The Zero Room

This week, I have been mostly reading:

• Something Crazy Is Happening to Swiss Bonds, and It’s a Sad Sign for the World Economy — Jordan Weissmann at Slate: Yields on government bonds from all around the world have been plunging thanks to anxious investors buying them for their safety. (Bond yields fall as prices rise.) And in many instances, the returns have cratered below zero. As Quartz reports Thursday, “around a third of all developed-country government debt—or more than $7 trillion, in terms of market value—is now trading at negative yields,” meaning that buyers are willing to pay more for these bonds than they will eventually get back if they hold them to maturity. […] The most mind-blowing example of this trend is Switzerland. Last week, yields on all of its government bonds, out to 50 years, turned negative. [A major qualification: Government bonds aren't loans. Governments with their own currency never need to borrow money in order to spend. Bonds are a mechanism to drain reserves held at central banks, in order to hit interest rate targets. The pessimism is real, though.]
• Corbyn: the summer of hierarchical things — Paul Mason in Medium: By September, if Corbyn wins he’ll be in a position to go into the Labour conference exerting control: over the NEC, where a left slate looks likely to win; and over policy via conference, where the delegates will for the first time reflect the changed membership. After that, in any election called by the incoming Tory prime minister Theresa May, Corbyn’s supporters would be able to stage “trigger ballots” to de-select the MPs most hostile to Corbyn, leaving the leadership, the HQ, the policy and the parliamentary group aligned to the left.
• Donald Trump Understands the Nexus Between Trade and Immigration — a corker by Marshall Auerback in Naked Capitalism: Historically, immigration law has concerned itself with many considerations, the most of which is the displacement of US workers. By contrast, advocates of free trade ignore this consideration, or blithely suggest that the resultant unemployment in a displaced sector (e.g., the automobile industry), is a “negative externality”, which is generally offset by the resultant gains in competitive efficiency, and lower cost goods. Cheap imports, then, outweigh the displacement of workers. But we do not extend this logic to immigration, or we would move straight to a policy of open borders.
• The murky world of industrial relations in the higher ed sector — Joanne Finkelstein in On Line Opinion: The quality of universities' delivery to students is adversely influenced by the casual, less engaged and experienced academic. It is particularly evident in newer institutions which have been aggressive in developing new programs of study supposedly in response to market demands. […] in the higher education sector, such a culture has ensured a declining quality in teaching especially in the newer and regional universities – those institutions designed specifically to widen participation and increase social equity.
• Modern Money: The Basics — Geoff Coventry provides a really nice, concise summary I wish I'd written: Money is a wonderful human invention – perhaps one of our greatest. Most nations have a monetary system designed to provide for private commercial needs, but also, simultaneously, to enable governments to access sufficient resources to create safe, just and ever-improving societies.
• Bernie Sanders’ connections with two UMKC economists run deep — Mark Davis at the Kansas City Star does a charming local news profile of Stephanie Kelton and Bill Black: Kelton and Black are part of a team of economic advisers, including former labor secretary Robert Reich and James Galbraith at the University of Texas in Austin, who help the Sanders campaign develop policies. Randall Wray, a fellow UMKC economics professor, credits Sanders for embracing thinkers from outside the economic mainstream. “The mainstream is a complete disaster and a complete disaster for our country,” Wray said. [We can assume they won't be advising Clinton.]
• Note To Economists: Saving Doesn’t Create Savings — Steve Roth in Evonomics;another wonderfully concise explanation I wish I'd written: When you spend money — transferring it to someone else in return for newly-produced goods and services — does it affect our collective monetary savings? In strict accounting terms, obviously not. Your money just moves from your account to someone else’s account; it doesn’t disappear. Your bank has less deposits; the recipient’s bank has more deposits. Aggregate monetary savings is unchanged by that accounting event. […] In three simple words: spending causes saving. Real, collective accumulation of real, long-lived stuff. Monetary saving — not-spending part of your income this year — doesn’t, collectively, create either real or monetary savings.
• How Democrats Created Liberalism of the Rich — Thomas Frank, Naked Capitalism via TomDispatch: Boston is the headquarters for two industries that are steadily bankrupting middle America: big learning and big medicine, both of them imposing costs that everyone else is basically required to pay and which increase at a far more rapid pace than wages or inflation. A thousand dollars a pill, 30 grand a semester: the debts that are gradually choking the life out of people where you live are what has made this city so very rich. […] Professional-class liberals aren’t really alarmed by oversized rewards for society’s winners. On the contrary, this seems natural to them — because they are society’s winners. The liberalism of professionals just does not extend to matters of inequality; this is the area where soft hearts abruptly turn hard.
• Letter from US Senator Al Franken to Niantic, Inc., owners of Pokemon GO: Recent reports, as well as Pokemon GO s own privacy policy, suggest that Niantic can collect a broad swath of personal information from its players. From a user's general profile information to their precise location data and device identifiers, Niantic has access to a significant amount of information, unless users - many of whom are children - opt-out of this collection. Pokemon GO'S privacy policy states that all of this information can then be shared with The Pokemon Company and "third party service providers", details for which are not provided, and farther indicates that Pokemon GO may share de-identified or aggregated data with other third parties for a non-exhaustive list of purposes. Finally, Pokemon GO s privacy policy specifically states that any information collected - including a child's - "is considered to be a business asset" and will thus be disclosed or transferred to a third party in the event that Niantic is party to a merger, acquisition, or other business transaction.
• Privatisation! Free trade! Shares for all! The great con that ruined Britain — Peter Hitchens in the Daily Mail! (via Richard Murphy): I am so sorry now that I fell for the great Thatcher-Reagan promise. […] I thought – this now seems especially funny – that private British Telecom would be automatically better than crabby old Post Office Telephones. I think anyone who has ever tried to contact BT when things go wrong would now happily go back to the days of nationalisation. Soviet-style slowness was bad, but surely better than total indifference.
• Is Competition the Cause of the Productivity Slowdown? — Dean Baker, CEPR: My alternative explanation is that a weak labor market and low wages explain much of the slowdown in productivity. The argument is straightforward. When Walmart can hire people at very low wages, they are happy to pay people to stand around and do almost nothing. That is why many retailers now have greeters or sales people standing in aisles who contribute little to productivity.

