Category Archives: Finance

Goldman Sachs win the race to the White House


It’s official.

Coolidge is no longer cool.

In his famous address to the address to the Society of American Newspaper Editors in the nation’s capital on 17 January 1925, President Calvin Coolidge famously declared that “the chief business of the American people is business.”

But unlike Coolidge, the motto of the looming Trump administration is “the chief business of the American people is banking.”

For proof, look no farther than his appointments,.

From the Associated Press:

In the heat of the presidential campaign, Donald Trump accused primary rival Ted Cruz of being controlled by Goldman Sachs because his wife, Heidi, previously worked for the Wall Street giant. He slammed Hillary Clinton for receiving speaking fees from the bank.

“I know the guys at Goldman Sachs. They have total, total control over him,” Trump said of Cruz. “Just like they have total control over Hillary Clinton.”

Now, Trump is putting Goldman executives at the helm of his administration’s economic team. He’s expected to name bank president Gary Cohn to an influential White House policy post, according to two people informed of the decision, and has already nominated former Goldman executive Steve Mnuchin to lead the Treasury Department. Steve Bannon, Trump’s incoming White House senior adviser, also worked at Goldman before becoming a conservative media executive.

>snip<

[T]he financial industry’s high-level presence in Trump’s burgeoning administration runs counter to some core campaign messages that energized his supporters.

The concentration of power among so many players who once worked at Goldman is sure to feed suspicions of a government at the service of Wall Street. Goldman was involved in the securities market for subprime mortgages, the same financial instruments that helped fuel the housing bubble and ultimately led millions of Americans to lose their homes to foreclosure. Wall Street executives also opposed the Dodd-Frank financial reform legislation signed by President Barack Obama. . .

But clear signals were sent

The appointments should come as no surprise to anyone who followed Trump’s campaign, who signaled in May that his promises to rein in Wall Street greed were just for show.

Back in June Fortune, Wall Street’s virtual house organ, reported this:

“Dodd-Frank has made it impossible for bankers to function,” he says.

Republican presidential candidate Donald Trump said on Tuesday that sweeping financial reforms put in place under President Barack Obama were harming the economy and he would dismantle nearly all of them.

Trump told Reuters in an interview that he would release a plan in about two weeks for overhauling the 2010 financial regulatory law known as Dodd-Frank.

“Dodd-Frank has made it impossible for bankers to function,” the presumptive Republican nominee said. “It makes it very hard for bankers to loan money for people to create jobs, for people with businesses to create jobs. And that has to stop.”

Pressed on the extent of the changes he wanted to make, Trump said, “it will be close to dismantling of Dodd-Frank.”

French central bank warns of a global slowdown


Thee global economic is engaged in a slow-moving crash.

When you consider the reasons, it’s inevitable.

While the rich are getting richer , everyone else is stuck or heading down [see our earlier posts].

And the rich are getting richer because their wealth is invested heavily in the  parasitical FIRE sector, the finance, insurance, and real estate markets,

Real economic growth, based on the consumption of goods and services, can’t happen without growth in the wages of the working and middle classes, the driving factors leading to consumption of those tangible goods and broadly used services.

But corporate mergers are producing cuts in pay and benefits, with cash assets stripped away and pocketed by plutocratic plunderers, rather than being shared with those folks whose labors produced all that wealth and could use their enlarged share of the pie to actually grow the economy [and, yes, we’re well aware that endless economic growth is itself problematic in the longer run].

And to buy what goods they can, people are increasingly forced to turn to debt, either through bank loans or credit cards, paying ever-higher rates of interest to the FIREy plutocrats.

And with education being privatized or subjected to reduced state subsidies, ever larger numbers of young people are being forced to take loans to attain educations once taken for granted.

And the FIRE folks get richer again.

And now for the warning, via Agence France Presse:

France’s central bank trimmed its growth forecasts for 2016 and 2017 on Friday, citing a deterioration in the global economy and Britain’s decision to leave the European Union.

The Bank of France revised its 2016 and 2017 growth forecast down to 1.3 percent, having previously expected growth of 1.4 percent this year and 1.5 percent next year.

It also predicted growth of 1.4 percent in 2018, down from its previous figure of 1.6 percent.

