Saturday, February 6, 2016

Stephen F. Cohen — The Obama Administration Has Just Recklessly Escalated Its Military Confrontation With Russia

The Pentagon’s announcement that it will quadruple US-NATO military forces in countries on or near Russia’s borders pushes the new Cold War toward actual war, possibly even a nuclear one.
The Nation
The Obama Administration Has Just Recklessly Escalated Its Military Confrontation With Russia
Stephen F. Cohen | Professor Emeritus of Russian Studies and Politics at New York University and Princeton University

See also

Russia really has only one option — massive thermonuclear retaliation against all NATO countries and Japan that would annihilate them (us) in the event of attack as a strategy of deterrence.

South Front
Russia rules out nuclear arms talks with US

Ollie Richardson — US Vice-President Biden’s Son Continues to Buy Gas Assets in Ukraine

Entrepreneur Hunter Biden has acquired equity securities of a company in the country which his father, Vice-President of USA Joe Biden, called the most corrupt in the world.
Joe, tell us it isn't so.

This is what snared Harvard economics professor Andrei Shleifer in a corruption case that cost Harvard millions to settle.
Neither Harvard nor Shleifer have admitted guilt in the matter. But a federal court ruled in 2004 that Harvard had breached its contract with the U.S., and that Shleifer and an associate were liable for conspiracy to defraud the government.

Last August, Harvard paid $26.5 million to settle the lawsuit, in addition to $2 million that Shleifer paid himself.

Sputnik International — Putting Russia on the Map: Stratfor CEO's Analysis

In an attempt to draw up a strategic portrait of Russia and to understand President Putin’s "long-term intentions in Europe,” former US chief intelligence officer and founder and CEO of the private intelligence corporation Stratfor, George Friedman, has created ten maps designed to illustrate “Russia’s difficult position since the Soviet Union collapsed.”
However, his research has produced some completely unexpected results.
“Many people think of maps in terms of their basic purpose: showing a country’s geography and topography. But maps can speak to all dimensions — political, military, and economic,” Friedman writes in his article for the New York-based magazine Business Insider.
“In fact, they are the first place to start thinking about a country’s strategy, which can reveal factors that are otherwise not obvious.”….

Russia, he says, is “more united than divided and derives power from the strength that comes from overcoming difficulty.”
With regards to Russia, he says it “isn’t prosperity that binds the country together, but a shared idealized vision of and loyalty toward Mother Russia. And in this sense, there is a deep chasm between both Europe and the United States (which use prosperity as a justification for loyalty) and Russia (for whom loyalty derives from the power of the state and the inherent definition of being Russian).”
“This support for the Russian nation remains powerful, despite the existence of diverse ethnic groups throughout the country,” he finally concludes.
Expecting economic pressure on Russia to result in political collapse as it would in the West is questionable. It seems to be based on wishful thinking and projection.

Rudy Panko — Iran Dumps Petrodollar, Wants Euros for All Oil Sales

Analysts say that the move is not just politically motivated: Now that sanctions have been lifted, Europe has become one of Iran's top trading partners. So why use dollars?
But the decision seems to be yet another act of defiance against dollar dominance. This week Russia became China's biggest oil partner, thanks in part to Moscow accepting payment in yuan. And last month, Iran and India announced that they intend to settle all outstanding crude oil payments in rupees, as part of a joint strategy to dump the dollar and trade instead in national currencies.…
Exorcising the ghost of Bretton Woods.

Russia Insider
Iran Dumps Petrodollar, Wants Euros for All Oil Sales
Rudy Panko

Yves Smith — Paul Craig Roberts on Michael Hudson’s Killing the Host

PCR's post at his website was also shared on Counterpunch, but now Yves has given it further exposure.

PCR: "Michael Hudson is the best economist in the world. Indeed, I could almost say that he is the only economist in the world. Almost all of the rest are neoliberals, who are not economists but shills for financial interests."

Naked Capitalism
Paul Craig Roberts on Michael Hudson’s Killing the Host
Yves Smith

Elijah J.Magnier — Russia Is Preparing the Syrian Army to Repel Any Turkish Incursion

Rebutting US Secretary of State John Kerry. This is more about documenting US support for Al Qaeda linked terrorists than the title of the post would indicate.

