Revisiting the Japanese Experiment in Quantitative Easing
For some reason, liberal technocrats seem to think that printing gobs of money when money can't flow into the real economy has some sort of impact for wage earners. In the United States, it's called quantitative easing and we're doing it to the tune of trillions. The signature example for this isn't the U.S., it's Japan, where the printing presses are really going hot.
Is it working?
Well, Paul Krugman wrote this about Japan in January, 2013.
Enter Mr. Abe, who has been pressuring the Bank of Japan into seeking higher inflation — in effect, helping to inflate away part of the government’s debt — and has also just announced a large new program of fiscal stimulus. How have the market gods responded?
The answer is, it’s all good. Market measures of expected inflation, which were negative not long ago — the market was expecting deflation to continue — have now moved well into positive territory. But government borrowing costs have hardly changed at all; given the prospect of moderate inflation, this means that Japan’s fiscal outlook has actually improved sharply. True, the foreign-exchange value of the yen has fallen considerably — but that’s actually very good news, and Japanese exporters are cheering.
In short, Mr. Abe has thumbed his nose at orthodoxy, with excellent results.
How's the experiment going?
In short, not good. This is a headline picked out at random, but they all say the same thing:Â Japan's economy makes surprise fall into recession
There's a lot to say about this policy. Printing money isn't a bad thing, per se. It is what governments need to do. It's probably true that QE is juicing some lending in some areas of the economy. The problem is that the financial system is at this point only very marginally connected to the real economy, so when you print more money, it goes into corporate treasuries and from there into speculation. Japanese exporters, for instance, are just keeping the extra money they are making from a lower yen rather than investing it into factories.
This money piles up, and since corporations can't put it into regular deposits, they stick it into the shadow banking system via money market funds, fancy things called 'repos' (which are basically just uninsured deposits), the central bank and some government and corporate debt. From there, the money is lent to hedge funds, pension funds, or other funds who buy financial assets. The stock and credit markets go up.
At no point does this money touch the real economy or the hands of consumers, it just inflates financial markets.
The main function of a credit system should be to put funds to work in useful endeavors. That's not happening, for a lot of reasons, but on a fundamental level because Japanese corporations are too powerful and stagnant, and no one else can get access to money. That is why Japan is in recession. We face the same problem.
The unemployment insurance and old age annuity sections of the present Social Security Act are unworkable and deny benefits to about two-thirds of our adult population, including professional men and women and all those engaged in agriculture and domestic service, and the self employed while imposing heavy tax burdens upon all. The so-called reserve fund estimated at forty-seven billion dollars for old age insurance is no reserve at all, because the fund will contain nothing but the Government's promise to pay, while the taxes collected in the guise of premiums will be wasted by the Government in reckless and extravagant political schemes.
Ok, so this is your standard 'the trust fund is a Ponzi scheme' style rhetoric. But check out the part I bolded. The Republicans are criticizing the new Social Security program for not going far enough. Originally Social Security did actually exclude whole categories of workers for complicated reasons mostly involving the South, but over the next 50 years or so, Social Security was improved to cover those excluded workers. The Republicans attacked the program from the left. They had, earlier in this 1936 platform, offered a broad-based pension style program for all American citizens over 65, and one of its virtues was it did cover workers excluded from Social Security.Â
The criticism was valid, but of course, disingenuous. Republicans never believed in Social Security, and the 1936 Republican campaign was organized around the theme that the New Deal was simply unconstitutional. Hence, here's FDR mocking the Republicans for their criticism of Social Security from the left. Watch the video and see what an incredible politician and funny guy he was. Damn he was good.
During the American Revolution, Did the British Used 18th Century Malware?
The Third Amendment to the Constitution reads as follows:
No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner, nor in time of war, but in a manner to be prescribed by law.
The reason this amendment was added to the bill of rights is because the British would quarter soldiers in Americans' homes when they ran out of barracks space, and the British would force Americans to pay for these 'guests.'
The amendment hasn't really mattered since then, being the least cited amendment in the Constitution. There has never been a Supreme Court case citing the Third Amendment as the primary basis for a decision.
But this may change. Malware is a form of quartering of military assets on one's computer. As the digital wave envelopes all aspects of our culture, malware will mean that the quartering of military assets in every appliance could become the norm.
So I'm interested in this paper by EPIC scholar Alan Butler.
