recesion 2015

http://davidstockmanscontracorner.com/production-discounting-globally-suggest-us-consumers-in-deepening-recession/

BOLSAS: MARTES NEGRO

http://www.mail.com/int/business/markets/3785644-us-stocks-fall-sharply-bleak-chinese-manufacturing-report.html#.1272-stage-mmm1-2

In depth: The Greek crisis | The Economist

http://www.economist.com/greekcrisis
syriza gana por amplio margen NO

Enviado desde mi Samsung Mobile de Claro

RV: La Newsletter du CEPII - Mai 2015

ggarcianunez@uni.edu.pe

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Asunto: La Newsletter du CEPII - Mai 2015

La Newsletter du CEPII        Mai 2015         Le contenu de l'édition anglaise peut différer
Focus Vers une moindre instabilité macroéconomique Depuis plusieurs mois , différents indicateurs macroéconomiques révèlent que les pays de l'OCDE sont entrés dans une phase de plus forte stabilité financière et économique, rappelant la « grande modération ». >>> Stéphane Lhuissier   publications Financer les investissements pour une croissance soutenable en Europe    Michel Aglietta, Étienne Espagne Trade policy and industrial policy in China: What motivates public authorities to apply restrictions on exports?    Julien Gourdon, Stéphanie Monjon, Sandra Poncet L'usine du monde au ralenti ou le changement de régime du commerce extérieur chinois    Françoise Lemoine, Sandra Poncet, Deniz Ünal, Clément Cassé Relative Real Exchange-Rate Volatility, Multi-Destination Firms and Trade: Micro Evidence and Aggregate Implications    Jérôme Héricourt, Clément Nedoncelle Does the volatility of commodity prices reflect macroeconomic uncertainty?    Marc Joëts, Valérie Mignon, Tovonony Razafindrabe Volatility and uncertainty are not the same!    Valérie Mignon, Marc Joëts, Tovonony Razafindrabe Vers un retour de la « grande modération » ?    Stéphane Lhuissier Schengen : passoire ou passerelle ?    Daniel Mirza Souhaiter la cohérence réglementaire est une chose, la faire avancer en est une autre    Sébastien Jean L'Europe prisonnière de l'obsession de la compétitivité    Sébastien Jean QE à l'européenne : comment soutenir l'investissement ?    Urszula Szczerbowicz, Natacha Valla La Chine est-elle en train de redessiner la finance mondiale ?    Jean-Pierre Patat La partie de Go des Chinois dans le système financier international    Christophe Destais A holistic approach to ECB asset purchases, the Investment Plan and CMU    Natacha Valla, Jesper Berg, Laurent Clerc, Olivier Garnier & Erik Nielsen Financing energy and low-carbon investment: public guarantees and the ECB    Michel Aglietta, Étienne Espagne Journal of International Economics Export dynamics and sales at home    Nicolas Berman, Antoine Berthou, Jérôme Héricourt   Événements Françoise Lemoine au Printemps de l'économie, sur ''Grands émergents : la Chine et les autres'' 16 Avril 2015 Sebastien Jean au Printemps de l'économie, sur ''Qui gouverne le commerce mondial ?'' 16 Avril 2015 Michel Aglietta au Printemps de l'économie, sur ''Le dollar, l'euro et les autres'' 16 Avril 2015 Global perspectives on investment and potential output 28 Avril 2015 L'innovation comme levier de la transition climatique 7 Mai 2015 L'inclusion financière en Afrique 19 Mai 2015 1st MENA Trade Workshop - Deadline for participant registration: Wednesday, April 22, 2015 2 - 3 Juin, 2015 15th Doctoral Meetings in International Trade and International Finance 25 - 26 Juin, 2015 L'Economie mondiale 2016 - SAVE THE DATE 9 Septembre 2015 XIII ELSNIT Annual Conference : Trade Facilitation - Call for Papers - Deadline for submitting: May, 15 23 - 24 Octobre, 2015 Agriculture, International Trade and Development - Call for Papers - Deadline for submitting: July 31 19 - 20 Novembre, 2015 La panne de l'immobilier freine la reprise    Thomas Grjebine Revue Banque CDS souverains : vraie ou fausse protection ?    Virginie Coudert BFM Business Bruxelles va-t-il relever sa prévision de croissance pour la France en 2015 ?: Jacques Mistral, Lionel Fontagné, Éric Woerth et Emmanuel Lechypre    Lionel Fontagné La Tribune Croissance: vers un retour de la "Grande modération" ?    Stéphane Lhuissier France Culture Pays émergents : rêve mondial, déclin local (2/4) - Brésil, Inde, Chine : colosses politiques aux pieds d'argile    Jean-Joseph Boillot La Croix Quelles seront les conséquences du ralentissement chinois ?    Françoise Lemoine Economie-Finances (BFM Business) Etats-Unis et Japon unis face à une Chine dominante ?    Sébastien Jean latribune.fr Traité transatlantique : une harmonisation règlementaire ardue    Sébastien Jean Revue Banque Chine : « Il y a un malaise avec les institutions de Bretton Woods »    Christophe Destais Xerfi Canal La panne de l'immobilier freine la reprise    Thomas Grjebine latribune.fr La BCE peut réellement soutenir l'investissement en Europe    Urszula Szczerbowicz, Natacha Valla la-croix.com L'espoir d'un accord européen avec la Grèce reporté    Thomas Grjebine Le Monde L'Europe prisonnière de l'obsession de la compétitivité    Sébastien Jean	Edito Compétitivité : une obsession dangereuse pour la cohésion européenne A l'heure où les excédents européens s'accumulent, sur fond d'atonie interne, les injonctions à améliorer la compétitivité externe de l'Union sont paradoxales. Pour l'Europe, le risque n'est pas de perdre sa compétitivité. Il est de ne pas retrouver sa cohésion et sa croissance. >>> Sébastien Jean   Rester informé Recevoir une alerte Lire un flux RSS Suivre @CEPII_Paris Nous contacter Nos autres sites   Faits & chiffres 4 On distingue quatre composantes dans les échanges extérieurs, « 4 Chine », qui se singularisent chacune par des évolutions spécifiques : 1) les firmes chinoises qui font du commerce ordinaire ; 2) celles q ui font des échanges de processing ; 3) les firmes étrangères qui font du commerce ordinaire ; 4) celles qui font des échanges de processing . >>> Françoise Lemoine, Sandra Poncet, Deniz Ünal, Clément Cassé   Opinion Diversifier la structure de financement de l'économie de la zone euro En optant plutôt pour les instruments financiers émis directement par des entreprises, la BCE offrirait un financement alternatif aux entreprises pour mener à bien leurs projets d'investissement, et ce faisant accélérerait sans doute la reprise de l'économie de la zone euro.>>> Urszula Szczerbowicz, Natacha Valla   Emplois Economistes Macroéconomiste Date limite de dépôt de candidature : 15/05/2015 Stagiaires Visiting Researchers ISSN: 1255-7072 Directeur de publication : Sébastien Jean Rédacteur en chef : Dominique Pianelli
Gérer son abonnement Les informations qui vous concernent sont strictement destinées au CEPII. Vous disposez d'un droit d'accès, de modification, de rectification et de suppression des données vous concernant (loi « Informatique et Libertés » du 6 janvier 1978 modifiée). Pour toute demande, adressez-vous à : cepiiweb@cepii.fr

