Tag Archive for 'credit crisis'

The Australian economy’s biggest problem? Barack Obama

Published
by
Mark
1 year ago
in Economics, Markets and USA
. 49 Comments

Politically, much of the resilience of Kevin Rudd’s government in the face of the economic downturn is explicable by voter perceptions that the causes of the crisis are external to this country – the Global Financial Crisis.

While that’s largely true, it doesn’t mean that only unseen structural forces are to blame. We could debate the responsibility of people like Alan Greenspan til the cows come home (and others have). But we don’t need to – we can look at a much more contemporaneous cause of the ongoing mess.

As Paul Krugman argues, the “dithering” of the Obama administration is a huge worry. There appears to be a bedrock ideological resistance to taking banks into public ownership (albeit temporarily). Hence all the talk of “zombie banks” and the continuing lack of liquidity in credit markets. Nothing has been done – effectively – to track down the toxic debt, and credit markets remain close to frozen.

Kevin Rudd is right to blame ideology for a large part of the world’s current economic woes. But the closest thing America has to a social democratic administration is compounding, not ameliorating the problems.

We’re all rooned!

Published
by
Mark
1 year, 4 months ago
in Economics, Markets, Media and Sociology
. 36 Comments

Malcolm Turnbull, whose peregrinations around themes on economic management I documented earlier, might actually be revealing some method in his madness. Possibly the regular calls for bipartisanship always follow the beatups and ranting and raving over alleged government incompetence. It may be designed to suggest that he’s always willing to assist, and it’s only the partisan refusal of his expertise by the government that is the root of every conceivable problem. On the other hand, I might be reading a lot more into Turnbull’s frenetic pontificating than is justified – simply by reading too much reportage of his endlessly expressed views. Maybe he’s picking up some bad habits from Twitter?

In any event, it’s been interesting to see some more clarity emerging about the issues surrounding various types of investment funds freezing withdrawals – including the fact that there are 190 000 Australians with such investments. Turnbull has certainly been carrying on as if the problem is of much greater dimensions than that. Bernard Keane raises one salient issue in Crikey:

The demand by cash management funds and mortgage trusts that they also get a government guarantee is one of the more shameless try-ons in an era of particularly refined rent-seeking. Why don’t we guarantee all listed companies while we’re at it? It would be heartlessness of titanic proportions to dismiss the concerns of shareholders about their investments.

It’s also becoming clearer that some of these investment vehicles have been in some trouble for quite some time, though it’s worth noting that in most instances, investors still have access to distributions and dividends even if their capital is temporarily not liquid. But it does look as if the “all the fault of the government and that bank guarantee” narrative is – at best – vastly overstated. Meanwhile, as Keane also observes, the News Limited papers are full of heart-tugging stories about hardship which conveniently support the opposition’s “narrative”. Continue reading ‘We’re all rooned!’

The state of capitalism today II

Published
by
Mark
1 year, 5 months ago
in Apocalypse, Disasters, Economics, Europe, Foreign Elections, International, Markets, Media, Nationalism, Politics, Sociology and USA
. 28 Comments

SocProf over at The Global Sociology Blog and I must be reading the same things, and thinking along similar lines, because I had planned to link to precisely the same articles she highlights in an update to my recent post on the state of the global financial crisis.

In The Guardian, Will Hutton explains why measures to halt the cascading crisis have been ineffectual to date. He might have made more explicit the implication that one of the basic structural problems is that action taken at the level of the nation state can be counter-productive given the disseminations and movements of capital, and that there are real domestic political barriers to coordinated action, as well as all the obvious problems of concertation through institutions such as the EU and the G20.

But he does make this point – harmonising with the note I’ve been sounding repeatedly – very clearly indeed:

There was no effective opposition. The left and organised labour collapsed as intellectual, social and political forces; there was no conviction that any alternative to this shareholder value-driven, financial, ’securitised’ capitalism existed, or any political muscle to support it even if there were. Mainstream culture moved away from public purpose and fairness; the new priorities were individual self-fulfilment, personal experience and loyalty to self.

Hutton is perhaps more sanguine than I am, though, about the capacity of state action to turn all this around. Continue reading ‘The state of capitalism today II’

The state of capitalism today

Published
by
Mark
1 year, 5 months ago
in Activism, Consumerism, Culture, Economics, Ethics, International, Markets, Media, Politics, Poverty, Sociology and USA
. 89 Comments

Iceland may be a barometer for what’s changing in the world economy. It was only very recently that the Milton Friedman fan club was hailing Iceland as a “Nordic Tiger”, lauding its flat taxes and praising its “economic freedom”. “Economic miracle” was a common phrase. What’s it looking like after the credit crisis?

