Kenneth Rogoff - Rethinking The Growth Imperative

Cambridge, United Kingdom - Modern macroeconomics often seems to treat rapid and stable economic growth as the be-all and end-all of policy. That message is echoed in political debates, central-bank boardrooms and front-page headlines. But does it really make sense to take growth as the main social objective in perpetuity, as economics textbooks implicitly assume?

Certainly, many critiques of standard economic statistics have argued for broader measures of national welfare, such as life expectancy at birth, literacy, etc. Such appraisals include the United Nations Human Development Report, and, more recently, the French-sponsored Commission on the Measurement of Economic Performance and Social Progress, led by the economists Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi.

But there might be a problem even deeper than statistical narrowness: the failure of modern growth theory to emphasise adequately that people are fundamentally social creatures. They evaluate their welfare based on what they see around them, not just on some absolute standard.

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http://www.project-syndicate.org/commentary/rogoff88/English

Mariana Mazzucato - Austerity Plans Are Based on the Wrong Diagnosis of the Wrong Problem -- And May Plunge Europe into Depression

Even if European politicians ‘get their acts together,’ the eurozone crisis will not be solved by a new ‘Fiscal Compact’ obsessed with austerity, i.e. tight rules for all member states on their spending. The agreement, which is intended to save the single currency, is not a “fiscal” anything, since that word usually refers to government spending. The plan is really an Austerity Compact – an attempt address economic malaise based on upside-down thinking.

And it won’t work. Because as John Maynard Keynes revealed, the worst thing that a government can do during a recession is to lower spending. And yes, all of Europe is in a recession, and probably a depression soon. Private investment spending is cyclical in nature -- too much during up-boom periods and too little during down periods. That’s why government spending must act as a counter-balance. Instead, what we have seen is government actions fueling private sector spending (with lower interest rates and lower taxes) in boom periods (like the 1990s), and now withdrawing spending during the recessionary period when there is not enough private investment.

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http://www.alternet.org/story/153656/austerity_plans_are_based_on_the_wrong_diagnosis_of_the_wrong_problem_--_and_may_plunge_europe_into_depression

Mike Whitney - Foreclosure Crisis Goes Global

Even though housing is in terrible shape in the US, it’s not nearly as bad as Ireland. Irish real estate is in freefall. Prices have plunged 60 percent across the country and 65 percent in Dublin. Austerity measures have sent unemployment soaring (18 percent) and housing into the doldrums. According to the Guardian, prices dipped 8 percent in the last quarter alone, “the largest ever quarterly fall in house prices in Ireland.” (“Ireland’s house prices at lowest levels since 2000″, The Guardian)

And things aren’t so hot in neighboring Spain either where housing prices slumped 7.4 percent in the third quarter year-over-year, “the fourteenth straight quarter of falls.” (Reuters) The wreckage from Spain’s housing bubble is visible everywhere, from the dysfunctional, underwater banking system, to the skyhigh unemployment (22 percent), to the droopy state revenues. The country’s dreary finances have led to the ousting of Prime Minister José Luis Rodríguez Zapatero and his Socialist government to be replaced by rightwing hardliner Mariano Rajoy. (Rajoy promises to slash government spending wherever possible, even if it means rolling back popular social programs.) Here’s more on Spains’ housing bubble from Reuters:

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http://www.counterpunch.org/2012/01/06/foreclosure-crisis-goes-global/

The Toll of Austerity: Eurozone Unemployment Hits New Record

As the U.S. Labor Department announces today that the unemployment rate has fallen to a low of 8.5%, new statistics released today from the Eurostat, the EU's statistics agency, show the soaring rates of unemployment in the eurozone.

Eurostat's data show "the highest [levels of unemployment] in Spain (22.9%), Greece (18.8% in September 2011) and Lithuania (15.3% in the third quarter of 2011)."

The Guardian notes how austerity measures have been a factor in the unemployment rate:

Public spending cuts and collapsing business confidence have sent unemployment in the eurozone to a record 16 million people, up 587,000 on the same month in 2010.

Official figures compiled by Eurostat, the EU's statistics agency, show the heavy toll taken on the workforce by austerity measures and the slowdown in the eurozone economy during 2011.

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http://www.commondreams.org/headline/2012/01/06-0

Robert Reich - The Decline of the Public Good

Meryl Streep's eery reincarnation of Margaret Thatcher in "The Iron Lady" brings to mind Thatcher's most famous quip, "there is no such thing as "society.'" None of the dwindling herd of Republican candidates has quoted her yet but they might as well, considering their unremitting bashing of everything public.

What defines a society is a set of mutual benefits and duties embodied most visibly in public institutions -- public schools, public libraries, public transportation, public hospitals, public parks, public museums, public recreation, public universities, and so on. 

Public institutions are supported by all taxpayers, and are available to all. If the tax system is progressive, those who are better off (and who, presumably, have benefited from many of these same public institutions) help pay for everyone else. 

"Privatiize" means pay-for-it-yourself. The practical consequence of this in an economy whose wealth and income are now more concentrated than any time in 90 years is to make high-quality public goods available to fewer and fewer.

Read More:

http://www.opednews.com/articles/The-Decline-of-the-Public-by-Robert-Reich-120105-150.html

Chaz Valenza - It's Official -- Gov Stats Shows the Middle Class is Dead

There was once a middle class in America, and if you were an average worker you were part of it, but not anymore.  

Peruse last year's government figures for the average American family's spending and debt.  The conclusion is dumbfounding: it's official, 2011 was the year the middle class died.  

Long live the "Lower Class"

To Americans, being middle class means two things:  more or less average wages that paid for life's necessities with cash leftover for discretionary spending.  

In a country where those from the marginally poor to the marginally rich claim to be in the middle, the US Bureau of Labor Statistics (BLS) set a factual standard: the Average American Consumer Unit.

