Financial Sector
Posted by WARREN MOSLER on April 15th, 2009
I like this line from Bill Black:
“These Democrats want to maintain America’s pre-eminence in global financial capitalism at any cost.”
Yes, they think it important for some measurement of ‘power’ that has nothing to do with our real standard of living. Like pyramid building or something like that.
I do think with net interest margins now north of 4% (thanks to government policy) and GDP stabilizing due to deficits in excess of 6% of GDP, and more fiscal on the way, the banks can now earn their way out of just about anything.
All they need is a year or two of very modest GDP growth. And it doesn’t bother me a bit that the legacy issues and past frauds might keep their net earnings depressed during that recovery time.
What does bother me is that it seems nothing has been done to remedy the fundamental flaws that support the ‘more trouble than it’s worth’ financial sector.
These include tax advantaged ‘savings’ incentives including pension rules, ira’s, corporate reserves, etc. as well as laws that support and enforce the trading of financial instruments.
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April 15th, 2009 at 11:12 am
Was doing my taxes yesterday. Lets say a single taxpayer,
person A, with standard deduction makes 200K working for a living
building bridges. A’s Tax bill: 70K (35%)
Now lets say person B is a futures trader and makes
200K. B’s tax bill 44K (22%).
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Mike Norman Reply:
April 16th, 2009 at 8:29 am
Good example! The system incentivizes paper flipping as opposed to productive work that leads to the creation of real assets. And this is being sustained by the present administration, which, purportedly, represents the working class!
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Dissenting Comments Encouraged Reply:
April 16th, 2009 at 4:22 pm
Why do you believe Obama is for the working class of the USA? Jesse Jackson openly criticized Obama at the start of his campaign. look at this unemployment map:
http://globaleconomicanalysis.blogspot.com/2009/04/vanishing-employment-map.html
Certainly more taxes are going to drive more businesses out of the USA borders and take the jobs with them, look at our gracious host, proof that leaving mainland USA borders is “worth it” if the tax and regulation structure gives the right incentives to leave.
Obama took credit for assassinating 3 pirates in a poor part of the world. Who wants to help poor people have a better life when it is just easier to shoot them? Even Hilary skirted the politics of the poor in that part of the world and echoed the same old military keynesian response.
I keep thinking about the international powder keg that exploded after the assassination in WW1 – my bible says violence begets violence.
Mike I just heard Justice Clarence Thomas give a speech about personal responsibility, when the society and government around you is wrong, to act right personally. If you and warren know that paper shuffling doesn’t really do much good for the world, but because “the government” has set that up to reward people, and you continue to engage in that activity, what does that say about you personally? I think it says you choose to take action you know do no good supporting a corrupt crony government. Why not be better than that? Why not do something that is really good for the world, even though it may not be the thing most financially rewarded by the government? When did you become such a slave to how the government wants to steer you, are you just a sheep in this world? Be a shephard.
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April 15th, 2009 at 11:14 am
BTW, do you think Junk bonds are a good buy here?
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Warren Mosler Reply:
April 19th, 2009 at 7:15 pm
yes
many
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April 15th, 2009 at 11:56 am
Economists are slowing catching up with you Warren and starting to question the usefullness of Wall Street. Here is a recent post from the FT’s William Buiter:
“The endless churning of contingent claims, including derivatives, when the purchaser has no identifiable insurable interest, turns financial intermediation into a market-mediated betting shop. Then the betting slips become bearer securities and are themselves traded, either OTC or on organised exchanges, and the derivative transactions volumes expand to dwarf the transactions in the markets for the underlying financial claims (let alone the markets for the underlying real resources). At that point, the betting tip of the financial tail of the real economy dog does all the wagging. It does not create value but redistributes it in a way that consumes real resources and exposes the real economy to unnecessary risk. It’s time to tame the tiger.”
http://blogs.ft.com/maverecon/2009/04/useless-finance-harmful-finance-and-useful-finance/#more-1357
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April 15th, 2009 at 4:16 pm
Mass suicide after crops fail
(Warren preaching to the choir at some untelevised conference in the USA is not helping from what I can tell, why aren’t you living in India and doing god’s good work with the least of us?)
