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It is a commonplace that there is more to life than money and the material benefits that it may provide someone. We often make trade-offs between income-earning work opportunities and more time with family or friends, or between risky but well-paying employment and a calmer and less stressful job that does not pay as well. We might decide whether it is worth forgoing some amount of personal material wealth for a more pleasant and healthy environment. The question is, Should government be trying to measure and manage these and other things like them, instead of each of us finding the right balance and values for ourselves?

Columbia University professor and Nobel Prize winner in economics Joseph E. Stiglitz thinks that it is more the government’s role to sort these things out, and, by implication, less each of ours as individuals. In a recent article titled “Beyond GDP,” Stiglitz points out that the usual measurements of economy-wide economic well-being fall short and leave out a lot of important things that make up a happy, fulfilling, and better life. Correct and recalibrate the measurements, and government can be trusted to take care of a lot of the rest.

The Meddler Wanting to Manage Society

It is an interesting sociological phenomenon how there seems to be an inexhaustible urge and drive among some people to constantly look for ways and means to remake society into their own preferred image. The idea that it is not the business or the right of such people to tell other people how to live, what values they should prefer, and in what manners they should interact with others never seems to enter their heads, particularly when they wish to use the coercive powers of government to make everyone conform to their vision of how to live. In the past, they sometimes have been called busybodies or meddlers.

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

For God’s Sake, Stop!

November 3, 2017

FOR GOD’S SAKE, STOP!

“Most economists, it seems, believe strongly in their own superior intelligence and take themselves far too seriously. In his open letter of 22 July 2001 to Joseph Stiglitz, Kenneth Rogoff identified this problem. ‘One of my favourite stories from that era is a lunch with you and our former colleague, Carl Shapiro, at which the two of you started discussing whether Paul Volcker merited your vote for a tenured appointment at Princeton. At one point, you turned to me and said, “Ken, you used to work for Volcker at the Fed. Tell me, is he really smart ?” I responded something to the effect of, “Well, he was arguably the greatest Federal Reserve chairman of the twentieth century.” To which you replied, “But is he smart like us ?”

Satyajit Das.

“..Every time a report lands on their desks, central bankers must stop to think about the economic, social and political havoc their policies have caused over the past 10 years.

“The desperate attempt to avoid deflation via quantitative easing and record-low interest rates has had horrible side effects, and this observation is hardly controversial. The rich have become much richer; corporate wealth has become more concentrated; soaring house prices have created intergenerational strife; low yields have made all but the super-rich paranoid that they will be entirely unable to finance their futures. Most markets have ended up overvalued (this will really matter one day), while pension fund deficits and a constant sense of crisis have discouraged capital investment — and have possibly held down wages in the UK.

“Set a target, get a distortion. This is standard stuff. But the fact that extreme monetary policy has been going on for so long means that central bankers do not just have macro problems to feel bad about.

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

Deaf blind

September 12, 2017

DEAFBLIND

“Most economists, it seems, believe strongly in their own superior intelligence and take themselves far too seriously. In his open letter of 22 July 2001 to Joseph Stiglitz, Kenneth Rogoff identified this problem. ‘One of my favourite stories from that era is a lunch with you and our former colleague Carl Shapiro, at which the two of you started discussing whether Paul Volcker merited your vote for a tenured appointment at Princeton. At one point, you turned to me and said, “Ken, you used to work for Volcker at the Fed. Tell me, is he really smart ?” I responded something to the effect of, “Well, he was arguably the greatest Federal Reserve Chairman of the twentieth century.”

To which you replied, “But is he smart like us ?””

