Finance

• World Banks have the Power to save the Global Economy, if they want to

  The global economy appears to be headed over cliff this year.  The emerging world is experiencing a significant economic slow down, the Eurozone will probably break apart in the next few months, and the United States faces sharp austerity measures at the end of the year.  There are enough bearish developments here to make the original Mayan calendar look prescient after all.  So should we despair?  Is the global economy fated to collapse in 2012?No, says Willem Buiter and Ebrahim Rahbari of Citigroup.  Though the outlook is dire, they argue there is much more the Fed, the ECB, the Bank…

• The Strong Dollar Leads to a Fall in Commodity Prices

  Panic is on deck, to use the baseball terminology that my foreign readers are often attempting to decipher. That is the only conclusion one can reach after getting gob smacked by the price action this morning. Copper got spanked for eight cents, oil burned $2, gold shed another $26, and silver puked 70 cents. The tantrum like stock behaviour in producing and equipment companies, like Freeport McMoRan (FCX) and Caterpillar (CAT) has been atrocious. How many of you out there know that JP Morgan (JPM) is the largest holder of futures contracts in the silver market and just got hit…

• The Lack of Accountability that Allowed JPMorgan to Gamble Billions

  If I were to stake you $50,000 and set you loose in the world's largest casino, you might try your luck in a big way at a number of games to see if you could double or maybe even triple your good fortune. But it would be an entirely different matter if the $50,000 were your own money. You might decide to take advantage of the casino's restaurant for which you would at least get a meal in return for your money. And, you might even test your skills with a few hundred dollars. But unless you were a gambling…

• Is Constant Economic Growth Possible?

  If we read the financial pages, economic growth seems to be viewed as the “normal” situation to which economies inevitably return. But is it really?If we look back over the past 50 years, or even over the past 100 years, economic growth has predominated. Over the longer term, we know that people have become more prosperous, and that world population has grown.  The natural assumption is that economic growth will continue in the future as it has in the past.Let’s think about this a little further. We live on an earth with a fixed surface area. If the population of…

• The Death of Global Integration

  The world's elites don't want to admit it. But the kind of global village that they have insisted on building--a vast free-trade paradise run by an ever more complex and opaque system of logistics and finance--isn't working, not even for many of them. The cost of maintaining this brittle, complex system and keeping the huge imbalances it creates at bay is becoming dizzyingly expensive.The consequences of those imbalances include heavily indebted countries such as Greece being driven into penury by the financial masters of Europe desperate to keep the Eurozone intact. They include an unsustainable system whereby the United States…

• Noble Notion vs Reality

  Seventy six years have passed since the first notion on taxing financial transactions first appeared under the pen of John Maynard Keynes in his study on Theory on Employment Interest and Money. But the idea to tax multi-billion financial transactions has remained yet to be implemented.The latest effort to introduce the financial transactions tax came from the very heart of the European Union.The European Commission, the executive arm of the EU, suggested last year in September that Europe should introduce a so-called Tobin Tax, a tax named after an American economist James Tobin. The purpose of the levy was to…

• When Hypotheses Are Worth Trillions

  UK banking regulators and the representatives of major banks intensified their discussions on new and more rigid regulatory scheme concerning the setting and calculating the British Bankers Association's London InterBank Offered Rate (BBALIBOR). Libor, sponsored by the British Bankers Association, is the rate set for the inter-bank borrowing and lending transactions worth £220 trillion of securities a day and is produced for ten currencies with 15 maturities quoted for each currency - ranging from overnight to 12 months - thus producing 150 rates each business day.It is also a benchmark rate indicating the average rate at which a bank can…

• What the Greek Debt Crisis Tells us about Governance and Public Finances

  The Greek sovereign debt crisis has captured the attention of the world, both for what it says about the viability of the Euro and the EU integration project, but also for the warning signs it sends to governments around the world about governance and public finances. In the U.S., politicians both on the right and the left are using Greece as an example of how bad management of public finances can lead to economic catastrophe. In particular, for the right, Greece is at the edge of the abyss because of the bloated government bureaucracy, unreasonably generous pensions and health-care benefits,…

• Ecological Economics: The Battle to Preserve the Natural World

  In September of 1982, a group of scholars met in Stockholm intending to reform -- even to revolutionize -- the study of economics. The new ecological economists saw the economy as embedded in, and supported by, natural systems; nature was not simply a factor in, but the foundation of, economic activity. By integrating models from ecology and economics, ecological economists sought to provide scientific arguments for preserving the natural world. The Stockholm meeting came at a critical time. During the 1970s, prominent environmentalists, encouraged by what they saw as a public awakening to environmental concerns, issued best-selling books and reports…

• Is a Reduction in Population Numbers the only Sustainable Solution?

  In a recent post, I talked about why we may be reaching Limits to Growth of the type foretold in the 1972 book Limits to Growth. I would like to explain some additional reasons now. Figure 1. Base scenario from 1972 Limits to Growth, printed using today's graphics by Charles Hall and John Day in "Revisiting Limits to Growth After Peak Oil" http://www.esf.edu/efb/hall/2009-05Hall0327.pdf In my earlier post, I talked about how rising oil prices are associated with rising food prices, and how these high prices can make it harder for borrowers to repay their loans, as is now happening in…