Why Listen To Keynes In The First Place?

A “how to” guide on winning elections

by James E. Miller

In a recent BBC News article, philosopher John Gray asks the quaint but otherwise vain question of what would John Maynard Keynes do in today’s economic slump.  I call the question vain because practically every Western government has followed Keynes’ prescribed remedy for the so-called Great Recession.  Following the financial crisis of 2008, governments around the world engaged in deficit spending while central banks pushed interest rates to unprecedented lows.  Nearly four years later, unemployment remains stubbornly high in most major countries.

Even now in the face of the come-down that inevitably follows any stimulus-induced feelings of euphoria, certain central banks have taken to further monetary easing.  The Bank of England recently announced an extension of its quantitative easing program by £50bn.  Not to be outdone, both the People’s Bank of China and the European Central Bank cut interest rates in an effort to boost consumer borrowing.  Still, these new rounds of monetary stimulus don’t appear to be doing the trick.  The Keynesian miracle cure has been a spectacular dud thus far.  All that modern day disciples of Keynes can do is scratch their heads and say “more should have been done.”  They never allude to how many more trillions of paper dollars should have been created or spent; just call it the excuse that keeps on giving.

The sharks are still circling other bodies in the water

Why France is on the road to becoming the new Greece

By Thomas Pascoe

The euro is headed south today against all comers except The Great British Krona  which is engaged in a nosedive of its own. The reason this time? Spanish 10 year debt is yielding 7.5pc, half of what it ought to yield but enough to spook markets not yet ready to face the inevitable deflation of what has long been a bond super-bubble.

This bubble is particularly evident in France. The debt levels which the country has are as unsustainable as Britain’s, yet its policies are more irresponsible and its remedies more restricted. Although it is considered a core country in the eurozone, France’s economic profile now bears more resemblance to Greece’s the Germany’s.

Public debt in France is at 86.1pc of GDP (146 pc if ECB liabilities and bank guarantees are included). The projected budget deficit this year is 4.5pc, with France having exempted itself from the EU’s instruction to bring deficits down to 3pct by the end of the year.

A Greek Exit Announcement Would Probably Come On A Sunday Night

An Interview with Niall Ferguson

By Matthew Boesler

Harvard economic historian Niall Ferguson went on Fareed Zakaria GPS on Sunday to discuss the euro crisis and how a Greek exit from the common currency would play out.

Ferguson told Zakaria it would go down on a Sunday night:

So, what you would be talking about would be an announcement, presumably on a Sunday night, along the lines of "news just in, those euros that you have in your bank from tomorrow, will be drachma. There'll be a little bit of a teething problem because the ATMs won't work for a few days while we get the drachmas into place, but don't panic. There's going to be a bank holiday until, let's say, Thursday."

However, this would cause panic to spread across Europe as everyone begins to ask, "who's next," said Ferguson. And listening to his stories, you would think Europe is primed for panic.

The perils of confirmation bias

How scientists collect positive evidence rather than test theories

By Matt Ridley

There's a myth out there that has gained the status of a cliché: that scientists love proving themselves wrong, that the first thing they do after constructing a hypothesis is to try to falsify it. Professors tell students that this is the essence of science.

Yet most scientists behave very differently in practice. They not only become strongly attached to their own theories; they perpetually look for evidence that supports rather than challenges their theories. Like defense attorneys building a case, they collect confirming evidence.

In this they're only human. In all walks of life we look for evidence to support our beliefs, rather than to counter them. This pervasive phenomenon is known to psychologists as "confirmation bias." It is what keeps all sorts of charlatans in business, from religious cults to get-rich-quick schemes. As the philosopher/scientist Francis Bacon noted in 1620: "And such is the way of all superstition, whether in astrology, dreams, omens, divine judgments, or the like; wherein men, having a delight in such vanities, mark the events where they are fulfilled, but where they fail, though this happen much oftener, neglect and pass them by."

Europe is in more danger than at any time since the 1930s.

