Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Economics Page 33 of 93

A Few Words About Argentina

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On August 13, 2019

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Okay, so Argentina elected a neoliberal president. He went to deep austerity, removed capital controls, and sought an IMF bailout.

Now it looks like a socialist may win and markets are freaking out, because he may default on some of the debt and re-institute capital controls.

Argentina’s problems have a long history, but it’s worth remembering this: Before WWII, it was a first world country, with a standard of living about equal to Canada’s.

Argentina partially defaulted in 2001. We should remember that that default was caused by following the conservative policy of pegging the Peso to the dollar, which any moron should have known would eventually backfire.

It is also worth remembering that, when Argentina defaulted in 2001, it wasn’t actually allowed to. American courts wouldn’t let Argentina pay the creditors who allowed their debt to be reduced unless they also paid those debtors who didn’t take the deal.

We live in a stupid, perverse world where people don’t understand that there has to be a balance between debtors and creditors. Creditors are making a bet, and if they lend to the wrong entity, and that entity eventually can’t pay back the debt, they should have to eat their losses. Don’t lend to people who can’t pay you back. Everyone knew that Argentina was going to have debt problems, every time, but they took the chance because they wanted high returns.

But the central financial system, the NY and London courts, and the IMF act as debt collectors for people who want the upside of high payments from distressed borrowers without the downside of possibly losing the money.

Worse, they act as enforcers for bad actors, who won’t cut deals, and expect to litigate.

Debtors may lose some money, but leg-breaking countries for rich debtors kills and impoverishes poor people.

Now, none of this is to say Argentina hasn’t made mistakes. Flipping back and forth between neoliberals and socialists is stupid. Pick one, and suck it up. Electing Macri was stupid, but then being outraged when he does what a neoliberal technocrat would do (i.e., austerity and sucking up to the IMF) is equally stupid.

Pick a governing philosophy and elect governments that adhere to that philosophy until the leading parties all follow it (like when Labour became neoliberal under Blair, cementing Thatcher’s victory).

Right now, Argentina is getting the worst of both worlds.

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Why We Need to End Banks and Shadow Banks

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On August 8, 2019

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Banks and various other financial companies have one important privilege: They can create money. When a bank lends you money, they don’t take it from another account and apply it to yours, they just put a number into a ledger, and voila, the money exists, created as debt.

Now, there are those who argue that creating all money as debt is stupid, but let’s move on from that and emphasize the important point:

Banks and other financial companies create money out of thin air.

Now, there are various caveats, and the amount they can create isn’t unlimited (though for practical purposes it’s close), but this is the bottom line.

They then get paid back by the people they loaned money to on money they created out of thin air.

It takes a special sort of genius to run a business which can actually create money, yet still lose money.

This chart gives an idea of how much genius:

I mean, you create the money out of nothing, and then you charge 17 percent returns (which underestimates the real rate of return, because of all the charges), and you still manage to cause a financial crisis because your liabilities wind up higher than your assets?

Wonderment aside, let’s circle back to the ability to create money.

Let’s say you’re Joe, guy who wants to start a business or buy a house. You go to a bank, and the bank decides whether you can do that.

Banks have the ability to create money in exchange for doing something: They decide who should get to do things. They give permission.

If a bank lends you 5o million, that’s the right to command 5o million dollars worth of other people’s labor: To hire them, or to buy the goods created by them. You get to choose what those people do.

Resources, especially people, aren’t infinite. Banks choose who gets to use them. The deal, spelled out is, “Give us the right to create money, and we’ll choose the people who do the most good with society’s resources to control those resources.”

And the banks have failed–over and over again they’ve failed. They don’t even actually make their returns (see 2007/8), let alone actually make good choices about how we should use our resources–with labour or other limited resources. I trust I don’t need to spell all of this out: Look at ecological collapse, climate change, and so on.