Iceland right now is apparently in a state of shock and gives a snapshot of what a depression with the Great in it will look like everywhere – “cafes were half-empty, real estate agents sat idle, and retailers reported few sales” says the AP.

This after the government basically took over its banking sector, with Russian money, which as noted in the linked post, has real geopolitical implications.

Meanwhile, the British government is laying out 500 billion pounds to take equity in its banking sector, but basically proposing business as usual. Co-ordinated interest rate cuts are having very little impact on the stock market, and more worryingly, on the liquidity crisis. Paul Krugman writes:

We’re way past the point at which conventional monetary policy has much traction.

In America, in the eye of the economic storm, the Fed has basically become the financial system, but to little avail:

The time for a recession was 2005. At that time simple macroeconomic policy; simply raising interest rates, would have ended the bubbles in credit and housing at the cost of a standard if somewhat nasty recession. Trillions of dollars of intervention would not have been needed. Just standard macro policy. Even in 2006 it might still have worked. The Fed blew it, and they broke the system, and now with the system broken they may have to either buy it all out (and Paulson may be considering that after all) or just become the system. And even if they do that may not work, because, well, who wants to borrow and invest right now?

Bernanke and Greenspan are certainly in the “worst Fed chairman of all time” stakes in a big, big way.

Continue reading ‘The state of capitalism today’

Liveblogging the House debate on the TARP bailout bill

Published
by
Kim
1 year, 5 months ago
in Blogging, Economics, Foreign Elections, Markets and USA
. 8 Comments

Earlier on tonight, the indications were that the US House of Representatives would be voting around 2am AEST on the revised version of the TARP bailout bill (with extra billions of dollars in pork to attract lawmakers’ votes – added in the Senate amendment which John “Against Earmarks and Wasteful Spending” the Maverick McCain duly voted for). It doesn’t look like that’s the case because a lot of Congressthings want to go on record for their constituents by speaking on the House floor (and/or because they have to ask questions now because the bill has never been subjected to legislative hearings, as is normal in the US Congress).

Anyway, I’m off to bed. But you can follow what’s going on via this liveblog from Catherine Rampell at the NYT’s Economix.

NB: Previous discussion and commentary at LP on the bailout, the financial markets crisis and the ramifications can be accessed here.

Update: via danny in comments -

1:25 p.m. | Bill passes: The bill passed 263 to 171. The vast majority of Democrats voted in favor (172 yeas to 63 nays), while a slighter majority of Republicans voted against (91 yeas to 108 nays).

Reaction and commentary over the fold.

Continue reading ‘Liveblogging the House debate on the TARP bailout bill’

House Republicans – quote of the week – it’s Dostoevsky, stupid!

Published
by
Kim
1 year, 5 months ago
in Economics, Levity, Markets, Politics and USA
. 14 Comments

Timothy Garton Ash, writing in The Guardian, has picked it:

Continue reading ‘House Republicans – quote of the week – it’s Dostoevsky, stupid!’

US economic crisis policy links post; and Obama and the economy

Published
by
Mark
1 year, 5 months ago
in Economics, Foreign Elections, Poverty, Sociology and USA
. 10 Comments

One point of view that’s been expressed about the financial markets crisis can be summed up by something I read at Crooks & Liars today:

Have you noticed that every person suddenly knows everything there is to know about how the economy works? Wow, it’s all so simple.

Maybe there’s a point there, but not the one John Amato thinks he’s making. I’ve consistently been of the view that the economy should be a subject for civic and political discussion, and that we shouldn’t hold back because of the “not an economist!” cries that sometimes echo around the place. If one of the continuing problems with the US financial sector is the lack of transparency which is causing the crisis of solvency – because no one still knows where all the securitised bodies are buried – so too a bit of transparency in demystifying the fiscal arcana whose complexity was part of the reason for this mess should be welcomed.

So, with that in mind, I wanted to share some links (from econobloggers and non-economists both) I’ve found particularly insightful and interesting over the last few days.

Continue reading ‘US economic crisis policy links post; and Obama and the economy’

Here’s something a bit interesting

Published
by
Kim
1 year, 5 months ago
in Economics, Markets and USA
. 4 Comments

Some Democratic congressfolks have had the intriguing and unorthodox idea that the role of Congress is to legislate. Ian Welsh has the details on the preparation of alternative bills to the Paulson take it or leave it (with bells and whistles to entice you to vote for it added in the Senate!) TARP measure.

