a curious Yankee in Europe's court

blog about living in Europe, and Italy

Overspending’s not main cause of deficits: Ha-Joon Chang

Posted on the November 23rd, 2010

Cutting the deficit is the battle cry of many countries’ leaders these days. But, begging to differ, Cambridge University economist Ha-Joon Chang says this is a mistake that ignores the core problem causing the financial crisis.

Chang was speaking in a video interview published online yesterday for the Guardian (“In the worst case scenario these cuts might actually increase the deficit”  Nov 22, 2010).

Chang names a different culprit as the cause of deficits and offers ideas for recovery. Chang is the author of the recently published book “23 Things They Don’t Tell You About Capitalism” (see earlier post here).

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All you want to know about QE2 explained clearly and very, very fast

Posted on the November 10th, 2010

Are we talking about the ship QE2?


Are we, metaphorically speaking, talking about the Titanic?

According to Naked Capitalism‘s Yves Smith, yes, we are in terms of its prospects for the U.S. economy.

Smith is referring to the Federal Reserve (known as the Fed) and its just launched $600 billion quantitative easing program QE2. Yesterday Smith sat for an in-depth interview with Paul Jay at The Real News (videos below).

Smith is a graduate of Harvard Business School and runs a financial management consulting firm in New York. Her website is one of the most read in the world, according to Wikipedia.

(On a post on her website today Smith apologized for speaking so fast in this interview, saying she was rushed for time – but there’s a transcript below the videos for anyone who gets a bit lost).

Interview intro:

Paul Jay: So let’s see if I have this right. The Fed’s going to take $600 billion and buy government bonds that are owned by the big banks. Except they’re not going to just buy them from the banks, they’re going to let other people buy them from the banks and then sell them to the Fed and make money on that.

I mean the whole thing seems rather bizarre. The critics are saying that this move, as many other moves of the Fed, seems to have absolute benefit for the big banks and relative to dubious benefit to the economy. So what’s your take?

Yves Smith: I would agree with that…

Smith goes on to explain just why the Fed’s QE2 is not a great idea. Along the way, she provides an expert view of the Wall Street (and elsewhere) financial world before, during and after the 2008 crisis. She also talks about the Tea Party movement in the U.S. and why its followers are so angry. A succinct analysis of what President Obama has done to make matters worse is also included.

Highly recommended viewing. In the past couple of weeks I’ve been doing a bit of reading about QE2, and I think this interview with Smith offers as clear and complete an understanding of the confusing and complicated FED and its various QEs as you may be able to find. (Tip: on the Real News webpage, the bottom video is segment one, and the top video is segment two of the interview).

Warning, you may need a good stiff drink afterwards.

Interview, segment one:

Interview, segment two:

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The many wrongs of Anglo-American style capitalism? Ha-Joon Chang

Posted on the September 30th, 2010

At the end of the Q&A session following his talk at the RSA earlier this month, Cambridge University economist Ha-Joon Chang summed up his overall perspective with this:

Two hundred years ago, people thought it was quite all right to buy and sell people, slave trade, you know. A hundred years ago, they put women in prison for asking to vote. Fifty years ago, all the founding fathers of developing nations were hunted by the French and British as terrorists. Twenty years ago, Mrs. Thatcher said that someone who thinks there will be a moderate black rule in Africa lives in cloud cuckoo land. But these things all have happened, no?

So that I follow the Italian Marxist Antonio Gramsci who said that we have to have pessimism of the intellect but optimism of the will. We have to make these changes, no? And the first step in that process is to know what is really going on.

Chang was appearing at RSA to talk about his soon-to-be-published book “23 Things They Don’t Tell You About Capitalism” (Jan 2011). This title, coupled with Chang’s quoting of renown communist thinker Gramsci might suggest that Chang is anti-capitalist. Aware of this, Chang pointedly dispelled the notion early in his RSA talk:

When I say these things some of you may think that I’m anti-capitalist. That would be, actually, wrong. To paraphrase Winston Churchill, I think that capitalism is the worst economic system, except for all the others. I mean, it has a lot of problems but it is, in my view, still the best economic system that humanity has invented.

But the problem is that over the past three decades we have lived under a very particular form of capitalism that is free market capitalism, which has served us very poorly. The point is that there are many different ways in which to run capitalism. I mean, it’s not just American style capitalism that is viable. I mean there are many different forms. The Japanese form, the Chinese form, the Swedish form, the French form, the German form.

But over the last 30 years, we have been told that there’s only one form of capitalism that works and that is Anglo-American style free market capitalism. Over the last three decades, this form of capitalism has produced very disappointing results…

What a breath of fresh air is Chang! To hear the full and informative talk at RSA, go here (32 min).

It came as a welcome boon to my own small blogging campaign to counter the idea propaganda that only economists and financial experts can understand economics to hear Chang say the following:

And in trying to explain these and other things, I do my best to dispel the widespread perception that economics is too complicated for non-economists. You know, I say often in my lectures, but also in the book, that 95 percent of economics is common sense deliberately made complicated, while even the remaining five percent can be explained in its essence, if not in all technical details, if you really try.

So through this book I want to equip my readers with fundamental economic reasoning and some basic but misunderstood facts about capitalism so that they can better exercise what I call active economic citizenship, and demand right courses of action from their policy makers, political representatives and business leaders…

My earlier campaign efforts in this regard are here and here. A recent article by Chang for the Guardian is here (“Getting capitalism right” Sept 16, 2010).

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Time to move on from capitalism: David Harvey

Posted on the July 19th, 2010

In a recent talk for the RSA Society, social theorist David Harvey asked if the time has come for a new social order that would be more humane and responsible than capitalism. The video above is a special excerpted portion of Harvey’s 31 minute talk — accompanied by an entertaining cartoonist’s animation (full version here).

Harvey is a Distinguished Professor of Anthropology at the Graduate Center of the City University of New York (CUNY). His most recent book, “The Enigma of Capitalism,” was published in April of this year.

I’ve transcribed a short excerpt from the ending portion of Harvey’s talk:

Any sensible person right now would join an anti-capitalist organization. And you have to. Because otherwise we’re going to have the continuation. And notice it’s the continuation of all sorts of negative aspects. For instance, the racking up of wealth.

You would have thought the crisis would have stopped that. Actually more billionaires emerged in India last year than ever. They doubled last year. The wealth of the rich — I read something this morning — in this country has accelerated. Just last year, what happened was the leading hedge fund owners got personal remunerations of $3 billion each. In one year.

Now, I thought it was obscene and insane a few years ago when they got $250 million. But they’re now hauling in $3 billion. And as the famous statement — I think it was by Andrew Mellon — way back… ‘In a crisis,’ he said, ‘assets return to their rightful owners,’ i.e., him. And that, in effect, is the plug of the financial world right now. ‘Yeah, the assets are going to return to us.’ Now that’s not a world I want to live in. And if you want to live in it, be my guest.

But you’ve got to start thinking. And what bothers me about academia… I don’t see us debating and discussing this. I don’t have the solutions. I think I know what the nature of the problem is. And unless we’re prepared to have a very broad based discussion that gets away, you know, from the normal pablum you get in the political campaign and — you know, everything’s going to be okay next year if you vote for me — it’s crap. You should know it’s crap and say it is.

And we have a duty, it seems to me, those of us who are academics and seriously involved in the world, to actually change our mode of thinking.

I know I’m pretty sick of pablum. But I do think it’s not only academics who need to change their mode of thinking. We all need to (see more here).

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