There was talk about renaming the Krugman thread for this purpose, but that seems to be going nowhere. Besides which, I feel the Krugman thread should be left to discuss Krugman while this thread can be used for more general economic discussion.
Discuss:
- The merits of competing theories.
- The role of the government in managing the economy.
- The causes of and solutions to our current economic woes.
- Comparisons between the economic systems of different countries.
- Theoretical and existing alternatives to our current market system.
edited 17th Dec '12 10:58:52 AM by Topazan
In short, we're buggered. In every position. -_-
Well, I wasn't planning on hitting 90 anyway...
That's a method of internalizing an externality, which is what economists calls it when a cost (or benefit) goes to someone other than the economic actors who make the decision. For example, industrial businesses who are allowed to pollute freely are in some sense taking value out of the community they reside in and are putting directly into their own coffers. Specifically, the cost of cleaning things up is usually left to the government and the taxpayers while the corporation is reaping all the rewards. On the other hand, a manufacturing business might add value to the community without necessarily intending to, by attracting workers and benefiting other local businesses.
Preventing corporations from completely ignoring the external costs of their practices is one of the first of many steps involved in making capitalism not a complete hellhole. Corporations on the other hand are always incentivized to push as many of their costs into externalities as possible.
edited 16th Jul '16 5:24:14 AM by Clarste
Euod: You could always move to the colonies.
I grew up as an expat: it's horrible.
There is a very good chance that Brexit will never happen.
Verizon to announce $5 billion bid for Yahoo.
"We're all paper, we're all scissors, we're all fightin' with our mirrors, scared we'll never find somebody to love."Makes sense. They partner heavily on the front-end of people's Verizon homepage or Verizon mail for those who use that ISP.
The theory I've heard is that Verizon already bought AOL, which has pretty good ad technology, so the idea with Yahoo is to get more pages to put the ads on. Yahoo actually still has a pretty decent install base, they've just been having trouble making money off of them. Better ads could turn that around — and if Verizon actually puts some effort into upgrading Yahoo's various content past the 1995-level shit it's got now, so much the better.
Really from Jupiter, but not an alien.Something from Britain's Labour Party Leadership Contest: Owen Smith promises workplace 'revolution' in Labour pitch
He will commit to focusing policies on achieving "equality of outcome" rather than "equality of opportunity", saying he wants the UK to be the "envy of the world" in terms of fair employment and conditions at work.
He will propose:
- Reintroducing Wages Councils, abolished by former Conservative PM Margaret Thatcher, across different sectors of industry - to boost pay above the minimum wage in sectors such as retail and care
- Minimum guaranteed working hours and the abolition of zero hours contracts
- Scrapping trade union reforms that curb the ability of unions to call strikes
- To establish a Ministry of Labour
- Same rights for agency workers as full time workers
- Workers to be placed on company remuneration committees
- A ban on companies being allowed to recruit only foreign workers.
Mr Smith is also expected to call for an end to private provision in the NHS, more spending on public services and higher taxes on the wealthy.
The MP - who has said Labour's constitution should be rewritten to explicitly state its commitment to reducing inequality - will suggest that the party in recent years has not done enough to address growing income gaps in society and rein in boardroom excesses.
"We need to rediscover a sense of national mission for Britain," he will say. "A faith in our country as having a future as bright as its past. And one where the fruits of our collective success are shared more equally between us.
"Where outcomes can be equal, not just the opportunities we create. That is why I am in politics."
At a rally on Tuesday evening, Mr Smith repeated his call for £200bn to be pumped into modernising Britain's schools, hospitals, railways and road network, what he has described as a British New Deal to be funded by increased borrowing.
A spokesperson for Mr Corbyn's campaign said Mr Smith's focus on equality of outcomes, reindustrialisation and workers' rights echoed policies and speeches set out by the Labour leader, and shadow chancellor John Mc Donnell.
"Owen's speech today shows the leadership that Jeremy Corbyn has demonstrated in placing economic justice and fairness back at the heart of Labour politics," they said. "Under Jeremy, Labour has put restoring dignity and pride in our communities worst hit by decades of neglect at the core of our politics."
X-posted to the British Politics Thread.
edited 27th Jul '16 4:14:53 AM by Greenmantle
Keep Rolling OnI wish more so-called left wing politicians would speak that way, and I wish some of them actually did something about it.
And here i thought all of the alternatives to Corbyn were Blairite conservatives.