ROUBINI sur la bataille des monnaies

https://www.project-syndicate.org/commentary/dollar-joins-currency-wars-by-nouriel-roubini-2015-05https://www.project-syndicate.org/commentary/dollar-joins-currency-wars-by-nouriel-roubini-2015-05

RT en Español: El gran armagedón financiero (E749) - Keiser Report en español

RT en Español: El gran armagedón financiero (E749) - Keiser Report en español. http://google.com/newsstand/s/CBIwmbPrsiE

Ante el laberinto de obstáculos globales y domésticos, la salida para América Latina: “un ajuste inteligente.”

Ante el laberinto de obstáculos globales y domésticos, la salida para América Latina: “un ajuste inteligente.”

systeme monetaire mondial, benassy-coeure

http://www.davidmourey.com/article-le-systeme-monetaire-international-une-introduction-par-agnes-benassy-quere-113244870.html

http://www.easybourse.com/bourse/international/article/23532/chine-les-autorites-multiplient-les-avertissements-contre-une-plus-forte-baisse-de-la-croissance.html

Perspectivas Económicas de la Economía Mundial en los próximos años

http://www.economonitor.com/blog/2011/08/recession-risks-debt-restructuring-inevitable-inflation-likely/

http://www.economonitor.com/blog/2011/08/recession-risks-debt-restructuring-inevitable-inflation-likely/

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Simon Johnson: Su vision de la crisis

A Second Great Depression – Or Could It Become Something Worse?

By Simon Johnson
With the US and European econIs This omies having slowed markedly according to the latest data, and with global growth continuing to disappoint, a reasonable question increasingly arises: Are we in another Great Depression?
The easy answer is "no" – the main features of the Great Depression have not yet manifest themselves and still seem unlikely.  But it is increasingly likely that we will find ourselves in the midst of something nearly as traumatic, a long slump of the kind seen with some regularity in the nineteenth century, particularly if presidential election-year politics continue to head in dangerous direction.
The Great Depression had three main characteristics, seen in the United States and most other countries that were severely affected.  None of these have been part of our collective experience since 2007.
First, output dropped sharply after 1929, by over 25 percent in real terms in the US (using the Bureau of Economic Analysis data, from its website, for real GDP, using chained 1937 dollars).  In contrast, in the U.S. we had a relatively small decline in GDP after the boom peaked.  According to the BEA's latest online data, GDP peaked in the 2^nd quarter of 2008 at 14.4155 trillion and bottomed out in the 2^ndquarter of 2009 at 13.8541 trillion; a decline of about 4 percent.
Second, unemployment rose above 20 percent in the US during the 1930s and stayed there.  We experienced record job losses for the post-war US, with around 8 million jobs lost.  But unemployment only briefly touched 10 percent (in the 4^th quarter of 2009; see the Bureau of Labor Statistics website).  Even if we include the highest estimates – which include people discouraged from looking for a job, thus not registered as unemployed – the jobless rate reached around 16-17 percent.  It's a jobs disaster, to be sure, but not the same scale as the Great Depression.
Third, in the 1930s the credit system shrank dramatically.  In large part this is because banks failed in an uncontrolled manner – largely as a part of panics that led to retail depositors running to take out their funds.  The creation of the Federal Deposit Insurance Corporation (FDIC) put an end to that kind of run and, despite everything, the FDIC has continues to play a calming role.  (Disclosure: I'm on the FDIC's newly created systemic resolution advisory committee, but I don't have anything to do with how they handle small and medium-sized banks.)
But experience at the end of the 19^th century was also quite different from the 1930s – not as dramatic, yet very traumatic for many Americans.  The heavily leveraged sector more than 100 years ago was not housing but rather agriculture – a different play on real estate. 
There were booming new technologies in that day, including the stories we know well around the rapid development of transportation, telephones, electricity, and steel.  But falling agricultural prices kept getting in the way for many Americans.  With large debt burdens, farmers were vulnerable to deflation (a lower price level in general or just for their products).  And prior to the big migration into cities, farmers were a mainstay of consumption.
According to the NBER, falling from peak to trough in each cycle took 11 months in 1945-2009 but twice that amount of time during 1854-1919.  The longest decline on record, according to this methodology, was not during the 1930s but rather during October 1873 to March 1879 – more than 4 years of economic decline. 
In this context, it is quite striking – and deeply alarming – to hear a prominent Republican presidential candidate attack Ben Bernanke for his efforts to prevent deflation.  Specifically, Texas Governor Rick Perry said earlier this week, referring to Mr. Bernanke,