Fort Russ
Russia Is Preparing the Syrian Army to Repel Any Turkish Incursion
Translated by Sufyan Jan for Fort Russ
Elijah J.Magnier

The US position dissected:

Syria: NATO’s Last Desperate Options in Lost Proxy War
Tony Catalucci

See also
But the US is putting a lot of pressure on these two states, willing to keep in danger, while applying pressure on Russia and Syria through their actions. However, this turn of events may lead to a major war, if Russian forces come under fire, Russia will have enough determination to launch retaliations strikes, starting the collapse of the regimes in both in Turkey and Saudi Arabia.
Reshaping of the Middle East Has Begun
Petr Livov

Raúl Ilargi Meijer — Debt Rattle February 6, 2016

More global pessimism

The Automatic Earth
Debt Rattle February 6, 2016
Raúl Ilargi Meijer

Steve Keen — Our Dysfunctional Monetary System

Steve Keen sums it all up on one sentence:
The great tragedy of the global eco­nomic malaise is that it is caused by a short­age of some­thing that is essen­tially cost­less to pro­duce: money.
It's beyond inane, especially post Keynes and post Lerner. Not that this was unknown or overlooked before. But Keynes and Lerner elaborated economic policy based on a theory that disproves the conventional approach.

Steve Keen's Debtwatch
Our Dysfunctional Monetary System
Steve Keen | Professor and Head Of School Of Economics, History & Politics, Kingston University, London
From Routledge:
A growing inequality in income and wealth marks modern capitalism, and it negatively affects nearly every aspect of our lives, especially those of the working class. It is and will continue to be the central issue of politics in almost every nation on earth. In this book, the author explains inequality in clear, passionate, and intelligent prose: what it is, why it matters, how it affects us, what its underlying causes are, and what we might do about it. This book was written to encourage informed radical action by working people, the unemployed, and the poor, uniquely blending the author’s own experiences with his ability to make complex issues comprehensible to a mass audience. This book will be excellent for courses in a variety of disciplines, and it will be useful to activists and the general reading public.

Radical Political Economy
New book by Michael D. Yates: The Great Inequality
David M. Fields

Geoffrey Gardiner — Guest Post: POSITIVE MONEY IN ACTION

How to make Positive Money work and the implications of doing this.

New Economic Perspectives
Geoffrey Gardiner, formerly director of the Financial Services Division of Barclays Bank

Stockman: 'The end is near!"

LOL and look at the twitter handle of these barbarian nut-job idiots promoting it. This and the Citi "Death Spiral!" thing from yesterday = #YUGE amounts of bearishness out there.

Gu Liping — No single country can write world trade rules: China

China said on Friday that world trade rules in the 21st century should not be written by a single country, in response to U.S. President Obama's remarks on the Trans-Pacific Partnership (TPP).
No single country can write world trade rules: China
Gu Liping

Friday, February 5, 2016

Ian Welsh— Problems with Economics: The Cult of Utility

Ian Welsh critiques "utility," "revealed preferences," and (economic) "rationality."

Conclusion: "It's bullshit." 

What's important is welfare and none of these concepts relate to it in a meaningful way. 

Homo economicus is not concerned with welfare in a meaningful sense. Homo socialis is.

Problems with Economics: The Cult of Utility
Ian Welsh

Cameron K. Murray — How 10,000 Years of War Made Humans the Greatest Cooperators on Earth

Cameron Murray reviews Peter Turchin's Ultrasociety. How we got here.

How 10,000 Years of War Made Humans the Greatest Cooperators on Earth
Cameron K. Murray

Sputnik International — Orthodox, Catholic Leaders Meeting Vital to Protect Christians

Pope Francis and Russian Patriarch Kirill may transform the focus of the ecumenical movement to concentrate on protecting Christians persecuted around the world and to promote social justice, eminent US Catholic and Orthodox scholars told Sputnik.…
Sputnik International
Orthodox, Catholic Leaders Meeting Vital to Protect Christians

Brad DeLong — Antonio Fatas: A 2016 Recession Would Be Different

If a recession ends up happening, helicopter money will likely become a policy option.
WCEG — The Equitablog
Antonio Fatas: A 2016 Recession Would Be Different
Brad DeLong

The Saker — Week Seventeen of the Russian Intervention in Syria: does Erdogan want war with Russia?