When Cyberweapons End Up on Private Networks: Third Amendment Implications for Cybersecurity PolicyÂ
A Grand Unified Theory of Terribleness: Moneylaundering by Banks, Terrorism, Genocide, and Tax Cuts
Major multi-national bank BNP Paribas just pleaded guilty to money-laundering a little less than $200 billion over the course of the last ten years. According to New York Superintendent of Financial Services Benjamin Lawsky, "BNPP employees – with the knowledge of multiple senior executives – engaged in a long-standing scheme that illegally funneled money to countries involved in terrorism and genocide."
Oh dear, that sounds awful.
What the? Gee, I wonder if there's a reason, oh, wait, here you go.
Only days before U.S. authorities reached a landmark $8.97 billion settlement with BNP Paribas over the bank’s dealings with countries subject to U.S. sanctions, New York Governor Andrew Cuomo intervened to ensure the state government got a much bigger share of the proceeds, according to three people familiar with the situation...
The state’s general fund was already set to receive $2.24 billion from a state regulator’s piece of the settlement, and the eleventh-hour deal pushed the state’s take up to $3.29 billion. That change was contained in a side agreement signed by Vance on June 29, and a lawyer for Cuomo on June 30.
New York takes in about $60B of tax revenue every year, so this deal is about 5% of that. And whaddayaknow, Cuomo announced roughly that amount of money in tax cuts for businesses and individuals earlier this year.
So basically, the bankers actually bought get out of jail free cards. As Lawsky put it, "In order to deter future offenses, it is important to remember that banks do not commit misconduct – bankers do."
And increasingly, fines for banker criminal activities are paying for state budgets. Surely Andrew Cuomo doesn't want a state addicted to money based on selling the right to commit crimes. Does he?
On July 19, 2014, I published this piece on Salon about "the most important money in politics race this year," that of Zephyr Teachout running against the seemingly invincible yet exceptionally corrupt New York Governor Andrew Cuomo.
On July 23, 2014, the New York Times published this 7000 word expose on Cuomo's interference in his own anti-corruption commission, with Federal prosecutors "investigating the roles of Mr. Cuomo and his aides in the panel’s shutdown and are pursuing its unfinished business."
Teachout's got an uphill climb and may not have enough time to get her message out before the September 8 primary, but an impossible race has been upgraded to a very difficult one.
Bottom line, you should listen to me, especially when I get lucky.
Can Any Government Agency Nominate Anyone to the No-Fly List?
That's what this seems to suggest, on page 38 of the manual (published by the Intercept) on how the No-Fly list is crafted. Does that mean the Commission on Fine Arts or the Peace Corps can just send an email to the FBI with a name and some derogatory info and then that person mysteriously can't fly anymore because they are on a list?
Hedge Fund Billionaire: The Statue of Liberty Was Great PR When the Oceans Kept Out the 'Weak'
Well well.
JULIAN ROBERTSON: I support immigration reform. I-- but I would like for our criteria on immigration to be higher. I would like for us to have the criteria of Harvard, Yale, Princeton, Stanford not some fly by night college that is desperate for money. And in America now, we are opening the floodgates, without getting great people into it.
The ocean, in years gone by, has been a great barrier and has ensured we get great people in. I don't think our immigration laws are correct. I think it's much more difficult. I give some scholarships to Duke University. And one of our people was doing very well in private equity up here. He lost his visa and had to return to New Zealand. It's-- meanwhile--
KELLY EVANS: But isn't the message of America, to some extent is on the Statue of Liberty, "Give us your tired, your poor, your huddled masses yearning to breathe free"? Isn't that a pillar of what has made this country so special and unique in the world?
JULIAN ROBERTSON: As I say, that was right when the Statue of Liberty was made, that, give us your tired, your weak and-- because they really couldn't get here because of the great oceans. And that was the safeguard of our immigration.
Now, people just hop on a plane and they're here. And I think our standards should be high. I would rather have an upstanding-- well-- college graduate-- and a striving college graduate from Kenya, than a refugee from Bangladesh who has had no schooling and has had no interest in school.
Is this what hedge fund billionaires mean when they say they support 'immigration reform'?
In my review of Geithner's book, I mentioned a few unusual aspects of Geithner's upbringing. He grew up abroad among ex-pats, with an ex-military Eisenhower Republican father doing development work in the developing world while shuttling back between government institutions in DC and the Ford Foundation in New York. His Dad, he says, was silent about his work, but Geithner mentions several coups that mildly interfered with his childhood.
