Forget Piketty’s 700-Page Tome – Here Is The Shortest Economics Textbook Ever

Forget the 700-plus-page Piketty 'socialism for all' tome; here is economics that everyone can understand.

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And here they are… the 5 things they don't tell you about economics…

1. 95% of economics is common sense

You don’t need a degree to understand it

 

We’ve got this profession wrong; a lot of professional economists think what they do is too difficult for ordinary people. You’d be surprised how often these people are stupid enough to say things, at least in private, like ‘you wouldn’t understand what I do even if I explained it to you’. If you cannot explain it to other people, you have the problem.

 

People express strong opinions on all sorts of things despite not having the appropriate expertise: climate change, gay marriage, the Iraq War, nuclear power stations. But when it comes to economic issues, many people are not even interested, not to speak of not having a strong opinion about them. When was the last time you had a debate on the future of the Euro, inequality in China or the American manufacturing industry, despite the fact that these issues can have a huge impact on your life, wherever you live?

 

2. Economics is not a science

Despite what the experts want you to believe, there is more than one way of ‘doing’ economics

 

People have been led to believe that, like physics or chemistry, economics is a ‘science’, in which there is only one correct answer to everything; thus non-experts should simply accept the ‘professional consensus’ and stop thinking about it.

 

Contrary to what most economists would have you believe, there isn’t just one kind of economics – Neoclassical economics. In fact there are no less than nine different kinds, or schools, as they are often known. And none of these schools can claim superiority over others and still less monopoly over truth.

 

I accept that being suddenly asked to taste nine different flavours of ice cream when you had thought that there was only one plain vanilla can be quite overwhelming. In order to help, I attach here a simple table that will help you overcome your initial fear.

 

3. Economics is politics

Economic arguments are often justification for what politicians want to do anyway

 

Economics is a political argument. It is not – and can never be – a science.

 

Behind every economic policy and corporate action that affect our lives – the minimum wage, outsourcing, social security, food safety, pensions and whatnot – lies some economic theory that either has inspired those actions or, more frequently, is providing justification of what those in power want to do anyway.

 

Only when we know that there are different economic theories will we be able to tell those in power that they are wrong to tell us that ‘there is no alternative’ (TINA), as Margaret Thatcher once infamously put it in defence of her controversial policies.

 

4. Never trust an economist

It is one thing not to foresee the financial crisis; it’s another not to have changed anything since

 

Most economists were caught completely by surprise by the 2008 global financial crisis. Not only that, they have not been able to come up with decent solutions to the ongoing aftermaths of that crisis.

 

Given all this, economics seems to suffer from a serious case of megalomania.

 

The financial crisis has been a brutal reminder that we cannot leave our economy to professional economists and other ‘technocrats’. We should all get involved in its management – as active economic citizens.

 

5. We have to reclaim economics for the people

It’s too important to be left to the experts alone

 

You should be willing to challenge professional economists (and, yes, that includes me). They do not have a monopoly over the truth, even when it comes to economic matters.

 

Like many other things in life – learning to ride a bicycle, learning a new language, or learning to use your new tablet computer – being an active economic citizen gets easier over time, once you overcome the initial difficulties and keep practicing it.

 

Unless you are willing and able to challenge the professionals, challenge the experts, what’s the point of having a democracy?

 

There is no excuse for complacency. If you organize and demand reforms then a lot of amazing things happen, but it won’t come easy – we have to fight for it.

And there it is – all you need to know when watching the talking head bloviation and justification day after day…

Source: Penguin Group (buy here)




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Janet Yellen: Either Lying or Incompetent

Janet Yellen just cemented her status as the third member of the unholy triumvirate of Fed Presidents: Greenspan, Bernanke, and now Yellen.

 

Greenspan was so afraid of deflation that he hired Bernanke (an alleged deflation expert) in the early 2000s. Between the two of them, they created bubbles in virtually every asset class on the planet.

