Posts Tagged ‘Retreat’

Krugman’s Ignominious Retreat on Quantitative Easing

December 20, 2014

In the 1980’s Paul Krugman worked at the White House under Reagan. In later decades, he somewhat mysteriously acquired a left wing reputation for what he wrote (in particular for daring to oppose the Iraq War; that, in 2003, qualified you as far out leftist). Naturally, after he got the Nobel Prize in Economics, his colossal reputation gave him great influence in the Obama administration.

Krugman gave the advice to institute a massive “Quantitative Easing”. In this the Central Bank (“Fed” in the USA) buys assets held by the largest banks (so a branch of government, the Central Bank, buys something sold by another branch of government, Government Bonds, and held by others, supposedly private parties, large banks; it’s all very absurd).

The USA and the EU engaged in trillions of Quantitative Easing.

Result?

More plutocracy than ever, as I had anticipated, more than 6 years ago by calling TARP (the lending of nearly a trillion dollars to the largest banks), Transfer of Assets to the Richest People

Increasing the money supply to banks is not increasing the money supply to people. Especially with the derivative trading being 12 times world’s GDP. So no wonder QE does not work: most of the financial activity is not about financing the real economy, but the big banks casino.

Under the last part of his reign, when Clinton demolished the Banking Act of 1933, FDR’s great work, financial derivatives trading was only 80 trillion dollars. Now it’s 800 trillions. A weakening of rules in effect only weeks ago, written by Citigroup, is now the new law…

People need money and they need work. The government is the lender, and employer, of last resort. When things go back to normal, the government can withdraw. Cyrus the great, founder of Achaemenid Persia used the government, and then, wild private capitalism: there is a time for either. Now we are at a time where governments need to provide with an economy for common people, not just an economy for fat cats.

Absent the will to do this renewal of economic activity in a civil way, the military option will show its ugly face… Yes, could start in Russia… Wait…

Here is Krugman:

“Money isn’t everything… Well, the money supply isn’t everything, either.

… I argued that it’s hard to see why anyone believes that money supply increases will do the trick after the past six years. … maybe describing my own conversion to monetary pessimism may help clarify what’s happening now. 

So, back in 1998 I was looking at Japan’s troubles, and — like Evans-Pritchard and many others now — believed that the Bank of Japan could surely end deflation if it really tried… doubling the monetary base will always raise prices, even if you’re at the zero lower bound… To my own surprise… when you’re at the zero lower bound, the size of the current money supply does not matter at all. You might think that it’s a fundamental insight that doubling the money supply will eventually double the price level, but … short-term interest rate is currently zero, changing the current money supply without … raising expected inflation — matters not at all.

And as a result, monetary traction is far from obvious. Central banks can change the monetary base now, but can they commit not to undo the expansion in the future, when inflation rises? …

But, asks Evans-Pritchard, what if the central bank simply gives households money? Well, that is, as he notes, really fiscal policy — it’s a massive transfer program rather than a conventional monetary operation… it would have no effect … households would know that future taxes will have to rise to pay for today’s gift, and save all of it.

[How silly and wealthy can Krugman be? Really poor people have no money… And very good things to spend it on, should they have any. All poor people know that, but Krugman never interviewed any of them, apparently. If the government gave the poor money, they would spend it right away. It’s actually a well-known fact that all the money given to the poor is immediately recycled in the economy!]

More Krugman:

“… Central banks aren’t in the business of just giving money away; what they do is always some kind of asset swap, in which they buy assets or make loans which then become assets. I’m pretty sure that neither the Fed nor the Bank of England has the legal right to just give money away as opposed to lending it out; if I’m wrong about this, put me down for $10 million, OK?”

Still, isn’t this just theory? Well, no. Huge increases in the monetary base in previous liquidity trap episodes had no visible effect.

And now we have the post-2008 experience, and it’s certainly not an example of central banks easily dealing with economic downdrafts.

Just to be clear, I have supported QE in both Britain and the US, on the grounds that (a) central bank purchases of longer-term and riskier assets may help and can’t hurt, and (b) given political paralysis in the US and the dominance of bad macroeconomic thinking in the UK, it’s all we’ve got. But the view I used to hold before 1998 — that central banks can always cause inflation if they really want to — just doesn’t hold up, theoretically or empirically.”