So banks, in their current form, shouldn’t have this incredible privilege, because they’ve repeatedly used it badly. This isn’t the first time, or even the second, or the tenth. Among others was the collapse of 1929 and the Great Depression, which effectively caused WWII. We thought we’d fixed the banking sector after that, and we were wrong, because rich people bought out government and undid all the fixes put in by FDR and the New Dealers.

So banks can’t be fixed, they do near apocalyptic damage, plus they suck at their actual job.

We need to find another way to give people permission to use scarce resources, including other people’s labor.

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Who Bans or Encourages Crypto?

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On July 24, 2019

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Iran, apparently, intends to legalize crypto.

India intends to ban it.

Iran needs a way to get money and resources in and out of the country, because it is under sanctions.

India has had a huge war on cash, ostensibly to crack down on corruption. (Well, partially that, but partially to give corporations a cut of every transaction.)

It’s fairly clear who is doing what, why.

Also, anyone who cracks down against cash is anti-freedom. This includes our otherwise decent Nordic brothers. Crypto isn’t actually a freedom technology, by the very nature of the ledger (tracking every transaction). It’s more naturally a totalitarian technology, we just haven’t caught up to the fact (just as drones are a weapon of the weak).

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

Is Turkey Going to Exit NATO?

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On July 23, 2019

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Turkey has NATO’s second largest army.

Turkey recently bought Russian s-400 air and missile defense systems. The US had warned that if Turkey did so, it would not be able to have F-35 fighters. Of course, part of this is that Turkish companies producing parts also lost those contracts. The companies will be compensated by helping produce the s-400.

No big deal. The F-35, if not the biggest, errrr, turkey in US defense appropriation history, is certainly part of the pantheon. I wish Canada hadn’t bought them. It’s just a pork operation, and a lot of arm-twisting and bribes were required to make anyone buy them.

But as Buchanan points out:

Under U.S. law, the administration is also required to impose sanctions on Turkey for buying Russian weaponry…

..US hawks are already calling for the expulsion of Turkey from NATO. And the withdrawal of American forces and nuclear weapons from the Incirlik air base in Turkey in retaliation is not out of the question.

I cannot imagine Erdogan’s response to US sanctions–that alone would stand a good chance of ending Turkey’s NATO membership.

But context is important here. Turkey has increasingly been swinging into the anti-Saudi alliance, with Iran and Qatar. Turkey made sure to get Qatar supplies, and Qatar and Iran also became close.

Meanwhile, there is the China factor: An important chunk of China’s Belt and Road Initiative needs to go through Turkey.

More context. For decades, the Turks, under the old secular government, effectively on their knees, begged the Europeans to let them join the EU. The Europeans dragged their feet, and dragged their feet, and dragged their feet.

The secular Turks saw themselves as part of Europe. Europe didn’t want them. Eventually, the Young Turks, having failed because Europe made them fail, turned to a populist Islamist government.

Membership in NATO was part of Turkey saying: “We are one of you.”

Now that Turkey knows it isn’t part of Europe, and knows that Europe would never let it be part of Europe (the same lesson Russia learned after Communism’s collapse, and, oh, did they want to be Westerners, and oh, did we fuck them over), it is moving to a different world with different economic and military ties.

You can only spurn someone for so long.

If the West wanted a secular Turkey which was a solid ally, it needed to make the economy part of the equation work for Turkey, and it needed to let Turkey in. Instead, over and over, it made it clear that Turks weren’t really Westerners.

Erdogan, and now this turn to the East, are the results of Western policy and prejudice. The Turks gave us many many decades to welcome them to the family.

Having failed to do so, we can hardly complain now.

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UK Seizes Iranian Tanker, So Iran Seizes UK Tanker

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On July 20, 2019

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That’s the news, basically.

Well, Iran also seized a Liberian-flagged tanker, not sure why (may be operating for a British company).

Also not sure why the UK seized an Iranian tanker in the first place. The UK has said it supports the Iranian nuclear deal, and the US sanctions on which it was operating are destroying that deal.

But I suppose lap-dog nations will be lap-dog nations and the UK wants a free trade deal with the US badly for Brexit, and all indications are that the US is demanding massive concessions in exchange for one.

