38. April 4 raw notes
April 5, 2009 § Leave a comment
And (sorry for no time to complete today’s edit)
The council on Foreign Relations of course looks at international organizations and finds them too weak, the question has to be, if we integrate the world system, will it be an object of lust, concupiscence? Will owning it be the only game in town?
International Institutions and Global Governance Program
World Order in the 21st Century
A New Initiative of the Council on Foreign Relations
May 1, 2008
The Council on Foreign Relations (CFR) has launched a comprehensive five-year program on international
institutions and global governance. The purpose of this cross-cutting initiative is to explore the institutional
requirements for world order in the twenty-first century. The undertaking recognizes that the architecture of global
governance—largely reflecting the world as it existed in 1945—has not kept pace with fundamental changes in the
international system, including but not limited to globalization. Existing multilateral arrangements thus provide an
inadequate foundation for addressing today’s most pressing threats and opportunities and for advancing U.S. national
and broader global interests. The program seeks to identify critical weaknesses in current frameworks for multilateral
cooperation; propose specific reforms tailored to new global circumstances; and promote constructive U.S. leadership
in building the capacities of existing organizations and in sponsoring new, more effective regional and global
institutions and partnerships.
Greenspan takes a narrow view, not referencing the shift from industrial to finance capitalism.
Greeenspan, writing in the Financial Times, traced the origins of the system that broke down to “the extraordinary risk management discipline that developed out of the writings of the University ofChicago’s Harry Markowitz in the 1950s.” That skein of work had won several Nobel Prizes, Greenspan noted, for Markowitz and others. (The story of the first 35 years or so was beautifully told by Peter Bernstein in 1991 in Capital Ideas: The Improbable Origins of Modern Wall Street.)
That this specialization proceeded by spin-off had long been noted, Rosenberg wrote. Less commonly recognized was the underlying process he called technological convergence – the process by which a solution to a problem in one industry is quickly employed to solve roughly similar problems in other industries
by Bruce Webb
We have all been so busy whining about bonuses at American International Group Inc. and arguing about the so-called card- check legislation that we forgot to watch the Social Security surplus. While we were looking away, that surplus disappeared, eight years ahead of schedule.
This was immediately picked up by the Washington Post stenographers in a piece from Lori Montgomery on Tuesday Recession Puts a Major Strain On Social Security Trust Fund: As Payroll Tax Revenue Falls, So Does Surplus
With unemployment rising, the payroll tax revenue that finances Social Security benefits for nearly 51 million retirees and other recipients is falling, according to a report from the Congressional Budget Office. As a result, the trust fund’s annual surplus is forecast to all but vanish next year — nearly a decade ahead of schedule — and deprive the government of billions of dollars it had been counting on to help balance the nation’s books.
If true this would be a totally ‘Holy Crap Batman!’ moment, because per the 2008 Report Social Security ran a positive balance of $190 billion in 2007, was projected to run a $196 billion positive balance in 2008 and $212 billion in 2009 Table IV.A3.—Operations of the Combined OASI and DI Trust Funds, Calendar Years 2003-17. In fact it was still projected to be adding assets to the tune of $213 billion in 2017. How could all of that just vanish without anyone noticing?
Answer? It didn’t. Hassett is mostly just playing word games. If we back up and examine
From the LA Times, School superintendents, who have given preliminary pink slips to more than 30,000 teachers and administrators, fear that one of the solutions to the state’s ongoing fiscal problems would be to tap into the federal stimulus money to make up shortfalls.
The nonpartisan Legislative Analyst’s Office last month suggested holding back some of the federal money until the state’s budgetary picture becomes clearer. These fears prompted members of California’s congressional delegation to send a stern letter to Schwarzenegger and other state officials warning them to use the money as directed.
Making sure the money is used as intended is a concern echoing in state capitals across the nation, leading Duncan to warn states and governors against playing “shell games” or acting in “bad faith.”
“We’re holding back literally billions of dollars for the second round of funding,” he said. “States that aren’t doing the right thing will basically eliminate themselves from competition.”
Duncan is also tying the first round of money to states committing to the Obama administration’s education goals, such as developing programs that improve teacher effectiveness, boost achievement in low-performing schools and track student achievement and teacher performance through data systems.
To qualify for the second round, states will be required to reveal detailed data such as how students perform on state tests compared to more rigorous federal assessments, whether students have access to quality teachers, particularly in high-poverty areas, and whether state intervention into failing schools is working.
In the third round of funding, Duncan intends to reward states that used earlier money to create innovative solutions to improve student performance with a $5-billion “Race to the Top” fund. Examples could include increasing school hours, or developing programs in which states work together to create rigorous common standards, rather than having each state set its own.