"If this guy prints more money between now and the election, I dunno what y'all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion."

In the nineteenth century the agricultural sector, particularly in the west of the country, favored higher prices and effectively looser monetary policy.  This was the background for William Jennings Bryan's famous "cross of gold" speech in 1896; the "gold" to which he referred was the gold standard, the bastion of hard money – and tendency towards deflation – favored by the east coast financial establishment.
Populism in the nineteenth century was, broadly speaking, from the left.  But now the rising populists are from the right of the political spectrum and they seem intent on intimidating monetary policy makers into inaction.  We see this push both on the campaign trail and on Capitol Hill – for example in interactions between the House Financial Services Committee, where Ron Paul chairs the monetary policy subcommittee, and the Federal Reserve.
The relative decline of agriculture and the rise of industry and services over a century ago was long believed to make the economy more stable – as we moved away from cycles based on the weather and global swings in supply and demand for commodities.  But financial development creates its own vulnerability as more people have access to credit for their personal and business decisions.  Add to that the rise of a financial sector that has proved brilliant at extracting subsidies that protect against downside risk – and hence encourage excessive risk-taking.  The result is an economy that is at least as prone to big boom-bust cycles as what existed at the end of the nineteenth century.
The rise of the tea party has taken fiscal policy off the table as a potential counter-cyclical instrument; the next fiscal moves will be contractionary (probably more spending cuts), irrespective of whether jobs start to come back or not.  In this situation, monetary policy matters a great deal – and Mr. Bernanke's focus on avoiding deflation and hence limiting the problems for debtors does not seem inappropriate (for more on Mr. Bernanke, his motivations and actions, see David Wessel's book, In Fed We Trust).
Mr. Bernanke has his flaws, to be sure.  Under his leadership, the Fed has been reluctant to take on regulatory issues – continuing to see the incentive distortions of "too big to fail" banks as somehow separate from monetary policy, its primary concern.  And his team has consistently pushed for capital requirements that are too low relative to the shocks we now face.
And the Federal Reserve itself is to blame for some of the damage to its reputation – although it did get a major assist from Treasury in 2008-09.  There were too many bailouts rushed over weekends, with terms that were too generous to incumbent management and not sufficiently advantageous to the public purse.
But to accuse Mr. Bernanke of treason for worrying about deflation is worse than dangerous politics.  It risks returning us to the long slump of the late 1870s.
An edited version of this post appeared this morning on the NYT.com's Economix blog; it is used here with permission.  If you would like to reproduce the entire post, please contact the New York Times.

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Crisis and Class Struggle in the Eurozone

Países europeos en peor situación provienen de regímenes fascistas y conservan políticas represivas y baja participación del estado en el PBI, la media europea es de 44% y España se ubica en 34% por ejemplo...

The Cases of Spain, Greece, Ireland and Portugal

Crisis and Class Struggle in the Eurozone

By VICENTE NAVARRO

To understand the situation in the countries at the periphery of the European Union, four countries within the Eurozone, Portugal, Ireland, Greece and Spain, we have to understand the political context they have in common. All of them were governed by fascist or fascist-like dictatorships (Spain, Portugal, and Greece) or by authoritarian right-wing regimes (Ireland) for most of the period from the late 1930s or early 1940s until the late 1970s. This history is usually ignored in analyses of these countries.

This shared history, however, has determined the nature of their states, a critical variable for understanding countries' economic behavior. Their states have been very repressive. Even today, these countries have the largest number of policemen per 10,000 individuals in the EU-15. Another shared characteristic is their very low level of state revenues and their highly regressive fiscal policies. The revenues to the state are much lower than the EU-15 average: approximately 34% of GNP in Spain, 37% in Greece, 39% in Portugal, and 34% in Ireland, compared with the EU-15 average of 44%, and compared with 54% in Sweden – the EU-15 country where the left has governed for the longest period. The low state revenues result from extremely regressive policies. The super-rich, rich, and high-income upper middle classes do not pay taxes at the same level and intensity as those in most of the central and northern EU-15 countries – a consequence of a history of government by ultra-right-wing parties. Of course, progress has been made since the dictatorships ended. But the dominance of conservative forces in the political and civil lives of these countries explains why their state revenues are still so low.