 

Deflation did hit for a total 12-14 months (late 2007-early 2009). It was enough to terrify Bernanke to the point that he spent well over $3 trillion (an amount larger than all but a handful of countries’ GDPs), cut interest rates to zero (punishing savers) and generally destroyed the US economy… all in the quest of propping up a few crony capitalist banks that were sitting on several hundred trillion dollars’ worth of derivatives trades.

 

Yellen took over the Fed in early 2014 and has since proven herself to be just as misguided or dishonest as Bernanke was.  Among other things…

 

·      She claims there are no signs of stocks being overvalued, despite the fact that by virtually every metric in existence the market is SEVERELY overvalued.

 

·      She first claimed inflation was too low, and now claims that rising prices are just “noise” while meat prices hit record highs, gas prices hit their highest levels since 2008, home prices are as unaffordable as they were in 2005-2006, healthcare costs are up double digits and energy prices are rising.

 

It’s an astounding series of comments, coming from the woman in charge of US monetary policy. What’s even more astounding is that it appears Yellen actually believes this stuff, which indicates that she either A) doesn’t read the news or look at price charts for items or B) has no idea how to interpret data or C) is a liar.

 

This is the same story we had with Bernanke and Greenspan, both of whom oversaw epic meltdowns in the financial system. Yellen will be no different.

 

This concludes this article. If you’re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://ift.tt/170oFLH.

 

This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.

 

Best Regards

 

Phoenix Capital Research

 

 

 

 

 




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The $1.5 Trillion Short And Noisy Inflation Trades

Submitted by Derrick Wulf of No Easy Trade blog,

One of the highlights of an otherwise uneventful press conference by Fed Chairman Janet Yellen earlier this week was her carefree dismissal of recent inflation gains as mere “noise.” This was significant for two reasons: first, it implied a level of forecasting confidence that seems wholly inconsistent with the “data-dependent” policy approach we have been told to expect from the Fed, and second, it was an entirely inaccurate characterization of the data. Much of the recent increase in CPI has in fact come from traditionally stable categories such as services, which have posted annualized three and six month gains of more than 3% for several months now, while weakness has actually come from the more volatile components such as “commodities less food”. The official BLS release for May even characterized the price increases as “broad based,” all of which strongly suggests there’s something more than mere noise behind these figures.

CPIservice0514

It’s important to remember that the FOMC has tactically embraced “forward guidance” as a monetary policy tool, and committee members know that in order for it to be effective they must speak with confidence and conviction. Most recently, their confidence has helped to reduce volatility and compress risk premia in a number of asset classes, but it also comes at the risk of damaging their credibility in the longer term. Moreover, history has shown time and again that the financial markets have an uncanny ability to seek out complacency and test the conviction of both investors and policymakers alike. Why should this time be any different?

On the day after Chairman Yellen’s press conference, investors aggressively bid up inflation trades across numerous asset classes. Gold and silver rallied sharply, TIPS implied inflation breakevens widened (despite a new slug of 30-year supply), Treasury yields rose, and the yield curve steepened. Based on investor positioning and market sentiment, I think there’s decent potential for additional gains in these inflation expressions in the days and weeks ahead.

In rates, for example, investors have accumulated significant short positions in the front end of the curve against longs in the 30-year sector, indicating potential for a meaningful curve steepening when these trades are unwound. Positioning surveys consistently show that “real money” investors are overwhelmingly short their duration benchmarks, while the CFTC’s Commitment of Traders data show record net short positions exceeding $1.5 trillion in notional rates exposure among speculators in the eurodollar futures markets.

Within the macro community, meanwhile, a number of large investors inspired by none other than Ben Bernanke in his paid private dinner musings maintain significant long-end rates exposure on the belief in a lower terminal fed funds rate. Frequent reassurances by various fed officials that inflation risks remain subdued has emboldened their view that 30-year yields can fall lower still.

But any time the Fed gets behind the curve on inflation, the yield curve steepens, and the post-FOMC price action yesterday warns that this may in fact soon be the case. Moreover, the charts show potential for a technical break in the 5s / 30s curve that may encourage additional unwinds of crowded curve-flattening trades.

5s30s062014

 

A glance at the 30yr yield chart also indicates potential for additional long-end weakness, with the recent bull-trend already broken and a potential reversal now underway.