US Treasury Secretary Timothy Geithner claims he is not seeking “to sustain weak banks at the expense of strong”. Yet the biggest five lenders in the US, led by JPMorgan Chase and Bank of America, are the weakest, holding 96% of US bank derivatives positions and almost all the net credit-risk exposure. And they are dictating federal government policy. – F William Engdahl
8. Qualitative and Quantitative Analysis in Economics
Sociology cannot grasp human action in its fullness. It must take the actions of individuals as ultimately given. The predictions it makes about them can be only qualitative, not quantitative. Accordingly, it can say nothing about the magnitude of their effects. This is roughly what is meant by the statement that the characteristic feature of history is concern with the individual, the irrational, life, and the domain of freedom. For sociology, which is unable to determine in advance what they will be, the value judgments that are made in human action are ultimate data. This is the reason why history cannot predict things to come and why it is an illusion to believe that qualitative economics can be replaced or supplemented by quantitative economics. Economics as a theoretical science can impart no knowledge other than qualitative. And economic history can furnish us with quantitative knowledge only post factum.
A confidential review ordered by Geithner in 2006 found that banking companies could not properly assess their exposure to a severe economic downturn and were relying on the “intuition” of banking executives rather than hard quantitative analysis, according to interviews with Fed officials and a little-noticed audit by the Government Accountability Office. The Fed did not use key enforcement tools until later, after the credit crisis erupted, according to its records and interviews.
The tube looks as if it was constructed out of the inner part of a huge roll of paper towels, but it is one of two surviving telescopes Galileo used in Florence in the 17th century, when he reshaped the cosmos with meticulous observations and startling interpretations. Those astronomical investigations are now being honored with international celebrations on their 400th anniversary.
But by the time we reach that telescope and the imaginative gallery it introduces, we have seen things even more remarkable: ornately decorated quadrants of enameled brass, metal calipers, arcane charts, minutely inscribed maps, spheres within spheres like compass roses from other worlds, codexes and manuscripts, cylinders, dials, rings, rods and boxes.
Some of these are extraordinarily beautiful: finely wrought, elegantly constructed, sensuously formed. Like the telescope, some also have the aura of having once been handled for profound purposes: a set of brass compasses in a battered black case are said to have been used by Michelangelo.
The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We’d just be trading the hubris of Wall Street for the hubris of Washington. The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible. Instead of rushing off to nationalize the banks, we should nurture and recapitalize what’s left of functioning markets.
We can agree on that reform. Still, one has to choose a guiding theory. To my mind, we didn’t get into this crisis because inbred oligarchs grabbed power. We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand.
Considerations of the qualities of life, of real living, have led us here.
Though mainstream economists are willing to recommend Keynesian policies in times of economic crisis, they are unwilling to change the core analytical assumptions driving modern neoclassical macroeconomics (an example of so-called”cuckoo” economics).The only satisfactory escape from this intellectual and political stew is the creation of a new, progressive Keynesian consensus. That will require placing economics at the center of the political stage.
What Really Happened to Consumer Spending
Posted by: Michael Mandel on April 02
Here’s a more detailed version of the analysis in my latest BW story. Right now it looks like personal consumption expenditures have fallen by only 0.4%, or $40 billion, over the past year (that’s nominal dollars). For an economy the size of the U.S., $40 billion is a rounding error.
Three efforts would increase the cash available for discretionary spending immediately and permanently — single payer health care, public transit, and increased wages. All three together would add an effective $8000 to $15,000 to a median household income, plus allowing people the security to relax and spend the newly available income rather than squirreling it away.
Former Treasury Official Releases Tell-All
A former senior Treasury Department official is shedding light into the Bush administration’s response to the financial crisis. In a 50 page report published as part of the Brookings Institution’s Panel on Economic Activity, Philip Swagel, who was assistant secretary of the Treasury for economic policy from 2006 until January 20, 2009, argues that political and legal constraints hemmed in the Treasury’s response more than many commentators have acknowledged.
The nature of war changed when tribes on the move saw advantage in holding ground and exploiting those they came upon — a change from raiding to conquest. With this, empire was born. A local ruler, if he survived conquest, might become a tool of the conqueror, collecting taxes and controlling the locals for the conquerors.
Few variables are as reliably correlated with economic growth as respect for private property. America’s economic strength reflects, in part, the fact that investors have historically found this a legally reliable place. That reputation is a golden goose, and destroying it would be like adding trillions to the debt.
. The success of the United States in running its war economy (during World War II) on principles so strikingly different from those that prevailed in peacetime is only the limiting case of a broad range of similar experiences in contemporary history.
Other countries by contrast have made a mess of both “dirigiste” and market-oriented solutions. They have not managed to remedy their failures in one of these directions by moving in the other one.
The moral consequences of economic growth
His First principle is “getting ahead and opportunities to do so. There is no analysis of the validity of this desire, which means leaving what one already knows, leaving one’s community.
This recovery will be long and it will give new meaning to the phrase the “jobless recovery”.
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