An under-discussed issue in governmental economics is economics of government

With a Democrat now in charge, fiscal conservatives will be hitting hard on the claim that it's irresponsible to deepen the nation's already-hefty debt. So it's more important than ever for people to understand why some of the more emotionally appealing of those arguments are specious.

  Bloomberg

...but hey, do what you want...you will anyway.

Meanwhile in Puerto Rico

The Trump administration on Tuesday denied a request to waive shipping restrictions to help get fuel and supplies to storm-ravaged Puerto Rico, saying it would do nothing to address the island’s main impediment to shipping, damaged ports.

[...]

The Department of Homeland Security, which waived the act after hurricanes Harvey and Irma, did not agree an exemption would help this time.

[...]

The government’s rationale for a waiver after the storms hit Texas, Louisiana and Florida was to ease movement of fuel to places along the U.S. East Coast and make up for temporary outages of high capacity pipelines.

[...]

Puerto Rico has long railed against the Jones Act, saying it makes the cost of imported basic commodities, such as food, clothing and fuel, more expensive.

[...]

The Jones Act limits shipping between coasts to U.S. flagged vessels. However, in the wake of brutal storms, the government has occasionally issued temporary waivers to allow the use of cheaper, tax free, or more readily available foreign flagged ships.

[...]

Gregory Moore, a spokesman for Customs and Border Protection, an office of Homeland Security, said in a statement that an assessment by the agency showed there was “sufficient capacity” of U.S.-flagged vessels to move commodities to Puerto Rico.

  Reuters

Then why don't they have water?

And add austerity/bank board rules: looks like the US is intent on destroying Puerto Rico, and the hurricane has given it a boost.

More on the Jones Act.

...but hey, do what you want...you will anyway.

Western Media's Venezuela Smear & Neoliberal Policy

On Monday, March 27, I received a message from a Bloomberg reporter asking me about a very nice compliment that the President of Venezuela and Secretary General of the Non-Aligned Movement, Nicolás Maduro, had said about me.

[...]

The reporter, Christine Jenkins, asked if I knew President Maduro or could explain what he found of value in my writing. I said that I thought he probably was referring to my discussion in Killing the Host of a September 2014 Harvard Business Review article by William Lazonick, “Profits without Prosperity,” calculating that for the decade 2003-2012, the 449 companies publicly listed in the S&P 500 index spent only 9% of their earnings on new capital investment. They used 54% to buy back their own stock, and 37% to pay dividends. I told the reporter that I thought the President’s point was that the financial sector was not financing capital formation and employment to increase output.

I told her that I had not followed Venezuela’s economy closely in recent years. I did say that I had discussed how Argentina and Greece were subjected to austerity as a result of foreign debt, and my belief that no sovereign nation should be obliged to impose austerity on its population to pay foreign bondholders. That has indeed been the problem confronting Latin America for decades, and is a central theme of all my books since Super Imperialism in 1972.

And to cap matters, of course, U.S. foreign policy has mobilized the World Bank and IMF to back creditor interests, foreign investment and privatization – while isolating countries from Cuba through Venezuela (and now Greece) to demonstrate that neoliberal diplomacy will make such a country a pariah if it makes a serious attempt to oppose austerity and financialization.

[...]

If you are inevitably going to default on sovereign debt, it’s best to stop paying now and keep what foreign exchange you have, and try to renegotiate the debt to bring it within the ability to be paid. Otherwise, you will end up suffering the legal tangle of default, but be stripped of funds needed by the domestic economy to survive.

  Michael Hudson

That is exactly what happened to Greece, and exactly the advice the ex-finance minister Yanis Varoufakis was giving his country in negotiations with the EU and was ultimately ignored.

I haven’t studied the legal status of Venezuela’s foreign debt, or what alternatives the government might have had open to it in the face of strong opposition from its domestic oligarchy as well as foreign pressure.

[...]

On Wednesday, [Jenkins] got back to me, and said that she was going to write up an article for Bloomberg.

I asked for a copy, and she wrote back that “Hi – so we actually aren’t allowed to send articles before publication!” That’s what raised a red flag in my head. My impression is that every serious reporter checks back with his or her source to ascertain that the report is accurate. This seems to be basic journalistic ethics.

[...]

