What the IMF could do is contribute capital to the ECB as needed, and then let the ECB write the checks.
G20 Looks to IMF to Show How it Could Help in Debt Crisis
By AP
October 15 (CNBC) — The finance chiefs of the world’s leading economies opened the door Saturday for the International Monetary Fund to play a bigger role in fighting the eurozone’s escalating debt troubles.
1. A full FICA suspension to end that highly regressive, punishing tax and restore sales, output, and jobs.
2. $150 billion in federal revenue sharing for the state goverments on a per capita basis to sustain essential services.
3. An $8/hr federally funded transition job for anyone willing and able to work to facilitate the transition from unemployment to private sector employment.
4. See my universal health care proposals on this website (Health Care Proposal).
5. See my proposals for narrow banking, the Fed, the Treasury and the FDIC on this website (Banking Proposal).
6. See my proposal’s to take away the financial sector’s ‘food supply’ by banning pension funds from buying equities, banning the Tsy from issuing anything longer than 3 month bills, and many others.
7. Universal Social Security at age 62 at a minimum level of support that makes us proud to be Americans.
8. Fill the Medicare ‘donut hole’ and other inequities.
9. Enact my housing proposals on this website (Housing proposal).
10. Don’t vote for anyone who wants to balance the federal budget!!!!
Warren will be on a radio talk show at 1:30pm EST today for an hour which can be heard here:
Call in numbers:
340 773 9951
340 773 0490
Click here for replay. (Wait 45 seconds for regular download)
Comment from reader:
If you hit ‘regular download” on the replay link Warren provided, it goes directly into your iTunes as “WSTXAM970Redfield&Mosler”. At least on my MacBook- and it showed up as a music file not a podcast.
Agreed.
Fundamentally, the 8%+ US federal budget deficit continues to support sufficient aggregate demand for modest GDP growth. Market participants don’t seem to understand this and were discounting a far higher probability of a recession than otherwise.
The strong euro/weak dollar strong stock dynamic continues, with the ECB continuing it’s strong euro policy of forced austerity in exchange for funding. However, this policy also slows growth in the euro zone, which tends to push deficits higher through softer tax revenues and higher transfer payments. At some point this means the ECB has to reconsider a policy designed to bring deficits down that is instead causing them to rise. The problem is they have no such alternative policy, and instead are looking for tight fiscal policy to drive exports. The problem with that is that without a policy of buying $US (the old German model), instead of exports rising, the euro rises to the point where trade stays relatively balanced, as has been the case since the inception of the euro.
Meanwhile, they seem to have responded adequately to the solvency issue with the ECB writing the check as needed. But with a slowing economy the checks the ECB must write get geometrically larger, which, while not an operational constraint, are a daunting political challenge that can quickly throw it all into even more disarray.
Karim writes:
Rewarding those who are culpable
By Bill Mitchell
October 14 — I didn’t comment earlier this week on the recent decision to award the (not)Nobel Prize in Economics to Thomas Sargent. My thoughts were otherwise occupied but it is worth recording that Sargent has been at the centre of the mainstream macroeconomics literature which has been used to justify the claims that government fiscal interventions are ultimately futile and only generate accelerating inflation. His ideas helped my profession to claim authority in its campaign to pressure governments in deregulation, privatisation, inflation targetting and abandoning full employment as a primary policy target. The upshot has been three decades of policy development which really laid the foundations of the current crisis. If Sargent and his cohort had not been so influential the world economy might not have been in the mess that it finds itself in. And … millions might still have their life savings and be gainfully employed. The so-called Nobel Prize in Economics continues to reward those who are culpable.
I covered the event last year – Nobel prize – hardly noble – and noted that the award had nothing to do with Alfred Nobel’s will which wanted prestige to be bestowed on “shall have conferred the greatest benefit on mankind”. Instead, the economic prize was established in 1968 by the ultra-conservative Swedish central bank and the prize is awarded by the Royal Swedish Academy of Sciences.
There is a good critique of Sargent’s selection by John Cassidy in his New Yorker article (October 12, 2011) – A Nobel for Freshwater Economics. He said:
This week’s announcement of the Nobel Prize in Economics got me thinking about the state of the subject, and my thoughts weren’t very positive. Three years after the great financial crisis of 2008 discredited the ruling orthodoxy in macroeconomics and finance, the Royal Swedish Academy of Sciences has chosen to honor one of the leading creators of that orthodoxy: Tom Sargent, of New York University. And judging from the reactions to the Nobel announcement, most academic economists heartily approved of it.
So how do you reconcile these two releases?
How about, they want the market to price in large haircuts so the ECB can buy the bonds that much cheaper?
Just guessing!
ECB Says Private-Sector Involvement in Rescues is Stability Risk
By Jeff Black
October 13 (Bloomberg) — The ECB said the involvement of the private sector in euro-area bailouts through enforced investor losses is a risk to financial stability and would have “direct negative effects” on the banking sector. While private-sector involvement “is certain to place significant stress on the solvency of banks and other private financial institutions in the country concerned, it will also have an impact on the balance sheets of banks in other euro-area countries,” the bank said in its monthly bulletin today. “The ECB has strongly advised against all concepts that are not purely voluntary or that have elements of compulsion, and has called for the avoidance of any credit events and selective default or default.”