I’m not sure, though, how “market sentiment” of “it’s 700 billion or the apocalypse” will deal with this development.

More at OpenLeft.

Ps: Paul Keating on Lateline last night made some very instructive points about why pumping liquidity into markets isn’t working and why Malcolm Turnbull is playing a populist game on interest rates.

Continue reading ‘Here’s something a bit interesting’

Playground politics

Published
by
Kim
1 year, 5 months ago
in Economics, Foreign Elections, Markets and USA
. 18 Comments

The Nancy Pelosi speech that made the Republicans cry:

Context in this post about the Congressional rejection of TARP.

Is neoliberalism finished?

Published
by
Mark
1 year, 5 months ago
in China, Developing world, Economics, Foreign Elections, Foreign policy, International, Markets, Philosophy, Politics, Sociology, USA and War
. 74 Comments

The question’s in the air at the moment. In the Australian blogosphere, John Quiggin thinks the financial markets crisis has killed it off, while Nicholas Gruen is (rightly in my view) more skeptical. [In response to commenters, Quiggin goes on in another post to define what he means by neoliberalism.]

From my (sociological) point of view, the shorter answer to the question is – no.

In fact, I think the way the question’s posed reflects a number of category mistakes. Continue reading ‘Is neoliberalism finished?’

The end of financialisation? II

Published
by
Mark
1 year, 6 months ago
in Economics, International, Markets, Media, Sociology and USA
. 62 Comments

As a supplement to earlier posts on the sociology of the global financial crisis from Kim and dk.au, I thought I’d note something very interesting written by Henry Farrell at Crooked Timber. Farrell traces the shift in paradigm in the regulatory architecture of finance, one that has supplemented the first shift away from direct involvement of the state in economic ownership:

The second is more specific and recent – the tendency to replace ‘heavy-handed’ forms of regulation with ‘regulation with a light touch’ and self-regulation. This has been most marked in Anglo-American economies, but other countries (in continental Europe and elsewhere) have faced persistent ideological pressures to move in this direction. This is a large chunk of the so-called ‘reform’ agenda that the Economist magazine, the OECD and other such bodies keep pushing. Both of these shifts are largely ideological – that is, they gained much of their impetus from changes in the ideas which constitute policy-makers’ shared collective wisdom about how to deal with the economy.

The second shift (the reform agenda) is now a busted flush. Its proponents are in disarray (if I’m feeling in a vindictive mood, I may well buy a copy of the next Economist to see how its editorialists try to rationalize all of this).

Any reasonable assessment of the actions of the Fed and the US Treasury would suggest that they’re driven by confusion and are very much ad-hoc measures. Neither Bernanke nor Paulson seems to have much of a big picture grip, and politicians reciting “the fundamentals are sound” is clearly not going to cut the mustard now, even, as with John McCain, precipitating something of a backlash.

John Quiggin has speculated on how all this will play out. The confusion has led to some quite bizarre moments, such as pundits on Lateline Business declaiming “capitalism is in crisis” and “the financial markets may not be viable”. What we’re seeing – among other things – is a decomposition of that abstraction “the markets” and a reduction of these so-called impersonal forces to the panicked reactions of individuals. If Robert Skidelsky is right, and a tipping point has been reached, it begs a very big question, which Farrell answers in terms of process (because no one can know the outcome of such a fluid conjuncture). Continue reading ‘The end of financialisation? II’

The end of financialisation?

Published
by
Kim
1 year, 6 months ago
in Economics, Markets and Sociology
. 139 Comments

As a bit of a follow up to the recent posts here on the crisis in the financial markets, and in particular dk.au’s piece on the way “facts” work in collective economic behaviour, I wanted to draw attention, firstly, to a comment from John Quiggin:

Having reached this point, it’s hard to see how the US can turn back from a massive extension of financial regulation, starting with the derivative markets where AIG got into so much trouble, notably those for credit default swaps (CDS). Along with winding up the affairs of AIG, Lehman and others, the authorities will need to oversee an orderly unwinding of the transactions in these markets which they are now effectively guaranteeing. More generally, it’s time for a partial or complete reversal of the financialisation of the economy that took place after the breakdown of the Bretton Woods system back in the 1970s.

That needs to be read in conjunction with a column in The Guardian by Robert Skidelsky, the distinguished biographer of Keynes. Skidelsky argues that we’re at a conjuncture – a tipping point where one “cycle of economic fashion” gives way to another.

Continue reading ‘The end of financialisation?’