So Krugman supported Quantitative Easing for the same reason as a drunk searches for his keys below a lamp post: it’s the only thing he sees. How smart is this?

As I said, the state will have to be the employer of last resort, it has always been, and always will be. The free market is great, but it’s not really free; the state pays for it.

Patrice Ayme’

Putin’s Novorossiya Retreat?

April 17, 2014

CONFRONTED TO FORCE, PUTIN IGNOMINIOUSLY RETREATS…

…Behind A Cloud Of Aggressive Smoke.

In human matters, psychology is everything, and, in light of social standing, often the exact opposite of what it is made to appear. The negotiations in Geneva produced an accord, April 17, that gives Putin the occasion to hide his ignominious retreat under the fury of self-damaging admissions.

The good news: the accord’s core is the disarmament of all armed “civilian” groups in Ukraine under international supervision (headed by Switzerland). Putin hid his invasion behind armed groups of his agents, so he won’t be able to use them, and this is a major anti-Putin victory.

Putin will be able to go back to the routine of prosecuting homosexuals, feminists, atheists, women who dance in churches, and “fifth columnists” inside Russia.

Moscow Did Not Yet Exist, Yet Kiev Ruled A Vast Empire

Moscow Did Not Yet Exist, Yet Kiev Ruled A Vast Empire

As his foreign minister was bringing up the white flag in Geneva, Putin was giving a giant news conference, to assert his supremacy. It was delicate: he had to hide his ignominious defeat under colossal bluster.

That’s why Putin recognized his invasion of Crimea six weeks ago. Six weeks ago, soldiers in immaculate uniforms, covered with masks, equipped with the latest Russian weapons, appeared all over Crimea. They came to be known by the locals as the “little green men”. But they did not come from Mars. Now Putin admits that he sent them, and congratulates himself that “our troops acted professionally”.

Why does Putin admits this grave violation of International Law he himself committed six weeks ago, and sternly denied then? He could be prosecuted for that crime, in the future. Von Ribbentrop. Hitler’s foreign minister, was condemned to death, and hanged for that exact charge: war of aggression.

So why does Putin risk prosecution, for the entire planet to see? Because he wants to go on as President of the Russian oligarchy, at this point. To pose as a ferocious war chief, stomping over International Law, and civilization, for his now red-hot supporters, is bound to buy him time. This way, by posing as a triumphant criminal, Putin hides the fact that he just suffered a crushing defeat in Geneva, and tries to inspire shock, awe, and fear.

On the question of Ukraine, Mr. Putin repeated that Russia feels an obligation to protect ethnic Russians in eastern Ukraine who are a large minority in the region. Whatever “ethnic” means, it’s never far removed from “ethnic cleansing”.

“We must do everything to help these people to protect their rights and independently determine their own destiny,” Putin said, sounding exactly like that other self-celebrating apostle of peace and minorities, Adolf Hitler, about the Sudeten Germans (who lived inside the Czech mountains forming the border with the great Reich).

“Can a compromise be found on the Ukrainian question between Russia and America?” Mr. Putin asked. “Compromise should only be found in Ukraine, among Ukrainian actors” Putin substantively said. So far, so good.

However, Putin used, repeatedly, the same meta-argument for East and South Ukraine that he had used previously in Crimea.

Putin used the historical term “NOVOROSSIYA” or “New Russia” to refer to the part of Ukraine closest to Russia… And to the Black Sea. The term was introduced under the German princess, the redoubtable Catherine the Great, famous for, among other things, drawing and quartering alive her opponents on (what is now) Red Square.

Putin is insistently replicating his assertions of historical ties, which he used for Crimea before occupying and annexing the peninsula. He says:

“The question is to ensure the rights and interests of the Russian southeast. It’s New Russia (“Novorossiya”). Kharkiv, Lugansk, Donetsk, Odessa were not part of Ukraine in Czarist times, they were transferred in 1920. Why? God knows. Then for various reasons these areas were gone, and the people stayed there — we need to encourage them to find a solution.”

Ah, Czarist times: what Putin is longing for. Putin, Rasputin. “Russian southeast”? That is of Ukraine that Putin is speaking: Ukraine is Russian! Putin thinks God knows, but I also. Novorossiya” covered both East and South Ukraine. It was “New Russia” because Moscow had just conquered it, when it annexed it in 1783.

