Week-end Wrap - October 27, 2018

Week-end Wrap - October 20, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus


Trump’s Continued Collision With the Federal Reserve

by Ian Welsh, October 22, 2018 [ianwelsh.net]

Yes, Trump is the source of all evil and anything and everything he does should be opposed, I know, but bear with me: the Federal Reserve should not be insulated from pressure from elected officials. 

I know that orthodoxy says it should, but the fact is that since 1979 the Federal Reserve has raised interest rates whenever it looked like wages were going to rise faster than inflation. The Federal Reserve, in other words, has crushed wages. 

This is bad. It is at the heart of why we have the rise of the right, and so many other problems. Vast inequality, in democracies, always leads to political instability, and in democracies the purpose of the economy should be to create a good life for everyone anyway. 

Trump ain’t a good guy, but wages aren’t increasing for ordinary people. That means that whatever the nominal unemployment rate is, the US isn’t actually at full employment. If it was, there would be rising wages. It is that simple. To raise interest rates before there are even significant wage increases is malpractice, even by the usual standards of monetary policy—and the usual standards are malpractice. 

Just because one despises Trump, one should not allow the major part of economic management be run by people who despise ordinary people having wage increases, or, indeed, by “independent bodies.” Democracy means elected officials having control over real policy. 

So I hope Trump fires a bunch of Federal reserve members, I hope it goes to the Supreme Court, and I hope that those firings are upheld.

Week-end Wrap - October 20, 2018

Week-end Wrap - October 20, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Dutch court rules that government must help stop climate change

by Quirin Schiermeier, October 10, 2018 [Nature, via Naked Capitalism 10-14-18]

A court of appeal in The Hague has upheld a precedent-setting judgment that forces the Dutch government to step up its efforts to curb greenhouse-gas emissions in the Netherlands. In 2015, a district court in The Hague had ruled in favour of the Urgenda Foundation, a Dutch citizens' climate-change group that filed the lawsuit on behalf of 886 plaintiffs.

The idea that action against climate change will ‘destroy the economy’ couldn’t be more wrong 

by Jared Bernstein [Washington Post, via Naked Capitalism 10-16-18]

Microplastics found in 90 percent of table salt 

[National Geographic, via Naked Capitalism 10-19-18]

Week-end Wrap - October 13, 2018

Week-end Wrap - October 13, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Key Global Bond Index Suffered $916 Billion Loss Last Week
By Sid Verma, October 08, 2018 [thinkadvisor.com, via John Claydon]

The value of the Bloomberg Barclays Multiverse Index, which captures investment-grade and high-yield securities around the world, slumped by $916 billion last week, the most since the aftermath of Donald Trump’s election victory in November 2016. 

American high-grade obligations are down 2.53 percent in 2018 — a Bloomberg Barclays index tracking the debt has dropped in just three years since 1976. 

“Bond investors have rarely seen losses like this over the past 40+ years,” Ben Carlson, director of institutional asset management at Ritholtz Wealth Management, wrote in a blog post. “Any further moves higher in rates could lead to the worst year since 1976 in terms of overall bond returns.”

Yesterday’s Stock Market Was Not Normal – And We’ve Been Watching Markets for 32 Years

By Pam Martens: October 5, 2018 [Wall Street on Parade]

A big drop in Dow Jones Industrial Average futures typically portends a negative open for the stock market. That’s what happened yesterday. When the Dow opened at 9:30 a.m., it initially fell modestly and then tanked by 200 points in less than an hour. At its low of the day, it had lost 356 points and by the closing bell was down 200.9 points. The S&P 500 Index was also negative from the opening bell, closing down 23.90 points.
The big losses in the stock market were predominantly attributable to a big spike in interest rates – particularly the benchmark 10-year U.S. Treasury note. That unusual interest rate spike should have meant that the big Wall Street bank stocks would have led the decliners from the get-go of trading. Instead, in the strangest action I have seen in 32 years, the shares of Citigroup, JPMorgan Chase, Morgan Stanley and Goldman Sachs spiked upward at the opening bell and that spike lasted for almost the next half hour. Then, as if someone had pressed another button, all four of the bank titans began to lose ground within minutes of each other. Citigroup and JPMorgan Chase entered their downward trajectory at exactly 9:48 a.m.; Morgan Stanley and Goldman Sachs began their slump four minutes later at 9:52 a.m. (Goldman Sachs closed modestly lower on the day while the other three banks closed modestly higher.) 

And here’s where things really got interesting yesterday. We took a look at two of the insurance companies that were singled out in the 2017 Financial Stability Report from the U.S. Treasury’s Office of Financial Research for having derivatives exposure to big Wall Street banks: MetLife and Prudential Financial. Those stocks not only also spiked at the open but both companies closed in the green yesterday.

A $1 Trillion Powder Keg Threatens the Corporate Bond Market

[Bloomberg, via Naked Capitalism 10-12-18]

“Bloomberg News delved into 50 of the biggest corporate acquisitions over the last five years, and found: By one key measure, more than half of the acquiring companies pushed their leverage to levels typical of junk-rated peers. But those companies, which have almost $1 trillion of debt, have been allowed to maintain investment-grade ratings by Moody’s Investors Service and S&P Global Ratings…. ‘The rating agencies are giving companies too much wiggle room,’ said Tom Murphy, a money manager at Columbia Threadneedle Investments. ‘There’s been some pretty heroic assumptions around cost savings and debt repayments laid out by some borrowers involved in mergers.””

Rev. William Barber - We need to change the moral narrative

Barber delivered a powerful history lesson, explaining that Trump is not a problem, but a symptom of the bigotry and cruelty of the richest and most powerful who counterattacked against the first Reconstruction after the Civil War.

Barber then read a passage from Ezekiel 22: God was angry because priests covering up for politicians who were devouring the poor.

“Your politicians have become like wolves — prowling and killing and taking whatever they want.
And your preachers are covering up for the politicians by pretending to have received visions and revelations; they say this is what God says and I God have not said a thing. And because your politicians are like wolves, and your preachers are covering up for your politicians; extortion is rife; robbery is epidemic; the poor and the needy are being abused; and the immigrants and the strangers are being kicked around at will with no access to justice.”

Week-end Wrap - October 6, 2018

Week-end Wrap - October 6, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

The Era of Near-Zero Interest Rates Is Over
[Bloomberg, via Naked Capitalism 10-2-18]

The era of zero interest rates in the world’s major economies ended with the Federal Reserve’s decision to raise borrowing costs last week. The average interest rate in developed economies weighted for output passed 1 percent for the first time since 2009, according to JPMorgan Chase & Co. 

Europe Finally Has an Excuse to Challenge the Dollar
Bloomberg, via Naked Capitalism 9-30-18] 

A new plan by Germany, France, Britain, China and Russia to create special financial infrastructure to work with Iran could be a credible challenge to the U.S. dollar’s long global dominance.

These 5 Rebel Movements Want To Change How Money Works

A new wave of agitators in the realm of monetary systems has emerged.

By Brett Scott, September 15, 2018 [Huffington Post]

1. Government Money Warriors - Modern monetary theory

2. Bank Money Reformers - Bank money reform groups include the American Monetary Institute, Positive Money, and the International Movement for Monetary Reform.

Commercial banks create new money when they issue loans. The moderate wing of the bank reform movement argues that, because the government grants them this privilege, banks should be subject to greater democratic scrutiny over their lending. The hard-line wing believes bank creation of money should be banned altogether.