Does anyone care about the economy?

[dkfan9]

all the hubbub about net financial assets does get to me though. i don't think that's an especially productive line of thought, and it's talked about all the time by MMTers.

[dkfan9]

From this piece, Wray states two things, implying one follows the other, but in no way is that the case:

Investment creates saving. Budget deficits create saving.

real investment-->real savings, yes. accounting identity.

public financial deficits-->private and rest of world financial savings, yes. again, accounting identity.

but public financial deficits do not necessarily --> private and rest of world real savings. no accounting identity is present, unless you insert the assumption that financial wealth necessarily accords to real wealth. and just thinking back to any stock market crash shows how poor an assumption that is.

[broken iris]

Yeah, so interest goings-on between the EU and Cyprus.

[Biff Pocoroba]

Yeah, so interest goings-on between the EU and Cyprus.

I saw that. Might this be the spark that starts the chain reaction many expect? Greece, Italy, Spain, Portugal; sooner or later somewhere is going to give.
An up to 10% tax on deposits? Wow.

[broken iris]

Yeah, so interest goings-on between the EU and Cyprus.

I saw that. Might this be the spark that starts the chain reaction many expect? Greece, Italy, Spain, Portugal; sooner or later somewhere is going to give.
An up to 10% tax on deposits? Wow.

Banks runs in those countries might become a possibility if Cyprus' government approves this bailout package. I understand that the EU cannot just keep bailing out banks (and thus national economies) without consequences for the citizenry, but this seems like a violation of the basic trust of the banking system which is that that money is the depositor's private property, not a rainy day fund for the government.

[simple schoolboy]

Yeah, so interest goings-on between the EU and Cyprus.

I saw that. Might this be the spark that starts the chain reaction many expect? Greece, Italy, Spain, Portugal; sooner or later somewhere is going to give.
An up to 10% tax on deposits? Wow.

Banks runs in those countries might become a possibility if Cyprus' government approves this bailout package. I understand that the EU cannot just keep bailing out banks (and thus national economies) without consequences for the citizenry, but this seems like a violation of the basic trust of the banking system which is that that money is the depositor's private property, not a rainy day fund for the government.

In some ways its more honest that devaluing the currency.

[dkfan9]

Yeah, so interest goings-on between the EU and Cyprus.

I saw that. Might this be the spark that starts the chain reaction many expect? Greece, Italy, Spain, Portugal; sooner or later somewhere is going to give.
An up to 10% tax on deposits? Wow.

Banks runs in those countries might become a possibility if Cyprus' government approves this bailout package. I understand that the EU cannot just keep bailing out banks (and thus national economies) without consequences for the citizenry, but this seems like a violation of the basic trust of the banking system which is that that money is the depositor's private property, not a rainy day fund for the government.

In some ways its more honest that devaluing the currency.

Also, devaluation without default when you already need to be bailed out is absurd, unless your debts are in your own currency.

I don't know how much a violation of the basic trust of the banking system this is. If the assumption is that without this action, the banks will fail, then it's certainly the lesser of two evils--depositors only lose 6-10% versus 100% (or 0% lose for those who are first in line for the bank run and 100% for the others). And sure, that money in the bank is private property, but all private property is subject to taxation, especially wealth stores (capital gains, inheritance, property). Not that I'm in favor of this. And I definitely worry about the repercussions on other peripheral European banks and their deposits.

Either way, interesting events.

[broken iris]

I don't know how much a violation of the basic trust of the banking system this is. If the assumption is that without this action, the banks will fail, then it's certainly the lesser of two evils--depositors only lose 6-10% versus 100% (or 0% lose for those who are first in line for the bank run and 100% for the others). And sure, that money in the bank is private property, but all private property is subject to taxation, especially wealth stores (capital gains, inheritance, property). Not that I'm in favor of this. And I definitely worry about the repercussions on other peripheral European banks and their deposits.

Either way, interesting events.

I did think something similar until I read that bond in the banks that are going to be bailed out are not subject to the "tax" (which is really a foreign orchestrated seizure). So if you own the bank you are fine, if you use the bank you must pay. I am not so sure that is the lesser of two evils between an EU managed orderly failure for a few banks and taking the deposits of the working class.

[Fuck You Jobu]

Yeah, so interest goings-on between the EU and Cyprus.

