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Series of economic shocks with global consequences | IMF |

Russia's invasion of Ukraine is an unmitigated catastrophe for global peace and particularly for peace in Europe. But the war also greatly compounds a number of preexisting adverse global economic trends, including rising inflation, extreme poverty, increasing food insecurity, deglobalization, and worsening environmental degradation.

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Returning to inflation, there is a strong case to be made that globalization is the secret sauce that made the job of bringing down inflation immensely easier in the 1990s and 2000s, so that deglobalization could easily exacerbate upward inflation pressures for an extended period. Recently, Charles Goodhart and Manoj Pradhan forcefully argued that adverse demographics in east Asia and eastern Europe will persistently increase global price pressures, just as the rise of China has been a disinflationary force. I made a similar argument in my 2003 Jackson Hole conference paper, "Globalization and Global Disinflation," saying that while the advent of central bank independence helped, it cannot be given all the credit for the decline in inflation in the 1980s and 1990s.

Perhaps the most important macroeconomic lesson today is that in crafting responses to the latest major macroeconomic shock, whether it be the financial crisis, the pandemic, or now war in Europe, policymakers (not to mention academic economists) must remember that although things usually get better after a catastrophic shock, they can also get much worse. Thus monetary and fiscal policy need to incorporate resilience, and not just the maximalism that has become fashionable of late.



'Sapere aude'
by Oui (Oui) on Fri Jul 22nd, 2022 at 04:36:02 AM EST
ARGeezer spot on ... makes a lot of sense.

Today the West is still stuck in a world provided by BIG OIL and COAL.

Are we in a Post Capitalist World?

by ARGeezer Thu May 6th, 2021

Yanis Varoufakis has an interesting take on the current situation in Europe and the USA. He was the virtual keynote speaker at a conference in Israel apparently sponsored by the Israeli Labor Party. He asserts that, since 2008, we have been in a Post Capitalist environment.

. _ . _ . _ .

Our situation is Post Capitalist as capitalism has been disconnected from the ability of corporations to make profits by making things or by providing non-financial services. Much of this has to do with financialization. In the USA and UK manufacturing ceased to be profitable and was largely 'offshored' under the guise of 'neoliberalism' which was neither liberal nor new. Since the '80s in the USA and UK profit sources came to be financial firms.

General Motors, by 2008, was a financial services firm that made cars on the side, while the profits came from General Motors Acceptance Corporation. I would add General Electric to that category, as by the '90s its profits came from the Japan Carry Trade - borrowing Yen for free in Japan, converting them to US$ and 'investing' those dollars for profit at a positive interest rate in the USA.

But in 2008 this all collapsed and the banks, along with other financial firms, were bankrupt and totally dependent on free money from the Federal Reserve or the Bank of England, which came to the rescue of the financial sectors, with the Federal Reserve also supplying generous swaps of US$ to foreign Central Banks [$10 trillion]. But what to do with this free money? Central Banks could only supply that money to credit worthy borrowers, of which there were few, as citizens did not have accounts at the Central Banks.

The answer was to give the money to large corporations. They could be counted on to pay the money back and many of them had huge cash reserves anyway. But the corporations did not see profitable investments available in the economy. In Europe the ECB went to negative interest rates, effectively paying the corporations to take the money. The not so ingenious solution of the corporations was to use the money to buy and retire shares of their own corporations, thus driving the stock bubble we now have.

To Varoufakis this was no longer capitalism, which is why he calls the situation Post Capitalist. Then he points to the massive market failure constituted by the inability of Capitalism to make the investments necessary to save the climate. So he argues for a Green New Deal financed by Green Keynesianism.

Small steps in a dark room: guiding policy on the path out of the pandemic | ECB - Feb. 28, 2022 |

'Sapere aude'

by Oui (Oui) on Fri Jul 22nd, 2022 at 10:27:13 AM EST
[ Parent ]

The revolutionary legacy of Nelson Rolihlahla Mandela - and those of his African National Congress (ANC) comrades Walter Sisulu, Joe Slovo, Ahmad Katharada, Oliver Tambo, Chris Hani and numerous others - burns brightly despite attempts to decontextualise their struggle and resurrect Mandela and co. as titans only of aid.

Instead of seeking charitable reforms, their fierce opposition against the Apartheid regime involved constant mass mobilisation of all those opposed to colonialism and imperialism.  

This included forming a broad anti-Apartheid political coalition with the Communist Party of South Africa, the South African Indian Congress, the South African Congress of Trade Unions, the Coloured People's Congress and the South African Congress of Democrats among others, creating the Congress of the People and issuing the Freedom Charter that set out the fundamental restructuring of South African society.

In other words, they did not seek reform and accommodation within existing structures but called forth a revolution that included rule by the people, nationalisation of its economic behemoths and reorientation of trade and industry towards the well-being of the people.

While today we celebrate Mandela as the beacon of humanity, we should recall his decades spent in active organisation against oppression - and guard against transforming his struggle into charitable acts.

Our focus must remain on the root causes of our conditions and, as our Manifesto states, to continue organising against the oligarchy that continues to prevent the democratisation of Europe and beyond.

Nelson Mandela's grandson slams 'Israeli apartheid'

Also speaking at the event was Israeli journalist Gideon Levy, who criticized efforts by the United States to resolve the Palestinian-Israeli conflict through investment.

'Sapere aude'

by Oui (Oui) on Fri Jul 22nd, 2022 at 10:28:25 AM EST
[ Parent ]

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