or why Paul Krugman doesn’t understand Modern Banking. Some readers may have noticed the brouhaha in the blogosphere about a blog post from Paul Krugman criticizing the paper from Steve Keen, which will be presented at the upcoming INET conference in Berlin. Paul Krugman then doubled down with another post and again with another post. First a personal advice: Folks, all these screaming and yelling “Dear Paul, but …” is only a waste of time. Paul Krugman will never ever concede that he’s wrong on anything concerning economics. The only appropriate response in my humble opinion is to state the obvious and then move on. These people take a perverse pleasure being yelled at from laymen, because … Well, they’re thinking like a “Nobel” economist and you are not!
Der Wirtschaftsphilosoph schreibt manchmal kleine Anekdoten aus seinem Berufsleben. Das möchte ich zur Abwechslung auch mal machen. Die Vorgeschichte: ich war letztes Jahr auf einer Tagung in Hamburg. Bei einem Abendessen mit ein paar Hedge Fund Managern plauderten wir unter anderem über das von George Soros initiierte Institute for New Economic Thinking. Es stellte sich heraus, dass ein paar der Hedgies regelmäßige Besucher der jährlichen INET Konferenz sind. Da die nächste INET Konferenz in Berlin stattfindet fragte ich ob ich an dieser Konferenz wohl auch teilnehmen könnte? Meine Gesprächspartner wollten sich darum bemühen.
If you read the financial media in the last days you must come to the conclusion: Damn, the sky is falling. A hysterical media is producing an avalanche of bad news: A debt crisis in Europe, Japan and USA. Deficits are totally out of control. Hyperinflation is imminent. 2.5 trillion US$ just vanished (Translation: The financial ruling class lost nominal wealth. Which is truly bad.) So the stories go. But here’s the good news. I will walk through one of this articles so you must not and afterwards we can hopefully put our worries to rest. The article was written by some Patrick Bernau — a neo-liberal minion — in the FAZ. It is titled “Börsenchaos: Die Welt vor der Rezession” (German) [Stock Market Chaos: The world on the brink of recession] So what worries our author?
No comment.
Maybe you have not noticed it yet. But we Europeans live under a European Tyranny. Unfortunately the messenger doesn’t inform us who exactly is the Tyrant who wants us to live under oppression and in misery. (Digression: Me thinks it is the ECB.) But this particular messenger — The Tea Party Folks — most probable haven’t heard that there’s such a thing as the ECB and have a hard time to locate Europe on a map. But there’s one thing they learned about Europe while traveling the place via Fox News. A bunch of Socialists, Marxists, Communists and other freedom hating monsters are living there. Via Bloomberg Businessweek “Summer Camps Offer Adventures, Training, Politics”:
Tampa Liberty School, hosted by Tea Party affiliate group The 912 Project, teaches 8-to-12-year-olds “the principles of liberty, free markets, and limited government.” Jeff Lukens, 53, whose day job is at an auto auction firm, will run this year’s session. The first lesson will teach campers the difference between European tyranny and freedom in America: After walking into a room that’s “kind of dark and gray and austere … [and being made] to sit down, be quiet, and do what they’re told … we tell them, there’s this other place you can go to called the New World,” says Lukens. Once they’ve crossed an obstacle course representing the Atlantic, the campers arrive in America. “It’s colorful, it’s bright, it’s cheery—they get over there and we pop confetti in the air and it’s a party,” says Lukens. The kids later clean up the mess, so they know that “with freedom comes responsibility.” Other lessons teach campers about the gold standard and that “our rights come from God, not from government,” he says.
So in case a future generation reads this blog post in 30 years you can stop wondering why US Congress has abolished Social Security, Medicare and Medicaid. And it is also no mystery anymore why you must carry Gold coins around. Finally you can also stop whining about people dying in the gutter because of no health care. It is a God given right to dye as a free man.
Delighted German chancellor Angela Merkel said: “Hitler was an arse. All those people slaughtered and cities laid waste when all he had to do was get everyone together in Rome and suggest a series of treaties that would eventually deliver a Thousand Year Reich but without all those ridiculous SS trousers and the pointless arm waving.”
Nice.
Which makes me proud to be an Austrian (by passport and not persuasion). Living in the US looks like living in a hellhole. Check it out!
