The Real News Network as the second part of the interview Finance is Super Rational about Profits, Irrational about Global Economy – Flassbeck (2/3).  I commented on the first part of the interview in my previous post Krugman is Wrong About the Market and Hot Money – Flassbeck (1/3).

Honestly, I had not seen this part before I made my comments on the last part.  This part starts off answering the question I posed and in almost exactly the way I surmised it would.

JAY: So I’m going to just pick up where we left off in part one. If you haven’t watched part one, I suggest you do so.

So, Heiner, you have proposed a model which I think we should get into about what a more rational exchange rate global system of currency exchange would look like. So talk a bit about it. But I’m going to very quickly kind of get to the question–there is a sort of rationality to what’s going on. In other words, if you’re sitting on great big pools of money and you’re making killings off all this volatility, I mean, you are being rational in a sense, aren’t you?

FLASSBECK: Absolutely. From a microeconomic point of view, these people are rational. They are super rational. And they’re making a lot of money, as I said. So that’s absolutely clear.

But we have to ask the question whether it’s rational from a macroeconomic point of view, from a global point of view, and there it’s definitely not, because what happens is–and I said it in the first part–what we have is money carried from low interest rate countries to high interest rate countries. But that implies at the same time, because interest rates are low, because the inflation rate is low in Switzerland and Japan and the euro area, in the United States, that implies that money is carried from low-inflation countries to high-inflation countries. Turkey, the inflation rate is not super high, but it’s 7 percent. In Argentina we all know it’s much higher. In Brazil it’s a bit higher.

And this means, this implies absolutely clearly and obviously that the currency, as long as the hot money flows into the high-inflation country, the currency of the high-inflation country is appreciated. This is exactly the opposite of what we expect from a functioning market.

I am hoping the third part will have more details on the proposed solution.

The Real News Network has a 3 part series that begins with the interview titled  Krugman is Wrong About the Market and Hot Money – Flassbeck (1/3) .

For most of the interview it is hard to see what was wrong with the quotes of Krugman cited in the beginning.  As they kept talking, I kept thinking, “Isn’t this what Krugman said?”  Toward the end, you finally get to hear the complaint about Krugman.

FLASSBECK: Yeah, that’s one thing, that’s one factor that’s very important. But, as I said before, it’s not only the U.S. We have zero interest rates in Japan. When the U.S. still had higher interest rate, the hedge funds went through Japan, borrowed money in Japan, and carried it to Brazil and other countries. So it’s always–there’s always a low interest rate country. Or it was done through Switzerland. So it’s not important how it is done.

But the crucial thing in here–I fully disagree with Paul Krugman. Paul Krugman said, you had capital controls in the ’50s and the ’60s under the Bretton Woods system. That’s true, but that’s not the whole truth. The much more important thing is that we didn’t have flexible exchange rates. We have flexible exchange rates, and these flexible exchange rates, with these huge flows of money, of hot money, are going in the wrong direction, they’re going definitely the wrong direction, because countries with a rather high inflation rate, like Turkey or Brazil, get an appreciation of their currencies, and everybody knows that’s absolutely untenable. Every good economic textbook will tell you that the country with the high inflation needs a depreciation. But the flexible exchange rate, the markets, the markets are doing exactly the wrong thing. And Krugman also is shying away from saying this very clearly. And this is the problem.

We had attempts in 2011 in the G20 to talk about a new monetary system, but everybody is shying away from touching this hot issue. This is the hot issue. The markets get the prices wrong. And this has to be addressed head-on. And that means you need intervention, international intervention into the market to avoid the misalignment in the first round, the misalignment driven by the market.

You’ll have to listen to the interview or read the transcript to see the parts that I have left out.  The interviewee does hint at some solutions that will be discussed in the other parts of the interview.

I haven’t seen the other two episodes yet to see if this question is answered.

How can the markets be wrong?  The people who are driving the market in the direction it is going are making huge profits.  So the market is right, and it is always right in the short term.  Well, right insofar as what individuals are capable of doing when they all make decisions that are rational for themselves individually.  What the individuals in the market and the market as a whole are incapable of doing is making decisions that are right holistically  for the society including the factors that are outside the market.  The society includes the individuals in the market, but, as I have said, the holistic actins are not actions that individuals can take.

The Real News Network has the interview State Cuts to Public Funding of Higher Education Responsible For Increases In Tuition Costs.

DESVARIEUX: But it hasn’t always been that way, right? Let’s take a look at one of the graphs from your report. We see that students didn’t always shoulder such a large share of the costs of public higher education. For example, in 1987, students paid close to 20 percent of their tuition, and in 2012 it’s inching closer to 50 percent. How has it changed in the last 25 years? Who’s funding public universities?

LEACHMAN: Yeah, well, that’s exactly right. What’s happened is that the states’ share, state and local funding, has gone down, and tuition has risen to sort of risen to fill that gap. So if you look over the last 25 years, per student revenue from state and local government, it fell by about $2,600 after you adjust for inflation–that’s per student–$2,600. Over the same period, tuition increased by $2,600. So, in other words, the entire increase in tuition at public colleges and universities over the last 25 years has gone to make up for the state and local funding cuts.

I have always assumed that the tuition rise at colleges was related to the cutting of government funding.  I think this is the first report I have seen that backs up my intuition about the cause of the problem.

The unwillingness to invest in this country’s future seems to have been passed down to us from the most wealthy.  The 1% loves the free ride of being able to gather a huge fortune as long as somebody else pays for the society that makes it all possible. They don’t seem to notice that if they take it all, there is nobody else left to pay for what they refuse to pay for.