They tried that last time, so now they're swinging left to try and grab Corbyn's voters. What Owen's actual beliefs are is uncertain (he is a former lobbyist I belive and had previously spoken in favour of partial NHS privatisation), but he's swinging further left now to try and win.
“And the Bunny nails it!” ~ Gabrael “If the UN can get through a day without everyone strangling everyone else so can we.” ~ CyranReuters: IMF failed to push for crucial debt relief in 2010 Greek bailout - auditor
The IMF also did not make a serious attempt to quantify the risk of financial contagion throughout Europe that was used to justify its granting of "exceptional access" funding to Greece when the country's debt was widely viewed internally as not having a high likelihood of repayment.
The decisions, made in the throes of a growing debt crisis, contributed to a programme that proved unsustainable as Greece's economy collapsed, the IMF's Internal Evaluation Office (IEO) said.
The 30 billion-euro IMF programme for Greece needed renegotiation in 2012, and the IMF is not yet a participant in a third bailout as it is now insisting that European lenders provide debt relief to Greece.
"Critically, there was no rigorous attempt to articulate a convincing path to restoring debt sustainability in Greece, other than a programme of official financing, fiscal adjustment and structural reforms," the IEO said of the IMF's actions in 2010.
The IEO said the IMF's rules on granting exceptional access, which require early board involvement, were "followed only in a perfunctory manner." Amendments to create a "systemic exemption" that allowed the Greek bailout to proceed departed from the Fund's usual deliberative process where major decisions receive careful review, the IEO said.
In January 2016, the Fund eliminated the special exemption which also paved the way for bailouts to Ireland and Portugal and enacted new rules governing such large bailouts.
Even though some senior IMF staff members did not believe that Greek debt in 2010 was sustainable, the report cited "pressure" to agree to the bailout, adding that then-managing director Dominique Strauss-Kahn decided "to go along with the decision already reached by European policymakers and take a chance" that stability in Greece could be restored without pre-emptive debt restructuring.
By contrast, the IMF's bailouts of Ireland and Portugal went far more smoothly, the IEO report said, helped by strong "national ownership" of the programs and implementation of required reforms.
But they noted their main aim in 2010 was to prevent financial contagion that threatened to engulf Europe.
Among its recommendations, the IEO said the IMF should develop procedures to minimize room for political intervention in the IMF's technical analysis.
IMF Managing Director Christine Lagarde said in a statement that she believed the IEO did not adequately prove that the IMF's technical analysis came under undue political pressure and disagreed with the need for new procedures.
Including Greece, Portugal and Ireland, she said the IMF's involvement in the euro zone crisis programs was a "qualified success".
"Greece, however, was unique: while initial economic targets proved overly ambitious, the programme was beset by recurrent political crises, pushback from vested interests and severe implementation problems that led to a much deeper-than-expected output contraction," said Lagarde, who replaced Strauss-Kahn in 2011 after he resigned amid a sexual assault scandal.
So, it does looks like the IMF was influenced by the EU and several Eurozone countries.
Keep Rolling OnSo the pivot in the IMF was starting earlier than they thought? Which makes some sense, the IMF should nominally be beholden to its largest contributors, just that those contributors should be more sensible than wanting to impoverish a country for 30 years just to prove a point.
A technical point here, but they're actually called Shareholders.
No clean bill of health for EU banks in stress test
Eight years since the collapse of Lehman Brothers sparked a global banking meltdown, many of Europe's banks are still saddled with billions of euros in poorly performing loans, crimping their ability to lend and putting off investors.
"While a number of individual banks have clearly fared badly, the overall finding of the European Banking Authority - that Europe's banks are resilient to another crisis - is heartening," Anthony Kruizinga at Pw C said.
Italy's Monte dei Paschi, Austria's Raiffeisen, Spain's Banco Popular and two of Ireland's main banks came out with the worst results in the EBA's test of 51 European Union (EU) lenders.
"Whilst we recognize the extensive capital raising done so far, this is not a clean bill of health," EBA Chairman Andrea Enria said in a statement. "There remains work to do."
Italy's largest lender, UniCredit, was also among those banks which fared badly, and it said it will work with supervisors to see if it should take further measures.
Germany's biggest banks, Deutsche Bank and Commerzbank, were also among the 12 weakest banks in the test, along with British rival Barclays.