As a result, the public sectors in Portugal, Ireland, Greece, and Spain are extremely underdeveloped. And their welfare states are poorly funded and very limited, including their public transfers (pensions) and public services (medical care, education, childcare services, homecare services, social services, and others). Indicators of this are many. One example is public social spending as percentage of GNP, which is lower in these countries than the EU-15 average (27%): Spain, 22.1%; Greece, 25.9%; Portugal, 24.3%; and Ireland, 22.1% (compared with Sweden, 29.3%). Another example is the percentage of the adult population working in public services of the welfare state – again, lower than the EU-15 average (15%): Spain, 9%; Greece, 11%; Portugal, 7%; and Ireland, 12% (compared with Sweden, 25%). In fact, Greece's percentage is three points higher, 14%, because it includes services for the military, (which represents approximately 30% of public employees).

The specificity of the political regimes

Thus, for these four countries, not enough attention has been paid in the economic literature to the consequences of being governed by ultra-conservative forces. The influence of such forces has been enormous. It is also important to emphasize that the conservative forces in these peripheral countries are different from those in northern and central EU-15 countries. They do not belong to democratic traditions since they are the inheritors of either fascist or authoritarian regimes. Even today, after almost 30 years of democracy, such forces continue to be very influential in the four states, even when the states are governed by social democratic parties. As just one example, Spain's Supreme Court has taken Judge Baltasar Garzon, who used to be a member himself of the Court, to trial for daring to inquire about crimes committed by General Franco's fascist regime. It is not fully comprehended outside Spain just how influential the ultra-right-wing forces still are within the Spanish state. They dominate political culture in many different ways, including control of the major media. There are no major left or left-of-center media in Spain, or in the other countries in this group.

The domination of the state by ultra-conservative forces has many consequences besides their low level of state revenues, their regressive fiscal policies, and their underdevelopment of the welfare state. Labor income, as percentage of national income, has declined since 1992, when policies were implemented (including by social democratic governments) in preparation for entering the Eurozone. This income decline has occurred more rapidly in Portugal, Ireland, Greece, and Spain than the EU-15 average, and is particularly accentuated in Spain, with a decrease from 70% to 61% of national income – despite an increase in the percentage of working adult population.

As noted, a consequence of domination by conservative forces, considerably limiting the public reforms approved and implemented by social democratic governments from the early 1980s onward, is regressive fiscal policies. As a result of these policies, the impact of state interventions on income redistribution has been very limited. For example, in Spain, as late as 2009, the level of poverty (60% of median income) declined only 4 points after implementation of state interventions (public social transfers): from 24% before to 20% after transfers. The EU-15 average decreased from 25% to 16%. Sweden's poverty rate fell from 27% to 13%. The decline in poverty rate resulting from public social transfers in Spain is the lowest in the EU-15. Another indicator of the limited redistributional impact of state interventions is that the Gini coefficients in all four countries are higher than the EU-15 average (29.2). Spain's Gini coefficient is 31.3, the same as Ireland's; Greece's is 34.3; and Portugal's is the highest at 36.8.

How the crisis has been building up

Another characteristic of this group of countries is the acceptance by the governing social democratic parties of most of the neoliberal policies pushed by the EU establishment. This acceptance has been generalized among the social democratic parties of the European Union. Actually, these parties were part of the consensus in developing neoliberal policies (usually referred to as the "Brussels consensus," the European version of the "Washington consensus"). As part of this consensus, both conservative-liberal and social democratic governing parties have been reducing taxes, particularly for the top income brackets. It was none other than Spain's socialist candidate in the 2004 election (and later prime minister), Jose Luis Rodriguez Zapatero, who promised to reduce taxes if elected, saying that lowering taxes was a cause to be promoted by the left. The major economic thinker of Spain's socialist party at that time was Jordi Sevilla, an economist who wrote in his book The Future of Socialism that "the left had to stop raising taxes and increasing public expenditures" – this said in the EU-15 country with the lowest state revenues and poorest welfare state.

The tax reductions over the past 15 years have led to a structural public deficit that was disguised by the fast economic growth created by the housing bubble, responsible for the banking–real estate–construction industry complex at the center of the bubble. When the bubble burst, and the economy came to a halt, the structural public deficit appeared in all its intensity. The public deficits in Portugal, Ireland, Greece, and Spain were the result of declining state revenues, not expanding public expenditures. This is why the public policies of these governments are profoundly wrong. They have been cutting public spending, assuming, incorrectly, that the cause of public deficits was an exaggerated growth of public expenditures.

Arguments used to justify cuts in public expenditures

The slogan now being used to justify these cuts is: "The country has been living beyond its means." Major political figures in the four countries claim that their welfare states are larger than they can pay for. But the data show otherwise. In Spain, for example, the GNP per capita is 94% of the EU-15 average, but public social expenditure per capita is only 72% of the EU-15 average. If it were 94%, the Spanish state would have 66,000 million more euros than it does today. So, Spain has the resources. The problem is that the state does not collect them, because its fiscal policies are so regressive and fiscal fraud is widespread among high-income groups and economic and financial corporations. Actually, banking in Spain is the primary entity responsible for fiscal fraud. Mr. Botin, the country's major banker (president of Santander Bank, the third most profitable bank in the world, after two Chinese banks), was discovered this year to have 2,000 million euros in a Swiss bank account – not declared until two whistleblowers at the bank went to the press. Such fraud is general practice. The tax inspectors of Spain's Ministry of Economy estimate there are 88,600 million euros that the state does not collect because of tax fraud.