Things are getting dicey. Erdogan is a loose cannon on deck, and the Saker sounds rattled over it.

The Vineyard of the Saker
Week Seventeen of the Russian Intervention in Syria: does Erdogan want war with Russia?
The Saker

Radio Free Europe Radio LIberty — Chechen Republic Head Sides With Embattled Ingush Mufti

Radio Free Europe Radio Liberty sides with fundamentalist Salafis against moderate Sufis in the Caucasus, mirroring the US position in MENA with its support for fundamentalist Saudi Arabia, Qatar, and the United Arab Emirates and their proxies versus secular Islamic states.

Radio Free Europe Radio LIberty
Chechen Republic Head Sides With Embattled Ingush Mufti

More propaganda
The Daily Beast
Michael Weiss

The reality.

What if Putin is Telling the Truth?
F. William Engdahl

Nikolay Shevchenko — How rival economic blocs replaced the Cold War's military blocs

This is a good article but it limits its scope to Russia and the EU. The problem is that the US is fixed on taking down a resurgent Russia and has mounted a strong economic, foreign policy and military stance if needed to do so. The US is also mounting a propaganda campaign domestically to prepare American for war with Russia. 

This situation is growing more dangerous daily and the Russians are well aware of US intentions. So is China and the Chinese leadership realizes that if Russia falls, they are next on the list for regime change and neoliberal takeover.

Complicating the matter are similar US designs on China in order to prevent an axis forming that would pit Eurasianists with Atlanticists. A Chinese, Russian and Iranian alliance is Washington's worst nightmare. This is also taking a geopolitical, geostrategic and global economic turn of pitting East and South represented by BRICS and the emerging world in general against the North and West (NATO and Japan).

If history is any guide, the present course is  a collision course and the world is again heading toward war. War has either a territorial or economic basis. Territorial disputes remain unsettled since WWII, and recent developments suggest that economic blocs are again confronting each other in a game that Washington perceives as zero-sum, based on unipolarity and hegemony, even though Russia and China have been emphasizing win-win based on multipolarity and a balance of power.

Add to this a Thucydides Trap, and the future is concerning. 

Most significant, however, is that this is now unfolding in Europe, which has been the scene of so much war for centuries, even millennia.

Russia Direct
How rival economic blocs replaced the Cold War's military blocs
Nikolay Shevchenko

See also

Demonising Russia won’t give us security
Letter to the Guardian by Anna Matveeva, King’s College London, and Richard SakwaKent University

The Daily Sheeple — Wake the Flock Up
WW3 Ahead? Pentagon To Quadruple Military Budget For European Theater
Joshua Krause

The Vineyard of the Saker
Coming to a head in Syria
Ghassan Kadi

Marko Marjanović — Uncle Sam in Arabia: 'Modernity for Me, but Not for Thee' – Why West Deposes Arab Secularists but Backs Arab Kings

Another paradox of liberalism.
A quick glance at a map of US military bases in the Middle East will immediately tell you that Washington's friends in the region are crowned heads. The Emirs of Kuwait, Bahrain, Qatar and UAE. The Saudi king in Riyad and the Hashemite king of Jordan. 
Meanwhile its historic chosen enemies in the Arab world have been secularist Arab nationalist regimes. Nasser in Egypt, Hussein in Iraq, Gaddafi in Libya, Assads in Syria…
Retrograde Arab monarchies reinforce the Western Orientalist idea of hierarchy of civilizations – Arab modernizers challenge it
The current geopolitical dynamic can be viewed as colonies challenging their former colonizers. While this may not true be of Russia, the goal of the US to turn Russia into a vassal state. Most Atlanticists don't view Russia as part of Western civilization.

Russia Insider
Uncle Sam in Arabia: 'Modernity for Me, but Not for Thee' – Why West Deposes Arab Secularists but Backs Arab Kings
Marko Marjanović

Richard Greene — BREAKING: Pope to Meet Head of Russian Church - It's Never Happened in 1000 Yr History

The long-feuding churches are meeting in atheist Cuba, with the blessing of communist hero Fidel Castro. How times change.
Why is this a big deal? Because Russia is under attack by Western elites, spearheaded out of Washington. This is a thumb in their eye. It will be amusing to see how they spin it.