This week, I have been mostly reading:

• Psychologists Throw Open The “File Drawer” — Neuroskeptic: Now, a group of Belgian psychology researchers have decided to make a stand. In a bold move against publication bias, they’ve thrown open their own file drawer. In the new paper, Anthony Lane and colleagues from the Université catholique de Louvain say that they’ve realized that over the years, “our publication portfolio has become less and less representative of our actual findings”. Therefore, they “decided to get these [unpublished] studies out of our drawer and encourage other laboratories to do the same.”
• Insanity — xkcd:
  
• Reform School — Malcolm Harris at The New Inquiry reviews Schools on Trial, by Nikhil Goyal: In 1837, Horace Mann, the founder of American compulsory education, established the Massachusetts Board of Education, the first such agency and one which would become the model for the nation. But Mann didn’t want a more intellectually engaged population—literacy in the state already stood at 99 percent. Social control was a serious concern for Western elites after a series of failed revolutions, and Mann was very impressed by the system he saw on a visit to Prussia. He returned with a plan for public education. “Compulsory schooling evangelists,” Goyal writes, “which included many industrialists and financiers, in fact, wanted to ‘dumb down’ the American population to create docile followers, not potentially troublesome freethinkers who questioned authority.”
• Trade Treaty Propaganda Goes Into High Gear — Dean Baker, CEPR: As far as the protectionism in the TPP, the deal is quite explicitly about increasing the length and strength of patent and copyright protection. Yes, that is "protection" as in "protectionism." Patent and copyright protection do serve a purpose in providing an incentive for innovation and creative work, but all forms of protection serve a purpose. The question that serious people ask is whether there is a better way to serve the purpose.
• 'I Love My Label': Resisting the Pre-Packaged Sound in Ed-Tech — Audrey Watters: As someone who works outside of academia, without an institutional affiliation, I can’t begin to tell you how frustrating it is to be unable to access journal articles. I always get so irked when I hear technology evangelists proclaim “You can learn anything you want on the Internet.” No, you can’t. Huge swaths of knowledge, art, science remain inaccessible; and it’s a loss for scholarship, which need not and does not only happen among those with access to a university research library or with log-in credentials to its online portal. That inaccessibility is a reflection of institutional culture, industry culture, corporate culture, copyright (that is, intellectual property laws), capitalism, and code. That is, when we talk about the future of something like “education technology” or even when we talk about the future of research and scholarship or teaching and learning, we must grapple with issues that are technological, sociological, and above all, ideological.
• The elites hate Momentum and the Corbynites - and I’ll tell you why — David Graeber, providing "opinion" for The Guardian, as opposed to whatever the hell you'd call the utter tripe they normally publish about Corbyn: I’ve spent much of the past two decades working in movements aimed at creating new forms of bottom-up democracy, from the Global Justice Movement to Occupy Wall Street. It was our strong conviction that real, direct democracy, could never be created inside the structures of government. One had to open up a space outside. The Corbynistas are trying to prove us wrong. Will they be successful? I have absolutely no idea. But I cannot help find it a fascinating historical experiment. […] insofar as politics is a game of personalities, of scandals, foibles and acts of “leadership”, political journalists are not just the referees – in a real sense they are the field on which the game is played. Democratisation would turn them into reporters once again, in much the same way as it would turn politicians into representatives. In either case, it would mark a dramatic decline in personal power and influence. It would mark an equally dramatic rise in power for unions, constituent councils, and local activists – the very people who have rallied to Corbyn’s support.