How and why the crisis arose

Before the financial crisis there was an economic crisis, largely the result of the decline in labor income as percentage of total national income. The neoliberal policies developed since the 1980s (accentuated over the past 15 years, and carried out by governments of various political persuasions, including social democratic, in Spain, Greece, and Portugal) have had a strong impact on income distribution, accelerating the concentration of income in the high income brackets. The decline of labor-derived income diminished the purchasing power of the popular classes, forcing them into debt in order to maintain their standard of living. And credit was relatively easy to obtain, because house values were rising and provided a means of borrowing from banks by putting up homes as security. The growth of the credit sector (and of financing) was based on the decline of labor income. But the decline of labor income was creating a major problem for demand and limited profitability in the economy.

With this limited profitability in the productive economy, the super-rich, rich, and upper-income middle class invested in sectors with higher returns, especially in real estate. The deregulation of banking (and deregulation of zoning laws) during the 1990s led to a real estate bubble, based on the complex of banking, real estate, and construction industries. In Spain, this complex was the main motor of economic growth and was supported by both central and local authorities, since local authorities were primarily funded by property taxes.

Stimulating the growth of housing construction was the influx of immigrants, with the immigrant population increasing from 4% to 10% of the population in only 10 years. Housing construction reached 10% of GNP, and this sector produced the most (but very low-paid) jobs. The Spanish "miracle" of job creation was based on large investments in a speculative sector of the economy. And it was funded with debt. This is the cause of the enormous private debt in Spain, which was facilitated by introduction of the euro – much more stable in the economy than the national currency it replaced. Introduction of the euro dramatically increased the size of the financial sector in the four peripheral Eurozone countries. When the bubble burst, the whole credit economy came to a stop.

The political origins of the public debt

In the four countries, there has been an alliance between the upper income brackets (the super-rich, rich, and upper middle class, whose taxes have been reduced in the past 15 years) and the banks, on the one hand, and the state, on the other. A fruit of this alliance was the reduction in taxes that created the structural public deficit, masked by the economic growth within the bubble.

The decline of revenues to the states (the consequence of tax cuts) forced the states to borrow from the banks, where the rich deposited the money saved due to reduced taxes. The indebtedness of the states and the need to borrow were clearly related to the reduction of taxes. When the economy came to a stop as the bubble burst, the structural public deficit became apparent. Public deficits as percentage of GNP, increased substantially in all four countries from 2007 to 2009 as a consequence. Spain went from a surplus of 1.9% of GNP in 2005 to a public deficit of 11.1% in 2009. Greece went from a deficit of 6.4% in 2007 to 15.4% in 2009, with Ireland moving from 0% to 14% in the same period. In all of them, rapid growth of the public deficit was based on the extremely regressive nature of state revenues. With most taxes based on labor income and consumption, when employment declined, unemployment grew, and consumption declined, the public deficit escalated dramatically.

Solutions that are never considered

The neoliberal response to this situation, which entails cuts in public expenditures, is making the situation worse because it reduces demand. The trade unions have accurately described neoliberalism as the ideology of banks and large employers. The major media support this doctrine, based more on faith than on evidence. At the root of the problem is class power and its realization through the state.

If Spain implemented the same fiscal policy as Sweden, the Spanish state would take in 200,000 million more euros than it now does. With those millions of euros, it could create 5 million new jobs (particularly in the underdeveloped welfare state services, such as the national health service, educational system, childcare services, and other social services). If one in every four adults worked in such services (as occurs in Sweden), instead of one in every ten adults (as occurs now in Spain), Spain would create 5 million more jobs, eliminating unemployment: 5 million is more or less the number of people currently unemployed in Spain.

A second point is that the fiscal stimulus applied by most of the governments in this group of countries in 2008 was basically tax cuts and transfers. Only a miniscule part of the stimulus went to creating jobs (through investment by local authorities). Stimulating the economy through the creation of jobs has not occurred in any of these countries. Moreover, reduction of the deficit is achieved by cutting public expenditures, not by increasing taxes. The European Federation of Trade Unions has proposed alternative ways of reducing the deficit, primarily by increasing taxes (reversing the tax reductions of the past 15 years). Class power, however, is the most potent opposition to these alternative policies. A manufacturing worker in Spain pays taxes estimated at 74% of the taxes paid by a manufacturing worker in Sweden. The top 1% of income earners in Spain, however, pay only 20% of the taxes paid by the top 1% in Sweden. This is what explains the enormously regressive fiscal policy in the four peripheral EU-15 countries and the enormous resistance to change by their dominant classes.

The problem of the public debt is thus basically a political, not an economic or financial one. The current situation is untenable because Europe's dominant classes and their allies, the EU leadership ("the troika": the European Council, European Commission, and European Central Bank), are trying to reduce the power of labor using the argument of "pressure from the financial markets" – the aim being to get labor to accept the huge sacrifices that the dominant classes have wanted for many years. In Spain, for example, the socialist government is cutting public social expenditures, which, besides adversely affecting economic growth and reducing level of demand, is hurting the popular classes. The parties to the left of the governing socialists have clearly shown that for each cut in public social expenditures, the government could obtain even larger revenues by selectively increasing taxes, which would not affect taxes for the majority of the population. Moreover, they have shown that the revenues obtained with those taxes could create jobs in the underdeveloped public sector, especially in the welfare state.