USGG30YE062014

A break above 3.50% would confirm the reversal and likely seek 3.75% next. If the inflation trade has legs, however, it may not be long before 4% is revisited.

Key to this trade will be incoming data on wages, incomes, and consumer confidence, as well as investor sentiment regarding fed credibility on the outlook for inflation. Considering the recent rhetoric in the context of current market positioning, I perceive some vulnerability on this front, which may well lead to more than just a bit of noise on the charts.




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Russia Reignites The Proxy War: Putin Offers “Complete Support” To Iraq Prime Minister Scorned By Obama

Two days ago, before it was formalized that the US tacitly, if not explicitly, now supports the removal of the Iraqi Prime Minister whom it itself had helped elect, we summarized the geopolitical tensions and “national interests” in Iraq, which is shaping up to be a proxy war that makes last year’s Syrian escapade pale by comparison, as follows:

The situation in Iraq, already a jumble of domestic sectarian violence, is now pitting virtually all major (and regional) international players against each other as well. There is:

  • US which tacitly supports Iran intervention in the region, but may have suddenly cooled in its support of Maliki despite sending naval and troop forces in the country after partially evacuating its embassy
  • Saudi Arabia which wants to remain friendly with the US but is antagonistic to the Iraq regime, is potentially aiding the ISIS forces, and clearly refuses to allow Iran entrance in Iraq
  • Iran, which has suddenly become America’s best friend in the region, which is willing to enter Iraq and protect its holy sites
  • Syria, whose president is sitting back amused at last year’s failed campaign by the US to remove him from power, and whose army is at a stalemate with the local US-armed and funded rebels
  • Qatar, which is supporting the Syrian rebels, but so far has not made its stance clear on Iraq. Like Saudi, it too may be indirectly backing ISIS
  • Jordan, which is a close friend the US, and which may have hosted ISIS in a secret base on its territory with the US instructing the jihadist group according to an unconfirmed report
  • Turkey, which is on constant alert to Kurdish escalation across the border, the same Kurds which now have far more leverage courtesy of ISIS crushing the Iraq army in the north and handing over Kurds access to oil fields in the north.
  • And of course Russia: because while Putin clearly benefits from rising crude prices, it is his Lukoil that is developing (and investing vast amounts of money in) the vast Iraqi West Qurna-2 oil field. It is not clear how he would feel about it falling into ISIS hands.

It was the bolded text that was of biggest interest because as we noted the next day, when discussing the next steps for ISIS, we said that “One wonders how long until the mercenary force finds its latest major backer, because for all the western, US-led intervention, both Russia and China are oddly missing from the scene. We expect that to change soon.

Because clearly one can’t have a global proxy war without China, and certainly without Russia.

Well, we said we expected Russia’s conspicuous absence to “change soon”, and so it did: within just 24 hours. Because apparently all Putin was waiting for was for Obama to pick sides (i.e., not Maliki) before the Russian leader made it clear whom he sides with. US, helpfully obliged yesterday morning when we also reported that “US Slams Its Former Iraq Puppet: “The Maliki Government, Candidly, Has Got To Go“.”

So what does Putin do? Why announce his undying support for Maliki, of course, and as AP reported, the former KGB spy offered Iraqi premier Nuri al-Maliki Russia’s total backing for the fight against fighters who have swept across the country.

Russian President Vladimir Putin has spoken by phone to Iraqi Prime Minister Nouri al-Maliki, expressing Moscow’s support for his action against the militant offensive.

 

The Kremlin said in a statement that al-Maliki informed Putin on Friday about his government’s steps to combat the “terrorist groups in the north of the country.” It added that the insurgency threatens security of the entire region.

 

Putin confirmed Russia’s “full support for the Iraqi government’s action to quickly free the territory of the republic from terrorists,” the Kremlin said, adding that Putin and al-Maliki also discussed bilateral cooperation.

 

Putin’s expression of support for the embattled Iraqi prime minister comes as al-Maliki’s rivals have mounted a campaign to force him out of office, with some angling for support from Western backers and regional heavyweights.

