Showing posts with label economy. Show all posts

Sunday, December 28, 2014

Plot To Sabotage US Economy with Frank Luntz

Daily Kos

Fri Jun 08, 2012 at 08:15 AM PDT

Eric Cantor, Paul Ryan & Kevin McCarthy: Plot To Sabotage US Economy with Frank Luntz

On January 20, 2009 Republican Leaders in Congress literally plotted to sabotage and undermine U.S. Economy during President Obama's Inauguration.
In Robert Draper's book, "Do Not Ask What Good We Do: Inside the U.S. House of Representatives" Draper wrote that during a four hour, "invitation only" meeting with GOP Hate-Propaganda Minister, Frank Luntz, the below listed Senior GOP Law Writers literally plotted to sabotage, undermine and destroy America's Economy.

The Guest List:
Frank Luntz - GOP Minister of Propaganda
Rep. Paul Ryan (R-WI)
Rep. Eric Cantor (R-VA)
Rep. Kevin McCarthy (R-CA),
Rep. Pete Sessions (R-TX),
Rep. Jeb Hensarling (R-TX),
Rep. Pete Hoekstra (R-MI)
Rep. Dan Lungren (R-CA),
Sen. Jim DeMint (SC-R),
Sen. Jon Kyl (AZ-R),
Sen. Tom Coburn (OK-R),
Sen. John Ensign (NV-R) and
Sen. Bob Corker (TN-R). Non-lawmakers present Newt Gingrich

During the four hour meeting:
The senior GOP members plotted to bring Congress to a standstill regardless how much it would hurt the American Economy by pledging to obstruct and block President Obama on all legislation. These Republican members of Congress were not simply airing their complaints regarding the other party's political platform for four long hours. No, these Republican Congressional Policymakers, who were elected to do 'the People's work' were literally plotting to sabotage, undermine and destroy the U.S. Economy.

Mitt Romney, who has hired most of Bush/Cheney Policy Advisers, and the GOP party believe they can defeat President Obama, take control of the Senate and maintaining control of the House of Representatives so long as the economic recovery stalls. So they are actively trying to make it happen ... and that's what hate-propaganda Minister Frank Luntz had in mind when he organized the January 20, 2009 covert meeting.
Republicans do not pay Frank Luntz to offer ideas for good policy to help America, rather, Republicans pay Luntz' to devise lies that will keep Americans dumb and ignorant to facts on policy. For decades Republicans have paid Frank Luntz to tell them (Republicans) what to say in order to brainwash 'the People' with lies and hate to destroy policy.
Luntz does not use words to merely have Americans "change their minds." Rather, Frank Luntz uses words intentionally to dumb-down Americans and fill them with lies and hate so as to brainwash and program Americans to hate a given policy.
Frank Luntz, like many Hate-Propaganda Ministers, loathes the notion of honesty in debate. Also, like many Hate-Propaganda Ministers, Frank Luntz wants total control ... total control even it if means destroying America. So, Luntz uses the tactics similar to Joseph Goebbels: spread hate, lies and fear in order to gain control. (More on Frank Luntz at the end of this Diary).
Remember, for months prior to January 20, 2009, America had been losing over 750,000 jobs per month because of policies these same elected Republican lawmakers had enacted and their goal, their goal that night, was to plot ways to sabotage and undermine any and all legislation that would pull American families up and out of the economic calamity they [lawmakers] had helped create.
Two months after their covert meeting where they plotted to sabotage the US Economy, in March 2009, Rep. Pete Sessions said Republicans should follow the model of the Taliban in its battles against President Obama.
In the March 2009 interview with National Journal Rep Sessions said:

"Taliban Insurgency, we understand perhaps a little bit more because of the Taliban. Insurgency is the way they went about systematically understanding how to disrupt and change a person's entire processes. And these Taliban -- is an example of how you go about to change a person from their messaging to their operations to their frontline message. And we need to understand that Insurgency may be required when [dealing with] the other side" ~Rep Pete Sessions, March 2009 to National Journal

Rep Pete Sessions went on to say:

"If they [democrats] do not give us those options or opportunities then we will then become Insurgency ... I think Insurgency is a mindset and an attitude that we're going to have to search for and find ways to get our message out and to be prepared to see things for what they are, rather than trying to do something about them"

Also, at their meeting they plotted to suddenly stop supporting any Stimulus Legislation, even though, they all supported Bush/Cheney Stimulus legislation.

At the meeting, Rep Kevin McCarthy said,
"We've gotta challenge them on every single bill." "Show united and unyielding opposition to the president’s economic policies."

Remember, these same Republican members of Congress supported the very Bush/Cheney policies that caused America to teeter on the brink of the 2nd Great Depression and caused the 2007 US Economic Meltdown.

Here's how they all voted:
-- "Yes" to Bush/Cheney January 2008 Stimulus
-- "Yes" to Bush/Cheney bailing out Bear Stern
-- "Yes" to Bush/Cheney bailing out AIG
-- "Yes" to Bush/Cheney TARP (sept 2008)
-- "Yes" to Bush/Cheney TARP (oct 2008)

And these same Republican members of Congress:

Supported Bush/Cheney keeping cost of two wars out of the Budget. Supported Bush/Cheney spending $4Trillion while giving Top 1% Tax Cuts; ignoring the fact that taxes pay for wars.

Not only did these Senior members of Congress plot to destroy the American Economy more than it already was destroyed? They actually carried out their mission:

Every one of these Senior members of Congress have threatened Government Shutdown over things like: - Funding planned parenthood,
- Raising the Debt Ceiling which, in-and-of-itself, would cause US Economic turmoil.
... oh, and stay current, these same House GOP members of Congress are still, today, threatening a Government Shutdown again over the Debt Ceiling.

Last year, during the Debt Ceiling negotiations, Eric Cantor and Sen. Jon Kyl abruptly walked out of negotiations and refused to renew discussions with Democrats. As a result, America's credit rating was lowered which put a smile on Republican's faces.