“In 2017 and 2018, the downward revision of our GDP growth projection… is mainly due to the deterioration in the international environment,” it said in a statement.

“The projection is thus particularly affected by less favourable foreign demand prospects.., notably as a result of the impact of Brexit on the UK economy and of its dissemination to the euro area economies.”

Understanding the predatory FIRE sector

For more on the current slowdown and its causes and the predatory nature of the FIRE section, watch this very informative German television interview with University of Missouri-Kansas City economist Michael Hudson, perhaps the most incisive commentator of the modern economic conditions:

Michael Hudson: How Private Debt Makes the Rich Richer

Program notes:

Michael Hudson talks about the causes of inequality in the 21st century

Our author Michael Hudson summarizes some important theses from his book “The Sector – Why Global Finance Is Destroying Us”.
The interview took place on the occasion of the 16th International Literary Festival in Berlin for a symposium titled “Inequality in the 21st Century. Progress, capitalism and global poverty. “ The authors, Angus Deaton, David Graeber and Michael Hudson, presented the most important theses of their current books.

Michael Hudson Bio: Michael Hudson is one of very few economists – globally – who perfectly predicted the 2008 financial crisis.

Michael is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Killing the Host (2015), The Bubble and Beyond (2012), Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971), amongst many others.

ISLET engages in research regarding domestic and international finance, national income and balance-sheet accounting with regard to real estate, and the economic history of the ancient Near East.

Michael acts as an economic advisor to governments worldwide including Iceland, Latvia and China on finance and tax law.

Greeks hold strike, marches against austerity


With the reign of austerity continuing in Greece, an ultimatum accompanying the modest debt relief granted the nation by the financial oligarchs of the Troika earlier this week, Greeks held a general strike today and turned out on the streets.

From Kathimerini:

A nationwide strike in Greece against spending cuts disrupted public transport, state-run schools, ferries and national rail services Thursday, and left public hospitals running with emergency staff.

More than 7,000 demonstrators marched in three separate demonstrations in the capital to protest against cost cuts the government is taking to satisfy its bailout creditors.

“We can either accept our continuing descent into poverty or fight against it,” theater actor Dionysis Xenakis said.

He was joined at the rally by musicians playing drums, as a nearby group of demonstrators chanted “People, fight back. They’re drinking your blood.”

Protests were held in cities around Greece, with more than 5,000 at marches in the country’s second largest city, Thessaloniki.

Troika agrees to modest debt relief for Greece


Greece, the European nation hardest hit by the Wall Street-sparked Great Recession, has been granted some modest debt relief, but conditions set the Troika [the International Monetary Fund, European Central Bank, and European Commission] mandate that the regime of austerity continue.

That means that cutbacks in pay, pensions, healthcare, and other social programs will continue, along with privatization of national resources and higher taxes on necessary consumer goods.

But the conditions set also require that the government maintain a high surplus, a measure ensuring that austerity pains will continue.

From Ekathimerini:

Monday’s decision at a Eurogroup meeting in Brussels to approve short-term debt relief measures for Greece was a “decisive step towards stabilizing the Greek economy and restoring trust,” the government spokesman said on Tuesday.

Speaking to the press, Dimitris Tzanakopoulos said that the government will continue negotiations with its eurozone partners for longer-term measures to reduce Greece’s huge debt pile, but stressed that Athens will “under no circumstances” agree to more belt-tightening once the bailout program is complete.

Tzanakopoulos was referring to the International Monetary Fund, which has demanded more structural measures in order to join the Greek program.

“The IMF cannot pressure the Greek government for new measures and not its European partners for lower primary surplus targets,” Tzanakopoulos said, referring to a demand that Greece maintain a primary fiscal surplus of 3.5 percent after 2018, a factor considered crucial by the IMF.

His comments echoed those of Finance Minister Euclid Tsakalotos who warned international creditors, including the IMF, on Monday not to pressure Athens to implement measures it had not previously agreed to.

But the IMF isn’t as happy with the deal as Tzanakopoulos indicated and has called for a halt to further austerity measures, as well as a lower GDP surplus, reports To Vima:

The International Monetary Fund welcomed the short-term debt relief measures that were announced at the Eurogroup, however it noted that they are not sufficient.

An IMF officer reportedly told Bloomberg that the Fund insists that the primary surplus targets after 2018 must not exceed 1.5% of the GDP, since anything higher is unrealistic.

