But the trickle could soon turn into a flood. The speculators of the world have been told by the new head of the BOJ, Haruhiko Kuroda, that they can now speculate with borrowed yen which has not only no cost but no currency risk. The borrowings, then, could be infinite. The foreigners increased their holdings of Japanese Government Bonds from four percent to nine percent in the two years before the break. No doubt much of that was sold on the break.
And the BOJ may well lose control of the pace of the descent in both the yen and JGB market. The Japanese domestics with a lag might start to sell big time. The faster and farther the yen falls the more likely that will happen. The situation is now very unstable. A deeper fall in the yen is going to force all of emerging Asia into a devaluation and that is gong to cause big problems down the road in places like Europe, particularly Germany.Pinetree Capital — Macrobits
West cited the need for a “democratic counterweight” against what he described as three dominant tendencies on the globe: “financializing, privatizing, and, militarizing.” He warned that as long as we’re stuck with an “empty” and “shallow” public sphere that has been “colonized” by the “oligarchs at the top”, we’re most certainly headed towards fascism.AlterNet
In a typical week, about 10 applicants will walk into a recruiting center in Bay Ridge, Brooklyn, hoping to enlist in the United States Army. Sergeant First Class Israel Herrera doesn't like to turn them away, but he often finds that six out of 10 simply don't measure up to military standards.
Just like private-sector employers, the military is seeking higher-skilled recruits these days....
Thanks to high youth unemployment and the drawdown from both Iraq and Afghanistan, Uncle Sam can afford to be a bit pickier....
It wasn't always this way. Just six years ago, during the Iraq war surge, the military had lower standards. Only about 86% of new recruits had high-school diplomas, and just 67% of recruits scored in the top 50th percentile on the Armed Forces Qualification Test. Waivers excusing health issues and prior misconduct -- even felonies -- were not uncommon.
Those waivers were needed to hit enrollment targets. The Army fell short of its recruiting goal by about 7,000 people in 2005, but like the other military branches, it has had a surplus of recruits every year since then....
There are roughly two applicants for every slot the military is trying to fill.CNN Money
Paul Krugman continues to have a hard time connecting the dots—for example, between inequality and macroeconomics. For him, there’s the macroeconomic dot and then there’s the inequality dot, and the two are separate: the former is “economics,” while the latter is “politics.” That’s what you get in the IS-LM world of which Krugman is so enamored.
Joseph Stiglitz, on the contrary, is in fact busy connecting the dots. He understands quite well that the existing macroeconomic models are fundamentally flawed, at least in part because they exclude the problems created by growing inequality.Real-World Economics Review Blog
I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
▪ Buffer stocks and price stability – Part 1
▪ Buffer stocks and price stability – Part 2
Chapter 13 – Buffer Stocks and Price StabilityBill Mitchell – billy blog
Peter Thiel’s Founders Fund is leading a group of investors into funding the merchant services firm BitPay.
BitPay, which offers corporate Bitcoin services, said it had not been looking for funding but the opportunity was too good to turn down.
BitPay founder and CEO Tony Gallippi said: “We raised seed funding in January and February and still had some left so we weren’t looking for money. They approached us, which was a nice surprise because we’d heard that they’d got as far as due diligence with another company in this space. We were really impressed with their experience and energy.”
Gallippi said BitPay would spend the money on hiring more staff and continuing to build the platform. He said any process involving lawyers takes time but it “was not as painful as we feared.”
Asked about yesterday’s action against Dwolla Gallippi said much of the coverage was wrong and once you looked at the actual warrant it was clear it was a very specific problem of non-compliance – “the shell company was not licensed to do what it was doing.”CoinDesk
Here it is in one paragraph:
“It is hardly necessary to say that Post Keynesians reject the ‘old classical’, ‘Bastard Keynesian’ and ‘New Keynesian’ argument that unemployment is due to the existence of a real wage above the equilibrium or ‘market clearing’ level owing to the trade union or government interference in the operation of the free market for labour. They also dismiss the ‘New Classical’ notion that unemployment is the (voluntary) result of intertemporal income-leisure choices by individual workers. As was demonstrated above, neither claim is supported by micro foundations; and neither has any macro foundation whatsoever. A Post Keynesian theory of unemployment would instead start from the proposition that in aggregate the level of employment depends on the level of output, which is itself determined by aggregate demand and therefore heavily influenced by macroeconomic policy.
Unemployment is simply the difference between the level of employment and the aggregate supply of labour, which may – as explained earlier – safely be regarded as invariant in the short run with respect to the real wage, but variable with respect to the number of job opportunities.” (King 2002: 84).Social Democracy For The 21St Century: A Post Keynesian Perspective
In short, it is, above all, aggregate demand that drives output and the level of employment.