Senators: Jim DeMint, Jon Kyl, Tom Coburn, John Ensign, and Bob Corker have: - Filibustered more Bills (over 300) than any Congress combined in US History.
- Voted NO on every single piece of Legislation brought to the Floor including:
NO on Al Franken's Anti-Rape Amendment,
NO on Lilly Ledbetter,
NO on Fair Pay Act,
NO on Anti-Outsourcing Bill (2010)

How in the hell could any thinking American be against those Bills? Seriously?!?

Representatives: Paul Ryan, Eric Cantor, Kevin McCarthy, Rep. Pete Sessions, Jeb Hensarling, Pete Hoekstra and Dan Lungren have voted NO on every single piece of Legislation including: NO on increasing FEMA during natural disasters.

These same failed Congressmen have been on tv constantly chanting the lie that they were guilty of ... the lie that "President Obama's policies undermine the US Economy."
Currently: Republicans Using the Transportation Bill to Sabotage the US Economy:
If the current Transportation Bill expires June 30, there will be no funding for transportation projects and 1.9 million construction workers would lose their jobs. Eric Cantor and Republicans in the House are refusing to act because Republicans would be overjoyed if almost two million Americans were added to the unemployment rolls this summer before the election.
Other Legislation used to sabotage US Economy
Republicans in Congress refused to negotiate or even discuss passing President Obama's American Jobs Act that independent economists claim would create 1.3 million new jobs. God forbid Eric Cantor, Paul Ryan or Kevin McCarthy support an actual Bill that would put people to work building needed infrastructure and provide funds to pay to rehire hundreds of thousands of teachers, firefighters, police officers and other public service workers that have been laid off in droves by cash-starved states.
Republicans are gearing up block President Obama's 2012 Anti-Outsourcing Bill - which is a Bill to discourage the outsourcing of American jobs, which is due to come to the Senate floor around the fourth of July.
The Washington Post reports that Republicans have made it clear that the Federal Reserve would face fierce Republican criticism if it takes further actions to stimulate the economy before the election. The Washington Post wrote that,

Republicans... have expressed deep concern about measures taken by the Fed to support the economy -- and could be doubly upset if new efforts goose the stock market and are perceived to work in favor of President Obama's re-election.

Frank Luntz Like I said above, Republicans do not pay Luntz to offer ideas for good policy to help America, rather, Republicans pay Luntz' to devise lies will keep Americans dumb and ignorant to facts on policy. For decades Republicans have paid Frank Luntz to tell them (Republicans) what to say in order to brainwash 'the People' with lies and hate to destroy policy.
Luntz is so good at lying, he even lies to himself. In order to blur reality and not take responsibility for his devising the spread of propaganda through hate and lies Luntz told Matt Lauer

"I focus on words that cause people to change their minds, change their behavior even change their attitudes." ~Frank Luntz 3/2011 in interview with Matt Lauer

No, Luntz is not using words to merely have Americans "change their minds" -- Luntz is using words intentionally to dumb-down Americans and fill them with lies and hate so as to brainwash and program Americans to hate a given policy. Luntz has been the Republican Hate-Propaganda Minister since at least 1993 and his list of words to stop policies that help America are vast:

Don’t say “oil drilling.” Say “energy independence.” Don’t say “inheritance tax.” Say “death tax.”
Don't say "Capitalism." Say "Economic Freedom."
Don't say that the government 'taxes the rich.' Say Government "takes from the rich."
Don't admit Lobbyists are Collective Bargainers for Corporations. Say "Union Collective Bargaining steals your tax dollars."

Luntz says people hate government so:

Don’t say “healthcare reform.” Say “government takeover.” Don't say "Public workers." Call them "Government workers."

For the 2012 election, Frank Luntz is training his failed co-harts in the Republican party on what Luntz says are "the three most powerful words to use" to con people is: "I get it." Luntz says:

Don't tell Occupy Wall Street "you don't give a shit." Say "I get it." Don't tell struggling Americans "you're on your own." Say "I get it."
Don't tell Occupy Wall Street "you should protest Wall Street." Say "You should occupy the White House."

Yes, it is true, the House Republican Leaders: Eric Cantor, Paul Ryan and Kevin McCarthy met in secret and plotted to sabotage and undermine the US Economy ... I call them TRAITORS TO AMERICA. So, the next time you hear the GOP say "Obama wants to destroy the economy" or "Government Shutdown" ... remember ... as Newt Gingrich said after their four hour dinner on January 20, 2009 "You’ll remember this as the day the seeds of 2012 were sown."

To Translate GINGRICH:
"You'll remember this day as they day we became Traitors to the United States."

My hope is that Americans and all members of Congress are reminded via twitter, facebook and all other forms of media over and over and over:
Republican Leaders in Congress literally plotted to sabotage the US Economy on January 20, 2009.

Wednesday, January 22, 2014

Recession’s True Cost Is Still Being Tallied

If you want to have a big political battle in Washington, start yelling about people freeloading on food stamps, but if you actually care about where the real money is, look at the massive wreckage being done by the Wall Street boys and incompetent policy makers in Washington.

JAN. 21, 2014

Eduardo Porter

ECONOMIC SCENE

On Sept. 15, 2008, the investment bank Lehman Brothers collapsed after a long struggle to avoid bankruptcy, paralyzing the world’s financial networks and tipping the United States economy into an abyss from which it has not yet fully emerged.

More than five years later, there is still no answer to perhaps the most critical question raised by the man-made disaster: How much did it all cost?

In July, three economists at the Federal Reserve Bank of Dallas, Tyler Atkinson, David Luttrell and Harvey Rosenblum, gave it a shot, at least as far as the United States economy goes.

Their analysis — cautious and tentative, critically dependent on debatable assumptions — underscores how difficult it is, still, to accurately tally the costs of the most severe economic catastrophe since the Depression of the 1930s into a coherent, conclusive measure of loss.

“It is not difficult to understand why such accounting exercises are rare,” they wrote. “They require comparing a world in which no financial crisis occurred to what actually happened and what is likely to transpire.”