Few things have the capacity to trigger an intense emotional response more effectively than this video of a 29-year-old deaf person hearing for the first time. For the able bodied, trying to imagine the life of someone missing one or more of the core senses feels pretty much impossible. In the UK, the Oily Cart theatre company specialise in providing entertainment for young people with profound disabilities. Their current show, an adaptation of Samuel Taylor Coleridge’s Kubla Khan, endeavours to create a theatrical spectacle for children who are both deaf and blind – which at first seems like an insurmountable challenge. But if you cannot engage with two senses, make the most of appeals to the rest. So for the participants in Kubla Khan, the seating revolves; the smell of incense wafts across the stage; the audience dip their hands into water, into which the stage crew blow bubbles through straws to conjure up a swirling River Alph. There are times when human ingenuity can be inspiring.

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

The War on Cash Intensifies

February 18, 2017

The War on Cash Intensifies

Mark my words: The war on cash is intensifying, putting our civil liberties at stake like never before.

Last month, the 2001 Nobel Prize-winning economist from Columbia University, Joseph Stiglitz, was quoted as saying: “I believe very strongly that countries like the United States could and should move to a digital currency.”

He argues that the move would give governments the ability to trace corruption, putting an end to illicit activities.

This falls in line with the thinking of Harvard’s Kenneth Rogoff. He has argued for two decades that a society awash with cash contributes to the growth of the underground economy. Rogoff believes large-denomination bank notes should be phased out.

He also argues that cash facilitates crime because it is anonymous. And big bills are especially problematic because they are so easy to carry and conceal.

But that’s not all …

India’s Prime Minister Narendra Modi has already removed 86% of his country’s currency from circulation in an attempt to curb tax evasion, tackle corruption and shut down the underground economy.

Here’s the bad news: It’s not going to work.

In 1969, the U.S. officially retired the $10,000 bill, along with the $5,000 bill and the $1,000 bill. Will all cash soon become extinct?

Sure, the bad guys would be inconvenienced for a while. But they would adapt, pushing their illegal activities deeper underground, out of sight, and further away from the watchful eye of the authorities.

Europe will most likely be next. The European Commission has already introduced a proposal enforcing restrictions on payments in cash.

And they’re pushing out all sorts of propaganda to do it, trying to get people to associate illegal activities with high denominations of cash.

But as I’ve said many times before the real reason behind this move to a cashless society is simple: Governments are going broke and these shenanigans are merely a hunt for more taxes.

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

Governments Create Monopolies and Cause Worker Exploitation, Not Free Markets

May 19, 2016

GOVERNMENTS CREATE MONOPOLIES AND CAUSE WORKER EXPLOITATION, NOT FREE MARKETS

The world is threatened with a renewed wave of anti-capitalism and anti-business sentiments and policies. Many who cheered the demise of Soviet communism in the early 1990s, presumed that this meant that, by default, the case for free markets and competitive enterprise had won in the battle of ideas. Over the last twenty-five years it has become clear that the same misguided arguments against free market capitalism constantly reemerge, like an ideological vampire waiting to rise from the intellectual grave and drain market freedom of its lifeblood by more government regulations and controls.

One of the most persistent of these misguided ideas is the belief that left on its own, competitive markets tend to bring about concentration of wealth, inequality of income, and “market power” to exploit workers and consumers of what justly should be theirs.

The most recent example of this is an article on, “Monopoly’s New Era,” by Joseph E. Stiglitz, the 2001 Nobel Prize winner in economics, which appeared on Project Syndicate website on May 13, 2016. Professor Stiglitz is one of those thinkers who seem to see a “market failure” at every turn and apparently has rarely found a government intervention he did not like.

Two Ways of Looking at the Market Process

He contrasts two differing views of the market economy. One view, an outgrowth of Adam Smith and those who followed in his intellectual footsteps over the last 250 years, argue that freedom, prosperity, and income equity are generally assured wherever the market is kept open and competitive, with minimal government impediments.

The other “school of thought” that he interestingly identifies with no one particular thinker of the past “takes as its starting point ‘power,’ including the ability to exercise monopoly control or, in labor markets, to assert authority over workers,” Stiglitz explains.