My father is quieter, more reserved, more skeptical, more conservative in every way. He’s an understated child of the fifties, a nice complement to my mother’s exuberant spirit of the sixties. He’s also a lifelong Republican, although he came of age in the Eisenhower era, before much of his party veered to the far right. He devoted his professional life to global development, not a typically conservative cause.
...
My mother is from a New England family dating back to the Mayflower, with relatives including the architect Buckminster Fuller, the journalist Margaret Fuller, and the novelist John Marquand. Her father, Charles F. Moore, Jr., was, among other things, a newspaperman, vice president of Ford Motor Company, and an adviser to President Eisenhower.
....
My mother’s older brother, Jonathan, spent his whole career in public service, helping to preserve the Cape Cod National Seashore as a Republican congressional aide, holding influential jobs at the U.S. Departments of State, Defense, and Justice, serving as the foreign policy adviser to Mitt’s father George Romney’s presidential campaign. I remember visiting him during the Watergate summer of 1973, just before President Nixon fired his boss, Attorney General Elliot Richardson, in the Saturday Night Massacre, and he resigned in protest. He was always busy, on the phone, doing consequential things. It made an impression on me.
....
I was born in a Manhattan hospital on August 18, 1961. My mother says I was a wild and energetic baby, chasing her around our apartment before I could even walk. My father soon joined the U.S. Agency for International Development and moved us to southern Rhodesia, which is now Zimbabwe, then to Northern Rhodesia, now Zambia. He took a job back at USAID headquarters when I was four, so we moved again to the Washington suburbs.
...
When I was six, the Ford Foundation asked my father to help run its programs in New Delhi. I still remember that first shock of India, driving in from the airport, overwhelmed by the heat and the smell, the strange and the awful...
It was a quasi-colonial existence, with drivers, maids, gardeners, and night watchmen, but my parents’ friends were Indian artists, activists, and intellectuals, as well as expats who worked at interesting places such as Oxfam, CARE, and the World Bank.
...
We returned to the United States after I finished sixth grade, when the Ford Foundation asked my father to run its developing-country programs from its headquarters in Manhattan.
...
And towards the end of ninth grade, just as I was feeling comfortable in my own country, my parents announced that we were moving to Thailand, where my father was going to run the Ford Foundation’s programs in Southeast Asia. He wanted to be back in the field, not behind a desk in New York.
...
My father rarely talked about his development work, even when he took us on trips to visit orphanages in India and hill tribes in northern Thailand, and I rarely asked about it. India and Pakistan had a brief war while we were living in New Delhi, so we had curfews and early lights-out, but I didn’t really understand what they were fighting about.
...
There was a coup in Thailand while we were there, but I wasn’t aware of the cause; my brother Jonathan remembers me consoling him because the coup forced us to cancel a beach vacation.
...
Some of my most important experiences during college happened off campus. The first was over Christmas break of my freshman year, when I got to photograph refugees in two massive camps along the Thai-Cambodian border for the Associated Press. These camps extended as far as the eye could see, with a horrifying level of deprivation and filth. They were filled with Khmer Rouge in black pajamas, fleeing the Vietnamese invasion of Cambodia. These victimizers turned victims cast a morally confusing shadow on the tragedy, but even after my experiences in India, the suffering left me numb. I took a lot of pictures, but there wasn’t much satisfaction in depicting misery well. I loved the craft of photography, but I started to realize I did not want to spend my life as an observer. I wanted to do things, not just see things, even though I didn’t know what it was I wanted to do.
....
But my next two summers were even more memorable, because I got to study in Beijing very early in China’s opening to the West. Most of the foreign students there were from the Soviet Union or its satellites in Africa and North Korea; Americans lived in a special dorm, isolated from the others.
....
I applied to a bunch of master’s programs in public policy, and eventually chose the School of Advanced International Studies at Johns Hopkins, which, again, happened to be the school my father attended after the Navy.
...
I never planned to follow in my father’s footsteps, and he never put any pressure on any of us to take any particular path. But Sarah and David also went to Dartmouth, and Jonathan also went to SAIS. Sarah also followed our father into a career in global development, and is now a World Bank consultant, while Jon is a military analyst at a Washington think tank.
...
My parents would later head off on a new adventure in Beijing, where my father opened up the Ford Foundation’s first office in China. He funded postgraduate education programs in the United States for a generation of Chinese officials, many of whom I would later meet during my own time in government.
There was also this, which is not about his upbringing, but was one of those quick very intriguing asides that was not explained but dropped into the book as if it was the most natural thing in the world. By way of context, he's talking about the 2007 financial environment, which was before the full extent of the financial collapse had become clear.