Most strikingly, their examination offers a panoramic view of the variety of ways in which the financial crisis diminished the nation’s standard of living. At a bare minimum the crisis cost nearly $20,000 for each American. Adding in broader impacts on workers’ well-being — an admittedly speculative exercise — could raise the price tag to as much as $120,000 for every man, woman and child in the United States. With this kind of money we could pay back the federal debt or pay for a top-notch college education for everyone.

The portrait of loss, tentative as it is, suggests that even the most far-reaching measures might be justified to ensure it never happens again. But you wouldn’t know that from the current debate.

In December, the American Bankers Association sued to stop a provision of the Volcker Rule, part of the Dodd-Frank financial reform law, and intended to stop banks from engaging in risky trading on their own account.

It pretty much won, convincing regulators that forcing banks to get rid of a complex debt security used by smaller institutions to raise capital would impose immediate and unnecessary costs on small community banks.

Separately, the Securities and Exchange Commission has taken a legal battering at the hand of business-friendly judges arguing that the agency has not adequately assessed whether the benefits of its rules justify the costs. This has largely stopped the agency’s rule-making.

Regulators creating international banking standards in Basel, Switzerland, have also faced a drumbeat of criticism from bankers who argue that proposed rules to increase the capital cushion international banks must amass to buffer against losses would slice 3.5 percent from the world’s economic output and cost 7.5 million jobs.

This month, as American regulators watered down the Volcker Rule in response to the bankers’ lawsuit, regulators in Basel agreed to soften some of their capital requirements, too.

Over all, almost half the rules required by the Dodd-Frank legislation have yet to be written. But the financial industry would love to slow regulation further. “Our goal is to press the pause button on the multitude of regulations and rules, to give the industry time to digest them,” said James Ballentine, executive vice president for congressional relations for the banking association. “The industry should have an opportunity to determine what is working and what is not.”

The bankers’ points are not necessarily wrong. Regulation does impose costs. Some banking rules and regulations might make loans scarcer or more expensive. Restrictions on banks’ businesses are likely to eat into their profitability.

Nonetheless, the legal attack on the new regulation is disingenuous. Increasing the industry’s costs and reducing its profits is an objective of the regulation overhaul, not a bug. The goal is to ensure that banks internalize the costs of their risky business rather than have them borne by the rest of society.

“Regulatory agencies are being sued to prevent that the law be put in place because it will cause the industry that crashed the world to lose money,” said Dennis Kelleher, who heads Better Markets, a nonprofit formed after the financial crisis to press for stricter regulation of the banking sector. “But Congress made the decision of who was going to bear the costs.”

Indeed, even if financial regulation imposes broader economic costs, what matters is how they measure up against the benefit of preventing another financial disaster.

The position taken by bankers, business-friendly judges and many Republicans in Congress is that every new financial rule must justify its existence based on a narrow monetary tally of costs and benefits. But the approach ignores the far greater benefits promised by the entire regulatory package.

To start, the economists at the Dallas Fed modeled how much economic activity would be lost by the time the nation returned to its growth path before the crisis. In their study, they initially assumed that the economy would return to its previous path by 2023, and concluded that the total loss would amount to 40 percent to 90 percent of a year’s worth of economic output. That’s about $6 trillion to $14 trillion in today’s money — or $19,000 to $45,000 per person.

Others have used different methods and come up with similar estimates. Better Markets estimated that the crisis cost $12.8 trillion in lost output. Last year, the Government Accountability Office estimated that the price tag could range from a few trillion dollars to over $10 trillion.

But what if the path is not recovered so quickly? So far, the economy has made up little if any of the ground it lost. Perhaps the shock from the crisis slowed the nation’s growth rate for good.

Under a more pessimistic assumption, the Dallas Fed economists estimated that the cost could be 65 percent to 165 percent of annual output. The upper limit amounts to about $25 trillion, almost $80,000 per American.

But even that might be an underestimate. Using a different method of analysis, the economists also looked at how Americans cut back on purchases of consumer goods. They concluded that the expectations of the lifetime income of working age adults fell by almost $150,000, on average.

Most tallies stop there. But that is not because this covers the entire fallout from the crisis. Rather, it is because the rest is even harder to measure.

Consider joblessness, which damages physical and mental health and breeds poverty, which contributes to crime. It affects the structure of families. Only about 500,000 new households were formed each year from 2007 to 2010, a third of the average pace during the previous decade.

It is impossible to put an accurate dollar sign on these social costs. Still, the economists at the Dallas Fed tried.

Recent research suggests that a jobless worker’s well-being declines 15 times as much as would be justified by the loss of income alone. Based on that number, Mr. Luttrell, who remains at the Dallas Fed, and Mr. Atkinson and Mr. Rosenblum, who have left, concluded that the unemployment spike between 2008 and 2012, which reduced aggregate wages by $900 billion, had the same effect on workers’ well-being as having lost $14 trillion, approximately another year of economic production in the United States.

Finally, estimates of the costs of the crisis would be incomplete without an assessment of the government’s role. And the Dallas economists borrowed an old estimate by the International Monetary Fund that direct support above and beyond the previously existing public safety net totaled 82 percent of the nation’s G.D.P. — about $12.6 trillion. This is about the size of the federal government’s debt to the public.

While all those numbers shouldn’t be taken at face value, the damages potentially add up to a staggering total. Even acknowledging that they are imprecise, speculative proxies of the true costs of our financial mess, they underscore how estimates of loss based solely on lost G.D.P. are far too conservative.

The Fed economists refrained from adding up the disparate costs from their analyses — which could risk double-counting losses. But simply adding the cost from the drop in well-being of the unemployed to the impact on G.D.P. would take the price tag to up to $120,000 a person. And that still leaves out many other measures of loss.

Every time you hear about the need to balance the costs of new financial regulations against their benefits, it might do well to think about that.