One nationalist demagogue could cause an earthquake

By Thomas Pascoe

Ours is a complacent continent. Despite impending events that would have precipitated a revolution in almost any other place at almost any other time in history – either a collapse of the currency or the complete secession of budgetary control to a supra-natural body in the EU – we expect the fabric of European society to endure without major changes. I think we are wrong.

There is a presumption of perpetual peace in Europe which rests in turn on a presumption of the perpetuity of our existing capital structures. Once the latter are undermined, the former is called into question.

They don't make 'em like that anymore

Alexander Cockburn, RIP

by Justin Raimondo

The death of Alexander Cockburn, columnist for the Nation and author of many books, is an irreplaceable loss not only personally, for those who knew him, but for the broad “progressive” movement, where his populist brand of anarcho-syndicalism — the leftist equivalent of “crunchy conservatism” — set him apart from the bullhorn-shouters and sloganeering ideologues of the haute cuisine Left. His passing, after a two-year battle against cancer, marks nearly the end of what remained vital and interesting about the American left in this country. There is simply no one even remotely like him. As Jesse Walker described his first encounter with Cockburn’s prose: “I had never read anything like this before.”

Alexander Cockburn, RIP

It is the end of an era

By Anthony Gregory

Journalist Alexander Cockburn has died after a painful battle with cancer at the age of 71. Cockburn wrote for The Nation and co-edited Counterpunch, my favorite radical leftist website. Whenever I talked about there being hope on the left, I was mainly thinking about people like Cockburn.

How Darwin would reform Britain's banks

Top down design is flawed even in finance

By Matt Ridley

It is not yet clear whether the current rage against the banks will do more harm than good: whether we are about to throw the baby of banking as a vital utility out with the bathwater of banking as a wasteful casino. But what is clear is that the current mood of Bankerdämmerung is an opportunity as well as a danger. The fact that so many people agree that some kind of drastic reform is needed, all the way along a spectrum from Milibands to mega-Tories, might just open the window through which far-reaching reform of the financial system enters.

All the actors involved bear some blame. First, investment bankers and the principals in financial companies that cluster around them have trousered an increasing share of the returns from the financial markets, leaving less for their customers and shareholders, while getting "too big to fail", so passing their risks to taxpayers.

There Is No 'Euro Crisis'

The single currency doesn't have to be "saved" or else explode

Politicians created an artificial link between national budget problems and the functioning of the single currency.

By PASCAL SALIN

Contrary to what is claimed daily in the media by politicians and many economists, there is no "euro crisis." The single currency doesn't have to be "saved" or else explode.

The present crisis is not a European monetary problem at all, but rather a debt problem in some countries—Greece, Spain and some others—that happen to be members of the euro zone. Specifically, these are public-debt problems, stemming from bad budget management by their governments. But there is no logical link between these countries' fiscal situations and the functioning of the euro system.

America the Energy Superpower

New World Coming 

The energy boom upends arguments about the inevitability of U.S. strategic decline

by David J. Karl 

A previous post peered into the crystal ball to argue that America’s strategic prospects are dramatically brightening due to an unexpectedly improving energy outlook and the looming revitalization of its manufacturing base.  This thesis cuts against the reigning anxiety about the nation’s economic course as well as the torrent of prophesying about how China is poised to eat America’s lunch.*  A subsequent post extended this theme to suggest that among the foreign policy implications of the U.S. energy boom would be the denouement of Russia’s great power aspirations and the restoration of U.S. soft power.

No Hell Below Us, Above Us Only Sky

The idea that neither the devil nor evil really exist is a persistent one

By Richard Fernandez 

Art imitates life. But does life imitate art? The superficial similarities between real-life neuroscience Ph.D. student James Holmes, the shooter at the Aurora, Colorado massacre, and the villain of Stephen Hunter’s not-too-well-written thriller Soft Target ^[1] are uncanny. The fictional mastermind in Hunter’s book is a genius-level, upper-middle class white kid who is bored with the world. He recruits some jihadis to attack a mall (loosely modeled after the Mall of America) in a Mumbai-style attack to provide him with a little stimulation. He wants to turn the mall into the ultimate first-person multiplayer shoot-em-up game and commits the act not for money, not even for power, but just to do something way cool.