[The article] was nothing at all like what I had said. It made me appear to be criticizing Venezuela’s politicians and, by implication, President Maduro. But at no point had I criticized Venezuela’s attempts at reform. Rather, I had criticized the problem of neoliberal opposition to countries trying to uplift their populations along the lines that Venezuela had done, using debt leverage to force countries to impose austerity. It looks to me like Venezuela is getting the “Greek treatment.”

[...]

I was appalled to find the article a hit-piece on Venezuela, and to make me appear to criticize President Maduro by implying that the country is not helpable. I never said that I was not “a fan of the socialist leader.” I applaud his attempts to maneuver as best he can within the corner into which Venezuela has been painted.

[...]

None of my beliefs are what Bloomberg [...] implied.

[...]

As I wrote to the Bloomberg reporter after reading her story: “The problem is that I AM sympathetic with the AIMS of Chavez etc. The problem is the hostility all around him that is undercutting the economy. That’s what makes the problem insolvable.”

...but hey, do what you want...you will anyway.

Reality Bites

Now, this really does surprise me.

 

From the 1980s the policymaking elite has waved away the notion that they were acting ideologically – merely doing “what works”. But you can only get away with that claim if what you’re doing is actually working.

[...]

[W]hen the Bank of International Settlements, the central bank’s central bank, warns that “the global economy seems unable to return to sustainable and balanced growth” [, the ideology underpinning contemporary capitalism is failing].

[...]

In the IMF’s flagship publication, three of its top economists have written an essay titled “Neoliberalism: Oversold?”.

[...]

At last a major institution is going after not only the symptoms but the cause – and it is naming that cause as political. No wonder the study’s lead author says that this research wouldn’t even have been published by the fund five years ago.

[...]

For so long mainstream economists and policymakers have denied the very existence of such a thing as neoliberalism, dismissing it as an insult invented by gap-toothed malcontents who understand neither economics nor capitalism. Now here comes the IMF, describing how a “neoliberal agenda” has spread across the globe in the past 30 years.

[...]

In this way, the public sector is replaced by private companies, and democracy is supplanted by mere competition.

The results, the IMF researchers concede, have been terrible.

  Guardian

I never understood why this has been called neoliberalism. The first time I heard it actually named was when Hugo Chávez started railing against it. What" I thought.  The forced austerity, privatization schemes are neoliberalism? In light of what the putative liberal party in the US has become (or returned to), I can see the reason now.

Neoliberalism hasn’t delivered economic growth – it has only made a few people a lot better off. It causes epic crashes that leave behind human wreckage and cost billions to clean up. [...] And, they say, its costs “could be large – much larger than the benefit”.

[...]

Two things need to be borne in mind here. First, this study comes from the IMF’s research division – not from those staffers who fly into bankrupt countries, haggle over loan terms with cash-strapped governments and administer the fiscal waterboarding. Since 2008, a big gap has opened up between what the IMF thinks and what it does. Second, while the researchers go much further than fund watchers might have believed, they leave in some all-important get-out clauses. The authors even defend privatisation as leading to “more efficient provision of services” and less government spending.

That's more like it.

Last year the rich countries’ thinktank, the OECD, made a remarkable concession. It acknowledged that the share of UK economic growth enjoyed by workers is now at its lowest since the second world war. Even more remarkably, it said the same or worse applied to workers across the capitalist west.

[...]

[W]hat you’re witnessing amid all the graphs and technical language is the start of the long death of an ideology.

Much too late. Better late than never? Too late might is never for millions and millions of people and for the environment.



That, too.

...but hey, do what you want...you will anyway.

So Much for "Yats"

We always back the biggest losers. Our man in Ukraine has just been forced to resign.

From March 2014:

Back before February 4, weeks before the most violent crackdown that killed protestors that led to Viktor Yanukovych’s ouster, Assistant Secretary of State Victoria Nuland and US Ambassador to Ukraine had a conversation about how to divvy up power between 3 opposition figures in a post-Yanukovych Ukraine. Nuland deemed “Yats” the necessary post-Yanukovych leader.

Nuland: [Breaks in] I think Yats is the guy who’s got the economic experience, the governing experience. 

  Marcy Wheeler

"Yats", of course, was our man for austerity in Ukraine.

