China Teaches Us

China has had phenomenal growth that slowed and now is continuing. The New York Times reports "the renewed growth has been fueled by rapidly mounting debt, as state-owned banks and the central bank have funneled hundreds of billions of dollars in additional lending to state-owned enterprises and government agencies to finance further investment projects."  We could do this too.  Our Federal Reserve could loan money to the national and state and local governments to build much needed infrastructure.  We are mired in old thinking that austerity is the answer to unemployment.  The debt of Chinese state-owned banks and the central bank is only a bookkeeping phenomena of no consequence. Central bank debt is just an accounting matter.  It can go on until the economy can not produce further goods. The limit is the real capacity of the economy.  Does anyone doubt that our economy can produce more?

Romney enriches himself

Romney received over 15 million from the government bailout of GM and its Delphi parts supplier.  A hedge fund that Romney invested in bot the bonds of Delphi at a discount and then received more than they paid for them when Delphi was saved from bankruptcy.  The trust fund moved most of the jobs to China and watched Delphi's stock price rise when it repudiated its pension funds obligations to its domestic workers.  Of course in Republican fashion, it conducted a multi-million dollar TV campaign claiming Obama  gave a handout to labor.  All of this is reported in The Nation magazine of Nov 5.

ECB offer to buy Spanish and Greek bonds

It is bloody nonsense for Spain and Greece to not sell their bonds to the European Central Bank.  They say they fear greater European control.  Well let chaos reign from more labor strikes and human suffering!

Portuguise Austerity Protested

“The austerity model has been applied rather mechanically,” he said. “This is not a country full of big companies that can adjust to a decline in their domestic market but rather small and medium-sized companies whose only option is then to close down.”says Viera Lopes quoted in NYT,

"Many stores in central Lisbon are now either closed or advertising huge discounts, as citizens struggle in a deepening recession that has pushed unemployment to a record 15 percent. A sharp rise in the sales tax has decimated the restaurant sector, including well-known venues like Bocca and Manifesto" NYT Oct. 18

This pain is not necessary. Why have austerity when the real economy could produce much more?

British Monetary Policy

"But there is also a growing sense (in Britain) that, with interest rates already at a record low (.5) and the economic effects of the central bank’s asset purchases unclear, monetary policy is becoming less effective as a means of stimulus.

Instead of central bank stimulus measures, some economists favor a slowdown in the pace of large government spending cuts intended to reduce the country’s budget deficit." NYT Oct 18 

       This economist agrees, but more is needed. When will central banks make interest-free loans to the country to create jobs in public works, etc.?  The problem is weak consumer demand.

Taxes and Jobs

Romney claims his proposed reduction in corporate taxes will create jobs.  This is bunk.

       US Corporate Cash Pile At $1.24 Trillion, Over Half Located Overseas reports Moodys.

Moody's expects overall business conditions to remain modest over the next year and expects companies to continue to use cash for shareholder dividends, share buybacks and acquisition activity.  Using profits to buy your own stock does nothing for jobs, and just enriches corporate management who own lots of their company’s stock.  Corporations have plenty of cash to increase investment in plant and equipment, but they will not do so unless consumer demand increases.

Nobel Without Emotion

 The new winners of the Nobel Prize  for economics must be living on another planet whose inhabitants have no emotions. Elegant theory it may be, but relevant to the real world is another mater.

"Mr. Shapley explained how individuals can be paired together in a stable match even when they disagree about what qualities make the right match. The paper focused on designing an ideal, perfectly stable marriage market: that is, how mates find one another in a fair way, so that no one who is already married would want (and be able) to break off and pair up with someone else who is already married.

It was an elegant and simple mathematical model that explained the optimal way to match up men and women.