Stubborn Ignorance

Fixing outcomes to promote Diversity

by Walter E. Williams

Academic intelligentsia, their media, government and corporate enthusiasts worship at the altar of diversity. Despite budget squeezes, universities have created diversity positions, such as director of diversity and inclusion, manager of diversity recruitment, associate dean for diversity, vice president of diversity and perhaps minister of diversity. This is all part of a quest to get college campuses, corporate offices and government agencies to "look like America."

For them, part of looking like America means race proportionality. For example, if blacks are 13 percent of the population, they should be 13 percent of college students and professors, corporate managers and government employees. Law professors, courts and social scientists have long held that gross statistical disparities are evidence of a pattern and practice of discrimination. Behind this vision is the stupid notion that but for the fact of discrimination, we'd be distributed proportionately by race across incomes, education, occupations and other outcomes. There's no evidence from anywhere on earth or any time in human history that shows that but for discrimination, there would be proportional representation and an absence of gross statistical disparities, by race, sex, height or any other human characteristic. Nonetheless, much of our thinking, legislation and public policy is based upon proportionality being the norm. Let's run a few gross disparities by you, and you decide whether they represent what the courts call a pattern and practice of discrimination and, if so, what corrective action you would propose.

Tiger, Cow or Horse ?

Obama's America – and Ours

by Patrick J. Buchanan

"If you've got a business, you didn't build that. Somebody else made that happen." Mitt Romney fell on this Obama quote like an NFL lineman on an end zone fumble during the Super Bowl. And understandably so.

For this was no gaffe, said Romney, this is what Obama believes. This is straight out of the catechism. Obama thinks that had not the government created the preconditions, none of us could succeed. We all depend on government. None of us can make it on our own.

Had Obama been channeling Isaac Newton – "If I have seen further than others it is because I am standing on the shoulders of giants" – or John Donne – "No man is an island, entire of itself" – many would have nodded in agreement.

But what Obama seemed to be saying – indeed, was saying – was that, without government, no business can succeed.

Pavlos Alexiou : "The Engineer"

In Greek crisis, lessons in a shrimp farm's travails

by Dina Kyriakidou

Just over a decade ago, Napoleon Tsanis set out from Sydney with 11 million euros and a dream to build a shrimp farm in his ancestral homeland.

What he got was years of wrestling Greek bureaucracy and a court battle with a civil servant. Tsanis eventually opened his shrimp farm, but even now the Greek-Australian has managed to invest just 2 million euros ($2.5 million), and that thanks to sheer stubbornness and a strong Australian dollar that has kept his venture profitable despite the delays.

Ask him for the root cause of Greece's crisis and his answer is simple: the enormous regulatory burden that he says crushes the country's economy.

The Dodd-Frank’s Protection Racket

The new Consumer Financial Protection Bureau is both irrelevant and dangerous

By Nicole Gelinas

When President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law two summers ago, standing behind him was Andrew Giordano, a retired Baltimore police officer. Giordano had “discovered hundreds of dollars in overdraft fees on his bank statement—fees he had no idea he might face,” Obama said. Looking on, too, was schoolteacher Robin Fox, “hit with a massive rate increase on her credit card even though she paid her bills on time.” Obama promised that it wouldn’t happen again. “A new consumer watchdog,” he announced, would have “just one job: looking out for people as they interact with the financial system.” People could expect an end to complex mortgage, student-loan, and credit-card contracts in which “pages of barely understandable fine print” contained “hidden fees and penalties.”