Sunday, August 18, 2013

Rogoff v. Stiglitz: Blood vs Butter

OpEdNews Op Eds 8/17/2013 at 05:00:02

Rajan Calls Krugman "Paranoid" for Criticizing Reinhart and Rogoff's Research | New Economic Perspectives

By William K. Black, J.D., Ph.D. (about the author) Permalink (Page 1 of 3 pages)
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Reprinted from neweconomicperspectives.org
From http://commons.wikimedia.org/wiki/File:Paul_Krugman-press_conference_Dec_07th%2C_2008-4.jpg

by Wikipedia

This article discusses a simmering feud among five of the most prominent economists in the world (two of them Nobel Laureates). It was prompted by the August 8, 2013 article by Raghuram Rajan, who has just been selected to run India's Central Bank, entitled: "The Paranoid Style in Economics." (Note: I have deliberately "buried the lead" in my last section.)
The personalities involved have a great deal to do with the feud, but as Paul Krugman wrote on May 23, 2013, "It's Not About You."
I will ignore the personalities and discuss what it is about -- economic policies that continue to cause devastating harm to the public all over the globe. Krugman and Joe Stiglitz are critics of the International Monetary Fund's (IMF) imposition of austerity as a cure for severe recessions. Ken Rogoff, Carmen Reinhart, and Rajan were the leading economists at the IMF who championed the imposition of austerity.

Round One: Rogoff v. Stiglitz

The original feud was most famously between Stiglitz and Rogoff. Stiglitz, who led the movement at the World Bank to throw off its support for austerity, memorably claimed that IMF was staffed with "third rate" economists. Rogoff famously blasted Stiglitz in a July 2, 2002, "open letter" (only months after Stiglitz was made a Laureate) that, inter alia, referred to him as a "loose cannon" who had "slandered" the IMF staff, slammed him for refusing to "admit to having been even slightly wrong about a major real world problem," suggested he was so arrogant that he doubted that Paul Volcker was "really smart," admitted that Stiglitz had a few ideas with which the IMF would "generally agree" because most of them were "old hat," described Stiglitz's most recent book as "long on innuendo and short on footnotes," derided him as pretending to see himself "as a heroic whistleblower" when he was actually peddling "snake oil," described Stiglitz views as being most analogous to Arthur Laffer's "voodoo economics" (cleverly and deeply insulting on multiple levels), accused Stiglitz of lacking faith in markets and having faith in increasingly democratic governments ("you betray an unrelenting belief in the pervasiveness of market failures, and a staunch conviction that governments can and will make things better"), and ended with a wonderfully nasty "compliment" that compared Stiglitz to a famous scholar who suffers from often disabling mental illness ("Like your fellow Nobel Prize winner, John Nash, you have a "beautiful mind.' As a policymaker, however, you were just a bit less impressive.") To top off this list, Rogoff told Stiglitz that he should pull his book from publication because it "slandered" a senior IMF official.
But those are only the gratuitous insults that Rogoff launched at Stiglitz. His real attack was that Stiglitz had done incalculable damage to the developing world by criticizing the IMF and by opposing austerity as "battlefield medicine" for nations thrown into severe recessions.

"In your role as chief economist at the World Bank, you decided to become what you see as a heroic whistleblower, speaking out against macroeconomic policies adopted during the 1990s Asian crisis that you believed to be misguided. You were 100% sure of yourself, 100% sure that your policies were absolutely the right ones. In the middle of a global wave of speculative attacks, that you yourself labeled a crisis of confidence, you fueled the panic by undermining confidence in the very institutions you were working for. Did it ever occur to you for a moment that your actions might have hurt the poor and indigent people in Asia that you care about so deeply? Do you ever lose a night's sleep thinking that just maybe, Alan Greenspan, Larry Summers, Bob Rubin, and Stan Fischer had it right--and that your impulsive actions might have deepened the downturn or delayed--even for a day--the recovery we now see in Asia?"

Recall that this was written in 2002, so the hilarity of summoning the support of Greenspan, Summers, Rubin, and Fisher for one's financial policies was not apparent to neoclassical economists. In any event, Rogoff's claim is that the "impulsive" Stiglitz's criticism of the IMF during the Asian crisis endangered the economic recovery essential to "indigent people in Asia" because it could have reduced "confidence" in the IMF's policy of imposing austerity as "battlefield medicine" for Nations that were in sharp recessions.
Not content with claiming that Stiglitz had "fueled the panic" that endangered the poor; Rogoff extends his "battlefield medicine" metaphor by accusing Stiglitz of "sniping at the paramedics as they tended the wounded." Having analogized Stiglitz to a murderous war criminal, Rogoff returns to his subthemes that Stiglitz is arrogant, a terrible economist, and personally responsible for the IMF's failed austerity programs because Stiglitz "ignominiously sabotaged" those programs by criticizing them. Rogoff asserts that the key to economic recovery from a recession is the appearance of what many economists now refer to as the "confidence fairy" and that austerity is the sole elixir that can summon the confidence fairy. The confidence fairy only appears if one believes, really believes, in fairies so Stiglitz's criticism of austerity was an act of sabotage that prevented the IMF from summoning the fairy. Rogoff then asks:

"Do you ever think that just maybe, Joe Stiglitz might have screwed up? That, just maybe, you were part of the problem and not part of the solution?"

Worse, the policies that Stiglitz urged the IMF to "prescri[be]" to reduce human distress and speed recovery from a severe recession rejected austerity. Stiglitz denies that the IMF was providing "battlefield medicine" to nations in severe recessions. Recessions represent sharply inadequate demand. Economists have known for at over 75 years that austerity reduces the already inadequate demand and exacerbates the recession, as we have seen in the eurozone. This gratuitously harms tens of millions of people. Real battlefield medicine consists of stopping the bleeding and giving the patient fluids and plasma. Forcing austerity on a nation in a recession is analogous to refusing to stop the bleeding (e.g., by opposing capital controls) and bleeding the patient (via austerity). The IMF does, of course, provide some liquidity, but only if the nation it lends to agrees to bleed its economy through austerity.
Attacking Stiglitz for having such a conventional view about economics that the IMF now generally concedes is correct (IMF publications are hopelessly contradictory on this subject) required Rogoff to rely on rhetorical flourishes that sought to mock Stiglitz for opposing austerity as "battlefield medicine" for a recession. Rogoff asserted that increasing demand through government spending led to inflation rising, "often uncontrollably." Rogoff's logic is that austerity aids the poor because it forces millions of them into unemployment and poverty. This reduces workers' wages by forcing them to compete with huge numbers of unemployed workers for jobs. This prevents inflation, which Rogoff asserts is the great threat to the poor.
The irony of the IMF deliberately creating the "reserve army of the unemployed" that Marx asserted was the defining dynamic of capitalism in order to suppress wages is lost on IMF economists. Whatever their other qualities (a matter hotly disputed by Rogoff and Stiglitz) IMF economists have not demonstrated introspection about the irony of the IMF's embrace of Marx's most famous critique of capitalism as a means to purportedly achieve a "capitalist" recovery from financial crisis. The IMF's deliberate adoption of austerity policies it knows produce severe unemployment while bailing out the financial sector leads to severe increases in inequality of income, wealth, and political power. This is one of the reasons that Stiglitz strongly criticizes austerity.