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

Monopoly’s New Era

May 14, 2016

Monopoly’s New Era

NEW YORK – For 200 years, there have been two schools of thought about what determines the distribution of income – and how the economy functions. One, emanating from Adam Smith and nineteenth-century liberal economists, focuses on competitive markets. The other, cognizant of how Smith’s brand of liberalism leads to rapid concentration of wealth and income, takes as its starting point unfettered markets’ tendency toward monopoly. It is important to understand both, because our views about government policies and existing inequalities are shaped by which of the two schools of thought one believes provides a better description of reality.

For the nineteenth-century liberals and their latter-day acolytes, because markets are competitive, individuals’ returns are related to their social contributions – their “marginal product,” in the language of economists. Capitalists are rewarded for saving rather than consuming – for their abstinence, in the words of Nassau Senior, one of my predecessors in the Drummond Professorship of Political Economy at Oxford. Differences in income were then related to their ownership of “assets” – human and financial capital. Scholars of inequality thus focused on the determinants of the distribution of assets, including how they are passed on across generations.

The second school of thought takes as its starting point “power,” including the ability to exercise monopoly control or, in labor markets, to assert authority over workers. Scholars in this area have focused on what gives rise to power, how it is maintained and strengthened, and other features that may prevent markets from being competitive. Work on exploitation arising from asymmetries of information is an important example.

In the West in the post-World War II era, the liberal school of thought has dominated. Yet, as inequality has widened and concerns about it have grown, the competitive school, viewing individual returns in terms of marginal product, has become increasingly unable to explain how the economy works. So, today, the second school of thought is ascendant.

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

Why All Central Planning Is Doomed to Fail

April 15, 2016

Why All Central Planning Is Doomed to Fail

Positivist Delusions

[ed. note: this article was originally published on March 5 2013 – Bill Bonner was on his way to his ranch in Argentina, so here is a classic from the archives]

We’re still thinking about how so many smart people came to believe things that aren’t true. Krugman, Stiglitz, Friedman, Summers, Bernanke, Yellen – all seem to have a simpleton’s view of how the world works.

Simpletons A bunch of famous people with a simpleton view of how the world works…who not only seriously think the economy can and should be “planned”, but arrogantly believe they are the ones who should do it. It’s a bit like the crazy guy who doesn’t know he’s crazy.

They believe they can manipulate the future and make it better. Not just for themselves… but also for everyone else. Where did such a silly idea come from?

After the Renaissance, Aristotelian logic came to dominate Western thought. It was essentially a forerunner of positivism – which is supposedly based on objective conditions and scientific reasoning.

“Give me the facts,” says the positivist, confidently.

“Let me apply my rational brain to them. I will come up with a solution!”

Beyond the Herald’s Cry

This is fine, if you are building the Eiffel Tower or organizing the next church supper. But positivism falls apart when it is applied to schemes that go beyond the reach of the “herald’s cry.”

That’s what Aristotle said: Only a small community would work. Because only in a small community would all the people share more or less the same information and interests.

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

What’s Wrong With Negative Rates?

April 13, 2016

What’s Wrong With Negative Rates?

NEW YORK – I wrote at the beginning of January that economic conditions this year were set to be as weak as in 2015, which was the worst year since the global financial crisis erupted in 2008. And, as has happened repeatedly over the last decade, a few months into the year, others’ more optimistic forecasts are being revised downward.

The underlying problem – which has plagued the global economy since the crisis, but has worsened slightly – is lack of global aggregate demand. Now, in response, the European Central Bank (ECB) has stepped up its stimulus, joining the Bank of Japan and a couple of other central banks in showing that the “zero lower bound” – the inability of interest rates to become negative – is a boundary only in the imagination of conventional economists.

And yet, in none of the economies attempting the unorthodox experiment of negative interest rates has there been a return to growth and full employment. In some cases, the outcome has been unexpected: Some lending rates have actually increased.