The new watchdog is called the Bureau of Consumer Financial Protection but is commonly shortened to the CFPB, with the “bureau” at the end. Its director, former Ohio attorney general Richard Cordray, is a savvy politician, and he has worked to fashion an anti-TSA: a government agency that people trust and like. It is busily making and enforcing rules governing everything from mortgage approval to bounced checks, and it has created a website, consumerfinance.gov, full of handy tips—many targeted to young people—and humble requests for comments and complaints. The bureau has held “field hearings” and town-hall meetings far outside the Beltway, listening to regular Americans’ perceptions of the financial industry. A publicity coup came in March, when New York Times columnist Joe Nocera visited the bureau’s offices and came away gushing about his “inspiring day.”

Why Greece can’t match Ireland’s recovery success

For Greece austerity came as a nasty surprise

By Padraic Halpin and Harry Papachristou

Ireland has become the poster boy of international lenders, held up as a model of European austerity to problem child Greece.

But when the two countries sought financial help from the European Union and International Monetary Fund within six months of each other in 2010, they were starting from different points.

Ireland had an efficient public administration, a modern open economy and not much culture of protest in contrast to Greece, making it very difficult to catch up.

“I think our situation was always more manageable than the Greeks’, there’s no doubt about that,” Ireland’s energy minister Pat Rabbitte told Reuters.

“That is not to say the cliff off which we fell wasn’t very steep but we always had the bureaucracy and the experience to make the adjustments if the political will was there.”

Rabbitte and his colleagues are set for another glowing report from their so-called troika of EU, European Central Bank and IMF lenders on Thursday, just as the same group visits Athens for the first time since tumultuous elections.

Too Small to Fail

It was not supposed to end this way

By DERMOT QUINN

In the glory days, when you could get a house with nothing down and almost nothing to pay, anything seemed possible. A new car every year? A trip to the sun? College tuition? Watch the house balloon and let the good times roll. The recipe was simplicity itself. First you find a physicist to tell you that gravity has been abolished on Wall Street. Then you hire a banker to slice and dice your derivatives. Then you promote a political class to bless the baloney before eating it. Finally, you ask China to underwrite the debt, happy to own half your house so that you don’t insist that it get its own house in order. What could go wrong?

No one noticed that when even bankers laugh all the way to the bank, something must be wrong. No one cared that multiplying derivatives is the fiscal equivalent of the miracle of the loaves and fishes. No one doubted the benediction of a political class that had been bought and paid for many times over.

But now that houses and jobs and pensions have disappeared in a puff of smoke, we remain oddly amnesiac as to the cause. The Economic Stimulus plan, the Mortgage Foreclosure Plan, the Bank Rescue Plan, the Debt Until the Crack of Doom Plan: trust me, says the president, they promised this was quite safe in the 12-step program. Then the program director asked me for some more money.

Fecklessness and stupidity are nothing new, but even by American standards of giantism this latest iteration of boom and bust takes some beating. Yet none of it need have happened had we listened to Wilhelm Roepke. Two generations ago, when postwar Germany lay in ruins, Roepke helped to lay the foundation of its extraordinary renewal. To be sure, that postwar “miracle” owed something to American generosity, even to the very statism (in the form of the Marshall Plan) that Roepke otherwise distrusted. But in the Age of Obama, when all our calculations have gone cock-eyed, an economist who seems to know what he is doing is worth a second look. Better than that, he knew the limits of economics itself as the means and measure of human happiness.

Roepke was born in Hanover in 1899 and died in Geneva in 1966. In between, he fought in World War I, studied and taught economics in Marburg, Istanbul, and Geneva, befriended Ludwig von Mises and Friedrich Hayek, helped establish the Mont Pelerin Society, and advised Konrad Adenauer on social and monetary policy. Such a life mixed the conventional and the bizarre.

The Theatre of the Absurd

Too late for prayers and useless pity

 Mrs. Ethel Chauvenet: Does Elwood see anybody these days?