“The very substantial improvements in risk management since the last crisis did not capture some risks that inevitably look more obvious in retrospect than they did left of the boom,” I said.
Left of the boom was a phrase I had picked up from analysts studying improvised explosive devices at the RAND Corporation think tank, where I served on the advisory board. The phrase referred to the time before an IED explodes. In October 2007, I thought we had survived a major financial explosion.
RAND is a big deal, it's where Daniel Ellsberg worked before leaking the Pentagon Papers. So Geithner was an advisor to the major strategic planning think tank for the military and intelligence world and was so comfortable there that he uses their jargon because, you know, he just is, whatever, go with it. Here's RAND's statement supporting Geithner's nomination to Treasury Secretary. He was on the board of trustees of RAND, not just an advisory board. But whatever, who's counting?
I wrote a review of Geithner's new book for Vice. I documented many of the claims in the book, and contrasted them against what we know happened. It's somewhat surprising what I found, as are the implications. Anyway, take a gander.
I put this up on my FB page a few days ago, after Andrew Cuomo got the Working Families Party endorsement nod over progressive law professor Zephyr Teachout. It's easier to link to and share Tumblr posts.. So here you go.
Hey liberals, take note. Last night should be a wake up call. Even when we had a an audience, the Working Families Party, which is specifically selected because they are liberals, the hard-right reactionary candidate Andrew Cuomo took 58% of the vote. Against our own Zephyr Teachout, who is a professor focused on money and politics, a policy question quite central to the democratic experiment.
That's not just bad. That's indicative of an utterly lost professional and ideological apparatus, one that has no capacity for internal dialogue or remediation of error. The identity politics of the Democratic Party has been utterly inverted, turned into mechanism to crush unionism and economic justice. Unions themselves have collapsed politically, and not just in terms of density of membership, but also ideologically. It was unions that whipped for Cuomo.
After a resurgence under Bush from 2005-2008, liberals have been losing consistently for six years now. Donna Edwards and Ned Lamont were the last stand. Now there is no real war within the Democratic Party. In blue states like Wisconsin, public unions got crushed, the centrist beat the liberal in the primary and then lost to Scott Walker. Primaries all over, blue states and red, are slaughters for liberals. EMILY'S list, the DCCC, the White House, and every other party institution makes liberals their chew toy. There are no challenges to incumbent centrist Democrats anymore, but there are right-wing challenges to liberals (see Ro Khanna).
There are some bright spots. Elizabeth Warren is a good Senator with a strong sense of consequential policy moves. But she uses her vast political network to help mainstream Democrats, not liberals. And Bill de Blasio and Eric Schneiderman, both aesthetically left-ish I suppose, are essentially failed at policymaking and stumped for Cuomo. The bright spots are not advancing the ball politically, or even worse, they are making things worse.
Meanwhile, forums for discussion are ruined. There's no place where genuine debates happen, where people debate and fight over what to do, where intellectual centers bubble over with energetic policy questions. Nothing like CPAC, for instance. There is grassroots energy, in some places, but that is totally disconnected from the political establishment.
I don't know what to do about this. I think, after years of watching this, that liberals have just been convinced that liberalism doesn't work. They think that liberals can't govern. Even though they dislike Cuomo, they don't actually think Zephyr could be Governor. They want mythic conservative figures, like Cuomo, and Obama, and so forth, and they don't really believe that government can make their lives better in any fundamental way. But Zephyr could be Governor! It's just a job. She could actually make college free in New York, and start a state debt card competitive with the banks, and bring small farms back to NY, and make the state carbon neutral. That's all possible! It's not that hard!
Anyway, I hope people take away from what happened last night a real sense that we need some soul-searching. We need to start asking ourselves why we dare not work for a better world, why when faced with a choice of the good versus the evil, the courageous versus the cowardly, the hope versus the fear, we pick fear. Because that's what happened. There was no structural blah blah blah this time. It was a group of liberals picking fear, fighting for fear, and making fear the guiding point of politics, one more time.
That's the government we'll get, again. That's what the Democrats chose to stand for, and it's why voters don't trust them or don't show up. They see the real choices. Why don't we?
A brief follow-up to this: apparently Michael Barr has withdrawn from consideration for a seat on the Federal Reserve Board of Governors. All it took was making the White House’s interest - and progressive opposition - public, which means it was pretty precarious to begin with.
The financial...
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