And just like in Syria from 2012 to 2013, the chessboard is once again set, with a regional middle-east conflict, this time in Iraq, merely serving as the proxy staging ground in which the Iraqi PM, once an obedient US puppet but now an enemy of Saudi Arabia and thus the US, “simply has to go” in the words of Dianne Feinstein, has suddenly become the fulcrum issue behind yet another soon to escalate conflict between Russia and the US.

One thing is certain: the more the US (and Saudi Arabia, and Qatar) pushes for Maliki’s ouster, the more involved Russia will become with its offers of support and bilateral cooperation. And if the Syrian fiasco (for John Kerry) is any indication, Russia is about to expand its “national interest” sphere of influence by one more country.




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Goldman’s World Cup Prediction Track Record To Date: 34% Accurate

With 23 games behind us in the FIFA World Cup in Brazil, we stop to reflect on the success (or failure) of forecasts so far. As we showed here, Brazil began the tournament as more than 3 times more likely winners than any other team, and, according to Goldman's new estimations, remains the strong favorite with a 49.5% chance of raising the Jules Rimet trophy. England's disappointment leaves them a 3% chance of getting to the knockout phase (and USA a 0.7% chance of winning it all). Goldman, however, have severely over-estimated Brazil and Spain's performances (and under-estimated Holland and Spain) as their track-record so far is Stolper-esque at 34% win rate (8 right, 15 wrong).

 

 

Initial predictions…

 

The results (red) and new predictions..

 

For the knockout phase…

 

and odds of progressing…

 

Source: Golkdman Sachs




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Ex-NSA Chief Keith Alexander is Now Pimping Advice to Wall Street Banks for $1 Million a Month

Screen Shot 2014-06-20 at 11.31.41 AMSo what’s a Peeping Tom, anti-democratic, Constitution-trampling intelligence crony to do after leaving decades of “public service?” Move into the private sector and collect a fat paycheck from Wall Street naturally. Following in the footsteps of some of the other top tier public sector cronies looking to cash out after doing their best to destroy the Republic, such as Banana Ben Bernanke collecting $250,000 per speech and Turbo Tax Timmy Geithner hopping over to private equity giant Warburg Pincus, Mr. Alexander is in good crooked company.

So what is Mr. Alexander charging for his expertise? He’s looking for $1 million per month. Yes, you read that right. That’s the rate that his firm, IronNet Cybersecurity Inc., pitched to Wall Street’s largest lobbying group the Securities Industry and Financial Markets Association (SIFMA), which ultimately negotiated it down to a mere $600,000 a month. In case you need a refresher on how much of a slimy character this guy is, I suggest you read the following posts:

continue reading

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USPS Wants to Attach Electronic Sensors to Your Mail, Not Sure Why Yet

The United States Postal
Service (USPS) wants to slap an electronic sensor on your letters
to grandma so they can become part of the buzz-wordy “Internet of
Things
,” and the postal service is offering $100,000 to the
person who can figure out how and why they should do that.

From the
proposal
, which came out Tuesday:

  • Research the current and near-future developments of the
    Internet of Things, provide a workable definition, major facts,
    trends and implications for the Postal Service;
  • Provide a vision for the Internet of Things applied to the
    Postal Service (the Internet of Postal Things — IoPT): a conceptual
    design of how new sensor and other data collection technologies
    could increase the ability of Postal Service infrastructure to
    create value to its business, customers and stakeholders through
    data;
  • Identify the components of the postal physical infrastructure
    that could lend themselves to the collection of new types of data.
  • Identify possible areas of application for the data
    collected.

Computerworld (which, notably, just announced the

end its 47-year print run
)
explains
that “the postal service hopes that an integration of
[information technology] and new sensor-based technologies can
bring ‘dramatic improvements’ to postal operations in terms of new
product offerings, better operational diagnostics, and insights
into consumer behavior,” but right now the federal agency is
essentially just “fishing for ideas.”

The agency already
collects data
on every letter and box you ship, so it’s
unlikely that this could make the USPS more intrusive in any
meaningful way. 