Now, today, April 10, 2016:

After weeks of political crisis in Kiev, Ukrainian Prime Minister Arseny Yatsenyuk has announced his long-expected resignation.

[...]

The prime minister has been a highly unpopular figure in Ukraine with his approval ratings languishing in the single-digit range. The public blames him for a ruined economy.

  RT

Again, March 2014:

For economists who think austerity is a disaster, Ukraine is on a path to ruin.

“We saw this in the 90s and what the IMF did to Russia with Yeltsin. They’ll do that to Ukraine,” said [Vladimir Signorelli, president of investment research firm Bretton Woods Research LLC].

[...]

“Yatsenyuk is the the kind of technocrat you want if you want austerity, with the veneer of professionalism,” Signorelli said. “He’s the type of guy who can hobnob with the European elite. A Mario Monti type: unelected and willing to do the IMFs bidding,” he said.

  Forbes

Well, that is indeed what we wanted. Alas, apparently the Ukrainian people did not.

Arseniy Yatsenyuk's resignation comes as no surprise. According to opinion polls, his party's popularity had plummeted and he narrowly survived a vote of no confidence in parliament in February.

[...]

President Poroshenko himself came under scrutiny this week after leaked documents suggested he had set up an offshore company as a tax haven using Panamanian legal firm Mossack Fonseca.

He said he had done nothing wrong and Ukrainian prosecution officials said there was no evidence of a crime but there were calls for his impeachment.

[...]

US Vice-President Joe Biden, in a call to Mr Yatsenyuk on Sunday, congratulated him on "accomplishments over the past two years", including economic reforms

  BBC

He may be calling Poroshenko soon.

Here's my favorite video of Yats (who does indeed maintain an air of professionalism) being appreciated at work:

It's for Your Own Good

The Cyclically Adjusted Budget (CAB) is a statistical estimate that aids government officials when they decide what to spend money on and how much they’re going to tax you. It is mostly federal governments that use it, but also international institutions like the International Monetary Fund (IMF).

Economists will tell you this tool is imprecise. Yet national and international institutions still rely on it to justify important decisions about government spending and taxation.

But there’s something the experts aren’t telling you: the cyclically adjusted budget can be easily maneuvered depending on which way the political winds are blowing. And it appears technical and obscure enough so that regular people tend to look at it as objective and undisputable.

[...]

It’s one thing to say to students in the streets that their education and economic wellbeing are not a priority for the government while saving banks is. It’s quite another to say that politics has nothing to do with it and the economy requires taking certain actions, sometimes painful.

[...]

Politicians and government officials using the CAB can limit the range of political choices that appear viable to a community. Policymakers can avoid the hassle of taking political responsibility for these choices, too. We had to do it! The budget says so!

[...]

I suppose this shows the limits of democracy when information, knowledge, and ultimately power are unequally distributed.

  Alternet: Orsola Costantini, senior economist at the Institute for New Economic Thinking

Ironically, the CAB was originated in the 1940s as a way to bolster the New Deal among business owners and get people back to work.

This obscure theory validates, with its authority, a big economic mistake that sounds like common sense but is actually snake oil — the notion that the federal government budget is like a household budget. Actually, it isn’t. Your household doesn’t collect taxes. It doesn’t print money. It works very differently, yet the nonsense that it should behave exactly like a household budget gets repeated by politicians and policymakers who really just want to squeeze ordinary people.

[...]

Usually we hear arguments that suggest we have to cut social programs and workers’ rights and benefits or face economic doom. Tune in to the presidential debates and you’ll hear this played out — and it isn’t strictly limited to one party.

[...]

Our education system is increasingly unequal and deprived of public resources. When children don’t get good educations, the production of knowledge falls into private control. Power gets consolidated. The official theoretical frameworks that benefit the most powerful get locked in.

In the economic field, we need to engage different points of view and keep challenging dominant narratives and frameworks. One day, human curiosity will save us from intellectual prostitution.

Yeah, I'm not that optimistic. To begin with, our education system is designed to squelch curiosity, and in its place force feed approved texts to children. And secondly, entertainment and consumerism are encouraged, and asking questions about the system will bring you under the full force of system authority.


...but hey, do what you want...you will anyway.