Round Two: Neoclassical Economics v. the World

Rogoff's criticisms of Stiglitz and his (and the IMF's) embrace of Greenspan, Rubin, and Summers' assaults on financial regulation produced the criminogenic environments that led to the epidemics of control fraud that drove the global financial crisis and the Great Recession. Reinhart and Rogoff (R&R) published a book claiming that government stimulus programs were counterproductive and that austerity should be the response. They asserted in policy recommendations that there was a cliff when a nation's debt reached 90% of its GDP that led to untenable interest expense burdens that served as a long-term brake on economic growth. Their book was widely and favorably cited by proponents of austerity. The proponents were able to restrict the size of the U.S. stimulus program, remove its vital "revenue sharing" component that could have prevented so much harm to states and communities and speeded the recovery, and force much of the stimulus to be in the form of relatively ineffective tax cuts for the wealthy. The impact of R&R in the Eurozone was far worse. It led to austerity programs that forced the Eurozone into a gratuitous recession and much of the periphery into a second Great Depression that continues.

Round Three: Heterodox Economists v. Reinhart and Rogoff's Study

There were strong, immediate criticisms of R&R's claims about austerity and the asserted debt cliff, including those of my colleague Randy Wray that proved correct. R&R failed to distinguish between nations with fully sovereign currencies and other nations and engaged in selective data that excluded nations and years that ran counter to their claimed findings. Graduate students from two of the Nation's few remaining heterodox economics departments (University of Massachusetts, Amherst and the University of Missouri-Kansas City) devastated the R&R book by examining its data -- and the data R&R excluded. The U. Mass graduate student won deserved fame for finding that R&R had made serious data entry errors that when corrected revealed that the purported 90% cliff was fictional and greatly reduced the relationship that R&R reported between increased debt and reduced growth. Our graduate students demonstrated that if one were to infer causality from the data the direction of causality ran the opposite of what R&R claimed in their policy arguments. Recessions led to high levels of debt, not the other way around.
R&R's errors were embarrassing and their policy advice in favor of austerity proved disastrous, but Stiglitz did not rush to recycle Rogoff's famous attack on him and explain that rather than providing "battlefield medicine," the IMF, the ECB, and the EU infliction of austerity on wounded economies was equivalent to bayonetting the wounded. The whole thing would have ended there, but Reinhart and Rogoff's response to the U. Mass article led to Round Four.

Round Four: Reinhart and Rogoff v. Reinhart and Rogoff

For reasons that pass all understanding, Reinhart and Rogoff decided to claim that the U. Mass study had confirmed the R&R study that higher debt was associated with lower growth and to claim that they had never argued that there was a cliff or that high debt led to lower growth. This was a strategy that had to fail in the modern era, which retained records of their statements and statements of policy makers about the cliff and about their claim that high debt led to low growth. (Note that Rogoff's 2002 letter lambasting Stiglitz made that same claim.)

Round Five: Krugman v. Reinhart and Rogoff

Reinhart and Rogoff's disingenuous response to the revelation of their many errors prompted Krugman to call them out on their claims. Note that Reinhart and Rogoff's response (immediately above) did not complain of Krugman's (quite mild) comments one week before they wrote their April 26, 2013 response.
Krugman cited Brad DeLong's graphical demonstration of the disingenuous nature of R&R's description of their findings.

Round Six: Reinhart and Rogoff v. Krugman: Reprising Rogoff's 2002 Attack on Stiglitz

Reinhart and Rogoff reprised some of the tactics of Rogoff's 2002 open letter attacking Stiglitz with an open letter (May 25, 2013) attacking Krugman for criticizing R&R. The famous line in this iteration was: "it has been with deep disappointment that we have experienced your spectacularly uncivil behavior the past few weeks. You have attacked us in very personal terms, virtually non-stop"."

Round Seven: The IMF Clan Closes Ranks to Attack Krugman

Just when one might have hoped that R&R's flawed study, their disastrous support for austerity, and the feud would become a bit of arcane economic history, Rajan, on the way to India to lead its central bank, decided to rally around his IMF colleagues and to (by innuendo) accuse Krugman of being "paranoid." The title of Rajan's article is: "The Paranoid Style in Economics" and his first two sentences are:

"Why do high-profile economic tussles turn so quickly to ad hominem attacks? Perhaps the most well-known recent example has been the Nobel laureate Paul Krugman's campaign against the economists Carmen Reinhart and Kenneth Rogoff"."

There are three obvious things to say in response to Rajan's title and claim. First, having read Rogoff's open letter to Stiglitz, if Rajan wants to criticize a "paranoid," "spectacularly uncivil" style of discourse containing myriad ad hominem attacks he has aimed his pen at the wrong economist.
Second, Krugman did not make ad hominem attacks on Rajan's IMF colleagues. Krugman made substantive criticisms of Reinhart and Rogoff's arguments and practices. One can debate the accuracy of his criticisms, but they were addressed to the merits of their research.

Third, Rajan makes an ad hominem attack on Krugman in this article. Worse, he does it by innuendo, implying that Krugman is "paranoid." Rajan and Rogoff have reason to be personally upset with Krugman. Krugman wrote a June 9, 2011 column that explained that Rajan and Rogoff gave spectacularly bad advice not only in favor of fiscal austerity, but raising interest rates, at a time when doing so would have been disastrous and was unsupported by any economic model. Krugman quoted Keynes' famous passage in which he noted that many economists viewed the willingness to inflict misery on others as the hallmark of a real economist.