The there will be the jokes: "Pope Francis, Patriarch Kirill, and Fidel Castro walk into a bar ….

Russia Insider
BREAKING: Pope to Meet Head of Russian Church - It's Never Happened in 1000 Yr History
Richard Greene

C.P. Chandrasekhar and Jayati Ghosh — Capital Bleeds from Emerging Asia

Everyone knows that 2015 was a terrible year for emerging markets – but exactly how bad it was has become clear only recently. Not only was it an annus horribilis in terms of net exports of goods and services, which declined sharply and even turned negative for some previously buoyant exporters, but it was also a time when capital flows reversed course. The downturns in both indicators have been much more widespread and substantial than they were initially expected to be, and even greater than mid-year assessments suggested.…
Naked Capitalism
Capital Bleeds from Emerging Asia
C.P. Chandrasekhar, Professor of Economics, Jawaharlal Nehru University, New Delhi; and Jayati Ghosh, Professor of Economics and Chairperson at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi

Thomas Klitgaard and James Narron — Crisis Chronicles: The Long Depression and the Panic of 1873

It always seemed to come down to railroads in the 1800s. Railroads fueled much of the economic growth in the United States at that time, but they required that a great deal of upfront capital be devoted to risky projects. The panics of 1837 and 1857 can both be pinned on railroad investments that went awry, creating enough doubt about the banking system to cause pervasive bank runs. The fatal spark for the Panic of 1873 was also tied to railroad investments—a major bank financing a railroad venture announced that it would suspend withdrawals. As other banks started failing, consumers and businesses pulled back and America entered what is recorded as the country’s longest depression.…
FRBNY — Liberty Street Blog
Crisis Chronicles: The Long Depression and the Panic of 1873
Thomas Klitgaard and James Narron

Timothy Taylor — Keynes on "Ruthless Truth-Telling"--and the IMF Connection

Setting the record straight on the context.

Conversable Economist
Keynes on "Ruthless Truth-Telling"--and the IMF ConnectionTimothy Taylor | Managing editor of the Journal of Economic Perspectives, based at Macalester College in St. Paul, Minnesota
ht Mark Thoma at Economist's View

Constantin Gurdgiev — Three Facts from the U.S. Labor Markets & Reality of the U.S. Economy

Here’s the real problem, folks: U.S. economy is struggling to sustain growth absent real investment and absent new technological improvements. It is that simple. And the jobs markets are starting to show the strains of this. Productivity growth being weak, while employment rising and remaining high amidst rising labour costs means only one thing: the U.S. is currently running above its potential rates of growth. It is, in other words, overheating. And that at roughly 2% annual growth rates against pre-crisis averages above 3%. One of two things will have to happen:
  • One: employment moderates and labour costs growth abates; or
  • Two: business investment has to rise (note: explicitly not public investment, because raising public investment in these labour markets conditions will simply exacerbate the twin problem of tighter labour markets and low productivity growth).
Good luck taking an investment strategy on one. Which leaves us with taking a strategy on two… or going defensive on an expectation that stagnation will be setting in...
True Economics
Three Facts from the U.S. Labor Markets & Reality of the U.S. Economy
Constantin Gurdgiev

Brad DeLong — Econ 210a Memo Question: Slavery and Serfdom

Another paradox of liberalism.
In his Wealth of Nations, Adam Smith confidently asserted that slavery was uneconomic–that in commercial society, manumission was the road to higher productivity because the carrot of working for yourself is much more efficient than the stick of being whipped by others.… 
Can we rescue Smith's optimal, Panglossian view of the historical destiny of unfree labor? Why, in history, didn't Smith's argument work?
Evolution programs alphas to dominate?

Grasping Reality
Econ 210a Memo Question: Slavery and Serfdom
Brad DeLong | Professor of Economics, UCAL Berkeley

David F. Ruccio — Capitalism’s growth problem

Anyone who understands MMT or has been following MMT blogs including this one knows what the "top" economists are apparently at a loss for.