US in Latin America: Wikileaks Cables

When Greece’s left government decided to hold a national referendum on the troika-imposed austerity program, the European Central Bank retaliated by restricting liquidity for Greek banks. This triggered a prolonged bank closure and plunged Greece further into recession.

 Though Greek voters ended up massively rejecting austerity, Germany and the European creditor cartel were able to subvert democracy and get exactly what they wanted: complete submission to their neoliberal agenda.

 In the last decade and a half, a similar fight against neoliberalism has been waged across the breadth of an entire continent, and mostly outside of the public eye. Although Washington initially sought to quash all dissent, often employing even fiercer tactics than those used against Greece, Latin America’s resistance to the neoliberal agenda has in large part been successful. It’s an epic tale that’s gradually coming to light thanks to continued exploration of the massive trove of US diplomatic cables released by WikiLeaks.

[...]

Much of the story of the US government’s efforts to contain and roll back the anti-neoliberal tide can be found in the tens of thousands of WikiLeaked diplomatic cables from the region’s US diplomatic missions, dating from the early George W. Bush years to the beginning of President Obama’s administration.

The cables — which we analyze in the new book, The WikiLeaks Files: The World According to US Empire — reveal the day-to-day mechanics of Washington’s political intervention in Latin America (and make a farce of the State Department mantra that “the US doesn’t interfere in the internal politics of other countries”).

  Jacobin

Read more.

...but hey, do what you want...you will anyway.

How Rich

Bullied and forced by Germany, the Greeks have to dance faster to stay in the Eurozone.

Greece's parliament will have to formally approve the following measures Wednesday:

--Streamline the VAT system and broaden the tax base to increase revenue. This will likely include raising sales taxes on restaurant meals and other items to 23%. And could include raising the corporate tax rate to 28%, from 26%.

--Overhaul the pension system, which would include setting the standard retirement age at 67 and discouraging people from retiring early.

--Safeguard the independence of the nation's statistics agency

--Implement rules to meet budget targets, which could require spending cuts

  CNN Money

”Streamline the VAT system and broaden the tax base to increase revenue.”

Or maybe just get German corporations to pay their taxes.

A German company was found to be the biggest tax evader in Greece. A court in Athens found that Hochtief, the German company that was running the “Eleftherios Venizelos” Athens International airport was not paying VAT for 20 years. It is estimated that Hochtief, will have to pay more than 500 million Euros for VAT arrears. Together with other outstanding payments, like those to social security funds, it might have to pay more than 1 billion Euros.

It must be noted that under the “Troika” austerity programme Greek employees lost around 400 million Euros from cuts to their salaries.

  Greek Reporter

Boycott Germany?

Not likely in this country.  Too many people with German ancestry.  Also, we've learned to associate quality products with German design and manufacturing.  On the other hand, not many Walmart products are made in Germany, so much of America is in on the boycott by default.

So, if you're game...

...but hey, do what you want...you will anyway.

German Economic Commentator's Two Cents' Worth on What Just Happened

[D]o you really think that an economic reform programme, for which a government has no political mandate, which has been explicitly rejected in a referendum, that has been forced through by sheer political blackmail, can conceivably work?

[...]

By forcing Alexis Tsipras into a humiliating defeat, Greece’s creditors have done a lot more than bring about regime change in Greece or endanger its relations with the eurozone. They have destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union.

In doing so they reverted to the nationalist European power struggles of the 19th and early 20th century. They demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order.

[...]

But it was not just the brutality that stood out, nor even the total capitulation of Greece. The material shift is that Germany has formally proposed an exit mechanism. On Saturday, Wolfgang Schäuble, finance minister, insisted on a time-limited exit — a “timeout” as he called it.

I have heard quite a few crazy proposals in my time, and this one is right up there. A member state pushed for the expulsion of another. This was the real coup over the weekend: not only regime change in Greece, but also regime change in the eurozone.

[...]

This brings us back to a more toxic version of the old exchange-rate mechanism of the 1990s that left countries trapped in a system run primarily for the benefit of Germany, which led to the exit of the British pound and the temporary departure of the Italian lira. What was left was a coalition of countries willing to adjust their economies to Germany’s. Britain had to leave because it was not.

[...]

Any other country that in future might challenge German economic orthodoxy will face similar problems.

[...]