So this may be a little something on the side from Britain.

But as far as I’m concerned, the US sanctions on Iran are completely illegitimate, and no other country should be helping enforce them. That includes Canada, especially after we arrested a Huawei executive for breaking Iran sanctions, and that also includes the UK.

I rather doubt Iran had a nuclear weapons program in the first place, though I don’t see why they shouldn’t have nukes when Israel does. But neither of those observations are the point, anyway.

Meanwhile this whole mess has just emphasized, again, that you can’t make a deal with the US and trust them to keep it. The second some new politician gets in who doesn’t like it, they won’t just break it, they’ll hurt you badly.

(Admin: Feel free to use the comments on this post as an open thread, as well.)

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

The Problem with Neoliberal “It’s Never Been Better” Triumphalism

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On July 15, 2019

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Saying that humanity is currently the best off it has ever been (a dubious proposition in any case) is like saying “I’ve never been warmer” as you burn down your house.

Globe on FirePeople like Pinker have been trotting out stats to claim that we’ve never been better off. Those stats are questionable, based on a definition of  poverty that is beyond questionable. Meanwhile, in India, people eat less calories than they did 30 years ago. (I traveled in India and lived in Bangladesh 30 years or so ago. Eating less calories is unimaginably bad. That a small middle class and a new wealthy class has been created means little to those eating… less.)

But let’s wave that all aside. Let’s posit that human life now is the best it’s ever been.

Meanwhile, in India, people are dying in 50 degree C weather. France had a massive heatwave. Indian farmers are committing suicide in droves, in large part because of issues with ground water.

Extreme weather is getting worse, the permafrost is melting 70 years ahead of the consensus forecast, and so on. Ecologically, fish stocks are collapsing, the Amazon is being chopped down at a ferocious rate, more than one study has found collapses in insect populations at 80 percent or so, and others have noticed that without insects, you don’t have birds, and so on and so forth.

Blah, blah, blah.

Not only is no human an island, but humanity lives among other species, and they make our lives possible in ways we are barely aware of. Most oxygen in the world, for example, is produced by small ocean organisms, organisms which could have a mass die off.

Sigh.

So let us say that this is the bestest of best worlds, a Panglossian paradise.

Present prosperity is being paid for with future poverty, future mass death, and a non-trivial risk of human extinction. As for non-human species, they are already dying at a rate which will show up as the fastest mass extinction in Earth’s existence.

This is only a good bet if you are sure that you’re going to die before the bill comes due. That was a good bet for the GI Generation. A decent bet for the Silents and not a bad bet for about the first half of the Boomers. It’s a bad bet for everyone afterwards who expects to live to 70 or 80 or so (a normal human lifespan in most developed countries).

And, of course, it’s a bad bet if you actually, y’know, care about your children, or other people’s children, or the future of humanity when you’re gone. (Gonna be a shitty place to reincarnate too, if reincarnation exists.)

Now let’s bring this back to neoliberal “greatest time to be alive” triumphalism.

The sub voce message there is, “We don’t need to change, everything’s fine and getting better.”

But, if we’re living not just unsustainably, but in a way that will call Biblical level catastrophe within the lives of most people now alive and their children, perhaps we do need to change, and radically.

So this sort of triumphalism, even if it were true, would be a disservice to not just humanity, but life on Earth.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

Matt Stoller Writes BIG: Anti-Trust

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On July 12, 2019

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Matt was one of the writers at BOPNews, in what seems like a long time ago now. He also wrote for MyDD for years. After that he, among other things, spent time on the Hill as a Congressional aide, to learn how politics and governance actually works.

He left and joined an anti-trust think tank, Open Markets Institute, and in January he started an email newsletter about anti-trust issues.

I’ve been reading it, and it’s good. Matt’s knowledge is encyclopedic, and he writes clearly and well. Matt’s chosen “bigness,” which is to say concentrations of power as the, er, big, issue he’s going to devote himself to defeating, and he’s spent years learning everything about it.