• The Duncan Smith resignation: fundamentally shifting the economic debate — Neil Schofield: 'I am unable to watch passively whilst certain policies are enacted in order to meet the fiscal self imposed restraints that I believe are more and more perceived as distinctly political rather than in the national economic interest.' In other words, for the first time a key player in the post-2010 Conservative project has said, almost explicitly, that austerity is a political, not an economic choice. […] In other words, Duncan Smith’s resignation letter – and the events surrounding it – powerfully endorse the fundamental tenet of Jeremy Corbyn’s and John McDonnell’s economic programme: that austerity is a choice, not an economic necessity. It wholly destroys the intellectual underpinning of McDonnell’s opponents in the Parliamentary Labour Party.
• Peak Indifference — Cory Doctorow in Locus Online: At a certain point, indifference to tobacco’s dangers peaked – long before actual tobacco use peaked. Peak indifference marks a turning point. […] That’s why it’s time for privacy activists to start thinking of new tac­tics. We are past peak indifference to online surveillance: that means that there will never be a moment after today in which fewer people are alarmed by the costs of sur­veillance.
• A world war has begun. Break the silence. — John Pilger: In 2009, President Obama stood before an adoring crowd in the centre of Prague, in the heart of Europe. He pledged himself to make "the world free from nuclear weapons". People cheered and some cried. A torrent of platitudes flowed from the media. Obama was subsequently awarded the Nobel Peace Prize. It was all fake. He was lying. The Obama administration has built more nuclear weapons, more nuclear warheads, more nuclear delivery systems, more nuclear factories. Nuclear warhead spending alone rose higher under Obama than under any American president.
• Budget accounting tricks — Simon Wren-Lewis: One of the problems with fixed date deficit (or in this case surplus) targets is that they encourage playing around with the public finances to hit the target. Generally, but not always, this involves making a saving today by shifting costs into the future. Privatisation is an obvious example. It may be justified if the net present value of the sale is positive, or if privatisation really improves efficiency, but all to [sic] often it is a device to meet a short term target. Although a New Keynesian (Wren-Lewis will when pressed admit he subscribes to the superstition of "sound finance"), he makes a good point here. i.e. that, just as in the popular bugaboo where public deficits can be run up by unscrupulous pollies who "buy votes", those same unscrupulous pollies are more likely in the current neoliberal environment to buy a reputation as good economic managers by using fire sales of public assets (usually a bad thing) to hide deficits (rarely a bad thing).
• Get ready for a recession by 2017 — Steve Keen in the Australian: Whichever party is in opposition at the time will blame the incumbent, but in reality this recession has been set up by the sidestep both parties have used to avoid downturns for the past quarter century: whenever a crisis has loomed, they’ve avoided recession by encouraging the private sector to borrow and spend. […] Australia’s most famous recession sidestep was during the GFC, when it was one of only two countries in the OECD to avoid experiencing two consecutive quarters of negative GDP growth (the other country was South Korea). Since then, the private sectors of the advanced countries have collectively de-levered, reducing their debt levels from about 170 to 160 per cent of GDP. Australia, in stark contrast, has levered up.
  
