Political leanings

[Torurot]

From Greece to Spain
The Eurozone's Self-Inflicted Crisis
http://counterpunch.org/weisbrot05262010.html
By MARK WEISBROT May 26, 2010

The current turmoil in financial markets around the world is another illustration of the damage that can be done by a bloated and politically powerful financial sector, combined with finance ministers and central bankers who identify with this sector and have their own right-wing policy agenda.

Welcome to Europe, which has become the epicenter of the new global €œfinancial crisis.€

On Tuesday, the focus of Europe€™s troubles shifted somewhat from Greece to Spain.

At first glance it€™s not obvious that there should be a crisis in Europe at all. Even if Greece were to default on its debt €“ and this would most likely be a rescheduling or a restructuring rather than a large-scale cancellation of the bulk of Greece€™s debt €“ this would involve a relatively small amount of money compared to the resources that the EU has available to bail out any affected banks. And Spain€™s debt is much smaller, relative to its economy, than that of Greece: it€™s about 60 percent of GDP, well below the EU average of 80 percent.

But €œthe markets€ have decided that Spain is next in line for attack, and so the price of Credit Default Swaps €“ a type of insurance -- on their debt shot up today. If this sentiment grows, Spain€™s interest rates will continue to rise, and then their debt burden really could become unsustainable.

To make it worse, €œthe markets€ can€™t seem to decide what they want from these governments in order to love them again. Two weeks ago the Euro was plummeting because the financial markets wanted more blood: they wanted Greece, Spain, Portugal, and the other currently victimized countries of Europe (Italy and Ireland) to commit to more spending cuts and tax increases. Then they got what they wanted, and within a day or two, the Euro started crashing again because €œthe markets€ discovered that these pro-cyclical policies would actually make things worse in the countries that adopted them, and reduce growth in the whole Eurozone.

Unfortunately the European authorities €“ especially the European Central Bank €“ are even worse than the markets. They are less ambivalent and more committed to punishing the weaker economies by having them cut spending even if it causes or deepens recession and mass unemployment (over 20 percent in Spain).

It will be recalled that the turmoil in financial markets took a big turn for the worse on May 6 when the European Central Bank announced that it was not going to engage in €œquantitative easing€ €“ creating money €“ in order to help ease the crisis. They reversed their decision, but only partially. And the agreement reached for the so-called €œtrillion dollar bailout€ requires that any country borrowing the funds must agree to more austerity. This means that if a country like Spain does run into trouble due to increased borrowing costs, tapping the €œbailout€ funds will force them to accelerate a downward economic spiral. And where is the inflation that the ECB is worried about? The Eurozone is projected by the IMF to have 1 percent inflation for this year and 1.5 percent next year.

Imagine how much worse the United States economy would be today if, instead of responding to our recession with fiscal stimulus, near zero interest rates and a doubling of the Fed€™s balance sheet €“ we had opted for budget cuts and tax increases. That is what the European authorities are advocating for the weaker Eurozone economies.

The Greek population refuses to accept these conditions, and understandably so. The upper classes in Greece don€™t pay their taxes, and now the majority are being forced to pay the price for their cheating €“ a price greatly magnified by the irrational, pro-cyclical nature of the adjustment. Unrest is growing in Spain as well, with the largest unions talking about a general strike.

There is a class dimension to all of this, with the EU authorities and the bankers united in wanting to balance the books on the backs of the workers €“ and adopt €œlabor market reforms€ that will weaken labor and redistribute income upward for generations to come. The EU authorities and financiers believe that real wages must fall quite sharply in these countries in order to make them internationally competitive €“ but the protestors are responding with a fiscal version of €œNo justice, no peace.€

They might add: €œNo justice, no euro.€ From the beginning there have been serious economic questions about the viability and the desirability of the common currency €“ most importantly whether such a currency union was feasible among countries with greatly different productivity levels, no common fiscal policy, and a Central Bank committed only to maintaining very low inflation (without regard to employment).

The populations now suffering under EU-imposed austerity must have a real and credible threat to get out €“ or they will end up with indefinite sacrifice for the reward of lower living standards.

Mark Weisbrot is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.

This article was originally published in The Guardian

[Torurot]

The Cult of the Subprime Bankers
A Crew of Incompetents
http://counterpunch.org/baker05272010.html
By DEAN BAKER May 27, 2010

The world is suffering from the worst downturn since the Great Depression. The crisis has left tens of millions unemployed in the U.S., Europe, and elsewhere. The huge baby boomer generation in the United States, now on the edge of retirement, has seen much of its wealth destroyed with the collapse of the housing bubble.

It would be difficult to imagine a worse economic disaster. Prior periods of bad performance, like the inflation ridden seventies, look like mild flurries compared to the blizzard of bad economic news in which we are now enmeshed.

None of this is new. People don't need economists to tell them that times are bad. However, what the public may not recognize is that the same people who caused this disaster are still calling the shots. Specifically, there has been little change in personnel and no acknowledgment of error at the central banks whose incompetence was responsible for the crisis.

Remarkably, this crew of incompetents is still claiming papal infallibility, warning governments and the general public that bad things will happen if they are subjected to more oversight. Instead, the central bankers and their accomplices at the IMF are dictating policies to democratically elected governments. Their agenda seems to be the same everywhere, cut back retirement benefits, reduce public support for health care, weaken unions and make ordinary workers take pay cuts.

Given how much they have messed up, it is amazing that these central bankers have the gall to even show their face in public. They are lucky that they still have jobs -- and very good paying ones at that. (Many of the boys and girls at the IMF can retire with six figure pensions at the age of 50.) Ordinary workers, like teachers, autoworkers, or custodians, would be fired in a second if they performed as badly as the world's central bankers.