We will soon be asking ourselves whether this new eurozone, in which the strong push around the weak, can be sustainable.

  Wolfgang Münchau

Well, actually, the whole planet works that way on behalf of the U.S. So, why shouldn't Germany expect it to work that way in Europe?

The True IMF

https://www.cigionline.org/blogs/global-economy/behind-scenes-imf-fateful-day-greek-crisis

"A bailout of ... private debt holders."   Precisely how the IMF has functioned throughout its history. Presumably the real reason it was formed in the first place.

...but hey, do what you want...you will anyway.

Greece Update

Scotland buckled on their turn - Greece, however, would appear to be the real heir to Scotsman William Wallace's cry of defiance.

As celebrants gathered in Athens’s central Syntagma Square, the Interior Ministry reported that with almost 90 percent of the vote tallied, 61 percent of the voters had said no to a deal that would have imposed greater austerity measures on the beleaguered country.

The no votes carried virtually every district in the country, handing a sweeping victory to Prime Minister Alexis Tsipras, a leftist who came to power in January vowing to reject new austerity measures, which he called an injustice and economically self-defeating.

[...]

The vote took place under what some analysts called a financial carpet bombing. The European Central Bank severely limited financial assistance to Greek banks, forcing them to close a week before the referendum, making it hard for retirees to get their money and raising widespread fear here that people would lose their deposits.

The news media, dominated by Greek oligarchs, saturated the airwaves and the newspapers with stories about losing gasoline and medicines, while the plight of elderly pensioners was afforded far more attention than in the past, media experts said.

Nonetheless, many voters, tired of more than five years of soaring unemployment and a collapsing economy, said they could not accept the terms of the European offer, which imposed yet more pension cuts and tax increases, without any hint of debt relief.

[...]

After five years in which unemployment soared beyond 20 percent and the country’s economy contracted by 25 percent, many said that a no vote was at least a vote for hope, the possibility of a new deal, rather than following the mandates of creditors who had failed to set Greece on a course to recovery.

  NYT

[W]e have just witnessed Greece stand up to a truly vile campaign of bullying and intimidation, an attempt to scare the Greek public, not just into accepting creditor demands, but into getting rid of their government. It was a shameful moment in modern European history, and would have set a truly ugly precedent if it had succeeded.

But it didn’t. You don’t have to love Syriza, or believe that they know what they’re doing — it’s not clear that they do, although the troika has been even worse — to believe that European institutions have just been saved from their own worst instincts.

[...]

And if Greece ends up exiting the euro? There’s actually a pretty good case for Grexit now — and in any case, democracy matters more than any currency arrangement.

  Paul Krugman

Greece Update

Spreading...

Further Greece Update

Thar she blows!

UPDATE:

Greece Update

...but hey, do what you want...you will anyway.

Meanwhile in Greece

http://greece.greekreporter.com/2015/06/28/greece-referendum-why-alexis-tsipras-made-the-right-move/

And 3.5% was the CONCESSION -- original target was a primary budget surplus of 4.5%. "Since 1995 all the countries of the euro area reached an aggregate primary surplus of 3.6% only once, in 2000." "Even Germany, the Federal Republic of Austerity, reached its own peak of 3% only twice, in Q4 2007 and Q1 2008." And Greece has ALREADY gone through most severe fiscal adjustment of any peripheral country. Eurogroup's demands make me think of a tweet I saw today: "The EU is just one big happy family. Unfortunately, it's the Manson Family."

  Billmon Twitter

Greece!  The birthplace of democracy.  Can nothing be done?

And here's a tidy Twitter summary from Club des Cordeliers for you to read in order to understand better:  https://storify.com/cordeliers/obscureobjet

...but hey, do what you want...you will anyway.

UPDATE:

Coincidence?

Greece leaves behind five years of humiliation and suffering, fear and authoritarianism, said the leader of the winning Syriza party, Alexis Tsipras. He’s moving on Monday to build a stable government and plans to get rid of Athens’ three main creditors.

[...]

Syriza won 149 seats in the 300-seat parliament election.

[...]

On Monday, Syriza managed to gain key support to form a new government after the meeting with Panos Kammenos, the head of the anti-austerity party Independent Greeks, which also opposes Greece's bailout deal. Kammenos said his party would back Tsipras to be the next prime minister.