It should have been apparent that most central banks’ pre-crisis models – both the formal models and the mental models that guide policymakers’ thinking – were badly wrong. None predicted the crisis; and in very few of these economies has a semblance of full employment been restored. The ECB famously raised interest rates twice in 2011, just as the euro crisis was worsening and unemployment was increasing to double-digit levels, bringing deflation ever closer.

They continued to use the old discredited models, perhaps slightly modified. In these models, the interest rate is the key policy tool, to be dialed up and down to ensure good economic performance. If a positive interest rate doesn’t suffice, then a negative interest rate should do the trick.

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

A Quarter Century Of Monetary Voodoo

April 4, 2016

A Quarter Century Of Monetary Voodoo

A Witless Tool of the Deep State?

Finance or politics? We don’t know which is jollier. The Republican presidential primary and Fed monetary policies seem to compete for headlines. Which can be most absurd? Which can be most outrageous? Which can get more page views?

Politics, led by Donald J. Trump, was clearly in the lead… until Wednesday. Then, the money world, with Janet L. Yellen wearing the yellow jersey, spurted ahead in the Hilarity Run.

“Cautious Yellen drives global stocks near 2016 peak,” reported a Reuters headline. The story itself was a remarkable tribute to the whole jackass money system.

At first glance, “cautious Yellen” would seem incongruous with stocks rising to “near 2016 peak.” Caution normally means playing it cool, not encouraging speculation.

But it wasn’t so much what Ms. Yellen said that sent stocks racing ahead. It was what she hasn’t done. And she hasn’t done exactly what we thought she wouldn’t do. That is, so far this year, she has not taken a single step in the direction of a “normal” monetary policy; our guess is that she never will.

Why not? Is it because she is a witless tool of Deep State cronies? Is it because her economic theory is silly, superficial, and simpleminded? Or is it because she and her predecessor, Ben Bernanke, have done so much damage to the normal world that there is nothing to go back to?

A coo-coo for the stock market…

“Cautious Yellen drives global stocks near 2016 peak,” reported a Reuters headline. The story itself was a remarkable tribute to the whole jackass money system.

At first glance, “cautious Yellen” would seem incongruous with stocks rising to “near 2016 peak.” Caution normally means playing it cool, not encouraging speculation.

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

TPP ‘worst trade deal ever,’ says Nobel-winning economist Joseph Stiglitz

April 1, 2016

TPP ‘worst trade deal ever,’ says Nobel-winning economist Joseph Stiglitz

Trans-Pacific Partnership should be redone to advance interests of citizens, not corporations, he says

Nobel Prize-winning economist Joseph Stiglitz says the Trans-Pacific Partnership may well be the worst trade agreement ever negotiated, and he recommends Canada insist on reworking it.

“I think what Canada should do is use its influence to begin a renegotiation of TPP to make it an agreement that advances the interests of Canadian citizens and not just the large corporations,” he said in an interview with CBC’s The Exchange on Thursday.

Stiglitz, a professor at Columbia University in New York, was a keynote speaker at a conference at the University of Ottawa on Friday about the complex trade deal.

Stiglitz takes issue with the TPP’s investment-protection provisions, which he says could interfere with the ability of governments to regulate business or to move toward a low-carbon economy.

Multinationals have right to sue

It’s the “worst part of agreement,” he says, because it allows large multinationals to sue the Canadian government.

“It used to be the basic principle was polluter pay,” Stiglitz said. “If you damaged the environment, then you have to pay. Now if you pass a regulation that restricts ability to pollute or does something about climate change, you could be sued and could pay billions of dollars.”

There were similar provisions in North American Free Trade Agreement that led to the Canadian government being sued, but the TPP goes even further.

He said the provision could be used to prevent raising of minimum wages or to overturn rules that prevent usury or predatory lending practices.

Stiglitz argues the deal, which is a 6,000-page mammoth and extremely complex, should have been negotiated openly.

“This deal was done in secret with corporate interests at the table,” he said.

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

Joseph Stiglitz – “American Inequality Didn’t Just Happen…It Was Created.”

