Commodity Market Reform: Wall Street versus the regulators

Steve Suppan, Guest Blogger

In contrast to the rapidity with which governments moved to use taxpayer funds to rescue the “too big to fail banks” in 2008, the pace of financial and commodity market reform since then has been agonizingly slow. One factor frustrating re-regulation is financial industry resistance to reform, aided in the United States by Republican Party efforts to reimburse the financiers of their November 2010 electoral victory with initiatives to defund the regulatory agencies responsible for implementing the “Dodd-Frank Wall Street Reform and Consumer Protection Act.”

Before dawn on February 19, the House of Representatives voted to slash the budget of the Commodity Futures Trading Commission by a third. “There would essentially be no cop on the beat,” CFTC Commission Michael Dunn said at a February 23 Senate hearing. CFTC Chairman Gary Gensler had told a House finance committee hearing that such a cut would not only cripple the CFTC’s ability to implement Dodd-Frank reforms, but would prevent his agency from investigating Ponzi schemes and market manipulation. The U.S. Senate is unlikely to support the House Republican assault on regulation, but the Obama administration’s proposal to levy a transaction fee to finance CFTC implementation and enforcement is facing stiff opposition.

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The Food Aid Convention: Feeding people or balancing budgets?

Jennifer Clapp, Guest Blogger

The week of February 28 is an important one for the future of international food aid. Negotiators from member countries of the Food Aid Convention (FAC) are meeting to hammer out details of a new agreement. The FAC is an obscure international treaty that dates back to 1967 under which donors pledge a certain amount of food aid. It is the only international agreement where donors pledge to provide a minimum amount of aid.

Last renegotiated in 1999, the FAC is now more than 10 years out of date. It was supposed to have been updated in 2001, but instead has limped from extension to extension on the hopes that the Doha Round of trade talks, which include new rules on food aid, would be completed first. Finally, following a major food crisis in 2007-08 and continued food price volatility, donors have realized that the FAC must be updated to take the new situation into account, even in the absence of a Doha agreement.

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What Will New Economic Thinking Look Like?

Alejandro Nadal

The crisis that erupted in 2007 has generated interest in re-thinking economics. As Mark Blyth noted earlier this week, one of the more visible efforts in this respect is the creation of the Institute for New Economic Thinking, INET, committed to promote “new thinking about how to reform our economic system and get economists to better serve our policy makers and our society”. That is certainly a good objective, but you still need to define several key words in that sentence, beginning with “economic system” and “policy makers”.

On the very positive side, INET’s executive director Rob Johnson says the Institute is still defining “on the fly what new economic thinking means”. This good news leaves the doors open for truly innovative thinking. On the other hand, several participants in the first INET conference in King’s College mention the magic words, “shifting paradigms”.

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Triple Crisis Roundtable at the Eastern Economic Association Meetings

On Saturday, February 26, Triple Crisis bloggers Kevin P. Gallagher, Gerald Epstein, Ilene Grabel, and Matías Vernengo will be joined by Jane D’Arista and Leanne Ussher for a roundtable discussion on “CURRENCY WARS, G20 SKIRMISHES AND OTHER GOVERNANCE FAILURES”.  The roundtable is part of the Eastern Economic Association Meetings at the Sheraton Hotel New York, at 10:30 am.  Read contributions by Triple Crisis bloggers on currency issues, capital controls, and finance.

On Reagan's Birthday We Still Celebrate His Policies That Broke the Middle Class

Triple Crisis blogger Jeff Madrick published the following opinion article on New Deal 2.0 on the mischaracterization of President Reagan’s successes and failures in the media coverage of his centennial.

As the nation celebrates the hundredth anniversary of Ronald Reagan’s birthday, the mischaracterization of his tenure as president is a national tragedy in itself. The media’s need to gloss over its glaring failures — failures that live on for all of us — is now so common that it hardly draws notice. If the media sometimes deigns to note that Reagan blundered in the Iran-Contra scandal — and almost surely violated the law, not to mention the much-adored U.S. Constitution — it is quick to repeat the stale, dreary myth that he was a “transformative” president. President Obama has apparently bought in.

He was transformative. He taught America to hate government and in the process created an economy that utterly failed to restore itself or the nation’s standard of living. He taught Americans not to be citizens who cared about each other but to ask what government did for them. And when asked, he distorted the answers. Does Obama truly not know this?

Read the full article at New Deal 2.0.

On Reagan’s Birthday We Still Celebrate His Policies That Broke the Middle Class

Triple Crisis blogger Jeff Madrick published the following opinion article on New Deal 2.0 on the mischaracterization of President Reagan’s successes and failures in the media coverage of his centennial.