Round Eight: We Must Focus on Rajan's Admissions

Readers will likely ignore Rajan's column because they will consider his attack on Krugman as an understandable, but disingenuous, payback for Krugman criticisms of the three former IMF economists. That would be a shame, for Rajan's article contains two enormously important admissions that my colleagues who specialize in macroeconomics have long emphasized.

"In the run-up to the 2008 financial crisis, macroeconomists tended to assume away the financial sector in their models of advanced economies. With no significant financial crisis since the Great Depression, it was convenient to take for granted that the financial plumbing worked in the background"."

As Krugman wrote, our focus needs to be on the economics rather than the personalities. Orthodox economics is broken, and Rajan's admissions are what matters in his article.
Theoclassical economists did not simply assume away finance and money. By assuming finance and money away they implicitly assumed away fraud and the essential regulatory cops on the beat. Theoclassical economists pushed to eviscerate the institutional protections such as effective financial regulation and regulators that had helped ensure "that the financial plumbing worked in the background" and created the criminogenic environments that led to the epidemics of control fraud that drive our recurrent, intensifying crises. Economists ignored the warnings and the policies recommended by another Laureate, George Akerlof. Akerlof and Paul Romer wrote a classic article in 1993 entitled "Looting: The Economic Underworld of Bankruptcy for Profit." They made this passage the conclusion of their paper in order to give the message special emphasis.

"The S&L crisis, however, was also caused by misunderstanding. Neither the public nor economists foresaw that the regulations of the 1980s were bound to produce looting. Nor, unaware of the concept, could they have known how serious it would be. Thus the regulators in the field who understood what was happening from the beginning found lukewarm support, at best, for their cause. Now we know better. If we learn from experience, history need not repeat itself" (Akerlof & Romer 1993: 60).

Neoclassical economists overwhelmingly continue to ignore Akerlof, Romer, and their former colleague Jim Pierce's findings about control fraud and the findings of criminologists. Rajan's book about the crisis, for example, asserts that fraud played no material role in the crisis and describes a hypothetical scam that he says illustrates the (lawful) causes of the crisis. The scam, however, requires two felonies and would fail as a scam. Rajan does not understand the law or fraud. The accounting control fraud "recipe," by contrast, works and has great explanatory power.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

William K Black , J.D., Ph.D. is Associate Professor of Law and Economics at the University of Missouri-Kansas City. Bill Black has testified before the Senate Agricultural Committee on the regulation of financial derivatives and House Governance Committee on the regulation of executive compensation. He was interviewed by Bill Moyers on PBS, which went viral. He gave an invited lecture at UCLA’s Hammer Institute which, when the video was posted on the web, drew so many “hits” that it crashed the UCLA server. He appeared extensively in Michael Moore’s most recent documentary: “Capitalism: A Love Story.” He was featured in the Obama campaign release discussing Senator McCain’s role in the “Keating Five.” (Bill took the notes of that meeting that led to the Senate Ethics investigation of the Keating Five. His testimony was highly critical of all five Senators’ actions.) He is a frequent guest on local, national, and international television and radio and is quoted as an expert by the national and international print media nearly every week. He was the subject of featured interviews in Newsweek, Barron’s, and Village Voice.
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Saturday, August 17, 2013

Rajan Calls Krugman "Paranoid" for Criticizing Reinhart and Rogoff's Research | New Economic Perspectives
(1 comments) This article discusses a simmering feud among five of the most prominent economists in the world (two of them Nobel Laureates) I will ignore the personalities and discuss what it is about -- economic policies that continue to cause devastating harm to the public all over the globe.

Thursday, August 15, 2013

Banksters Love Holder; The FBI's 2010 Mortgage Fraud Report Reveals Why
(9 comments) DOJ has refused to prosecute any elite banker for mortgage fraud. The Obama administration's refusal to prosecute the elite banksters... has made it clear that the rule of law no longer applies to wide ranges of life and that crony capitalism will continue to reign.

Saturday, April 13, 2013

The New York Times Thinks Bleeding Cyprus Is 'Strong Medicine'
(5 comments) The economic truth, proved repeatedly during this crisis, is that austerity is to "medicine" as bleeding a patient was to "health care."

Tuesday, October 30, 2012

The Great Betrayal -- and the Cynicism of calling it a Grand Bargain
(14 comments) Obama is telling the media that the Great Betrayal is his first, and overarching, priority should he be re-elected. We are forewarned and we must act now to make clear that we will block the Great Betrayal and crush at the polls any member of Congress who supports it.

Sunday, August 12, 2012

America's Attention Deficit Disorder by David Korten

In highly unequal societies, the very rich are prone to seek affirmation of their personal worth through extravagant
displays of excess.”

by David Korten

YES! magazine Op-ed

The political debate in the United States and Europe has focused attention on public financial deficits and how best to resolve them. Tragically, the debate largely ignores the deficits that most endanger our future.

In the United States, as Republican deficit hawks tell the story, “America is broke. We must cut government spending on social programs we cannot afford. And we must lower taxes on Wall Street job creators so they can invest to get the economy growing, create new jobs, increase total tax revenues, and eliminate the deficit.”

Democrats respond, “Yes, we’re pretty broke, but the answer is to raise taxes on Wall Street looters to pay for government spending that primes the economic pump by putting people to work building critical infrastructure and performing essential public services. This puts money in people’s pockets to spend on private sector goods and services and is our best hope to grow the economy.”

Democrats have the better side of the argument, but both sides have it wrong on two key points.

First, both focus on growing GDP, ignoring the reality that under the regime of Wall Street rule, the benefits of GDP growth over the past several decades have gone almost exclusively to the 1 percent—with dire consequences for democracy and the health of the social and natural capital on which true prosperity depends.
Second, both focus on financial deficits, which can be resolved with relative ease if we are truly serious about it; and ignore far more dangerous and difficult-to-resolve social and environmental deficits. I call it a case of deficit attention disorder.