I saw that. Might this be the spark that starts the chain reaction many expect? Greece, Italy, Spain, Portugal; sooner or later somewhere is going to give.
An up to 10% tax on deposits? Wow.

Banks runs in those countries might become a possibility if Cyprus' government approves this bailout package. I understand that the EU cannot just keep bailing out banks (and thus national economies) without consequences for the citizenry, but this seems like a violation of the basic trust of the banking system which is that that money is the depositor's private property, not a rainy day fund for the government.

They've shut down the bank until Thursday to prevent a run.

Also looks like they are rejecting the bailout becuase of the "tax".

[simple schoolboy]

Is it safe to assume that the majority of Russian deposits represent ill gotten gains?

[BurtReynolds]

Yeah, so interest goings-on between the EU and Cyprus.

I saw that. Might this be the spark that starts the chain reaction many expect? Greece, Italy, Spain, Portugal; sooner or later somewhere is going to give.
An up to 10% tax on deposits? Wow.

Banks runs in those countries might become a possibility if Cyprus' government approves this bailout package. I understand that the EU cannot just keep bailing out banks (and thus national economies) without consequences for the citizenry, but this seems like a violation of the basic trust of the banking system which is that that money is the depositor's private property, not a rainy day fund for the government.

They've shut down the bank until Thursday to prevent a run.

Also looks like they are rejecting the bailout becuase of the "tax".

i would take every cent i had out at the first opportunity. I might do that here...

[broken iris]

Looks like Cyprus has pushed a vote back to 26.March, I guess trying to outlast the 24 hour global news cycle. Their government also rejected initial plans to "non-consensually tax" savings accounts. In related news such a tax is now legal in Spain... and... OMFG Justin Bieber got kicked out of a Paris hotel just after Selena bashed him on TV while prompting her new movie! Gotta go check that out!

[simple schoolboy]

Yeah, so interest goings-on between the EU and Cyprus.

I saw that. Might this be the spark that starts the chain reaction many expect? Greece, Italy, Spain, Portugal; sooner or later somewhere is going to give.
An up to 10% tax on deposits? Wow.

Banks runs in those countries might become a possibility if Cyprus' government approves this bailout package. I understand that the EU cannot just keep bailing out banks (and thus national economies) without consequences for the citizenry, but this seems like a violation of the basic trust of the banking system which is that that money is the depositor's private property, not a rainy day fund for the government.

In some ways its more honest that devaluing the currency.

Also, devaluation without default when you already need to be bailed out is absurd, unless your debts are in your own currency.

Isn't it rather more significant that members of the eurozone don't have the option of inflation? I'm just saying its more up front than devaluing the currency and focusing border patrols on capital flight. The effect is similar, just spread out over time compared to a one off haircut. Is the public trust really violated more in one case than the other, presuming both are intentional and the result of readily foreseeable policy?

[dkfan9]

Yeah, so interest goings-on between the EU and Cyprus.

I saw that. Might this be the spark that starts the chain reaction many expect? Greece, Italy, Spain, Portugal; sooner or later somewhere is going to give.
An up to 10% tax on deposits? Wow.

Banks runs in those countries might become a possibility if Cyprus' government approves this bailout package. I understand that the EU cannot just keep bailing out banks (and thus national economies) without consequences for the citizenry, but this seems like a violation of the basic trust of the banking system which is that that money is the depositor's private property, not a rainy day fund for the government.

In some ways its more honest that devaluing the currency.

Also, devaluation without default when you already need to be bailed out is absurd, unless your debts are in your own currency.

Isn't it rather more significant that members of the eurozone don't have the option of inflation? I'm just saying its more up front than devaluing the currency and focusing border patrols on capital flight. The effect is similar, just spread out over time compared to a one off haircut. Is the public trust really violated more in one case than the other, presuming both are intentional and the result of readily foreseeable policy?

Inflation in the form of devaluation also has benefits, such as easing the current account (aka trade) deficit, while this does nothing to address that issue--the only way to address it within a fixed exchange rate context is deflation, which is biased against debtors and against real economy activity/investment, unless you can make interest rates on money negative (i.e. deflation in the US would've made the recession even worse, and if you know the value of your currency is going to increase in real terms, stuffing dollars under your mattress becomes a sensible investment strategy), and anyway it's impossible for Cyprus to decide to spark inflation or deflation because it has no monetary policy, being part of the euro.

