naked capitalism
Fearless commentary on finance, economics, politics and power

  • The Financialization of Life
    Yves here. One of the efforts the Naked Capitalism community has been engaged in is trying to understand and map our emerging political and economic order. Over the last four decades, massive changes have taken place in social values, in job security, in the importance of communities relative to other networks, like professional associations, and in the role of the state. Economists, social scientists, and laypeople have used various frameworks for describing this period. Understanding the driving process is important not merely for the purposes of description, but also for analysis, since a major question remains open: is this a last gasp of large-scale industrial capitalism, or is this the starting phase of a new economic order? We've tended to see this period as a self-limiting finance-led counter-revolution against the New Deal, but that may prove to be too optimistic a reading. This Real News Network interview with Costas Lapavitsas, a professor in economics at the University of London School of Oriental and African Studies, takes a different perspecive. Lapavitsas contends that financialization itself constitutes a new form of capitalism, which is supported by neoliberal ideology. Independent of whether you fully agree with Lapavitsas' framing, this talk gives a good overview of the major economic and political changes since 1970. His summary would be useful for those who could use a historical perspective on these shifts, or want a high-level understanding of the restructuring of modern economies without having to get too deep into the weeds. But even though this interview is designed to go down easily, it offers a lot of grist for thought.

  • Ilargi: 40% of Eurozone Banks Are In Bad Shape
    Yves here. While investors remain fixed on how much more the Fed and the ECB will pump into financial assets via QE, Eurozone banks lumber on in their walking wounded state. Deflationary pressures and lousy growth grind down weak and even once-good borrowers. And it's not as if the banks who lent to them in the first place were good shape themselves. As we wrote at the onset of the Eurozone bank stress tests, they were designed to be even more cosmetic than the US bank stress tests. Just a month ago, we posted an analysis that showed that many countries in Europe have banking systems weaker than those in Latin America. Even with the efforts to use the stress tests as a confidence-building exercise, the result of the current exam of Eurozone banks is expected to be less than impressive.

  • 2:00PM Water Cooler 10/22/14
    Today's Water Cooler: Shootings on Parliament Hill in Ottawa, Hong Kong, dueling autopsies in Ferguson, CPI release, slavery, and trouble with visualizations.

  • Matt Stoller: Why Is Alan Greenspan’s Lawyer, Scott Alvarez, Still Controlling the Federal Reserve? (AIG Bailout Trial)
    Yves here. This important post explains why Scott Alvarez, the general counsel of the Federal Reserve Board of Governors, needs to be fired. His responses to the plaintiffs' questions at the AIG bailout trial weren't simply evasive; they reveal a deep, almost visceral, dedication to defending the very policies that nearly destroyed the world economy as well as a salvage operation that favored financial firms over the real economy. We have embedded the transcripts from the first three days of the AIG bailout trial, which cover Alvarez's performance on the stand, at the end of this post. Alvarez was brought to the Fed by Alan Greenspan. As a staff lawyer, he helped implement bank deregulation policies such as ending supervision of primary dealers in 1992, refusing to regulate derivatives in 1996 (I recall gasping out loud when I first read about the Fed's hands off policy), and implementing the rules that shot holes through Glass Stegall before it was formally repealed in 1999. Among those measures was giving a commercial bank, Credit Suisse, waivers to take a 44% stake one of the biggest investment banks, First Boston, in 1988 and assume control in 1990. Alvarez also has a poor record as far as representing broad public interest in his tenure as General Counsel, which started in 2004. The Fed did an even worse job than the bank-cronyistic Office of the Comptroller of the Currency in enforcing Home Ownership and Equity Protection Act, a law that put restrictions on high-cost mortgage lenders. The Fed was also one of the two major moving forces behind the disastrous Independent Foreclosure Review, an exercise that promised borrowers who were foreclosed on in 2009 and 2010. The result instead was a fee orgy by the supposedly independent consultants, capricious and inadequate payments to former homeowners, and virtually no disclosure of what was unearthed during the reviews. Yellen has said she wants to make financial stability as important a priority of the Fed as monetary policy. That means, among other things, being willing to regulate banks. Scott Alvarez is too deeply invested in an out-of-date world view to carry that vision forward. If Yellen intends to live up to her word, Alvarez has to go.

  • Links 10/22/14
    fawns munching red flowers links

  • Forward Guidance: Human Plans and Divine Laughter
    ves here. VoxEU has come to serve as a wonky alternative to the Financial Times comments section, which is Brit-speak for op-eds. While most FT comments are at least interesting and timely, now and again the pink paper serves as a venue where real policy players put a stake in the ground, sometimes in exclusive interviews but also in opinion pieces. This article by David Miles of the Bank of England is clearly intended to reach a wider audience than the normal VoxEU piece. In it, he calmly and methodically tries to tell finance people that what they want from central bank forward guidance is tantamount to having their cake and eating it. Admittedly, the unreasonable expectations for what forward guidance can accomplish is partly central bankers' own creation. In keeping, this piece suggests that a retreat from efforts at precision in forward guidance would probably be a plus.

  • 350.org’s Bill McKibben, His Parachute, and His Bubble
    I know, I know. Criticizing Bill McKibben is like kicking a puppy.

  • Low Oil Prices Hurting U.S. Shale Operations
    Yves here. In yesterday's Water Cooler, Lambert posted a link from Bloomberg that indicated that oil at $80 a barrel would pop the fracking bubble, an outcome we'd discussed previously. Some readers in comments expressed doubts. In fact, it was already happening as oil prices were falling from over $100 a barrel through the nineties. Seasoned energy hands had warned that shale operations could be shut down rapidly, and that has started to take place. However, the author of this article argues that the shutdowns are likely to be delayed and that most US shale operations have low break-even costs, insulating them from the impact of the oil price drop. However, he misses that another driver of the shale boom has been access to super-cheap credit and an overly-bullish mentality that has not factored in the short production lives of shale wells. The junk bond market has been much less accommodating of late, and if that skittishness continues, the prognosis isn't quite as sanguine for the industry as Cunningham suggests.

  • 2:00PM Water Cooler 10/21/14
    Today's Water Cooler: HK's Leung says democracy = majority rule = bad, Ferguson leaks forecast cop's acquittal, midterms, and Apple snooping

  • Why is the Boston Globe Covering Up for Gubernatorial Candidate Charlie Baker? (Updated)
    Boston's paper of record is effectively covering up for Massachusetts gubernatorial candidate Charlie Baker by failing to cover a growing pay to play scandal in New Jersey, with Baker as one of its central figures. David Sirota has been doing impressive sleuthing, and his latest report, which we'll cover shortly, reveals that Chris Christie is persistine in his effort to hide information that presumably implicates Baker.





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