To achieve the ideal of a world that secures health and prosperity for all people for generations to come, we must reframe the public debate about the choices we face as a nation and as a species. We must measure economic performance against the outcomes we really want, give life priority over money, and recognize that money is a means, not an end.

What We Borrow from Each Other

To realistically address the nature of the public financial deficits at the center of the current political debate, it is crucial to understand the nature of money and debt. Money is just a number, a system of accounting useful in facilitating economic exchange. A deficit occurs when expenditures exceed income. If, as a result, financial liabilities come to exceed financial assets, we go into debt. It is all basic accounting.

The key point, which the deficit debates rarely address, is that one person or entity’s financial debt is another person or entity’s financial asset. We can only borrow money from each other. The idea that we borrow money from the future is an illusion.

From a societal perspective, total debts and assets are always in balance. Consequently, if we say that one person or entity has excessive financial debt, we in effect say that another has excessive financial assets. Reducing the aggregate financial debt of debtors necessarily requires reducing the aggregate financial assets of the creditors.

In theory, we could instantly wipe away all financial debts through a universal forgiveness, a modern equivalent of the ancient institution of the Jubilee. The ancients recognized the significance of such action to restore the balance essential to the healthy function of the human community.

The deficit-hawks recoil in horror and assure us that we can reduce government debt while leaving the financial assets of the rich untouched. It makes perfect sense in the fantasy world of pure finance in which profits and the financial assets of the rich grow perpetually even as growing inequality and wasteful material consumption deplete the social capital of community and the natural capital of Earth’s biosphere.

A viable human future, however, must be based on living world realities rather than financial world fantasies.

What We Steal from Future Generations

Any normally intelligent 12-year-old is fully capable of understanding the distinction between a living forest or fishery and a system of financial accounts that exists only as electronic traces on a computer hard drive. Unfortunately, this simple distinction seems to be beyond the comprehension of the economists, pundits, and politicians who frame the public debate on economic policy. By referring to financial assets as “capital” and treating them as if they had some intrinsic worth beyond their value as a token of exchange, they sustain the deception that Wall Street is creating wealth rather than manipulating the financial system to accumulate accounting claims against wealth it had no part in creating.

Real capital assets have productive value in their own right and cannot be created with a computer key stroke. The most essential forms of real capital are social capital (the bonds of trust and caring essential to healthy community function) and biosystem capital (the living systems essential to Earth’s capacity to support life). We are depleting both with reckless abandon.

Social capital is the foundation of our human capacity to innovate, produce, engage in cooperative problem solving, manage Earth’s available natural wealth to meet the needs of all, and live together in peace and shared prosperity. Social capital is depleted as individualistic greed becomes the prevailing moral standard and the governing institutions of society deprive all but a privileged minority of access to a secure and dignified means of living. Once it is depleted, social capital can take generations to restore.

Biosystem capital provides a continuing supply of breathable air, drinkable water, soils to grow our food, forests to produce our timber, oceans teeming with fish, grassland that feed our livestock, sun, wind, and geothermal to provide our energy, climate stability, and much else essential to human survival, health, and happiness. It is depleted when soils are degraded, oceans are overfished, rivers and lakes are polluted, forests cut down, aquifers contaminated and depleted, and climate stabilization systems disrupted. These natural systems can take thousands, even millions of years to restore. Species extinction is forever.

According to the World Wildlife Federation’s 2012 Living Planet Report, at the current rate of consumption, “it is taking 1.5 years for the Earth to fully regenerate the renewable resources that people are using in a single year. Instead of living off the interest, we are eating into our natural capital.” This is a path to never-never land. Unlike with financial deficits, simple debt forgiveness is not an option.

When we deplete Earth’s bio-capacity—its capacity to support life in its many varied forms—we are not borrowing from the future; we are stealing from the future. Even though it is the most serious of all human-caused deficits, it rarely receives mention in current political debates.

When we assess economic performance by growth in GDP and stock price indices, we in effect manage the economy to make the most money for people who have the most money. This leads us to the fanciful belief that as a society we are getting richer. In fact, we are impoverishing both current and future generations by creating an unconscionable concentration of economic power, depriving billions of people of a secure and dignified means of living, and destroying the social and biosystem capital on which our real well-being depends.

With proper care and respect, biosystem capital can provide essential services in perpetuity. The reckless devastation of productive lands and waters for a quick profit, a few temporary jobs, and a one-time energy fix from Earth’s non-renewable fossil energy resources represent truly stupid and morally reprehensible deficit spending. Evident current examples include tar sand oil extraction, deep sea oil drilling, hydraulic fracturing to extract natural gas, and mountaintop removal coal mining The fact that we thereby deepen human dependence on finite nonrenewable fossil energy reserves and accelerate climate disruption make such actions all the more stupid and immoral.

Financial system logic, which rests on the illusion that money is wealth, tells us we are making intelligent choices. Living systems logic tells us our current choices are insane and a crime against future human generations and creation itself.

From Built-to-Loot to Built-to-Serve

The economy of a just and sustainable society needs a proper system of money creation and allocation that:

Supports the health and productive function of social and biosystem capital and allocates the sustainable generative output of both to optimize the long-term health and well-being of all; and
Rewards individuals with financial credits in proportion to their actual productive contribution to living system health and prosperity.

The current U.S. money system does exactly the opposite. It celebrates and rewards the destruction of living capital to grow the financial assets of Wall Street looters at the expense of Main Street producers—thus concentrating economic and political power in the hands of those most likely to abuse it for a purely individualist short-term gain.

Wall Street operates as a criminal syndicate devoted to the theft of that to which it has no rightful claim. It then bribes politicians to shield the looters from taxes on their ill-gotten gains and to eliminate social programs that cushion the blow to those they have deprived of a secure and meaningful means of livelihood. This brings us back to the real source and consequence of excess financial debt.

Masters and Debt Slaves

In the big picture, the Wall Street 1 percent has divided society into a looter class that controls access to money and a producer class forced into perpetual debt slavery—an ancient institution that for millennia has allowed the few to rule the many [See inset: “Wall Street and the Ultimate Tyranny”] .The immense burden imposed on the 99 percent by public debt, consumer debt, mortgage debt, and student debt is an outcome of a Wall Street assault on justice and democracy.