March 16, 2016

Joseph Stiglitz – “American Inequality Didn’t Just Happen…It Was Created.”

Yesterday, I came across an excerpt from a book written by economist Joseph Stiglitz, which touched upon many crucial points regarding the U.S. economy. I think it’s an important read since it helps explain the roots of the current rebellion taking place within the political system.

Americans aren’t angry because other Americans are fabulously wealthy. Americans are angry because the economy is intentionally rigged to benefit a small group of individuals known as “insiders.” They’re angry because rather than add value to society, these insiders parasitically take from society. Rent-seeking is what economists call their destructive behavior, and the public is fed up with it.

No one would be outraged if genuinely innovative entrepreneurs and creators were the ones cleaning up in the modern economy. Unfortunately, this is not the way things work. Indeed, it’s an unfortunate fact that a disturbingly large number of America’s so-called “economic winners” in 2016 are little more than corrupt, scheming hacks and political types unconscionably profiting from the ongoing destruction of the Republic. “The people” have finally started to wake up.

Now here are a few excerpts from Evonomics:

American inequality didn’t just happen. It was created. Market forces played a role, but it was not market forces alone. In a sense, that should be obvious: economic laws are universal, but our growing inequality— especially the amounts seized by the upper 1 percent—is a distinctly American “achievement.” That outsize inequality is not predestined offers reason for hope, but in reality it is likely to get worse. The forces that have been at play in creating these outcomes are self-reinforcing.

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

Nobel-Prize Economist Condemns Obama’s ‘Trade’ Deals

March 4, 2016

Nobel-Prize Economist Condemns Obama’s ‘Trade’ Deals

The Nobel-Prize-winning former chief economist of the World Bank, and Chairman of the Council of Economic Advisers to the U.S. President, Joseph Stiglitz, went to England to warn the British public, and Parliament, that “no democracy” can support U.S. President Barack Obama’s proposed trade-deals, because all of these have a feature built into them, called Investor State Dispute Resolution, or ISDS, which will establish a supra-national authority that gives international corporations the power to sue any signatory nation that introduces new or increased economic regulations regarding product-safety, the environment, workers’ rights, or anything else that the corporation alleges lowers the corporation’s profits; and because these cases will be tried not in courts that are subject to the given nation’s constitution and laws, but instead by private three-person panels of mainly corporate lawyers, and their rulings will not be subject to being appealed within the given nation’s court system — the panel’s decison will be final. There will be no democratic accountability at all, regarding regulations and laws that are designed to protect the public: environmental, product-safety, and workers’ rights. The existing regulations will be, in effect, locked in stone, or else decreased — never increased, no matter how much the latest scientific findings might indicate they ought to be. That’s because the international corporations’ panels will have powers above and beyond any signatory nation’s constitution and laws. ISDS gives international corporations the right to sue taxpayers; it does not give any government the right to sue an international corporation (and that also means no right to sue such a corporation for having filed a frivolous lawsuit against the taspayers). It’s a new profit-center for international corporations, in which those profits are coming from the taxpayers of nations that lose these lawsuits — and these cases will explode in volume if Obama’s deals get passed.

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

Central Banks Are Trojan Horses, Looting Their Host Nations

February 12, 2016

Central Banks Are Trojan Horses, Looting Their Host Nations

A Nobel prize winning economist, former chief economist and senior vice president of the World Bank, and chairman of the President’s council of economic advisers (Joseph Stiglitz) says that the International Monetary Fund and World Bank loan money to third world countries as a way to force them to open up their markets and resources for looting by the West.

Do central banks do something similar?

Economics professor Richard Werner – who created the concept of quantitative easing – has documented that central banks intentionally impoverish their host countries to justify economic and legal changes which allow looting by foreign interests.

He focuses mainly on the Bank of Japan, which induced a huge bubble and then deflated it – crushing Japan’s economy in the process – as a way to promote and justify structural “reforms”.