• Tony Blair's spin unspun: how his claims compare with the Chilcot report — Andy McSmith, The Independent: Mr Blair has claimed that he was promising the Americans his support as a way of influencing Washington’s decision making and getting them to seek United Nations approval before acting. Taking questions from journalists, he asserted that his support was not “unconditional”. But the opening words of that July note [to Bush] – “I will be with you, whatever” – do sound unconditional.
• I read the Chilcot report as I travelled across Syria this week and saw for myself what Blair's actions caused — Robert Fisk, The Independent: When Blair can say, as he did the moment the Chilcot report was published, that it should “lay to rest allegations [sic] of bad faith, lies and deceit” – without a revolution in the streets against his bad faith, lies and deceit – then you can be sure that his successors will have no hesitation in swindling the public again and again. After all, what’s the difference between Iraqi WMDs that don’t exist, 45-minute warnings that are falsities, 70,000 non-existent Syrian “moderates” and a fictitious NHS windfall of millions if Britain left the European Union?
• To Save The Economy, We Have To Break Its One Sacred Rule — Jason Hickel, Co.Exist: As soon as we start focusing on GDP growth, we’re not only promoting the things that GDP measures, we’re promoting the indefinite increase of those things. And that’s exactly what we started to do in the 1960s. GDP was adopted during the Cold War for the sake of adjudicating the grand pissing match between the West and the USSR. Suddenly, politicians on both sides became feverish about promoting GDP growth. GDP growth became a sacred rule. And we remain in thrall to it today.
• Mocked and forgotten: who will speak for the American white working class? — Chris Arnade in The Guardian: America, and particularly the white working class, is dealing with a drug epidemic that is killing more people each year at a startling rate. Just in the past decade deaths from drugs has doubled. The National Review sees it as another sign of the flawed character of the poor. This is a common and moralistic trope those battling an addiction have long dealt with – that it is all the fault of their weakness. The reality is often far more complex. Addiction thrives in societies undergoing stress.
• Stopping Deflation? Dead Easy. So Why Isn’t It Being Done? — Ian Welsh: If you let fixed costs have inflation above income increases, then everything else is going to have to suffer deflation, because it is discretionary. Gotta eat and have a warm place to sleep, first.
• The Tory leadership election is a sort of X Factor for choosing the antichrist — Frankie Boyle in the otherwise disgraceful, paper of choice for the discerning New Labour war criminal, The Guardian: [The Parliamentary Labour Party] say they need a leader who knows how to oppose, albeit primarily their own party membership. The idea is that Corbyn is unelectable, and it’s just one of life’s sad ironies that none of the people who believe this will be able to beat him in an election. […] One of the PLP’s main worries will be that Labour’s vote will crumble to Ukip under Corbyn, who won’t produce enough racist mugs and mouse mats to reassure everybody. And, to be fair, it must be galling to a party that invaded Iraq, rendered Libyans to be tortured by Gaddafi and detained asylum seekers with Dickensian cruelty to lose voters on the race issue.