(Every autumn, according to Plutarch, the Spartan ephors would pro forma declare war on the Helot population so that any Spartan citizen could kill a helot without fear of blood guilt. The kryptes were sent out into the countryside with only a knife to survive on their skills and cunning with the instructions to kill any helot they encountered at night and to take any food they needed.)
I’m impressed. Today the Greek Parliament decided to turn its whole populace into modern-day Helots. So we core European Nations — the Surplus Kings — can turn into modern-day Spartans and show up every autumn, during the crypteia, to kill Greek indentured laborers without fear of repercussion. Of course only financially and only on behalf of our master — our European zombie-banks.
— Terrence McDonough
A notably rare exception! An economist with a credible plan how to rescue the Irish economy and it fits on a beermat. Hmmm … let’s see whether we can come up with some ingenious plan for Greece? How about: Greece should default on its debt, leave the euro, build a single public bank, provide a jobs guarantee for all workers and nationalise all its zombie banks.
Here’s my bet: Before the end of 2012 Greece will default on its sovereign debt and bring its own FIAT currency in existence. That doesn’t necessarily mean for Greece to exit the Eurozone. Montenegro did well having two currencies as legal tender — the Dinar and the German Mark.
Some reasons: Most obvious the insane austerity measures imposed by The Troika will cripple the economy. An ongoing recession will trigger the automatic stabilizers. Tax revenue will go down and welfare expenditures will go up. The debt mountain will grow further. Privatization won’t help either. A distressed public sector selling off its assets by mandate without the possibility to walk away from bad deals isn’t a good idea. Potential buyers will exert their negotiation power and only buy for deflated fire sale prices. Then they will set in motion measurements to maximize profit through efficiency gains. Which means in plain English mass layoffs. These will again trigger the automatic stabilizers. Finally the penalty interest rate on the supposed “rescue” loans is way too high and will reduce nominal demand on an extra-ordinary scale. The substantial outflow of €s to foreign creditors is the final nail in the coffin of Greece.
Any takers?
Money is a commodity, invented to help people by facilitating transactions. It is not wealth in itself. Wealth is natural resources, water, food, land, education, skill, spirit, ingenuity, art. In those terms, the people of Greece are no poorer than they were two years ago. Neither are the people of Spain or Ireland or the UK. And yet, we are all being put through various levels of suffering, in order for numbers (representing money which never existed) to be transferred from one column of a spreadsheet to another.
Exactly. A lawyer turned actor gets it. Maybe part of the solution is to let actors run the show at the ECB in Frankfurt instead of economists. Modern money is a digital token — a unit of account. This crisis can be resolved with the push of some buttons on a keyboard to mark up/down some numbers in an electronic balance sheet in Frankfurt. Alas instead we’ve to watch this ridiculous international circus of clowns (IMF, ECB, EU) pretending we’re still digging up our units of account from mother earth.
Nassim Nicholas Taleb was asked by BBC’s Jeremy Paxman whether the people taking to the streets in Athens is a Black Swan Event. He replied: “No. The real Black Swan Event is that people are not rioting against the banks in London and New York.” (BBC) [Can’t provide a link for the world because it is behind the BBC IP Chinese Wall. If you want to know how to conquer IP Chinese Walls visit Witopia.net]
The next Republican President has a plan what to do about the woes of the American economy.
Cambridge is celebrating the 75th anniversary of the publication of John Maynard Keynes’s “General Theory of Employment, Interest and Money” with a conference without the annoyance of contemporary Keynesians attending the conference by not inviting actual Keynesians in the first place. Nice!
Which is presumably a good idea. Given the papers “Unemployment in an Estimated New Keynesian Model” and “On Identification of Bayesian DSGE Models” they would only spoil the party.
Excellent choice by France24! They present the archetype of the German economist. Listen to Mister Markus C. Kerber. His message: back to the roots. We’re all moral philosophers again. Economics as a morality play. The market will reward the virtuous. The market will punish the sinners. Amen.
Update: John Maynard Keynes just called me from wherever he is right now to relay this message to Mister Markus C. Kerber:
»It is an extraordinary fact that the fundamental economic problems of a Europe starving and disintegrating before their eyes, was the one question in which it was impossible to arouse the interest of Germany. Reparation was their main excursion into the economic field, and they settled it as a problem of theology, of polities, of electoral chicane, from every point of view except that of the economic future of the States whose destiny they were handling.«