Monte dei Paschi, Italy's third largest lender, had been scrambling to pull together a rescue plan and win approval for it from the European Central Bank ahead of the test results.
The Italian bank confirmed less than an hour before the results that it had finalised a plan to sell off its entire portfolio of non-performing loans and had assembled a consortium of banks to back a 5 billion euro capital increase.
This was the third stress test in the EU since taxpayers had to bail out lenders in the 2007-09 financial crisis, with no pass or fail mark this time round. The test involved scenarios including EU economic output 7.1 percent below the baseline over the next three years and a 20 percent drop in interest income.
"Based on these results European banks do have deeper loss absorbing capacity than previously, but concerns clearly remain around profitability and the appetite of equity investors to invest in bank stocks," said Steven Hall of KPMG.
Analysts have informally set a basic pass mark of 5.5 percent, the threshold set in the last round of tests in 2014, and a weak result could raise question marks over dividend payments.
Like Monte dei Paschi, Allied Irish Banks was also below the 5.5 percent level at 4.31 percent, but said it has undergone fundamental restructuring and is now sustainably profitable.
Markets will also look at how many banks were able to maintain a core ratio of capital to risk-weighted assets of 7 percent. This is a typical level for triggering the writedown of bonds issued by banks to replenish capital.
Spain's Banco Popular, Bank of Ireland and Austria's Raiffeisen all ended the test below this level at 6.62 percent, 6.15 percent, and 6.12 percent, respectively.
"We are aware of our capital situation and have been implementing for some time appropriate measures to strengthen our capital base," Raiffeisen CEO Walter Rothensteiner said.
Of the banks tested, 37 are based in the euro zone and supervised by the ECB, which said the results reflected progress in repairing balance sheets.
"The banking sector today is more resilient and can much better absorb economic shocks than two years ago," said Daniele Nouy, who heads supervision at the ECB.
At the start of the test, the banks had an aggregate core ratio of 12.6 percent, with all capital requirements factored in. However, this fell to 9.2 percent by the end of the test, a drop of 340 basis points, equivalent to 226 billion euros of capital.
For the first time, the EU test included the impact of conduct risks such as fines and settlements.
EBA said the total hit from conduct costs was 71 billion euros. The largest impact was from credit or losses on loans, totaling nearly 350 billion euros across all the banks tested.
'Bank of England wields stimulus 'sledgehammer' to beat Brexit blues
Acting on its chief economist's wish to use "a sledgehammer to crack a nut", the BoE reduced interest rates by 25 basis points to a record-low 0.25 percent.
This first cut since 2009 was accompanied by a pledge to buy 60 billion pounds ($79 billion) of government bonds with newly created money over the next six months, and two new stimulus schemes. One will buy 10 billion pounds of high-grade corporate debt, the other - potentially worth up to 100 billion pounds - is to ensure banks pass on the full rate cut to borrowers.
The Bank said most BoE policymakers expected to cut the main interest rate to even closer to zero later this year, and sharply downgraded its outlook for growth next year.
"By acting early and comprehensively, the (Bank) can reduce uncertainty, bolster confidence, blunt the slowdown and support the necessary adjustments in the UK economy," BoE Governor Mark Carney told a news conference.
Sterling fell as much as 1.6 percent against the dollar following the announcement, while British government bond yields hit record lows and the main share index rose by 1.6 percent.
Carney said he had unveiled an "exceptional package of measures" because the economic outlook had changed markedly following the Brexit vote. The Bank expects the economy to stagnate for the rest of 2016 and suffer weak growth next year.
By cutting rates to the lowest in its 322-year history, the BoE joins the Bank of Japan and the Reserve Bank of Australia, which both undertook unprecedented stimulus in the past week.
He added that commercial banks had "no excuse" not to pass on the BoE's rate cut to their customers.
The Bank's policymakers were not completely united on how to respond to the fallout from Brexit.
The cut in rates and the measure intended to ensure banks passed it on to consumers - known as the Term Funding Scheme (TFS) - gained unanimous support.
But three policymakers - Kristin Forbes, Ian McCafferty and Martin Weale - opposed raising the target for quantitative easing government bond purchases to 435 billion pounds from the 375 billion total reached in late 2012.
Forbes also voted against buying corporate debt - something the BoE did briefly after the financial crisis.
The BoE had wrong-footed markets by keeping rates on hold in July, but since then its chief economist Andy Haldane argued the central bank should be ready to use a "sledgehammer" to tackle even tentative signs of a downturn.