I don't get politics. I understand particular political issues, but I never understand the state of popular opinion about them. Politics, in that sense, is that thing I'm perpetually out of step with. So I should have known that the UK leaving the European Union, appearing to me such a self-evidently bad idea, was inevitable. I am further surprised to find that on the wisdom of "Brexit" some really super-smart people disagree with me. This almost never happens; coincidence of opinion is my infallible yardstick for intelligence, after all.

I understand the main criticisms of the EU, and they bear repeating:

• The Maastricht fiscal rules (national debt must stay below 60% of GDP and annual deficits below 3% of GDP) guarantee that any country under that regime which happens not to have a large export-driven economy (like for instance Germany) will be unable to use fiscal deficits to offset current account deficits and maintain spending power in the private sector (see Godley's sectoral balances for how that works), and will be driven into a debt deflation spiral that shrinks their economy. That is, the more the Eurozone periphery nations try to stick to the rules and end up liquidating productive capacity in the attempt to reduce debt/deficits, the less able they become to stick to the rules, and the worse they suffer. When Portugal, Ireland, Italy, Spain, and Greece joined the EU, they also joined the third world. Any other outcome was a logical impossibility.
• The Euro is the most disastrous faux-gold-standard since the last one. If you ever need an argument against independent central banks, just point to the way the ECB, the most independent central bank in history - 100% free of democratic accountability, has turned Europe into a game of beggar-thy-neighbour mercantilism. Unnecessary suffering on a grand scale, for no reason other than the ridiculous pursuit of larger numbers on the ECB's computer. Not even any useless lumps of soft yellow metal to show for it! Under the Euro, a country's economic prospects end up not being a function of their real productive capacity, but a result of a surfeit of or lack of those magic numbers.

So I understand why Bill Mitchell would welcome the Leave vote as the return of the class struggle, and why Steve Keen and Mark Blythe also see leaving as the most sensible course of action for any country able to do so. I have two reasons to disagree:

1. The quickest and easiest solution for any individual EU member state able to leave is not the best long-term solution for Europe.

Thanks to the City of London, the UK has the economic heft to wear any negative consequences of Brexit (although this is rather like sailing into a storm and thinking "It's a good thing we have that huge, unexploded bomb to use as ballast!"). Countries currently under the thumb of the "troika" of the ECB, the IMF, and the Eurogroup do not have a realistic, or at least tolerably painless, exit option, and it is in nobody's interest that they should continue to suffer. It may be satisfying to say "Congratularions Dr. Schauble, your prize is the 1930s," but it would have been better to deploy the UK's weight towards building a democratised EU, rather than a disintegrating Europe.

2. There is no reason to believe the scope for meaningful democracy in the UK will be improved by Brexit.

I will be dancing in the street when Jeremy Corbyn's Labour wins the 2020 (or earlier, maybe) general election. But it will be more for what it says about the UK's political aspirations than in anticipation of of what Labour will be able to achieve. John McDonnell has already undertaken to follow monetarist "balanced budget", "sound finance" policies, rather than the "functional finance" which is necessary to defuse the City of London financial bomb and rebuild the real economy. Regardless of which party is in power, for the forseeable future the UK has merely shed the straightjacket of Maastricht for the straitjacket of the Charter for Budget Responsibility. In the process the far right has come to feel vindicated and emboldened.

I would love to be wrong about this, but I fear I am merely in the minority, as usual.

Look, I'm no expert in the psychology of child abuse, but it seems self-evident to me that if you cover some poor woman with gold paint, and force her to assume a stress position, bearing the weight of a bloody great sword and a pair of scales that aren't even being used to weigh anything, you really have nobody but yourself to blame if afterwards she's a bit short-tempered. Who's the real villain here?  Clearly there's somebody high-up, with a gold paintbrush, who isn't being held to account, while she's left holding the baby.