The BLS's statistically computed family, with 2.5 humans and 1.3 workers, is a fictional construct.  But, it is also the one true benchmark that pinpoints the dead center of the American worker's economic situation.  

Read More:

http://www.opednews.com/articles/The-Middle-Class-Vanishes-by-Chaz-Valenza-120101-954.html

Eric Zencey - The Infinite-Planet Approach Won’t Solve The European Debt Crisis

By Eric Zencey//22 December, 2011

http://countercurrents.org/zencey221211.htm

Last week European leaders met in Brussels and, like sophomores cramming before a final, pulled an all-nighter. Their exam was a real-world project: restore investor confidence in the Eurozone. A lot of pressure was put on David Cameron to bring the UK into the new agreement; he was adamant in his refusal. Even without the UK, the measures that the Eurozone nations have announced may restore investor confidence, but one thing is certain: they shouldn’t, because they’ll fail miserably at staving off future financial crisis.

That’s because “restoring investor confidence” and “fixing the broken system” are two very different goals.

If more investors were like Jeremy Grantham, who’s got a clear view of the origin of the financial crisis, the two would line up a lot better. But most investors, like all of the policy makers who met in Brussels, are working out of an old-fashioned and mistaken economic model. Restoring confidence in a system built on that model isn’t going to fix what’s wrong.

What, exactly, is wrong? The New York Times articulated the conventional thinking when it opined, a few days before the all-nighter in Brussels, that the root of the debt crisis is “lack of growth.” The first step toward success in solving any problem is to define it accurately, and the conventional diagnosis gets it wrong because it looks at just half the problem. A more complete diagnosis: Some of the European economies haven’t been able to grow fast enough to pay back the burden of debt that has been wagered on them.

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Mike Whitney - The $600 Billion Ripoff

December 28, 2011

How Draghi Rigged the System

by MIKE WHITNEY

 

http://www.counterpunch.org/2011/12/28/the-600-billion-ripoff/

European Central Bank president Mario Draghi is either a liar or a fool.  Either way, he should be canned immediately before he dumps more money into an EU banking system sinkhole.

What’s all the fuss about? Here’s a clip from Bloomberg that explains what’s going on:

“The European Central Bank said overnight deposits from the region’s financial institutions increased to an all-time high. Euro-area banks parked 452 billion euros ($591 billion) with the Frankfurt-based ECB yesterday, the most since the euro’s introduction in 1999 and up from the previous record of 412 billion euros a day earlier.

The ECB last week lent 523 banks a record 489 billion euros for three years to keep credit flowing to the 17-nation euro economy during the sovereign debt crisis. It lent the money at its benchmark rate of 1 percent. Banks are depositing excess cash back with the ECB at the overnight rate of 0.25 percent, incurring a loss rather than lending it at a better rate.

Barclays Capital estimates the three-year loans injected 193 billion euros of new money into the system, with 296 billion euros accounted for by maturing loans. Since the three-year loans started on Dec. 22, overnight deposits have jumped by 187 billion euros, suggesting banks are parking almost all the additional liquidity back with the ECB.” (“ECB Says Banks Increased Overnight Deposits to All-Time High”, Bloomberg)

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Walden Bello - The New German Colossus

by WALDEN BELLO

http://www.counterpunch.org/2011/12/28/the-new-german-colossus/

Germany towers over Europe like a colossus. Its economy is the biggest in the European Union, accounting for 20 percent of the EU’s gross domestic product. While most of Europe’s economies are stagnating, Germany’s will have grown by some 2.9 percent in 2011. It boasts the lowest unemployment rate, 5.5 percent, of Europe’s major economies, compared to those of France (9.5 percent), the United Kingdom (8.3 percent), and Italy (8.1 percent).

In many ways, Germany is like Japan. Both countries were forced to give up armed expansion during the Second World War, only to have the national energy channeled into building formidable economies. But whereas Japan faltered in the 1990s, Germany has steadily plowed ahead, becoming the world’s biggest exporter from 1992 to 2009, replaced in first place by China only in 2010.

With the recent agreement by most EU countries to move toward tighter coordination of fiscal policies, the prime mover of which was Germany, Germans and other Europeans alike feel that a new era of German primacy has begun. Not only is Germany the strongest economy in Europe; it is also now writing the rules of economic governance.

Unbalanced Relationship?

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Bob Chapman - Grim Economic Prospects for 2012 -- Social Upheaval, Bank Defaults and Financial Chaos

By Bob Chapman

Global Research, December 28, 2011

http://globalresearch.ca/index.php?context=va&aid=28381

The game goes on, as German leadership tells us the euro is stable, even as it hits yearly lows. We are told the problem is a crisis in several member states. That may be true, but they all are inseparable. The reassurance from politicians and bankers to calm the market place is beginning to fall on deaf ears. No matter what the cause of the debt crisis it exists and leadership as yet cannot find a solution. Even short-term solutions, such as the use of the EFSF are not going to work. All they will do is gain time. In that process, what happens if France’s credit rating is cut one or two levels? How can France then continue to participate? 

The present French government has buried the government in losing investments, which we believe in June will force the electorate to choose the Front National to solve national problems. The public, as in most other countries are sick and tired of lies and incompetence from politicians, bankers and bureaucrats possessed with the creation of world government. At this point confidence in the euro is hanging by a thread and Europe’s leadership doesn’t know how to solve the problem. We have seen such crises of confidence often over the past 15 years. It is not unique, but the size of the euro zone is compelling, because the crisis touches so many people. Currency is the vehicle to bring about a solution, but if confidence is lost the currency cannot perform part of its role as monetization continues unabated, confidence continues to fall and inflation as a result flourishes.

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