Another issue is that, at this time, no major force on the left has called for exit from the euro. An explanation for this is that Europe has always been a point of reference for progressive democratic forces. In Spain, for example, under the fascist dictatorship, Europe meant liberty, democracy, and the welfare state. The attraction of Europe is now waning, though not very rapidly. Because of this, most of the debate centers on correction of the fiscal regressiveness of the state and development of expansionary policies as a way of stimulating economic growth and job production. Sectors of the left in Spain believe this is not possible, pointing to the Mitterrand case as an example of how one country cannot follow expansionary policies. This needs to be shown as wrong, although expansionary policies at the European level would help a lot. This is unlikely to occur at this time, however, given the control of the major EU institutions by neoliberal dogma.

The indignados movement

Meanwhile, a new movement has appeared which has surprised everyone. Initially led by the young unemployed, it has attracted enormous support from the majority of the population. Its primary focus is on denouncing the absence of democracy, in Spain and elsewhere in Europe, showing how governments are making decisions not mandated by the population. This movement is going to the root of the problem: the nature of democracy and who it is that democratic institutions are representing. Of course, in Spain, the government is worried about this movement. The candidate of the governing socialist party, hoping to succeed Zapatero (the Spanish president with the least popular support during the democratic period), has called for increased taxation of the bankers and the banks to help resolve the fiscal problems of the state. This is important because the proposal is a response to the public outrage directed at banking and the wealthy. The financial and industrial bourgeoisie are seen as using the "pressure of the financial markets" as a way of getting what they have always wanted: to weaken labor. And what is really threatening to the establishment is that all the polls show enormous sympathy for this popular movement, including among large sectors of the conservative parties. We will see what happens next.

Vicente Navarro is Professor of Public Policy, the Johns Hopkins University and Director of the Public Policy Program jointly sponsored by the Pompeu Fabra University (Barcelona, Spain) and the Johns Hopkins University (Baltimore, MD)

The work of Marta Tur, Miquel Campa Sole and Maria Allwine in the preparation of this article is gratefully acknowledged. 

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Wall Street Aristocracy Got $1.2 Trillion in Fed’s Secret Loans

Wall Street Aristocracy Got $1.2 Trillion in Fed's Secret Loans

Q

By Bradley Keoun and Phil Kuntz - Aug 22, 2011 7:19 AM GMT-0500

Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market's collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.

Fed Chairman Ben S. Bernanke's unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

"These are all whopping numbers," said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. "You're talking about the aristocracy of American finance going down the tubes without the federal money."

(View the Bloomberg interactive graphic to chart the Fed's financial bailout.)

Foreign Borrowers

It wasn't just American finance. Almost half of the Fed's top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 billion. Germany's Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.

The largest borrowers also included Dexia SA (DEXB), Belgium's biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.

The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

Peak Balance

The balance was more than 25 times the Fed's pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.

The Fed has said it had "no credit losses" on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.

"We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the U.S. taxpayer," said James Clouse, deputy director of the Fed's division of monetary affairs in Washington. "Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses."

While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.

Odds of Recession

The odds of another recession have climbed during the past six months, according to five of nine economists on the Business Cycle Dating Committee of the National Bureau of Economic Research, an academic panel that dates recessions.

Bank of America's bond-insurance prices last week surged to a rate of $342,040 a year for coverage on $10 million of debt, above whereLehman Brothers Holdings Inc. (LEHMQ)'s bond insurance was priced at the start of the week before the firm collapsed. Citigroup's shares are trading below the split-adjusted price of $28 that they hit on the day the bank's Fed loans peaked in January 2009. The U.S. unemployment rate was at 9.1 percent in July, compared with 4.7 percent in November 2007, before the recession began.

Homeowners are more than 30 days past due on their mortgage payments on 4.38 million properties in the U.S., and 2.16 million more properties are in foreclosure, representing a combined $1.27 trillion of unpaid principal, estimates Jacksonville, Florida-based Lender Processing Services Inc.

Liquidity Requirements

"Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?" U.S. Representative Walter B. Jones, a Republican from North Carolina, said at a June 1 congressional hearing in Washington on Fed lending disclosure. "They get help when the average businessperson down in eastern North Carolina, and probably across America, they can't even go to a bank they've been banking with for 15 or 20 years and get a loan."

The sheer size of the Fed loans bolsters the case for minimum liquidity requirements that global regulators last year agreed to impose on banks for the first time, said Litan, now a vice president at the Kansas City, Missouri-based Kauffman Foundation, which supports entrepreneurship research. Liquidity refers to the daily funds a bank needs to operate, including cash to cover depositor withdrawals.

The rules, which mandate that banks keep enough cash and easily liquidated assets on hand to survive a 30-day crisis, don't take effect until 2015. Another proposed requirement for lenders to keep "stable funding" for a one-year horizon was postponed until at least 2018 after banks showed they'd have to raise as much as $6 trillion in new long-term debt to comply.

`Stark Illustration'

Regulators are "not going to go far enough to prevent this from happening again," said Kenneth Rogoff, a former chief economist at theInternational Monetary Fund and now an economics professor at Harvard University.

Reforms undertaken since the crisis might not insulate U.S. markets and financial institutions from the sovereign budget and debt crises facing Greece, Ireland and Portugal, according to the U.S. Financial Stability Oversight Council, a 10-member body created by the Dodd-Frank Act and led by Treasury Secretary Timothy Geithner.

"The recent financial crisis provides a stark illustration of how quickly confidence can erode and financial contagion can spread," the council said in its July 26 report.