Note that this suggests that the U.S. economy, which is ahead in the desktop manufacturing technology (e.g. 3-D printers, used recently to create ... yes, a gun!; 3-D scanners, laser cutters, computer numerical control routers, etc.) is actually still at the forefront of the industrial revolution, in spite of the talk about deindustrialization.Naked Keyesianism
According to the World Bank and numerous other analysts, wealth in developing countries is today largely locked up among the elite....
Of potentially considerable concern in the bank’s projections is where this new wealth will end up being concentrated.
“It’s one thing for the pie to be increasing, but how equitably is it being distributed?” Kar asks.
“Equity is a huge problem, as the rich seem to be getting richer and the poor getting poorer. Further, it seems the nouveau riche in the developing countries are a bit more callous than the established rich in developed countries.”Inter Press Service
This is a very informative (and short) piece by economists at the NY Fed on the effect of the 2011 US payroll tax cut and its recent expiration.Fictional Reserve Barking
A short note in reply to @Frances_Coppola. She disagreed with a paper from Jan Kregal at Levy.
Kregal argues that there are two types of deposit, deposits of currency and coin, and deposits created when loans are made. If a bank makes bad loan
“it is the failure of the holder of the second type of deposit [loan-created deposits] to redeem its liability that is the major cause of bank failure”
so the first type of depositor (of currency and coin) should not bear the brunt of these bad decisions.
Coppola disagrees with this on a theoretical point via twitter.Decisions, Decisions, Decisions
In the preface to the forthcoming Festschrift to Alain Parguez, Mosler argues that in the mid 1990s he thought, “the theory of the monetary circuit was correct to the point of being entirely beyond dispute”. However, he also argues that the theory “could be further enhanced by starting from the beginning”. This beginning for Mosler was of course why the workers accepted the units of a currency as payment for their labor services. His answer (which is quite well known among heterodox economists by now) was that imposed debts denominated in that unit of account, give it's units value; in other words taxes.
This is an important part of the story, but we would argue it is in fact not the beginning. The true beginning to the circuit is the question of where people and organizations gain the ability to tax.INET
Pope Francis has denounced the global financial system, blasting the "cult of money" that he says is tyrannizing the poor and turning humans into expendable consumer goods.The Huffington Post
The Le Parisien article (September 28, 2012) – L’incroyable histoire de la naissance des 3% de déficit (The incredible story of the birth of the 3% deficit) – spilled the beans.
An English language report – The secret of 3% finally revealed – says that a “former senior Budget Ministry official” in the Mitterrand government was asked to come up with the fiscal rules that would become the Stability and Growth Pact (SGP).
He was quoted as being the “the inventor of the concept, endlessly repeated by all governments whether of the right or the left, that the public deficit should not exceed 3% of the national wealth”.
Note that this reporting, itself, is misleading because wealth is a stock and GDP is a flowand the SGP budget deficit rule is specified in terms of 3 per cent of GDP (the size of the flow of national output and income in any given period). But we can overlook that reporting slip.
Anyway, the French official had this to say when asked about the origins of the 3 per cent rule:
We came up with the 3% figure in less than an hour. It was a back of an envelope calculation, without any theoretical reflection. Mitterrand needed an easy rule that he could deploy in his discussions with ministers who kept coming into his office to demand money … We needed something simple. 3%? It was a good number that had stood the test of time, somewhat reminiscent of the Trinity.
Somewhat religious (Trinity) no less.
So what appear to be “credible” rules are just arbitrary numbers – all part of an elaborate smokescreen or charade – to limit the capacity of government.Bill Mitchell – billy blog
My recommendation is that the EU elites hire a bus for a month and go to Spain and Greece and some of the French towns where huge housing estates are located and check out what their policies are breeding.
They would find, although I am sure they wouldn’t admit it, a seething, deprived and angry cohort which is growing and will become a force for lawlessness and societal instability.
Walrasian general equilibrium theory is the greatest obstacle to the development of economics as a science.
That is the bold contention of Nicholas Kaldor in his article “The Irrelevance of Equilibrium Economics” (Economic Journal 82 [1972]: 1237–1252), and it is undoubtedly true.Social Democracy For The 21st Century: A Post Keynesian Perspective
One can summarise Kaldor’s argument as follows:
The Obama administration is forecast to turn a record $51 billion profit this year from student loan borrowers, a sum greater than the earnings of the nation's most profitable companies and roughly equal to the combined net income of the four largest U.S. banks by assets.The Huffington Post
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