The Bank of Japan has used a heavy hand on Japanese economy for many decades, but Japan is stuck in a horrible slump.

But Werner says the same thing about the European Central Bank (ECB). The ECB has used loans and liquidity as a weapon to loot European nations.

Indeed, Greece (more), Italy, Ireland (and here) and other European countries have all lost their national sovereignty to the ECB and the other members of the Troika.

ECB head Mario Draghi said in 2012:

The EU should have the power to police and interfere in member states’ national budgets.

***

“I am certain, if we want to restore confidence in the eurozone, countries will have to transfer part of their sovereignty to the European level.”

***

“Several governments have not yet understood that they lost their national sovereignty long ago. Because they ran up huge debts in the past, they are now dependent on the goodwill of the financial markets.”

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

What’s Holding Back the World Economy?

February 10, 2016

What’s Holding Back the World Economy?

NEW YORK – Seven years after the global financial crisis erupted in 2008, the world economy continued to stumble in 2015. According to the United Nations’ report World Economic Situation and Prospects 2016, the average growth rate in developed economies has declined by more than 54% since the crisis. An estimated 44 million people are unemployed in developed countries, about 12 million more than in 2007, while inflation has reached its lowest level since the crisis.

More worryingly, advanced countries’ growth rates have also become more volatile. This is surprising, because, as developed economies with fully open capital accounts, they should have benefited from the free flow of capital and international risk sharing – and thus experienced little macroeconomic volatility. Furthermore, social transfers, including unemployment benefits, should have allowed households to stabilize their consumption.

But the dominant policies during the post-crisis period – fiscal retrenchment and quantitative easing (QE) by major central banks – have offered little support to stimulate household consumption, investment, and growth. On the contrary, they have tended to make matters worse.

In the US, quantitative easing did not boost consumption and investment partly because most of the additional liquidity returned to central banks’ coffers in the form of excess reserves. The Financial Services Regulatory Relief Act of 2006, which authorized the Federal Reserve to pay interest on required and excess reserves, thus undermined the key objective of QE.

Indeed, with the US financial sector on the brink of collapse, the Emergency Economic Stabilization Act of 2008 moved up the effective date for offering interest on reserves by three years, to October 1, 2008. As a result, excess reserves held at the Fed soared, from an average of $200 billion during 2000-2008 to $1.6 trillion during 2009-2015. Financial institutions chose to keep their money with the Fed instead of lending to the real economy, earning nearly $30 billion – completely risk-free – during the last five years.

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

The New Geo-Economics

January 8, 2016

The New Geo-Economics

COLOMBO, SRI LANKA – Last year was a memorable one for the global economy. Not only was overall performance disappointing, but profound changes – both for better and for worse – occurred in the global economic system.

Most notable was the Paris climate agreement reached last month. By itself, the agreement is far from enough to limit the increase in global warming to the target of 2º Celsius above the pre-industrial level. But it did put everyone on notice: The world is moving, inexorably, toward a green economy. One day not too far off, fossil fuels will be largely a thing of the past. So anyone who invests in coal now does so at his or her peril. With more green investments coming to the fore, those financing them will, we should hope, counterbalance powerful lobbying by the coal industry, which is willing to put the world at risk to advance its shortsighted interests.

Indeed, the move away from a high-carbon economy, where coal, gas, and oil interests often dominate, is just one of several major changes in the global geo-economic order. Many others are inevitable, given China’s soaring share of global output and demand. The New Development Bank, established by the BRICS (Brazil, Russia, India, China, and South Africa), was launched during the year, becoming the first major international financial institution led by emerging countries. And, despite US President Barack Obama’s resistance, the China-led Asian Infrastructure Investment Bank was established as well, and is to start operation this month.

The US did act with greater wisdom where China’s currency was concerned. It did not obstruct the renminbi’s admission to the basket of currencies that constitute the International Monetary Fund’s reserve asset, Special Drawing Rights (SDRs).

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

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