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The Political Consequences of Financial Crises

The Political Consequences of Financial Crises

LONDON – I may not be the only finance professor who, when setting essay topics for his or her students, has resorted to a question along the following lines: “In your view, was the global financial crisis caused primarily by too much government intervention in financial markets, or by too little?” When confronted with this either/or question, my most recent class split three ways.

Roughly a third, mesmerized by the meretricious appeal of the Efficient Market Hypothesis, argued that governments were the original sinners. Their ill-conceived interventions – notably the US-backed mortgage underwriters Fannie Mae and Freddie Mac, as well as the Community Reinvestment Act – distorted market incentives. Some even embraced the argument of the US libertarian Ron Paul, blaming the very existence of the Federal Reserve as a lender of last resort.

Another third, at the opposite end of the political spectrum, saw former Fed Chairman Alan Greenspan as the villain. It was Greenspan’s notorious reluctance to intervene in financial markets, even when leverage was growing dramatically and asset prices seemed to have lost touch with reality, that created the problem. More broadly, Western governments, with their light-touch approach to regulation, allowed markets to career out of control in the early years of this century.

The remaining third tried to have it both ways, arguing that governments intervened too much in some areas, and too little in others. Avoiding the question as put is not a sound test-taking strategy; but the students may have been onto something.

Now that the crisis is seven years behind us, how have governments and voters in Europe and North America answered this important question? Have they shown, by their actions, that they think financial markets need tighter controls or that, on the contrary, the state should repudiate bailouts and leave financial firms to face the full consequences of their own mistakes?

…click on the above link to read the rest of the article…

Where Candidates Fear to Tread

Where Candidates Fear to Tread

That the snarkier circles of political commentary thrill to the elephantine bellowings of Donald J. Trump only shows the pathetic limitations of the snarkists. They enjoy Trump’s filterless mouth, his harsh goadings of the other presidential wannabes, and his supposed telepathic empathy for the suffering public outside the magic kingdom of DC.

Trump has one legitimate issue, immigration, plus a brief against the general incompetence of professional politicians, and a pocketful of grandiose claims about his majestic skills in business and deal-making. As business goes in this huckster’s paradise, being a real estate developer is perhaps one click above being a car-dealer, and the fact that some of Trump’s artful deals end up in bankruptcy court might argue against his self-proclaimed mastery. Hence, his relegation to the clown category.

What Trump represents most vividly in this moment of history is the astounding lack of seriousness among people who pretend to be political heavyweights. No one so far, including the lovable Bernie Sanders, has nailed a proper bill of grievances to the White House gate. A broad roster of dire issues facing this society ought to be self-evident. But since they are absent so far in the public discussion, here is my list of matters that serious candidates should dare to talk about (all things that a sitting president could take action on):

The security state. America has developed the most horrifying state security apparatus that the world has ever seen in its NSA and associated agencies. It has become the sugar tit for some of the most malevolent enterprises of the corporatocracy — the black ops companies and the weapons dealers. The growth of this monster was not mandated by heaven. A president could lead the move to deconstruct it. A candidate with a decent respect for our heritage would make this a major campaign issue.

…click on the above link to read the rest of the article…

 

European Leaders Promise The Greek Debt Crisis Will Be Resolved One Way Or Another On Sunday

European Leaders Promise The Greek Debt Crisis Will Be Resolved One Way Or Another On Sunday

The End - Public DomainThe wait will soon be over.  Greece submitted a final compromise plan to its eurozone creditors on Thursday, European finance ministers will meet on Saturday to discuss the proposal, and an emergency summit of all 28 EU nations on Sunday will make a final decision on what to do.  The summit on Sunday is being billed as a “final deadline” and a “last chance” by EU officials.  In essence, Greece is being given one more opportunity to embrace the austerity measures that are being demanded of them by their creditors.  So has Greece gone far enough with this new proposal?  We shall find out on Sunday.

For months, the entire planet has been following this seemingly endless Greek debt saga.  Global financial markets have gyrated with every twist and turn of this ongoing drama, and many people have wondered if it would ever come to an end.  But now European leaders are promising us that the uncertainty is finally going to be over this weekend

This time, the leaders’ summit called for Sunday is being billed by all concerned as the definitive moment that will determine Greece’s future in the euro. It’s “really and truly the final wake-up call for Greece, but also for us — our last chance,” EU President Donald Tusk said on Wednesday, the day after the most recent emergency session.