As the officer commented, the targets set must not require austerity and argued that the fewer years the high targets are maintained, the lesser the impact will be on the country’s growth, since the 3.5% GDP target will require additional reforms in the pension and tax system.

The officer also called Athens and Brussels to present measures to be taken, should the primary surplus target of 3.5% be maintained after 2018.

The Troika’s official statement is posted here.

Finally, some debt relief for Greece on the table


After cutting out their pound of flesh from Greeks workers, the poor, the disabled, and their schools, as well as forcing their sale of much of their national wealth, the Troikarchs may be cutting the beleaguered nation a little slack.

Greek was the nation hardest hit by the Great Recession, the crisis ignited by the greed of banksters in Wall Street and London,, and they’ve paid the highest price for the ensuing crisis.

From Kathimerini:

Eurozone finance ministers hope to forge a compromise on Greek reforms on Monday in a final push to secure the support of the International Monetary Fund for Athens’s bailout program by the end of the year.

The 19 ministers of the currency bloc were holding their regular meeting a day after Italian voters rejected constitutional reform plans in a referendum, putting the euro under renewed pressure and reigniting the smoldering eurozone crisis, further complicating the Greek talks.

Athens is required by its eurozone creditors to pass wide-ranging reforms and sell state assets under an 86 billion euros ($92 billion) bailout program, but negotiators have not been able to agree on labor and energy reforms or Greece’s 2018 fiscal targets, leaving ministers to close the remaining gaps.

A deal would allow discussions on substantial relief measures for Greece, whose debt, at about 180 percent of gross domestic product, is the highest in the eurozone.

Meanwhile, the banksters who caused it all continue to collect their billions in bonuses. and continue to toast their greed aboard their yachts, rather than eating the swill in the prisons where they belong.

Chart of the Day: The elephant in the room


blog-econ

From the Yomiuri Shimbun, offering a sharp critique of neoliberalism which notes:

U.S. leaders seemingly assumed that economic inequality among citizens would not significantly increase as a result of their policies. This is because they believed in the “trickle down” theory, whereby an increase in the number of wealthy people and large corporations would stimulate the economy and gradually benefit poor people and smaller businesses.

But this trickle down never happened.

Manufacturers moved their production facilities to emerging economies with cheap labor, such as China. Laborers in developed economies were forced to take lower-paid work. Investors started demanding more dividends from successful companies, leading them to prioritize payments to investors over increasing the salaries and benefits of their employees. Large corporations transferred their profits to tax havens to evade taxation.

>snip<

[W]hite laborers — the driving force of Trump’s victory — have fallen to a position of vulnerability over the past 30 years of neoliberalist policy. Perhaps it was a matter of course that their distrust of established politics could not be overturned.

Real estate tycoon Donald Trump is undoubtedly a “winner” in the stratified society. The policies he proposes, such as improving infrastructure, have the potential to boost the economy for the time being. But they also include generous tax reductions for the rich and lower corporate taxes, which could go in the opposite direction of the attempts to rectify disparity.

The many contradictions contained in Trump’s policies are the result of an attempt to attract a wide range of voters.

Quote of the day: A call for resistance in Greece


As the austerians demand yet more draconian cuts as a condition for further financial assistance to a Greece reeling from the Wall Street bankster-created Great recession, a call for action comes from Stavros P. Psycharis, president of the Lambrakis Press Group, publisher of the influential newspaper To Vima:

It is clear that we are faced with the most serious financial crisis that Greece has ever experienced. For the past seven years the country cannot move forward aside from within the economic paths set by our foreign “rulers”. The United Europe is losing respect for Man and its political leaders are seemingly turning into second-rate cash lenders.

Against this situation, Greece must resist, fight and win. It is unacceptable to be blackmailed by a mob of “technocrats” who propose and impose measures like the village doctor hands out aspirin!

But what is done, is done. It is time to refuse the humiliation of the poor relative being humiliated by his own family.

One quick example. Greece cannot implement labor laws other than what is provided in the European acquis.

It is time for Greece to demonstrate that it has the power to ask and receive fair treatment from the people of Europe family. Otherwise the country’s political leadership must be united in facing the crisis that has brought poverty to Greece for the past seven years.