But to take on the issue of public trust, the Fed openly states that it has a 2% inflation target, so 2% inflation doesn't seem like a violation of trust to me. Cyprus never openly stated depositors will be taxed if the government fucks up its budgets too much or the banks are almost insolvent., so when it does impose that tax, it certainly seems like a violation of trust. Then again, deposits are a loan to the bank--but they should have priority over bonds.

[dkfan9]

I don't know how much a violation of the basic trust of the banking system this is. If the assumption is that without this action, the banks will fail, then it's certainly the lesser of two evils--depositors only lose 6-10% versus 100% (or 0% lose for those who are first in line for the bank run and 100% for the others). And sure, that money in the bank is private property, but all private property is subject to taxation, especially wealth stores (capital gains, inheritance, property). Not that I'm in favor of this. And I definitely worry about the repercussions on other peripheral European banks and their deposits.

Either way, interesting events.

I did think something similar until I read that bond in the banks that are going to be bailed out are not subject to the "tax" (which is really a foreign orchestrated seizure). So if you own the bank you are fine, if you use the bank you must pay. I am not so sure that is the lesser of two evils between an EU managed orderly failure for a few banks and taking the deposits of the working class.

I have to think the ECB and other Important People figure interest rates will skyrocket on bonds for banks all around the periphery if the bondholders in Cypriot banks were forced to take a hit. That doesn't sound like good policy to me, and as a matter of common sense depositors should be due their money before bondholders, but I figure European policymakers figure the bondholders have more power to tear down the system, because they don't need to put their money in bank bonds, they can store it elsewhere, while most people don't want to hoard money in a safe at home--so a "run" on bonds is more likely than a run on deposits.

[broken iris]

[dkfan9]

And here's a great little parable: http://www.kentwillard.com/5-ducats/201 ... oodle.html

Hooptedoodle

There was an island where people lived and loved all the things that people should. Sometimes they had scarcity, sometimes abundance, and a few times even war. But their island always provided enough for them to at least get by, and usually more. They helped and served each other, and because of that they were wealthy.

One day a visitor from a land called Mammonia came and showed them all that they lacked. Other nations had fashion, technology, and luxuries – much of it was made in Mammonia. The islanders were as Adam and Eve when they discovered their backwardness.

The visitor explained how easy it was to get those fancy things and to be modern and sophisticated. They only had to use Mammonia’s money for everything. Mammonia would even make the exchange for free. And so the islanders excitedly agreed even though most nations consider their own money to be a sovereign right.

With the new money the islanders went crazy buying nice things from around the world, which seemed very cheap with Mammonin currency. And when they had spent all their currency, the islanders made loans to each other to buy even more imports, and sold the loans to the Mammonians as payment. Soon the islanders stopped helping each other and spent all their time trying to acquire more Mammonian currency.

Being paid to trade money seemed like a much better business than serving each other, but there weren’t enough people or money on their little island. So they borrowed and lent huge amounts of money from other nations. That became their main business, yet they failed to understand that
when you borrow money you have to be able to invest the money at a higher rate in order to repay it. But the little island couldn’t possibly profitably invest all that borrowed money.

The island went bankrupt. They asked Mammons for help, but were chided for buying things with the money rather than hoarding it as good Mammonians do. You see only the Mammons could create more of their money, which they would never do because that would make their existing hoards worth less.

The Mammons still demand the loans be repaid, but that was impossible because the Mammons had all the money and the islanders had none. So the Mammons demanded that the islanders have less food and education and healthcare and everything, even though that could not possibly help repay the loans.

Eventually one day in their poverty, the islanders decided to just default on their loans and go back to helping each other and making things for each other. To their surprise they became wealthy again even though they had no Mammonian money and looked backward.

What was odd was that this was a terrible tragedy for the Mammonians because they realized that they had less of all that really mattered to them – money. Their banks went bankrupt. Even though they created many wonderful things, the Mammonians made it to sell for more money rather than
enjoying themselves. And so they ended up with neither their money nor their wonderful things.

Of course this is just a silly story, but just because it never happened doesn’t mean that it isn’t true.