So what is the general mood of European leaders as they head into this summit?

Overall, it does not appear to be overly optimistic.

For example, just consider what the head of the Bundesbank is saying

Bundesbank Chief Jens Weidmann, meanwhile, said that central banks have no mandate to safeguard the solvency of banks or governments, and stressed that emergency liquidity to Greece should not be increased.

And even normally upbeat leaders such as ECB President Mario Draghi are sounding quite sullen

 

…click on the above link to read the rest of the article…

Our Social Depression

Our Social Depression

This erosion of opportunities to complete life’s stages and core dramas is rarely recognized, much less addressed.

The consequences of economic stagnation are not limited to finance: stagnation is causing a social depression. We can best understand this social depression by examining how the natural stages of human life are being disrupted.

Each stage has various tasks, goals and duties, which establish the foundation for the next stage.Confucian thought views life as a developmental process with seven stages, each roughly corresponding to a decade: childhood, young adulthood (16-30), age of independence (30-39), age of mental independence (40-49), age of spiritual maturity (50-59), age of acceptance (60-69), and age of unification (70 – end of life).

I see each stage as centered on a core human drama: for the teenager, establishing an identity and life that is independent of parents; for the young adult, finding a mate and establishing a career; for the middle-aged, navigating the challenges of raising children and establishing some measure of financial security; for those in late middle-age, helping offspring reach independent adulthood and caring for aging parents; early old age, seeking fulfillment now that life’s primary duties have been accomplished and managing one’s health; and old age, the passage of accepting mortality and the loss of vitality.

The End of Secure Work and the diminishing returns of financialization are disrupting these core human dramas and frustrating those who are unable to proceed to the next stage of life:

1. Teenagers are being pressured to focus their lives on achieving a conventional financial success (see “Training for Discontent” in From Left Field) that is becoming harder to achieve.

2. Young adults without secure full-time careers cannot afford marriage or children, so they extend the self-absorption of late adolescence into middle age.

…click on the above link to read the rest of the article…

 

 

 

 

Recovery, Geopolitics and Detergents

Recovery, Geopolitics and Detergents

Increasingly over the past year or so, when people ask me what I do, and that happens a lot on a trip like the one I’m currently on in the world of down under, I find myself not just stating the usual ‘I write about finance and energy’, but adding: ‘it seems to become more and more about geopolitics too’. And it’s by no means just me: a large part of the ‘alternative finance blogosphere’, or whatever you wish to call it, is shifting towards that same orientation.

Not that no-one ever wrote about geopolitics before, but it used to be far less prevalent. Much of that, I think, has to do with a growing feeling of discontent with the manner in which a number of topics are handled by the major media and the political world. Moreover, as would seem obvious, certain topics lay bare in very transparent ways how finance and geopolitics are intertwined.

In the past year, we’ve seen the crash of the oil price, which will have – financial and political – effects in the future that dwarf what we’ve seen thus far. We’ve seen Europe and its banks stepping up their efforts to wrestle Greece into – financial and political – submission. And then there’s the nigh unparalleled propaganda machine that envelops the Ukraine-Crimea-Russia issue, which has bankrupted the economy of the first and imposed heavy economic sanctions on the latter, for political reasons.

…click on the above link to read the rest of the article…

 

 

Russia to launch alternative to SWIFT bank transaction system in spring 2015 — RT Business

Russia to launch alternative to SWIFT bank transaction system in spring 2015 — RT Business.

Russia intends to have its own international inter-bank system up and running by May 2015. The Central of Russia says it needs to speed up preparations for its version of SWIFT in case of possible ”challenges” from the West.

“Given the challenges, Bank of Russia is creating its own system for transmitting financial messaging… It’s time to hurry up, so in the next few months we will have certain work done. The entire project for transmitting financial messages will be completed in May 2015,” said Ramilya Kanafina, deputy head of the national payment system department at the Central Bank of Russia (CBR).

Calls not to use the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system in Russian banks began to grow as relations between Russia and the West deteriorated over sanctions. So far, SWIFT says despite pressure from some Western countries to join the anti-Russian sanctions, it has no intention of doing so.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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