[...]

The 40-year-old leader plans to create the first eurozone government elected to undo the conservative polices of budgetary rigor imposed by German Chancellor Angela Merkel on Greece as a condition of the bailout back in 2010.

  RT

THAT can be added to Greece's list of problems now.  Refuse austerity imposed by the Great White West, and you're going to be labeled a terrorist haven.  Watch for drones.

Another Round of Austerity Fail

[Portugal] will become the second [...] country to leave the [euorozone] bailout after Ireland. Portugal underwent three years of painful austerity, in order to receive a 78-billion euro loan (106 billion US dollars), to help a nation that was on the verge of bankruptcy.

[...]

“There is a great need in Brussels and Berlin and other capitals to present Portugal and Ireland as success stories. They will claim that their reforms in Portugal have been a success- well, they haven’t, they have destroyed the society and economy,” Rui Tavares, an independent Portuguese MEP told RT in April.

  RT

...but hey, do what you want...you will anyway.

Privatizing the Water Supply

As you know, the world banking industry has its hands in most third world countries' economies, making loans on the condition that the countries introduce extreme austerity and privatization of public resources, including water supplies.

This article will explain the water privatization issue and its obvious problems. The money quote  (pun unintended, but you are welcome to it) for me:

In addition, financing by the IFC, which is both investor and adviser on these projects, poses a conflict of interest. On the one hand, the IFC is advising governments to privatize the sector; on the other, it’s investing in the corporations getting those contracts. “It’s self-dealing: setting up a project that it’s in a position to profit from,” Naficy told me. When the IFC was established in 1956, it was expressly prohibited from purchasing corporate equity to avoid this sort of conflict, but the board amended this rule a few years later, allowing these kinds of deals.

  alJazeera

See any problem there?...but hey, do what you want...you will anyway.

And So It Goes

Back before February 4, weeks before the most violent crackdown that killed protestors that led to Viktor Yanukovych’s ouster, Assistant Secretary of State Victoria Nuland and US Ambassador to Ukraine had a conversation about how to divvy up power between 3 opposition figures in a post-Yanukovych Ukraine. Nuland deemed “Yats” the necessary post-Yanukovych leader.

Nuland: [Breaks in] I think Yats is the guy who’s got the economic experience, the governing experience. He’s the… what he needs is Klitsch and Tyahnybok on the outside. He needs to be talking to them four times a week, you know. I just think Klitsch going in… he’s going to be at that level working for Yatseniuk, it’s just not going to work.

Pyatt: Yeah, no, I think that’s right. OK. Good. Do you want us to set up a call with him as the next step?

Thursday, Yatseniuk was appointed Prime Minister.

  Marcy Wheeler

“Yatsenyuk is the the kind of technocrat you want if you want austerity, with the veneer of professionalism,” [Vladimir Signorelli, president of boutique investment research firm Bretton Woods Research LLC in New Jersey] said. “He’s the type of guy who can hobnob with the European elite. A Mario Monti type: unelected and willing to do the IMFs bidding,” he said.

[...]

“Yatsenyuk was saying that what the Greeks did to themselves we are going to do ourselves,” said Signorelli. “He wants to follow the Greek economic model. Who the hell wants to follow that?”

[...]

Yanukovych resisted the International Monetary Fund’s demand to raise taxes and devalue the currency. Yatsenyuk doesn’t mind. For economists who think austerity is a disaster, Ukraine is on a path to ruin.

“We saw this in the 90s and what the IMF did to Russia with Yeltsin. They’ll do that to Ukraine,” said Signorelli.

  Forbes

Yeah, austerity hasn’t done any country any good that I’ve heard. Well, not directly. It’s done the money-holding countries wonders.

Meanwhile...

Russia sent fighter jets to patrol the border with Ukraine [...], as the interim president warned any movements of its troops from their Crimea naval base will be considered an act of "military aggression".

Meanwhile, a Russian news organisation said the country was providing shelter for ousted president Viktor Yanukovych in a Kremlin sanatorium just outside Moscow.

Ukrainian interim President Olexander Turchynov condemned the takeover of government and parliament buildings in Crimea as a "crime against the government of Ukraine" following a seizure by pro-Russian activists.

  UK Independent