Central bank faces balancing act to stimulate growth without further fuelling house prices
Entry into IMF’s SDR basket would boost country’s geopolitical ambitions
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
Our estimates show that the developing world lost US$991.2 billion in illicit financial flows in 2012, over ten times the amount of official development aid received by these countries in that year, and greater than the amount of net foreign direct investment received. From 2003 – 2012, US$6.6 trillion left developing country economies illicitly.
Since we last updated the state of Saudi Arabia’s reserve stash, things have gone from bad to worse. It appears the battle to crush US Shale producers is taking its toll as The FT reports, Saudi Arabia is burning through its foreign reserves at a record rate as the kingdom seeks to maintain spending plans (and thus social stability) despite lower oil prices. All the time The Fed remains ‘easy’, no matter how negative US Shale cashflows are, the muppets will buy their debt and keep the mal-invested market alive. Saudi reserves are now their lowest in almost 2 years (but they have plenty more to chew through to out-wait The Fed).
Saudi Reserves have dropped to 2 year lows and fallen by the most ever in the last 2 months…
Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,
Apologists for the National Security Agency (NSA) point to the arrest of David Coleman Headley as an example of how warrantless mass surveillance is necessary to catch terrorists. Headley played a major role in the 2008 Mumbai terrorist attack that killed 166 people.
While few would argue that bringing someone like Headley to justice is not a good thing, Headley’s case in no way justifies mass surveillance. For one thing, there is no “terrorist” exception in the Fourth Amendment. Saying a good end (capturing terrorists) justifies a bad means (mass surveillance) gives the government a blank check to violate our liberties.
Even if the Headley case somehow justified overturning the Fourth Amendment, it still would not justify mass surveillance and bulk data collection. This is because, according to an investigation by ProPublica, NSA surveillance played an insignificant role in catching Headley. One former counter-terrorism official said when he heard that NSA surveillance was responsible for Headley's capture he “was trying to figure out how NSA played a role.”
The Headley case is not the only evidence that the PATRIOT Act and other post-9/11 sacrifices of our liberty have not increased our security. For example, the NSA’s claim that its surveillance programs thwarted 54 terrorist attacks has been widely discredited. Even the president’s Review Group on Intelligence and Communications Technologies found that mass surveillance and bulk data collection was “not essential to preventing attacks.”
According to the congressional Joint Inquiry into Intelligence Activities before and after the Terrorist Attacks of September 11, 2001 and the 9/11 Commission, the powers granted the NSA by the PATRIOT Act would not have prevented the 9/11 attacks. Many intelligence experts have pointed out that, by increasing the size of the haystack government agencies must look through, mass surveillance makes it harder to find the needle of legitimate threats.
Even though mass surveillance threatens our liberty, violates the Constitution, and does nothing to protect us from terrorism, many in Congress still cling to the fiction that the only way to ensure security is to give the government virtually unlimited spying powers. These supporters of the surveillance state are desperate to extend the provisions of the PATRIOT Act that are set to expire at the end of the month. They are particularly eager to preserve Section 215, which authorizes many of the most egregious violations of our liberties, including the NSA’s “metadata” program.
However, Edward Snowden's revelations have galvanized opposition to the NSA’s ongoing violations of our liberties. This is why Congress will soon vote on the USA FREEDOM Act. This bill extends the expiring surveillance laws. It also contains some “reforms” that supposedly address all the legitimate concerns regarding mass surveillance.
However, a look at the USA FREEDOM Act’s details, as opposed to the press releases of its supporters, shows that the act leaves the government’s mass surveillance powers virtually untouched.
The USA FREEDOM Act has about as much to do with freedom as the PATRIOT Act had to do with patriotism. If Congress truly wanted to protect our liberties it would pass the Surveillance State Repeal Act, which repeals the PATRIOT Act. Congress should also reverse the interventionist foreign policy that increases the risk of terrorism by fostering resentment and hatred of Americans.
Fourteen years after the PATRIOT Act was rushed into law, it is clear that sacrificing liberty does little or nothing to preserve security. Instead of trying to fool the American people with phony reforms, Congress should repeal all laws that violate the Fourth Amendment, starting with the PATRIOT Act.
The latest out of Baltimore appears to be that although police are denying that the man who was taken to the hospital (identified as Robert Tucker) was shot or even injured, no one on the ground trusts anyone else, a situation would has the potential to spontaneously combust at any given time…
No matter official BPD account, locals say trust so broken w/police they won’t believe anyway. As 1 said, situation here ‘to be continued’
— Hannah Allam (@HannahAllam) May 4, 2015
Doctors have withheld information concerning his both his condition and what exactly happened to Tucker. #RobertTucker #BaltimoreUprising
— Benjamin Jancewicz (@benjancewicz) May 4, 2015
Sen Pugh has brought #RobertTucker, to his family and he is okay yet is twitching, limping, and unable to speak #BaltimoreUprising
— Benjamin Jancewicz (@benjancewicz) May 4, 2015
Update: Baltimore police now claim they did not shoot anyone and the person in question was arrested for handgun possession.
MORE: #Baltimore PD claims on Twitter man not shot, was only arrested for handgun possession http://t.co/T82pRJ5zrA pic.twitter.com/Gd34AYGmSa
— RT America (@RT_America) May 4, 2015
If there’s one capital markets-related story that just never seems to get old it’s the unrelenting rally in Chinese stocks. The country’s equity mania truly is the gift that keeps on giving, and not just for those who are riding the wave, but also for those who, like us, appreciate the humor in a giant, margin-fueled bubble that’s captivated millions upon millions of semi-literate housewives and banana vendors turned day traders. Unfortunately, Chinese regulators threw a bit of cold water on the party last month, suggesting a move to curb margin lending may be in the cards.
