Going Negative?

Barkley Rosser at Econospeak raises the entertaining prospect that, in the States at least, base rate may actually fall below 0% in a deflationary situation. (Actually, he says it sometimes already has temporarily in the past, but now there's a theoretical case for it doing so long term).

So the government would be paying the banks - and anyone else who borrowed off them - to take their money. But if I understand him right - and let's never take that for granted - it only works for the seriously rich because they're the ones who don't have a 'cash alternative'.

I think that means that if we really are in a Titanic situation, economically speaking, we now have a design of a lifeboat big enough to take the iceberg.

Addendum: via I discover the l-curve, a site that illustrates the income distribution in the States using a football field visual metaphor. It's fun - remember to zoom in (x2) and then go back to the start and zoom out (x3).

That Old Time Religion: Socialism 101

Capitalism Hits the Fan: A Marxian View from UVC-TV 19 on Vimeo.

I love this - it's 40 minutes long but worth the time. Rick Wolff , heir of Baran and Sweeny, explains the origins of the crisis and makes the case for bottom up socialism in simple, clear, populist language in an authentically American idiom. He's like a character from a Jimmy Stewart movie or a Studs Terkel book.

Whereas most of his British would-be equivalents either sound like they're characters from the ladybird book of Leninism or have swallowed the dictionary at the Library of the Sorbonne.

It's on google and Youtube, but I found it at Rethinking Marxism.

Gaza: The Nature of Domestic Reaction

B&T says,
"People should have their opinions addressed as citizens, not their emotions graded as threats."
And he's right.

The Interwebs Have Gone Robot Crazy Today

Everyone talking about them - and all because the Institute of Electrical and Electronics has produced some funky graphics.


Funny how yesterday's future never goes away - you just get used to the idea, forget it and then turn round, 20 years later, to find it hasn't quite changed the world the way you thought it might. Mind you, it has changed the world my factory working father knew. Perhaps, in this generation, it will do for office work as well.

Personally, I'm more worried by the IEEE's hint that invisibility might be on the way. Let's see the government maintain school attendance once that hits the streets...

I'm Gonna Cry 96 Tears

From an offspring of the Wall Street Journal:

"The hedge fund is being questioned, and it's in danger," says Timothy Brog of Locksmith Capital Management, an activist New York hedge fund.

Indeed, the industry is moving into survival mode for 2009 -- and many funds won't make it. The number of hedge funds, which surged in recent years to an estimated 10,000, could eventually fall to about half that, as small, marginal players are sold or go out of business.

Small? Marginal? That's the thing about this much trumpeted creative destruction that makes capitalism tick - it hurts the little guy.

The big guys just get bailed out.

New Balls Please?

Peter Gowan has an exceptionally interesting piece in the current New Left Review: Crisis in the Heartland. In it he lays out the case for not seeing the credit crunch as due to some flaws in the system but as an intrinsic aspect of what he calls the 'New Wall Street System' itself. He makes the point that it would be wrong to blame hedge funds or 'speculators' as, in reality, it was the central institutions of the system who were speculating - and speculating in a purposeful and systematic way:

Both the Washington regulators and Wall Street evidently believed that together they could manage bursts. This meant there was no need to prevent such bubbles from occurring: on the contrary it is patently obvious that both regulators and operators actively generated them, no doubt believing that one of the ways of managing bursts was to blow another dynamic bubble in another sector: after dot.com, the housing bubble; after that, an energy-price or emerging-market bubble, etc. .... the operational belief systems of what might be called the Greenspan-Rubin-Paulson milieu seems to have been post-Minskian. They understood Minsky’s theory of bubbles and blow-outs, but believed that they could use it strategically for blowing bubbles, bursting them, and managing the fall-out by blowing some more." (My emphasis)

But what really caught my eye was his use of the term 'wimbledonized' to describe London's role in all this. I take this to mean a situation where a particular location plays host to a important game but never wins it.London was a key part of what Gowan calls 'the shadow' (i.e. lightly regulated, or unregulated) banking system outwith the formal controls.

"By the early 1990s the American investment banks had wiped out their London counterparts and dominated the Square Mile’s asset markets, with the City acquiring an increasingly ‘wimbledonized’ role within the New Wall Street System. Gordon Brown institutionalized the new relationship in 1997 by creating the unified Financial Services Authority, which claimed to operate according to ‘principles’ rather than binding rules: one central principle was that the Wall Street banks could regulate themselves. London thus became for New York something akin to what Guantánamo Bay would become for Washington: the place where you could do abroad what you could not do back home; in this instance, a location for regulatory arbitrage."

At the end of the piece he predicts that the idea of 'public utility' banking will gain a renewed respectability - which will create problems for the EU as well as the States. As part of this, the idea of capital controls and non convertible currencies, on the Chinese model, may come again to be seen as necessary. He's not a catastrophist - a weakened America will still dominate the financial architecture of the world in his view. But it will probably squander its chance to re-invent itself as an industrial power and become increasingly caught in debt subordination to East Asia.

The question that I'm left with, however, is whether Britain can necessarily expect to even have such a 'breathing space' to squander.

Trust Him

I don't normally post on Israel-Palestine on the grounds I know just enough about the subject to know what's wrong, but not enough to know what to do about it.

But my friend Chris Gunness was all over the news tonight like a rash. He's now working for the United Nations Relief and Works Agency in Gaza. He was telling Channel 4 and ITN that food and water and medicine are running out and the UN couldn't get supplies in through the Israeli lines. The Israelis are denying this.

He's not a combatant; he's not a political actor. He's a Trinidadian born, mixed race (half white, half Tamil) journo who was once a UN spokesman in the former Yugoslavia. He doesn't share my views; he's not a socialist.

But he is a good and trustworthy man. & long ago, he became a minor hero to the Burmese people for testifying to their suffering. So believe him now.