When I say the sickness has been passed down to the rest of us, I don’t mean the people who are scrambling for the crumbs left by the 1% could be expected to make up for what the 1% take out of society.  I mean that the 99% ought to vote for a government that stops giving the 1% a free ride.  Somehow the 1% has convinced enough of the 99% to think that ending the free ride for the 1% would be bad for the 99%.  The 99% have been convinced that they need to act “responsibly” in spite of the fact that the 1% won’t.  The 99% just do not have the resources to make up for the failures of the 1%.

Change.org has my petition Rethink the Trans Pacific Partnership (TPP) Treaty. Please sign the petition.

The leaked information about the current draft indicates that it will worsen income inequality.  This treaty will also allow corporations to sue to overturn laws and regulations protecting the people’s health and the envrionment.  It will also raise the cost of drugs.  Surely these kinds of things do not belong in a trade bill.

If you don’t want to sign my petition, there are many more TPP petitions on Change.org. Just search for them.

Medical Xpress has the article Divorce rate cut in half for newlyweds who discussed five relationship movies.

Discussing five movies about relationships over a month could cut the three-year divorce rate for newlyweds in half, researchers report. The study, involving 174 couples, is the first long-term investigation to compare different types of early marriage intervention programs.

Here is the video from the article.

Consider this an early Valentine’s Day present.

In my previous post Obama’s Aversion to Income Inequality Doesn’t Extend to TPP, I suggested that we tell President Obama what we think of the TPP.

At Whitehouse.gov I have created the following petition Remove everything from the TPP that promotes income inequality and promotes obscene advantages to multi-nationals. Click on the previous link or this one to sign the petition.

President Obama is promoting The Trans Pacific Partnership (TPP) as a trade agreement. It has little to do with fair trade, but it has a lot to do with giving huge powers to multi-national companies to overturn any of our laws and regulations that they do not like.

If it weren’t for leaks from whistle-blowers we wouldn’t have any idea what the administration is insisting on putting into this agreement.

If President Obama didn’t already know the American public is dead set against these proposals, he wouldn’t be putting so much effort into keeping it secret.

This may be the last straw for many supporters of President Obama.

If we can just get 100,000 signatures by March 2, 2014 on this petition, he might listen.  To get those signatures, I will need your help to get the word out.

There is a short URL http://wh.gov/lRbAR and a long URL https://petitions.whitehouse.gov/petition/remove-everything-tpp-promotes-income-inequality-and-promotes-obscene-advantages-multi-nationals/CpVfKtPq that will get you to the petition.  Pass along either of these URLs (links) when you tell your contacts about the petition.

If you need any help in signing the petition, see my previous post How To Sign a whitehouse.gov Petition.  Please let me know if you have any trouble signing the petition.

Truth Out has the article Obama’s Aversion to Income Inequality Doesn’t Extend to TPP .

In his State of the Union address, President Obama touted his dedication to fight income inequality, yet his administration is working to fast-track a trade agreement predicted to cut pay for 90 percent of American workers.

This article gives more details to explain my remark in my previous post Mirabile Dictu! Reid Tells Off Obama on Fast Track, Killing Toxic Trade Deals for 2014. What I said in that post is:

When I heard this part of the SOTU address, I almost threw-up.

Not that those words need immortalization.  I just wonder what motivates some of the things that Obama does.  The Democrats generally don’t like TPP.  The trading partners don’t generally like what the USA is pushing in the TPP.  The US citizens whose pay will be cut don’t like the TPP. The only people who seem to like the TPP are some Republicans, the huge multi-national companies, and President Obama. Which side is he really on?

Do you suppose Obama would change his mind if we all let him know that this is the last straw?

The Daily Kos has this under the title Hungry Mungry.  Apparently the cartoon comes from Politico, but I cannot find it there.

Sometimes you wonder if there will ever be a limit for how much the 1% want to hoard. Of course, that previous statement falls under the umbrella of the fallacy of composition. The behavior of individuals in the top 1% may make sense to each one of them. The problem is when you aggregate the behavior of all these that it causes a societal problem. If one person in the class of the 1% stopped the behavior it wouldn’t make much difference. That is why there needs to be a systemic solution to get the majority of the 1% to change their behavior.

CounterPunch has the article Pete Seeger: a Dissenting View.

Following the August 1939 Hitler-Stalin Pact, the Communist Party strongly opposed the “imperialist war,” and Pete Seeger and the Almanac Singers made some great antiwar songs which were published in an album called “Songs for John Doe”
.
.
.
After the Nazis invaded Russia, the Party line changed and the Almanac Singers began beating the drums for war: “Did you have a friend on the good Reuben James?” When the U.S. entered the War they became patriots: “It’s gonna take everybody to win this war.” “Me and the landlord may not agree, but when a burglar breaks in you quit fighting with the landlord and throw him out. “ (Some missing words here, but the point is clear.

I bring this to your attention in the spirit of being fair and balanced, although I never promised that in the Introduction to this blog.

I make no pretense about balance on this blog. If you want balance, read another blog.

I am not averse to considering other points of view.  If you read the article, does this change your view of Pete Seeger?  Is there anything to be learned?

The Daily Dot has the article The rise and fall of Bitcoin mining.

Earlier this month, fans of Bitcoin – the world’s most popular digital currency—were caught in a whirl of panic as one group threatened to corner the market for new bitcoins.

Reader WayneP has been bugging me with the question  “Is Bitcoin foolproof?”  I brushed this question aside as irrelevant.  Well, with this article I am starting to see Wayne’s point.  The article does a nice job of putting the issue in context.  Further, it does explain some of the mystery that I felt about the issue of mining.

Stay tuned for the continuing saga.