But 2017 brings a sharp downgrade to growth of just 0.8 percent from a previous estimate of 2.3 percent - the biggest downgrade in growth from one Inflation Report to the next, exceeding what was seen in the financial crisis. The growth outlook for 2018 was cut to 1.8 percent.
The BoE also revised up its inflation forecasts sharply, due to the big fall in sterling since the financial crisis, predicting it will hit 2.4 percent in 2018 and 2019. It said the costs of trying to bring it back to its 2 percent target in the immediate future would exceed the benefit.
The Term Funding Scheme is designed to make sure lower interest rates set by the Bo E are reflected in the costs commercial banks charge households and firms to borrow funds.
For the next 18 months lenders will be able to borrow four-year central bank reserves at rates close to the Bank Rate. They will charge a penalty rate to banks that reduce net lending.
Unlike the BoE's Funding for Lending Scheme, which was being wound down before the Brexit vote, the TFS is funded by newly created money, making it a form of quantitative easing.
"Today's decision will test the limits of monetary policy which many would argue ran out of runway some time ago," Bill Michael, global head of financial services at KPMG said.
edited 4th Aug '16 1:23:46 PM by Greenmantle
Keep Rolling OnI don't know that you can reasonably call quantitative easing "stimulus" and get away with it anywhere except in a major economic news story, of all things.
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"I read an article by a conservative who supports the idea of guaranteed minimum income. His suggested amount? $833 a month. I make 2.5x that in take-home pay and I'm having difficulty! (medical needs are a part of it) The hell is he thinking?
I'd like to know how guaranteed minimum income could work. I get that it's meant to be a replacement for the welfare system, so I can see the logic there and how it could save money, but how would it shift the economy and where would all the money come from, and how much is realistic?
Fundamentally, economies run on demand — that is, the capacity of the general population to buy goods and services. If that is lacking, then all the production in the world won't help you. Now, it's possible for supply to be bottlenecked due to production issues, resource constraints, or whatever, but the solutions to that are different, and we don't live in that sort of world now by a long shot.
Minimum basic income (MBI) is designed to address several fundamental problems:
- The economic disenfranchisement of the long-term unemployed and/or under-employed. Giving them enough money to buy the things they need regardless of their employment status will, simply put, allow them to participate in the economy: get educated, vote, buy iPhones and cars, etc. It does an economy no good to have a class of people who are perpetually out in the cold.
- Technological displacement means that, in the future, there simply won't be enough jobs for everyone to take. The consequences of not giving people a way to live without having a job are massive social disruption: starvation, riots, and even revolution.
- MBI is more efficient to administer than a patchwork of welfare and assistance programs. For one thing, it does away with means testing, which has enormous overhead.
- It pays for itself many times over in tax revenues, since consumers at the lower end of the economic scale will be buying a ton more stuff than they were before. This will correspond to increased hiring as businesses need workers and production facilities to meet the new demand, with corresponding increases in private investment, all with a massive bootstrapping effect, and all of it paying taxes.
- If it leads to inflationary pressure, that can be contained by adjusting tax and/or interest rates; i.e., standard monetary/fiscal policy.
The objections to MBI are neither economic nor practical — they're moral. It's the same reason you see things like states implementing mandatory drug testing for welfare recipients as a cost-saving measure (when it actually costs far more to process all those drug tests than it saves in money denied to people who failed the test). Charity is great, as long as it goes to deserving people. Money going to people who need it but don't deserve it, though? That's evilbadwrong, and must be stopped at all costs.
Really from Jupiter, but not an alien.That highlights one of the big problems with MBI: Different places have different living expenses. I spent some time in a tiny town in Texas where I was surviving in my own apartment for 500 a month, easily. Where I'm living now, that wouldn't be enough for even half an apartment, not to mention food and whatnot. Your medical bills also put your expenses higher than what this guy is assuming.
But those are primarily logistics issues. They could be fixed without too much difficulty. Free universal health care, for example, would ease a lot of the weight off the lowest levels. As Jovian said, it's mostly dismissed due to moral issues.
You can't scale MBI based on local costs of living because that would increase economic stratification. Rather, giving everyone access to the same resources would help to spread out America's wealth rather than concentrate it, which is a good thing for easing class divisions.
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
The bloc that lets EU and EEA members trade with each other without tariffs.
"Yup. That tasted purple."