[broken iris]

Not really sure where to put this, but since it deals with class struggle, this thread may work.



http://www.nytimes.com/2013/04/07/opini ... uthat&_r=0

The Secrets of Princeton
By ROSS DOUTHAT
Published: April 6, 2013

SUSAN PATTON, the Princeton alumna who became famous for her letter urging Ivy League women to use their college years to find a mate, has been denounced as a traitor to feminism, to coeducation, to the university ideal. But really she’s something much more interesting: a traitor to her class.

Her betrayal consists of being gauche enough to acknowledge publicly a truth that everyone who’s come up through Ivy League culture knows intuitively — that elite universities are about connecting more than learning, that the social world matters far more than the classroom to undergraduates, and that rather than an escalator elevating the best and brightest from every walk of life, the meritocracy as we know it mostly works to perpetuate the existing upper class.

Every elite seeks its own perpetuation, of course, but that project is uniquely difficult in a society that’s formally democratic and egalitarian and colorblind. And it’s even more difficult for an elite that prides itself on its progressive politics, its social conscience, its enlightened distance from hierarchies of blood and birth and breeding.

Thus the importance, in the modern meritocratic culture, of the unacknowledged mechanisms that preserve privilege, reward the inside game, and ensure that the advantages enjoyed in one generation can be passed safely onward to the next.

The intermarriage of elite collegians is only one of these mechanisms — but it’s an enormously important one. The outraged reaction to her comments notwithstanding, Patton wasn’t telling Princetonians anything they didn’t already understand. Of course Ivy League schools double as dating services. Of course members of elites — yes, gender egalitarians, the males as well as the females — have strong incentives to marry one another, or at the very least find a spouse from within the wider meritocratic circle. What better way to double down on our pre-existing advantages? What better way to minimize, in our descendants, the chances of the dread phenomenon known as “regression to the mean”?

That this “assortative mating,” in which the best-educated Americans increasingly marry one another, also ends up perpetuating existing inequalities seems blindingly obvious, which is no doubt why it’s considered embarrassing and reactionary to talk about it too overtly. We all know what we’re supposed to do — our mothers don’t have to come out and say it!

Why, it would be like telling elite collegians that they should all move to similar cities and neighborhoods, surround themselves with their kinds of people and gradually price everybody else out of the places where social capital is built, influence exerted and great careers made. No need — that’s what we’re already doing! (What Richard Florida called “the mass relocation of highly skilled, highly educated and highly paid Americans to a relatively small number of metropolitan regions, and a corresponding exodus of the traditional lower and middle classes from these same places” is one of the striking social facts of the modern meritocratic era.) We don’t need well-meaning parents lecturing us about the advantages of elite self-segregation, and giving the game away to everybody else. ...

Or it would be like telling admissions offices at elite schools that they should seek a form of student-body “diversity” that’s mostly cosmetic, designed to flatter multicultural sensibilities without threatening existing hierarchies all that much. They don’t need to be told — that’s how the system already works! The “holistic” approach to admissions, which privileges résumé-padding and extracurriculars over raw test scores or G.P.A.’s, has two major consequences: It enforces what looks suspiciously like de facto discrimination against Asian applicants with high SAT scores, while disadvantaging talented kids — often white and working class and geographically dispersed — who don’t grow up in elite enclaves with parents and friends who understand the system. The result is an upper class that looks superficially like America, but mostly reproduces the previous generation’s elite.

But don’t come out and say it! Next people will start wondering why the names in the U.S. News rankings change so little from decade to decade. Or why the American population gets bigger and bigger, but our richest universities admit the same size classes every year, Or why in a country of 300 million people and countless universities, we can’t seem to elect a president or nominate a Supreme Court justice who doesn’t have a Harvard or Yale degree.

No, it’s better for everyone when these questions aren’t asked too loudly. The days of noblesse oblige are long behind us, so our elite’s entire claim to legitimacy rests on theories of equal opportunity and upward mobility, and the promise that “merit” correlates with talents and deserts.

That the actual practice of meritocracy mostly involves a strenuous quest to avoid any kind of downward mobility, for oneself or for one’s kids, is something every upper-class American understands deep in his or her highly educated bones.

But really, Susan Patton, do we have to talk about it?

[---]

.

[Bob Loblaw]

For the nerds: http://www.economist.com/news/finance-a ... omes-under