Technological innovation shakes things up and brings down costs,
which is great, but it can’t get people excited about using
something that’s still slower and more expensive than email. It’s a
case of too little, too late for the Post Office. Headlines have
for years been noting the federal agency’s prolonged death rattle,
and a digital tracker cannot turn around such titanic governmental
inefficiency.

“With a net loss of $1.9 billion” in the second quarter of
fiscal year 2014, the Post Office acknowledged in
May, “this marks the 20th of the last 22 quarters it has sustained
a loss.” That’s just the tip of the iceberg, though. Back in 2012,
the USPS recorded net losses of $16 billion. The fact that it has
also defaulted on
billions of dollars
of pre-funding for retiree payments in the
last few years doesn’t bode well either. 

The most optimistic spin the agency’s chief financial officer,
Joseph Corbett, can put on the situation is that “the financial
hole we’re in is so deep, we can’t fill in this hole every year
even when we return to profitability.” He said that in an
interview
the same day the electronic sensor proposal came
out.

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‘Florida’s Worst Cop’ Finally Convicted of Something, May Be Headed to Jail

surprise, mug shot not readily availableYou couldn’t make up a story, or a
name, like German Bosque’s, a Florida cop who was proud to have had
his credentials threatened by disciplinary action more times than
any other cop in the state.
Via the Miami New Times
:

Let us quickly recount the glorious career of German
Bosque, Florida’s worst cop. He was arrested three times and fired
five times. He was probed more than 40 times by internal affairs,
including 16 cases involving serious battery and excessive force.
He tried to board an airplane with a loaded gun, got caught with
coke and counterfeit cash in his police car, was charged with
domestic violence, lied to his bosses, and made up police
reports.

And through it all, he kept his job and avoided serious trouble.
Until now! The Opa-locka sergeant was convicted last night of
felony false imprisonment and witness tampering for assaulting
a local youth counselor.

Bosque could receive up to 10 years in prison on the conviction,
although the sentence, up to a judge, could be as low as
probation—the judge didn’t send Bosque to jail after his conviction
yesterday, opting for house arrest instead. The prosecutor, too,
called the conviction “bittersweet,”
telling the Miami Herald that
“it’s never a good thing
when you have to take down a police officer.”

Given Bosque’s history, in this case it absolutely is. The
Miami New Times
recaps
:

The greatest hits of his career read like a Training
Day
 sequel treatment. He split open one handcuffed man’s
face with a vicious headbutt and spit in another one’s face. He
improperly chased a suspect until he crashed into a tree and then
covered up his role in the wreck by doctoring police reports. He
punched a teen suspect in the face three times and seriously hurt
him.

But Bosque couldn’t beat the latest case against him. In August
2011, he responded to a domestic dispute involving a city youth
counselor named Korey Davis, who was sitting in his car with a baby
on his lap after arguing with the child’s mother.

Bosque may be one of the worst cops Florida law enforcement can
offer, but he’s
not unique
. He has not yet been officially fired after his
conviction. Through the case, he insisted he would be acquitted,
calling himself a “good cop.”

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It’s Never Different This Time – 1987 or 2014?

While the price analogs of the last few year’s exuberance in US equity markets are enough to worry all but the most systemically bullish “believer”; we suspect the following article from the LA Times In the Spring of 1987 will raise a few hairs on the back of the neck of perpetually optimistic extrapolator…

 

 

It’s never different this time..

“One of the largest bullish factors is burgeoning worldwide liquidity, thanks to expansive monetary policies by central banks. That has helped fuel a surge of foreign investing that could propel US stocks higher, regardless of what happens to the American economy, some analysts say…

 

Low interest rates also help stocks by making Treasury securities, certificates of deposit and other interest-paying investments less attractive. The sluggish economy, meanwhile, keeps the Federal Reserve from driving up interest rates and prevents inflation from overheating…

 

Also, the sluggish economy–by keeping manufacturing rates low–discourages money from flowing out of financial assets into such investments as factories and machinery.”

     LA Times, March 8, 1987; a few months before the October 1987 crash

Read that again!!

Never different.




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