Tag: financial history

Big in Japan

Big in Japan

As I see it, Japan’s problem was that during the 1980s it was so addicted to investment-led growth and artificially cheap financing that it misallocated capital on a massive scale and failed to include the resulting implicit losses in its GDP calculations. If you look at real per capita household income and household consumption growth during the period of Japan’s stagnation, you will find that both of them rose fairly rapidly. This isn’t what typically happens during a US-style financial crisis, when household income suffers.

Falling Oil Prices: A Worrying Trend and Saving Grace

Falling Oil Prices: A Worrying Trend and Saving Grace

When oil prices start to decline, investors and economists get worried. Oil prices in large part reflect global sentiment towards our economic future – prosperous, growing economies need more oil while slumping, shrinking economies need less, and so the price of crude indicates whether the majority believes we are headed for good times or bad. That explains the worry – those worried investors and economists are using oil prices as an indicator, and falling prices indicate bad times ahead.

US real 10 year yields at record 225bpt discount to JGBs

US real 10 year yields at record 225bpt discount to JGBs

PIMCO, the world’ largest bond fund call this suppression of yields financial repression because it means savers and bond investors get negative real returns. However, John Hempton pointed out that in Japan, where this monetary policy is well-advanced, deflation has set in and real yields are positive despite the zero-rate interest policy (ZIRP).

Bretton Woods, R.I.P.

Bretton Woods, R.I.P.

Richard Nixon unilaterally closed the gold window 40 years ago today. No longer would the U.S. permit other countries to exchange their dollars for gold and by breaking that link, he ended the Bretton Woods international financial regime and ushered floating exchange rates that characterize the modern era.

Policy Conclusions for Russia (Part 2)

Policy Conclusions for Russia (Part 2)

Can Russia get the best of both worlds by freeing its economy from technologically unnecessary charges and rentier tolls paid to special interests? Such expenditures prevent the economy from developing. That is the basic cause of poverty – and hence of national decline. Now that neoliberal financial lobbyists have turned Progressive Era economic reforms upside down, it is necessary to “reform the reformers” in order for Russia to rebuild its economy in the way that made the U.S. and Western Europe so successful during their economic takeoffs.

Russia’s Economic Interests (Part 1)

Russia’s Economic Interests (Part 1)

The neoliberal idea is to dismantle the government’s ability to regulate markets to steer growth and economic advance in the national interest. They claim that this is an alternative to centralized planning. But the reality is that it simply centralizes planning in the hands of bankers – primarily those of Wall Street and the City of London, followed by financial interests in satellite economies and other subordinate partners in this policy.

Hudson: Traditionally war spending has driven deficits

Hudson: Traditionally war spending has driven deficits

Michael Hudson and William Hartung make the argument that military spending was exempted from cuts in the debt ceiling deal because it had strong backers who protected it. They also reveal that the US debt ceiling was put into place to keep Woodrow Wilson from overspending during World War I as military conflicts have traditionally been the real budget busters for governments.

Ben Bernanke and J.P. Morgan on Gold

Ben Bernanke and J.P. Morgan on Gold

On July 13, 2011 Chairman Bernanke explained: “The reason people hold gold is protection against tail risk, really, really, bad outcomes. To the extent that the last few years have made people more worried about the potential of a major crisis, then they hold gold as a protection.”