So, you can read BIG’s back issues here, and if you scroll to the bottom, you can sign up for the emails. Matt’s also on Twitter and quite active. You can follow him at @matthewstoller

Matt’s a friend, to be clear, but I don’t push even my friends stuff if I don’t think it’s good. This list is far beyond good, it is excellent and will give you an education you can’t get anywhere else.

Admin: Internet finally back.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

Why Would Iran Attack Tankers?

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On June 19, 2019

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Well, if it did.

Let me tell a story, possibly apocryphal. Back in the 1970s, the Russian (USSR) ambassador supposedly had a talk with the Pakistani leader of the day. This is what he is reputed to have said.

” I do not know who will be in charge in Moscow in ten, twenty, or even 50 years. But what I do know is that whoever is there will want the same things then, that we do today. You can trust us, not because we pretend we are your friends, but because we are consistent.

Anyway, remember, that we’ll come back to it.

In the meantime, on June 13th there were reports that two tankers had been sunk in the Gulf. Claims were made they were sunk by Iran.

I shrugged. Important people want war between Iran and the United States, and in such a situation it’s hard to know what’s true and what’s not. I moved on with my day.

(I am fundraising to determine how much I’ll write this year. If you value my writing and want more of it, please consider donating.)

But yesterday I discovered an interesting fact. Before the two tankers were sunk, something else happened:

On June 5, 2019, a huge fire consumed a storage facility for oil products at the Shahid Rajaee port in the southern Hormozgan Province. Located west of Bandar Abbas, the Shahid Rajaee port is Iran’s largest container shipping port. Reportedly, a vehicle used for transporting shipping containers exploded and caught fire. Since there were oil products near the site of the explosion, the blaze spread quickly to several tanks and storage sites and caused heavy damage to the port. The spreading fire set off huge explosions which shot fireballs and heavy smoke high into the air.

On June 7, 2019, six Iranian merchant ships were set ablaze almost simultaneously in two Persian Gulf ports.

First, five ships “caught fire” in the port of Nakhl Taghi in the Asaluyeh region of the Bushehr Province. Three of these ships were completely burned and the two others suffered major damage. Several port workers and sailors were injured. As well, at least one cargo ship burst into flames and burned completely at the port of Bualhir, near Delvar. The fire was attributed to “incendiary devices” of “unknown origin.” The local authorities in the Bushehr Province called the fires a “suspicious event” and went no further.

Oh hey.

So, assuming the Iranians did attack the ships, they were retaliating.

Iran has long said that if they can’t get their oil to customers, no one will get oil to customers through the Gulf.

Yeah.

But this has bigger consequences. The real problem is simpler: The US made a deal with the Iranians, under Obama, then repudiated it when the President changed.

The US has arrogated to itself the right to impose sanctions on anyone it wants, for any reason, with no recourse by the victim. It is using this “right” in an attempt to remove Iran’s government.

The US cannot be trusted. Every few years, it changes. You can’t make a deal and be sure it will be honored for any length of time, let alone 10, 20, or 50 years.

Americans who squeal about Trump being an aberration both miss the point (your system allowed him) and are wrong: Bush attacked Iraq based on lies, and everyone knows it. Hilary Clinton promised the Russians that Qaddafi would not be removed, then removed him and gloated about him being killed after being raped by a knife.

The US can’t be trusted.

So the larger consequence is that a coalition of countries, including multiple oil producers, China and Russia are moving to sell and buy oil in a bundle of currencies which does not include the US dollar, and where no payments go through the payment system which the US can control (systems like SWIFT, to slightly oversimplify).

Dollar hegemony is one of the main supports of American hegemony. Misuse of dollar hegemony to attack other countries has brought us to this point.

I’ve been a bit of a broken record on this issue, but that’s because it’s been the obvious consequence of the US Treasury’s misuse of its powers.

Other great powers and their allies can put up with a cruel, even an evil, hegemon. What they will not put up with is a capricious one whom they cannot predict.

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