As the nation celebrates the hundredth anniversary of Ronald Reagan’s birthday, the mischaracterization of his tenure as president is a national tragedy in itself. The media’s need to gloss over its glaring failures — failures that live on for all of us — is now so common that it hardly draws notice. If the media sometimes deigns to note that Reagan blundered in the Iran-Contra scandal — and almost surely violated the law, not to mention the much-adored U.S. Constitution — it is quick to repeat the stale, dreary myth that he was a “transformative” president. President Obama has apparently bought in.

He was transformative. He taught America to hate government and in the process created an economy that utterly failed to restore itself or the nation’s standard of living. He taught Americans not to be citizens who cared about each other but to ask what government did for them. And when asked, he distorted the answers. Does Obama truly not know this?

Read the full article at New Deal 2.0.

Paradigms Lost? Cowboys and Indians in the Battle over Economic Ideas

Mark Blyth

One of the most interesting organizations to come out of the crisis is the Institute for New Economic Thinking (INET), which is dedicated to “fresh insight and thinking to promote changes in economic theory and practice.” I attended its first conference in April 2010. The mood was optimistic. Rational expectations theories, the efficient markets hypothesis, capital account openness, Ricardian equivalence, were all on the chopping block. The book of the conference was Skidelsky’s The Return of the Master. We were all Keynesians now, again…for about eight months.

Then came the ECB June 2010 Monthly Report that raised the specter of ‘Ricardian consumers’ and ‘expectation effects,’ while the G20 meeting that same month (coincidence?) focused attention upon ‘Growth Friendly Fiscal Consolidation’ and the overwhelming need to reduce debt. Led by the UK (whose net debt-to-GDP ratio was at that time was below the Maastricht threshold) the voices of orthodoxy quickly regrouped and triumphed. Austerity and belt-tightening gained traction as the advocates of a reinvigorated Keynesianism shifted their sights from dismembering the neoclassical corpus to simply maintaining the legitimacy of spending under any circumstances.

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Obama (and Congress) Can’t Cut the Budget Deficit

Ann Pettifor, Guest Blogger

The terrific hoo-ha around the US Budget Deficit is just that: hot air – predicated on the fallacy that President Obama and an ideologically-driven Republican Congress can cut the deficit.

They can’t.

It’s a delusion that arises because economists insist on applying microeconomic reasoning to macroeconomic conditions.  It’s a delusion that leads to broader misunderstanding as voters wrongly make the link between their own individual budgets and the government’s budget.

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Climate Change: The fatal disconnect

Triple Crisis blogger Sunita Narain published the following opinion article in Business Standard on the World Economic Forum’s analysis that climate change is the highest-ranking risk the world will face in the coming years.

The fatal disconnect

The World Economic Forum — the gathering of power glitterati each year in Davos — has assessed the top risks the world faces in 2011. According to this analysis, climate change is the highest-ranking risk the world will face in the coming years, when its likelihood and impact are combined. What’s even more important is the interconnections between climate change and the other top risks: economic disparity (ranked three), extreme weather events (ranked five), extreme energy price volatility (ranked six), geopolitical conflict (ranked seven), flooding and water security (nine and ten).

This is not a past or future scenario. This is the present. The Food and Agriculture Organisation (FAO) says world food prices this January hit a “historic peak”. The food price index, collated by FAO, averaged 231 points in January, which is the highest since 1990, when it started measuring food prices globally. The reasons for the spike are not just the traditional, ranging from greedy speculators to faulty future markets and rising demand. They are newer: extreme weather events, floods and droughts, heat and frost waves. And they suggest a threat even more difficult to contain.

Read the full article at Business Standard.

Outsourcing, Trade Agreements and Employment: Lame Duck or Just Plain Lame?

Gerald Epstein

The Obama plan for employment generation has now come down to this: trickle-down stimulus tax cuts and a pledge to double exports in five years’ time. The first plan was passed during a lame duck session of Congress, while the second is pretty lame, plain and simple.

Taking a page out of the Clinton playbook, the Obama administration is now touting free trade agreements and the restoration of American competitiveness as a key solution to our economic and employment problems. Yet despite soaring rhetoric about the need to invest in America and to create 21st century jobs here at home, the administration is pushing so-called “Free Trade” agreements that, despite some improvement in labor protections,  are really “Free Investment” agreements that help open up developing countries to foreign direct investment by US multinational corporations and financial risk taking and speculation by U.S. banks and other financial institutions like those that led us down the primrose path to financial crisis.

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