Exchange and buying across the board tomorrow?" he asked. "And yet this, the Fed has steadfastly denied ever doing."If these rescues were intended to benefit everyday Americans, as Mr. Paulson contended, they have failed.
Main Street is in a world of hurt, facing high unemployment, rampant foreclosures and ravaged retirement accounts.
8. Rational economics - Yves Smith at NakedCapitalism points to an archival interview that Ayn Rand, the hero of libertarians everywhere, gave to Mike Wallace in 1959. The videos are worth watching. Click through the link to the two other videos. It's a full half hour interview with the fountainhead of the Neo Liberal movement.
I wish I'd seen this a long time ago. She inspired Allan Greenspan and all types of laissez faire economists that went on to dominate policy making for the last 30 years.
The other amazing thing is that this long interview about philosophy and ideas was broadcast on US national network television in prime time. It would never happen today.
She (Yves) makes some good points about Rand's failure:
I must confess to not realizing that Rand’s philosophy was rooted in the counterfactual belief that people are rational. Every social science (ironically, save mainstream economics) puts human irrationality and inconsistency front and center.
Nobel prize winner Herbert Simon studied how woefully limited human cognitive capacities. More Nobels have been awarded for behavioral economics, which (among other things) has catalogued numerous cognitive biases.
One of the world's leading economists said Wednesday that the very structure of the Federal Reserve system is so fraught with conflicts that it's "corrupt." Nobel laureate Joseph Stiglitz, a former chief economist at the World Bank, said that if a country had applied for World Bank aid during his tenure, with a financial regulatory system similar to the Federal Reserve's -- in which regional Feds are partly governed by the very banks they're supposed to police -- it would have raised alarms.
"If we had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure," Stiglitz said during a conference on financial reform in New York. "It's time for us to reflect on our own structure today, and to say there are parts that can be improved."
10. The Daily Show explains The Tea Party movement.
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