Over 1,500 farmers in an Indian state committed suicide after being driven to debt by crop failure, it has been reported.
The agricultural state of Chattisgarh was hit by falling water levels.
“Most of the farmers here are indebted and only God can save the ones who do not have a bore well,” Shatrughan Sahu, a villager in one of the districts, told Down To Earth magazine.
Mr Sahu lives in a district that recorded 206 farmer suicides last year. Police records for the district add that many deaths occur due to debt and economic distress.
In another village nearby, Beturam Sahu, who owned two acres of land was among those who committed suicide. His crop is yet to be harvested, but his son Lakhnu left to take up a job as a manual labourer. His family must repay a debt of £400 and the crop this year is poor.
“The crop is so bad this year that we will not even be able to save any seeds,” said Lakhnu’s friend Santosh. “There were no rains at all. That’s why Lakhnu left even before harvesting the crop. There is nothing left to harvest in his land this time. He is worried how he will repay these loans.”
Bharatendu Prakash, from the Organic Farming Association of India, said: “Farmers’ suicides are increasing due to a vicious circle created by money lenders. They lure farmers to take money but when the crops fail, they are left with no option other than death.”
Mr Prakash added that the government ought to take up the cause of the poor farmers just as they fight for a strong economy.
“Development should be for all. The government blames us for being against development. Forest area is depleting and dams are constructed without proper planning. All this contributes to dipping water levels.
“Farmers should be taken into consideration when planning policies,” he said.
http://www.google.com/hostednews/ukpress/article/ALeqM5jXyYwSwS1G0aIJUaBuZj5zKfDz9Q
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warren mosler Reply:
April 15th, 2009 at 5:42 pm
last i heard 20 million jobs have been funded for the ‘rural poor’ directly based on my ‘full employment and price stability’ paper.
even after what they did to custer i still think govt should fund a job for anyone willing and able to work.
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April 15th, 2009 at 4:42 pm
MACRO LEVEL TOO MANY MOUTHS TO FEED!!
Conspiracy, the GM (Genetically Modified) foods are failing by design so the illuminati can get rid of 90% of the population.
Al Gore, GLOBAL WARMING AND CO2 are being caused by YOU!
BUKAKA, He said along time ago we need population control and people to stop being soo wasteful & MESSY! And if the Illuminati are pinching us off we deserve it!
Then there is those pesky ALIENS and their Terra Forming!
DUDE Don’t just blame WARREN
Don’t forget Planet X also!
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April 16th, 2009 at 3:33 am
Warren who has told you that you have saved 20 million souls from starvation and death? Custer invaded my forefathers home, he got everything he deserved as a foreign invader, you do not agree? If an armed thug came into your house to harm you and Sada like custer did, what would you do?
Begotka do some research on atlantropa, or a dysan sphere, humans haven’t even entered into the seas (floating cities or underwater cities) or burrowed far into the earth – coober pedy style. There is a nice book about living in the solar system too – Living off the land in space – written by les johnson of Nasa. I think you should start embracing the population explosions that are coming, otherwise:
http://www.youtube.com/watch?v=iYJKd0rkKss
Here is a man who lived alone in the wilderness for 30 years, he said he didn’t like things where different parts were made by different men – an Anti-Mosler I suppose.
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April 16th, 2009 at 1:13 pm
Dude I purchased this on video many years ago, and still watch it sometimes. (I do not have TV)
The human MONKEY will destroy everything it touches, if there are floating cities there will be a floating cardboard city towing behind, if we do not clean up what we have now we will never succeeded. SO JUST KEEP PUMPING OUT THE LITTLE MONKEYS, I will be the guy in the woods. He lived to be almost 100 BTW!
Sorry for the “Off topic pooo”
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