Europe eyes bigger Greek losses for banks
By Jan Strupczewski
October 12 (Reuters) — Euro zone countries will ask banks to accept losses of up to 50 percent on their holdings of Greek debt. Ahead of a make-or-break summit of European leaders on October 23 at which a comprehensive new Franco-German crisis plan is expected to be discussed, four euro zone officials told Reuters that a “haircut” of between 30 and 50 percent for Greece’s private creditors was under consideration. That is far more than the 21 percent loss they had asked banks, pension funds and other financial institutions to accept in July as part of a second rescue package for Athens.
Shows how quick Republicans are to ‘step up’ from Romney. Shows there’s a lot more than racism working against President Obama.
And shows translating Tea Party rhetoric into logically consistent policy proposals is highly problematic at best.
With Cain leading, his 999 proposal is suddenly getting more serious media attention, and getting ripped to shreds.
Leaves the Republicans, and the nation, without any headline proposals to debate, Romney holding on as the default candidate, and President Obama holding on to a narrow lead.
Cain Beats Romney as GOP Frontrunner for Primary
By John Harwood
October 12 (CNBC) — Business executive Herman Cain has jumped to the top of the volatile Republican presidential race in a campaign season dominated by economic anxiety.
Among Republican primary voters, Cain leads former Massachusetts Gov. Mitt Romney 27 percent to 23 percent, according to the latest NBC News/Wall Street Journal poll.
Texas Gov. Rick Perry, who led the August NBC/WSJ survey with 38 percent supported, plummeted to third place with 16 percent. He was followed by Rep. Ron Paul with 11 percent, former House Speaker Newt Gingrich with 8 percent, Rep. Michele Bachmann with 5 percent, former Utah Gov. Jon Huntsman with 3 percent and former Sen. Rick Santorum with 1 percent.
Cain’s rapid rise, from 5 percent in the previous poll, underscores the volatility of the 2012 GOP nomination contest. Like the rank-and-file’s earlier flirtations with Donald Trump, Michele Bachmann and Perry, this one, too, may not last.
Bill McInturff, the Republican pollster who conducts the Journal/NBC survey with his Democratic counterpart Peter Hart, cautioned that this latest “speculative bubble” reflects the Republican base sifting a presidential field without a dominant front-runner. Romney holds a lead in fund-raising and in New Hampshire’s first-in-the-nation primary, but has so far been unable to capture the heart of his party.
“He’s the remainder-man candidate for the Republicans,” Hart said. “Acceptable, but not their first choice.”
1. US Regulators can make it illegal for their banks, housing agencies, and other publicly supported entities to refuse to refi on the basis of appraisals and income. Those loans were made, and priced, with the understanding that when long rates fall they get refinanced at the lower rates.
2. A rent to own option where a homeowner has the option to sell his home to the govt. at the lower of his mtg balance or current appraisal before a foreclosure sale, and then rent the home at fair market rent for two years. At the end of two years the home gets offered for sale at fair market prices, and the homeowner has right of first refusal to buy it and finance it at current market interest rates if he has paid his rent as agreed.
The housing crisis is still with us only because these proposals were not implemented when first proposed in 2008.
(To download PDF, right click link and select save link as)
Highlights
US – Payroll report eases recession fears but still weak
EU – ECB held rates at 1.5%
JN – Machinery Orders better than expected
UK – Largest number of unemployed since 1996
CA – Unemployment Rate lowest since 2008
AU – Confidence has improved
Yes, it is highly regressive, and, worse, the 9% Federal sales tax is a transactions tax that discourages those transactions it taxes.
And, taking him at his word, it balances the budget, which leaves the economy even more short of aggregate demand than the current tax structure, meaning unemployment would be that much higher unless it somehow drives up private sector debt expansion by $trillions per year.
Cain: I’m the Only One Who Wants to Kill Tax Code
By Jeff Cox
October 12 (CNBC) — Now that Herman Cain’s stock has been rising in the Republican presidential scrabble, he’s drawing a clear line between himself and the other candidates when it comes to taxes.
Where his fellow GOP challengers are content to tinker with the current convoluted tax code, Cain says he is the only one who wants to junk the current system altogether and come up with a simpler way that everyone can understand.
It’s all part of his 9-9-9 proposal, which he discussed on CNBC.
“Their plans or ideas all pivot off the existing tax code,” the former CEO of Godfather’s Pizza said in an interview Wednesday. “My plan is the only one that throws out the tax code and is a fresh presentation of how we raise revenue on an expanded base.”
Cain has unexpectedly become one of the Republican leaders in the crowded field. Entering the race as a virtual unknown, Cain shocked the race by winning last month’s Florida straw poll. Recent surveys from Gallup and others have him in a virtual dead-heat with Mitt Romney, the frontrunning former Massachusetts governor.
At its core, the Cain plan slaps a 9 percent flat tax — no loopholes, no exceptions — on businesses, individuals and sales.
While the exact figures have yet to be released, the candidate said he has had his plan scored by an analytical firm and he will show that it generates more revenue while stimulating growth for the ailing U.S. economy.
“No, it is not regressive,” he said. “First of all, by putting it on sales tax — that third ‘9’ — we are going to pick up revenue that we are not getting today. That helps to lower the rate for everybody including the people that are making the least amount of money.”