21,000 Transactions

Any new rescues by the U.S. central bank would be governed by transparency laws adopted in 2010 that require the Fed to disclose borrowers after two years.

Fed officials argued for more than two years that releasing the identities of borrowers and the terms of their loans would stigmatize banks, damaging stock prices or leading to depositor runs. A group of the biggest commercial banks last year asked the U.S. Supreme Court to keep at least some Fed borrowings secret. In March, the high court declined to hear that appeal, and the central bank made an unprecedented release of records.

Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world's largest banks depended on the U.S. central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.

Morgan Stanley Borrowing

Two weeks after Lehman's bankruptcy in September 2008, Morgan Stanley countered concerns that it might be next to go by announcing it had "strong capital and liquidity positions." The statement, in a Sept. 29, 2008, press release about a $9 billion investment from Tokyo-based Mitsubishi UFJ Financial Group Inc., said nothing about Morgan Stanley's Fed loans.

That was the same day as the firm's $107.3 billion peak in borrowing from the central bank, which was the source of almost all of Morgan Stanley's available cash, according to the lending data and documents released more than two years later by the Financial Crisis Inquiry Commission. The amount was almost three times the company's total profits over the past decade, data compiled by Bloomberg show.

Mark Lake, a spokesman for New York-based Morgan Stanley, said the crisis caused the industry to "fundamentally re- evaluate" the way it manages its cash.

"We have taken the lessons we learned from that period and applied them to our liquidity-management program to protect both our franchise and our clients going forward," Lake said. He declined to say what changes the bank had made.

Acceptable Collateral

In most cases, the Fed demanded collateral for its loans -- Treasuries or corporate bonds and mortgage bonds that could be seized and sold if the money wasn't repaid. That meant the central bank's main risk was that collateral pledged by banks that collapsed would be worth less than the amount borrowed.

As the crisis deepened, the Fed relaxed its standards for acceptable collateral. Typically, the central bank accepts only bonds with the highest credit grades, such as U.S. Treasuries. By late 2008, it was accepting "junk" bonds, those rated below investment grade. It even took stocks, which are first to get wiped out in a liquidation.

Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an "unknown rating," according to the documents. About 25 percent of the collateral was foreign-denominated.

`Willingness to Lend'

"What you're looking at is a willingness to lend against just about anything," said Robert Eisenbeis, a former research director at the Federal Reserve Bank of Atlanta and now chief monetary economist in Atlanta for Sarasota, Florida-based Cumberland Advisors Inc.

The lack of private-market alternatives for lending shows how skeptical trading partners and depositors were about the value of the banks' capital and collateral, Eisenbeis said.

"The markets were just plain shut," said Tanya Azarchs, former head of bank research at Standard & Poor's and now an independent consultant in Briarcliff Manor, New York. "If you needed liquidity, there was only one place to go."

Even banks that survived the crisis without government capital injections tapped the Fed through programs that promised confidentiality. London-based Barclays Plc (BARC) borrowed $64.9 billion and Frankfurt-based Deutsche Bank AG (DBK) got $66 billion. Sarah MacDonald, a spokeswoman for Barclays, and John Gallagher, a spokesman for Deutsche Bank, declined to comment.

Below-Market Rates

While the Fed's last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through itsTerm Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland's RBS Citizens NA unit with $10 billion, Fed data show.

JPMorgan Chase & Co. (JPM), the New York-based lender that touted its "fortress balance sheet" at least 16 times in press releases and conference calls from October 2007 through February 2010, took as much as $48 billion in February 2009 from TAF. The facility, set up in December 2007, was a temporary alternative to the discount window, the central bank's 97-year-old primary lending program to help banks in a cash squeeze.

`Larger Than TARP'

Goldman Sachs Group Inc. (GS), which in 2007 was the most profitable securities firm in Wall Street history, borrowed $69 billion from the Fed on Dec. 31, 2008. Among the programs New York-based Goldman Sachs tapped after the Lehman bankruptcy was the Primary Dealer Credit Facility, or PDCF, designed to lend money to brokerage firms ineligible for the Fed's bank-lending programs.

Michael Duvally, a spokesman for Goldman Sachs, declined to comment.

The Fed's liquidity lifelines may increase the chances that banks engage in excessive risk-taking with borrowed money, Rogoff said. Such a phenomenon, known as moral hazard, occurs if banks assume the Fed will be there when they need it, he said. The size of bank borrowings "certainly shows the Fed bailout was in many ways much larger than TARP," Rogoff said.

TARP is the Treasury Department's Troubled Asset Relief Program, a $700 billion bank-bailout fund that provided capital injections of $45 billion each to Citigroup and Bank of America, and $10 billion to Morgan Stanley. Because most of the Treasury's investments were made in the form of preferred stock, they were considered riskier than the Fed's loans, a type of senior debt.

Dodd-Frank Requirement

In December, in response to the Dodd-Frank Act, the Fed released 18 databases detailing its temporary emergency-lending programs.

Congress required the disclosure after the Fed rejected requests in 2008 from the late Bloomberg News reporter Mark Pittman and other media companies that sought details of its loans under the Freedom of Information Act. After fighting to keep the data secret, the central bank released unprecedented information about its discount window and other programs under court order in March 2011.

Bloomberg News combined Fed databases made available in December and July with the discount-window records released in March to produce daily totals for banks across all the programs, including the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, Commercial Paper Funding Facility, discount window, PDCF, TAF, Term Securities Lending Facility and single-tranche open market operations. The programs supplied loans from August 2007 through April 2010.