What was going through their heads when they saw house prices in the United States, the UK, Spain and elsewhere spiral upward with no basis in any of the fundamentals of the housing market? How did they think this bubble would end; did they think that trillions of dollars of housing bubble wealth could just disappear without any impact on the economy. Or, did they think the bubble would never end and that house prices would just continue to go skyward forever?

How about the central bankers who allowed the euro to be imposed on a mix of economies with very little in common and no controlling governmental organization? Did they think that wages and prices would follow the same pattern in Greece and Germany? If not, what adjustment mechanism did they envision once these widely different economies were tied to together in a single currency?

Yes, many of the central bankers are now saying that they knew the euro was a bad idea back when it was established. Some of them even muttered quietly to this effect. But the central bankers and the IMF in 1998 were not making the same bold pronouncements and issuing the same directives to elected governments about structuring the euro zone that they are now doing in telling them to dismantle their welfare states. In other words, these central bankers failed disastrously -- why do they still have jobs and why on earth is anyone listening to them?

At the top of the list of villains in this story is the IMF. Its ineptitude managed to reverse the fundamental flows of capital in the world economy. In normal times capital is supposed to flow from wealthy countries with large amounts of capital, like the United States and the European countries, to the developing countries who need capital to fuel their development. Due to the failure of the IMF to establish a workable system of international finance, the flows went in the opposite direction in a huge way. The world's poor were sending their capital to the United States because the IMF gave them little choice.

It is important to be clear about the responsibility of the central bankers and the IMF for this totally preventable disaster. The first reason is accountability, something that is very important to economists who believe in economics. Economic theory teaches us that if workers are not held accountable for poor work, then they have no incentive to do their jobs well. If the central banker and IMF crew can mess up disastrously and continue to draw their paychecks as though everything is fine, what is their incentive to do better next time?

The other reason why it is important to recognize the responsibility of the central bankers and the IMF for this disaster is so that we don't continue to take advice from people who apparently don't have a clue. Before anyone listens to Ben Bernanke, European Central Bank President Jean-Claude Trichet, or IMF Managing Director Dominique Strauss-Kahn, they should first be forced to tell us when they stopped being wrong about the economy. We cannot afford to let these subprime central bankers control economic policy any longer.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This column was originally published by Huffington Post.

[Jake_Sully]

Why don't we take this test to see where we all really are?

---> http://www.politicalcompass.org/test <---

Here's my result:

Economic Left/Right: -3.25
Social Libertarian/Authoritarian: -2.21


Where does that scale put you?

[Lefty]

Your political compass
Economic Left/Right: -4.50
Social Libertarian/Authoritarian: -4.31

I'm very close on the grid to The DaLai Lama. I guess that makes me about equally enlightened.

[manarak]

you bunch of commies !!

Economic Left/Right: 1.12
Social Libertarian/Authoritarian: -1.95

Most odd is that there are no famous people in the Right Libertarian corner... hmmm...
That means I'm a sort of right wing libertarian lunatic!

[Lefty]

Well at least 3 of us took the test. I am curious as to how some of the other members here would score on test, but either they can't be bothered to take it or are embarrassed by their scores.

[thaibound]

okay okay, lefty, you embarrassed me into taking the damn test:
Economic Left/Right: -5.88
Social Libertarian/Authoritarian: -4.31

me and ghandi? wtf?
did ghandi love ladyboys too?

[Lefty]

Heck you're more left than I am on economic and on social we scored the same.

[manarak]

What is really enlightening is that many top managers score in the fascist zone.

But I guess that is natural - if a job requires someone to tell others what to do, then most people in that position will be people who enjoy telling others what to do.

[Jake_Sully]

I hate to say this but I was brought up in a republican household.

My parents loved Ronald Reagan. But today they and I find myself at odds with the GOP.

I could write up an essay on why but its best when someone else nails how you feel in a few words that make you not want to say anything more:

"The Europeans have had it correct all these years---"ugly Americans". As a former conservative Republican, I have never seen that group have less viable content in their platform, yet cry out so loudly. I have been blogging and on Facebook, expessing my opinion of late, and pointing out basic facts in the political arena, only to have my supposed fellow Americans belittle my higher education, chastise my assertions that our country is in need of major change, and use grade school comebacks in an attempt to make their point. When did Republicans become the anti-everything party. That used to be called obstructionism. So much hate, cloaked in good old boy, love-it-or-leave-it patriotism. When our society can no longer use words in an intelligent dialogue to resolve our differences, then violence will be the resort of the fanatics. The South and MidWest political scene is but another reflection of a state where this week in South Carolina, a nineteen year-old white man shot a thirty-four year old black co-worker, then tied his body to the bumper of his truck and drug it ten miles before abandoning it on the side of the road. Racism and homophobia are alive and thriving there."

[Lefty]

So far, 4 of us took the test and posted their results. What is wrong with the rest of you? Come on, it's fun to see where you fall on the grid.

[Jake_Sully]

Maybe we should ask Jaidee to make a new thread and pin it?

[JaiDee]

Can't pin anything these days, I don't work here anymore

Haven't taken the poll yet but maybe I will after I get back from Montreal, where I am going in about 30 mins

[alan1chef]

Economic Left/Right: 5.75
Social Libertarian/Authoritarian: 0.82

No surprises here... I can't wait for November voting...California will have a Republican governor again...and a woman!

[katoeylover]

Your political compass
Economic Left/Right: 0.12
Social Libertarian/Authoritarian: 0.62