 Veta Louise Simmons: Oh, yes, Aunt Ethel, Elwood sees “somebody.”
                                                       -The play, Harvey

by Mark Grant

Andrew Ross Sorkin once speculated that I was the next “Doctor Doom.” Anyone that knows me or that reads my commentary with any frequency would know that this is hardly my personality nor would I stir pots for the pleasure of watching the froth. Sometimes it is just that I can see the rabbit leaning on the light post before others even see the street corner upon which it is standing. Others may also see the lamp post but they are frightened to admit it because their leaders have screamed for so long that it isn’t there and will never be there; never mind any 6’3” pookah. However as the light is beginning to dawn and as the early morning shadows that played tricks with your vision dissipate; more and more people can see the vague outline of Harvey leaning against the lamp post and, startled by his presence or not, they can no longer turn away and pretend him out of existence.

“What can I do for you Mr. Dowd?

 “What did you have in mind?”

The troika arrives in Athens tomorrow. The preliminary estimates of meeting the budgetary targets under the Memorandum of Understanding signed off on by the EU, the IMF and the Greek government indicate an achievement somewhat akin to an Olympian running down the track in the opposite direction. A novel approach, no doubt, but one hardly likely to win any race.

Beware of Greeks bearing gifts

Can Shakespeare illuminate the Greek crisis?

The National Theatre is scouring Ancient Greece, via Timon of Athens, for moral thoughts on the recession.

by Patrick Marmion 

A Shakespeare play about a Greek who takes on too much debt and is then hung out to dry by his friends? It is surely a gift of a play, the very thing which we have been looking for to act as a metaphor not just for the financial crisis in general, but for the Eurozone crisis in particular. The miracle is perhaps that the UK National Theatre’s artistic director, Nicholas Hytner, hadn’t thought of staging Timon of Athens before.

With Simon Russell Beale in the title role, the modern-dress production is certain to be a big hit. It also ticks the social-commentary boxes and maintains the National Theatre’s need to be ‘relevant’. Hytner ensures, moreover, that the play is staged as a thoroughly contemporary parable of consumption, debt and ruin. Timon and the wealthy nobility of Ancient Greece are suited and booted as corporate stiffs in a world hermetically sealed from ordinary people who are here presented as whistle-blasting rioters protesting noisily but at the security gates.

Inside what is surely the Sainsbury Wing of London’s National Gallery, the play kicks off with a champagne reception celebrating a sponsorship deal in ‘The Timon Room’. The room houses what else but El Greco’s painting of Jesus casting out moneylenders from the temple. While Timon bathes in the spectacle of his munificence, the collection of favoured artists and groupies clutching flutes of bubbly fill out a world in which Shakespeare’s vision of Ancient Greece seems to map perfectly on to the twenty-first century.

In a confessional, postmodern world where truth is relative, subjectivity is king

Are Roswell believers really that barmy?

It’s easy to mock the geeks who think aliens crash-landed in New Mexico, but their paranoia is part of a big trend today.

by Patrick West 

’X-Files fans. Create the effect of being abducted by aliens by drinking two bottles of vodka. You’ll invariably wake up in a strange place the following morning, having had your memory mysteriously “erased”.’

So ran a ‘Top Tip’ in Viz comic some years ago. Such advice may be sarcastic, but it does demonstrate that we tend to mistrust tales of alien abduction. There is the suspicion that those who profess to have had one were probably drunk or stoned at the time, or that they’re congenital fantasists, or mentally unstable.

This month sees the sixty-fifth anniversary of the Roswell incident of 1947, when, legend has it, a flying saucer crash-landed in New Mexico. The US authorities supposedly removed five humanoid corpses from the wreckage, hid them, and have been trying to cover up the event ever since - although they continue to insist that the wreckage was merely that of a high-altitude weather balloon. Still, the fable persists, and now a former CIA agent, Chase Brandon, has surfaced to endorse it, telling the Huffington Post: ‘It was not a damn weather balloon - it was what it was billed when people first reported it. It was a craft that clearly did not come from this planet, it crashed and I don’t doubt for a second that the use of the word “remains” and “cadavers” was exactly what people were talking about.’