Authored by Stephen Roach, originally posted at Project Syndicate,
The world economy is in the grips of a dangerous delusion. As the great boom that began in the 1990s gave way to an even greater bust, policymakers resorted to the timeworn tricks of financial engineering in an effort to recapture the magic. In doing so, they turned an unbalanced global economy into the Petri dish of the greatest experiment in the modern history of economic policy. They were convinced that it was a controlled experiment. Nothing could be further from the truth.
The rise and fall of post-World War II Japan heralded what was to come. The growth miracle of an ascendant Japanese economy was premised on an unsustainable suppression of the yen. When Europe and the United States challenged this mercantilist approach with the 1985 Plaza Accord, the Bank of Japan countered with aggressive monetary easing that fueled massive asset and credit bubbles.
The rest is history. The bubbles burst, quickly bringing down Japan’s unbalanced economy. With productivity having deteriorated considerably – a symptom that had been obscured by the bubbles – Japan was unable to engineer a meaningful recovery. In fact, it still struggles with imbalances today, owing to its inability or unwillingness to embrace badly needed structural reforms – the so-called “third arrow” of Prime Minister Shinzo Abe’s economic recovery strategy, known as “Abenomics.”
Despite the abject failure of Japan’s approach, the rest of the world remains committed to using monetary policy to cure structural ailments. The die was cast in the form of a seminal 2002 paper by US Federal Reserve staff economists, which became the blueprint for America’s macroeconomic stabilization policy under Fed Chairs Alan Greenspan and Ben Bernanke.
The paper’s central premise was that Japan’s monetary and fiscal authorities had erred mainly by acting too timidly. Bubbles and structural imbalances were not seen as the problem. Instead, the paper’s authors argued that Japan’s “lost decades” of anemic growth and deflation could have been avoided had policymakers shifted to stimulus more quickly and with far greater force.
If only it were that simple. In fact, the focus on speed and force – the essence of what US economic policymakers now call the “big bazooka” – has prompted an insidious mutation of the Japanese disease. The liquidity injections of quantitative easing (QE) have shifted monetary-policy transmission channels away from interest rates to asset and currency markets. That is considered necessary, of course, because central banks have already pushed benchmark policy rates to the once-dreaded “zero bound.”
But fear not, claim advocates of unconventional monetary policy. What central banks cannot achieve with traditional tools can now be accomplished through the circuitous channels of wealth effects in asset markets or with the competitive edge gained from currency depreciation.
This is where delusion arises. Not only have wealth and currency effects failed to spur meaningful recovery in post-crisis economies; they have also spawned new destabilizing imbalances that threaten to keep the global economy trapped in a continuous series of crises.
Consider the US – the poster child of the new prescription for recovery. Although the Fed expanded its balance sheet from less than $1 trillion in late 2008 to $4.5 trillion by the fall of 2014, nominal GDP increased by only $2.7 trillion. The remaining $900 billion spilled over into financial markets, helping to spur a trebling of the US equity market. Meanwhile, the real economy eked out a decidedly subpar recovery, with real GDP growth holding to a 2.3% trajectory – fully two percentage points below the 4.3% norm of past cycles.
Indeed, notwithstanding the Fed’s massive liquidity injection, the American consumer – who suffered the most during the wrenching balance-sheet recession of 2008-2009 – has not recovered. Real personal consumption expenditures have grown at just 1.4% annually over the last seven years. Unsurprisingly, the wealth effects of monetary easing worked largely for the wealthy, among whom the bulk of equity holdings are concentrated. For the beleaguered middle class, the benefits were negligible.
“It might have been worse,” is the common retort of the counter-factualists. But is that really true? After all, as Joseph Schumpeter famously observed, market-based systems have long had an uncanny knack for self-healing. But this was all but disallowed in the post-crisis era by US government bailouts and the Fed’s manipulation of asset prices.
America’s subpar performance has not stopped others from emulating its policies. On the contrary, Europe has now rushed to initiate QE. Even Japan, the genesis of this tale, has embraced a new and intensive form of QE, reflecting its apparent desire to learn the “lessons” of its own mistakes, as interpreted by the US.
But, beyond the impact that this approach is having on individual economies are broader systemic risks that arise from surging equities and weaker currencies. As the baton of excessive liquidity injections is passed from one central bank to another, the dangers of global asset bubbles and competitive currency devaluations intensify. In the meantime, politicians are lulled into a false sense of complacency that undermines their incentive to confront the structural challenges they face.
What will it take to break this daisy chain? As Chinese Premier Li Keqiang stressed in a recent interview, the answer is a commitment to structural reform – a strategic focus of China’s that, he noted, is not shared by others. For all the handwringing over China’s so-called slowdown, it seems as if its leaders may have a more realistic and constructive assessment of the macroeconomic policy challenge than their counterparts in the more advanced economies.
Policy debates in the US and elsewhere have been turned inside out since the crisis – with potentially devastating consequences. Relying on financial engineering, while avoiding the heavy lifting of structural change, is not a recipe for healthy recovery. On the contrary, it promises more asset bubbles, financial crises, and Japanese-style secular stagnation.