Rolling Crisis

The result is a timeline illustrating how the credit crisis rolled from one bank to another as financial contagion spread.

Fed borrowings by Societe Generale (GLE), France's second-biggest bank, peaked at $17.4 billion in May 2008, four months after the Paris-based lender announced a record 4.9 billion-euro ($7.2 billion) loss on unauthorized stock-index futures bets by former trader Jerome Kerviel.

Morgan Stanley's top borrowing came four months later, after Lehman's bankruptcy. Citigroup crested in January 2009, as did 43 other banks, the largest number of peak borrowings for any month during the crisis. Bank of America's heaviest borrowings came two months after that.

Sixteen banks, including Plano, Texas-based Beal Financial Corp. and Jacksonville, Florida-based EverBank Financial Corp., didn't hit their peaks until February or March 2010.

Using Subsidiaries

"At no point was there a material risk to the Fed or the taxpayer, as the loan required collateralization," said Reshma Fernandes, a spokeswoman for EverBank, which borrowed as much as $250 million.

Banks maximized their borrowings by using subsidiaries to tap Fed programs at the same time. In March 2009, Charlotte, North Carolina-based Bank of America drew $78 billion from one facility through two banking units and $11.8 billion more from two other programs through its broker-dealer, Bank of America Securities LLC.

Banks also shifted balances among Fed programs. Many preferred the TAF because it carried less of the stigma associated with the discount window, often seen as the last resort for lenders in distress, according to a January 2011 paper by researchers at the New York Fed.

After the Lehman bankruptcy, hedge funds began pulling their cash out of Morgan Stanley, fearing it might be the next to collapse, the Financial Crisis Inquiry Commission said in a January report, citing interviews with former Chief Executive Officer John Mack and then-Treasurer David Wong.

Borrowings Surge

Morgan Stanley's borrowings from the PDCF surged to $61.3 billion on Sept. 29 from zero on Sept. 14. At the same time, its loans from the Term Securities Lending Facility, or TSLF, rose to $36 billion from $3.5 billion. Morgan Stanley treasury reports released by the FCIC show the firm had $99.8 billion of liquidity on Sept. 29, a figure that included Fed borrowings.

"The cash flow was all drying up," said Roger Lister, a former Fed economist who's now head of financial-institutions coverage at credit-rating firm DBRS Inc. in New York. "Did they have enough resources to cope with it? The answer would be yes, but they needed the Fed."

While Morgan Stanley's Fed demands were the most acute, Citigroup was the most chronic borrower among the largest U.S. banks. The New York-based company borrowed $10 million from the TAF on the program's first day in December 2007 and had more than $25 billion outstanding under all programs by May 2008, according to Bloomberg data.

Tapping Six Programs

By Nov. 21, when Citigroup began talks with the government to get a $20 billion capital injection on top of the $25 billion received a month earlier, its Fed borrowings had doubled to about $50 billion.

Over the next two months the amount almost doubled again. On Jan. 20, as the stock sank below $3 for the first time in 16 years amid investor concerns that the lender's capital cushion might be inadequate, Citigroup was tapping six Fed programs at once. Its total borrowings amounted to more than twice the federal Department of Education's 2011 budget.

Citigroup was in debt to the Fed on seven out of every 10 days from August 2007 through April 2010, the most frequent U.S. borrower among the 100 biggest publicly traded firms by pre- crisis market valuation. On average, the bank had a daily balance at the Fed of almost $20 billion.

`Help Motivate Others'

"Citibank basically was sustained by the Fed for a very long time," said Richard Herring, a finance professor at the University of Pennsylvania in Philadelphia who has studied financial crises.

Jon Diat, a Citigroup spokesman, said the bank made use of programs that "achieved the goal of instilling confidence in the markets."

JPMorgan CEO Jamie Dimon said in a letter to shareholders last year that his bank avoided many government programs. It did use TAF, Dimon said in the letter, "but this was done at the request of the Federal Reserve to help motivate others to use the system."

The bank, the second-largest in the U.S. by assets, first tapped the TAF in May 2008, six months after the program debuted, and then zeroed out its borrowings in September 2008. The next month, it started using TAF again.

On Feb. 26, 2009, more than a year after TAF's creation, JPMorgan's borrowings under the program climbed to $48 billion. On that day, the overall TAF balance for all banks hit its peak, $493.2 billion. Two weeks later, the figure began declining.

"Our prior comment is accurate," said Howard Opinsky, a spokesman for JPMorgan.

`The Cheapest Source'

Herring, the University of Pennsylvania professor, said some banks may have used the program to maximize profits by borrowing "from the cheapest source, because this was supposed to be secret and never revealed."

Whether banks needed the Fed's money for survival or used it because it offered advantageous rates, the central bank's lender-of-last-resort role amounts to a free insurance policy for banks guaranteeing the arrival of funds in a disaster, Herring said.

An IMF report last October said regulators should consider charging banks for the right to access central bank funds.

"The extent of official intervention is clear evidence that systemic liquidity risks were under-recognized and mispriced by both the private and public sectors," the IMF said in a separate report in April.

Access to Fed backup support "leads you to subject yourself to greater risks," Herring said. "If it's not there, you're not going to take the risks that would put you in trouble and require you to have access to that kind of funding."

To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net; Phil Kuntz in New York at Pkuntz1@bloomberg.net.

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