The resulting desperation and loss of social trust account for the many current symptoms of social disintegration and decline in ethical standards. These include growth in family breakdown, suicide, forced migration, physical violence, crime, drug use, and prison populations.

Equality as a Crucial Variable

I grew up in America during a time when we took pride in being a middle-class society without extremes of wealth and poverty. In part, we were living an illusion. Large concentrations of private wealth were intact and systemic discrimination excluded large segments of the population—particularly people of color—from participation in the general prosperity. The underlying concept that the good society is an equitable society, however, was and still is valid. And from the 1950s to the 1970s the middle class expanded.

Complete equality is neither possible nor desirable. Modest inequality creates essential incentives for productive contribution to the well-being of the community. Extreme inequality, as exemplified by current U.S. society, is both a source and an indicator of serious institutional failure and social pathology.

British epidemiologist Richard Wilkinson has compiled an impressive body of research that demonstrates beyond any reasonable doubt that economic and social inequality is detrimental to human physical and mental health and happiness—even for the very rich. Relatively equal societies are healthier on virtually every indicator of individual and social health and well-being.

In highly unequal societies, the very rich are prone to seek affirmation of their personal worth through extravagant displays of excess. They easily lose sight of the true sources of human happiness, sacrifice authentic relationships, and deny their responsibility to the larger society—at the expense of their essential humanity. At the other extreme, the desperate are prone to manipulation by political demagogues who offer simplistic analyses and self-serving solutions that in the end further deepen their misery. Governing institutions lose legitimacy. Democracy becomes a charade. Moral standards decline. Civic responsibility gives way to extreme individualism and disregard for the rights and well-being of others.

To achieve true prosperity, we must create economies grounded in a living systems logic that recognizes three fundamental truths:

The economy’s only valid purpose is to serve life.
Equality is foundational to healthy human communities and a healthy human relationship to Earth’s biosphere.
Money is a means, not an end.

A New Political Narrative and Agenda

Runaway public deficits are but one symptom of a profound system failure. They can easily be resolved by taxing the unearned spoils of the Wall Street looters, eliminating corporate subsidies and tax havens, and cutting military expenditures on pointless wars that undermine our security.

Joblessness can easily be eliminated by putting the unemployed and underemployed to work meeting a vast range of unmet human needs from rebuilding and greening our physical infrastructure to providing essential human services, eliminating dependence on fossil fuels, and converting to systems of local organic food production. If the primary constraint is money, the Federal Reserve can be directed to create it and channel it to priority projects through a national infrastructure bank—a move that avoids enriching the bankers and does not create more debt.

In addition, we must:

Break up concentrations of unaccountable power.
Shift the economic priority from making money to serving life by replacing financial indicators with living wealth indicators as the basis for evaluating economic performance.
Eliminate extremes of wealth and poverty to create a true middle-class society.
Build a culture of mutual trust and caring.
Create a system of economic incentives that reward those who do productive work and penalize predatory financial speculation.
Restructure the global economy into a planetary system of networked bioregional economies that share information and technology and organize to live within their respective environmental means.

Within a political debate defined by the logic of living systems, such measures are simple common sense. Within a political debate defined by conventional financial logic, however, they are easily dismissed as dangerous and illogical threats to progress and prosperity.

So long as money frames the debate, money is the winner and life is the loser. To score a political victory for life, the debate must be reframed around a narrative based on an understanding of the true sources of human well-being and happiness and a shift from money to life as the defining value.

A promising new frame is emerging from controversies surrounding the recent United Nation’s Rio+20 environmental conference. Wall Street interests argued that the best way to save Earth’s biosystems is to put a price on them and sell them to wealthy global investors to manage for a private return. Rather than concede the underlying frame to Wall Street and debate the price and terms of the sale, indigenous leaders and environmental groups drew on the ancient wisdom of indigenous peoples to challenge the underlying frame. They declared that as the source of life, Earth’s living systems are sacred and beyond price. They issued a global call to recognize the rights of nature.

Thus framed, the Rio+20 debate highlights a foundational and inherent conflict between the rights of nature, human rights, property rights, and corporate rights.

In current practice, based on the same financial logic that leads us to treat financial deficits as more important than social and environmental deficits, we give corporate rights precedence over the property rights of individuals. We give property rights precedence over the human rights of those without property. And we give human rights precedence over the rights of nature.

We will continue to pay a terrible price for so long as we allow the deeply flawed logic of pure finance to define our values and frame the political debate.

There is no magic bullet quick fix. We must reframe the debate by bringing life values and living systems logic to the fore and turning the prevailing rights hierarchy on its head. The rights of nature must come first, because without nature, humans do not exist. As living beings, our rights are derivative of and ultimately subordinate to the rights of Earth’s living systems.

Human rights come, in turn, before property rights, because property rights are a human creation. They have no existence without humans and no purpose other than to serve the human and natural interest. Corporations are a form of property and any rights we may choose to grant to them are derivative of individual property rights and therefore properly subordinate to them.

The step to a prosperous human future requires that we acknowledge life, not money, as our defining value, accept our responsibilities to and for one another and nature, and bring to the fore of the debate the social and bio-system deficits that are the true threat to the human future.

Replacing cultures and institutions that value money more than life with cultures and institutions that value life more than money is a daunting challenge. Fortunately, it is also an invigorating and hopeful challenge because it reconnects us with our true nature as living beings and offers a win-win alternative to the no-win status quo.

David Korten wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas and practical actions. David is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine, co-chair of the New Economy Working Group, a founding board member of the Business Alliance for Local Living Economies, president of the Living Economies Forum, and a member of the Club of Rome. He holds MBA and PhD degrees from the Stanford University Graduate School of Business and served on the faculty of the Harvard Business School.

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ABOUT David Korten

David Korten is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller: When Corporations Rule the World. He is board chair YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-distributed by CSRwire.com and yesmagazine.org, based on excerpts from Agenda for a New Economy.

The Rising Tide