1783 may sound like a long time ago, from the American perspective. But not so from the European one.

Czarist Russia, and Prussia, occupied entire nations for centuries, and they, ultimately recovered their independence (through the Versailles Treaty).

Whereas the USA destroyed Neolithic Indian nations, during its genesis, some European nations, because they had their own languages, religions and very deep culture, were able to survive centuries and sometimes even millennia of occupation by hostile powers: Britannia (!), Eire, Spain, Greece, Albania, Serbia, Armenia are examples.

Ukraine is very old, more than twice older than Russia. More importantly, Ukraine’s culture did not grow exclusively, at the Mongol’s ferocious teat… As Russia’s did. So Ukraine’s culture is more worldly than the much more military-imperial overstretched oriented Russian one.

In Eastern Ukraine, up to 200 kilometers from the border with Russia, some of Putin’s Special Forces have acquired control of (some) Ukrainian armor (they then put special, prepared, orange and black symbols on them, that symbolize the struggle against Nazi Germany… a not so subtle identification of the authorities in Kiev with Nazism).

Putin explicitly denied that his Special Forces were deep in Ukraine (although even the UN says so!). His proof? They don’t wear “masqui” (masks). However he already lied about that precise point in Crimea, as he now recognizes. The trick of having his military show its face is not working: locals don’t know these very disciplined, latest equipment soldiers, who refuse to talk, or be approached, by journalists… although one of them admitted being a lieutenant colonel in the Russian army.

A damning report about what happened in Crimea, by the United Nations, came just in time.

The United Nations report, based on investigations by Ivan Simonovic, a United Nations assistant secretary general, and United Nations human rights monitors, pointed to evidence that some participants in deadly clashes in Eastern Ukraine had come from Russia.

The report said excessive use of force by Ukraine’s special police forces, the Berkut, against initially peaceful demonstrators, had radicalized protesters and led to the violence that erupted in January and February.

UN investigators found that 121 people were killed in clashes in February, as a result of severe beatings or gunshots, and that more than 150 people were still missing.

UN investigators received reports of attacks on Ukraine’s Russian minority, but these were “neither widespread nor systematic.” Instead, the report said, “greatly exaggerated stories of harassment of ethnic Russians by Ukrainian nationalist extremists, and misinformed reports of them coming armed to persecute ethnic Russians in Crimea, were systematically used to create a climate of fear and insecurity that reflected on support to integration of Crimea into the Russian Federation.”

The UN said there were numerous reports of vote rigging in the annexation referendum, complete with harassment and abductions of journalists and activists who were opposed to it, as well as the presence of armed militias, and transparent ballot boxes.

Some of the journalists and activists who disappeared have since been released, but had been tortured, the UN report added.

The UN established a human rights monitoring mission in Ukraine with outposts in five cities, and reported that Russia said it did not support the deployment of human rights monitors in Crimea.

Against such a blitz of truth, what could the Kremlin’s propaganda do?

So Putin retreated. But then, again, he is just one guy, who decides upon the Earth, Sky, and Reality itself. No checks and balances for him, except inside his unbalanced self. This is the problem with representative oligarchy: one man should not be able to say whatever comes to him, and lead everybody into war.

Conclusion? This is good. The Obama administration held to a tough line, tougher than G. W. Bush during Putin’s Georgia invasion of 2008. Europe’s three dozen countries fell in four groups, completely disorganized by their economic ties with Russia (ten times those of the USA).

What of the future? Russia is a one man show. Putin’s mind is all over the place. For example, he got so enraged about Kosovo (a few miles from Rome), in the past, that he may have sincerely believe that Kosovo is just like Crimea. A completely idiotic idea. If some people around him pointed out enough of his idiotic beliefs, he may have realized, or will realize, that he went too far.

The Organization for Security and Cooperation in Europe (OSCE) is in charge of sending observers. Interestingly, it is presided by Switzerland. Differently from what happened in the 1930s, transnational world governance is acting well, and in a timely manner. More than 100 nations voted in the UN General Assembly, against Putin’s invasion of Crimea, and that was well before the more damning facts established in the meantime.

In light of this, and the world climate report, the United Nations is acting well these days. World governance can work better than a one-man show.

Yet Crimea is now Russia, illustrating an ominous new boss, same as the old boss: force rules.

Patrice Aymé