The slow down of growth is a demand problem. Investment is demand led. Lagging demand can be fixed either by increasing labor share, or (inclusive disjunction) increasing government contribution.

Increasing exports cannot do this in an open global economy in which lagging demand is a global issue, since one country's net exports are other countries net imports. Unfortunately, this has not sunk into the thinking of policymakers that are trying to export their way out their countries' doldrums, using currency devaluation, for example.

So-called secular stagnation is a fancy way of saying that economies are settling into equilibrium at under optimal potential and full employment (without defining down "full"). Keynes understood this and showed how to escape this trap eighty years ago. The General Theory was published in 1936. Abba Lerner elaborated on how to manage government contribution through functional finance. In "Political Aspects of Full Employment," Michal Kalecki explained how capitalism is about disciplining labor and controlling labor share to the advantage of capital share.

There is no mystery here. What is wrong with these people?

The issue to threefold.

1. Capital is increasingly dominant over labor and the capital share to labor share reflects this.

2. The paradox of thrift is making itself felt through the popularity of fiscal austerity in government among elites.

3. The rise of mercantilism and beggar-thy-neighbor policy, where trade surpluses are preferred by elites even though they are a cost in real terms to net exporters' economies.

Occasional Links & Commentary
Capitalism’s growth problem
David F. Ruccio | Professor of Economics, University of Notre Dame

Gerald Friedman Responds to Kenneth Thorpe on Single-Payer

A distinguished professor and Chair of the Department of Health Policy & Management, in the Rollins School of Public Health of Emory University, Kenneth Thorpe has been one of the leading figures in the analysis of health care finance in the United States. From 1993-95, he was Deputy Assistant Secretary for Health Policy in the U.S. Department of Health and Human Services in charge of coordinating financial estimates and program impacts of President Clinton’s health care reform proposal. Since leaving the Clinton White House, he has written widely about the economic advantages of a single payer system to finance health care. (See footnote 1.)

Thorpe’s expertise and reputation have added weight and authority to his attack on Senator Sanders’ program for Medicare-for-All. (See footnote 2.) This makes it all the more important that his analysis receive the type of scrutiny due a serious policy proposal. Unfortunately, Kenneth Thorpe does not provide enough documentation to make an explicit comparison between his estimates and those provided in detail by the Sanders campaign. He lists his projected Federal spending per year, he fails to explain how he calculated these numbers. While this failure makes it impossible to consider his claims on a point by point basis, it is possible to extract enough from his statement to conclude that his analysis is so deeply flawed that it implies some clearly unrealistic assumptions.
Dollars & Sense
Gerald Friedman | Professor of Economics, University of Massachusetts at Amherst

Don Quijones — our Things that Keep Spain’s Senior Bankers Awake at Night — Prelude to a nightmare

The specter of Creditanstalt looming over Europe? Just how much is the banking system a house of cards. If a big bank goes down, we may find out if Creditanstalt and Lehman Bros. are any indications.

Don Quijones

Diane Coyle — Coase in theory and Coase in practice

Diane Coyle reviews Forever Contemporary - The Economics of Ronald Coase, edited by Cento Veljanovksi.
It starts with the Coase theorem: that when property rights are clearly assigned and there are no transactions costs (such as those involved in acquiring information, negotiating, monitoring compliance etc), then there are no externalities leading to a divergence between private and social costs: the parties involved will negotiate their way to the efficient outcome. ‘Externalities’ are symmetric, he argued: if you claim a right to clean air, you are costing me the opportunity to pollute. Who compensates whom will depend how the property rights are assigned. If you indeed have your clean air right, I will have to bargain with you to pay you for the pollution; if I have the right to produce emissions, you will have to pay me to desist.
Coase made it clear he took the existence of transaction costs very seriously, and argued that every situation had to be carefully assessed to determine the most welfare-enhancing course of action.…
Download free PDF.

The useful bibliography of Coase’s work shows how seriously he took his own conclusion that you have to look in detail at each industry, its history and specificities before pontificating; as is well known, he described anything else as ‘blackboard economics’...

Case method instead of formal theory.

The Enlightened Economist
Coase in theory and Coase in practice
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation