The Consortium News has the Gareth Porter story How Misread Cables Fed Iran Hysteria.

When Western intelligence agencies began in the early 1990s to intercept telexes from an Iranian university to foreign high technology firms, intelligence analysts believed they saw the first signs of military involvement in Iran’s nuclear program. That suspicion led to U.S. intelligence assessments over the next decade that Iran was secretly pursuing nuclear weapons.
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Iran produced voluminous evidence to support its explanation for each of the procurement efforts the IAEA had questioned. It showed that the high vacuum equipment had been requested by the Physics Department for student experiments in evaporation and vacuum techniques for producing thin coatings by providing instruction manuals on the experiments, internal communications and even the shipping documents on the procurement.

For those who are so sure that we shouldn’t negotiate with Iran because they are also so sure that Iran is building a bomb and lying about, I bring up the quote from Mark Twain again.

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

I am not claiming that I know for sure that Iran is telling the truth.  I am just doubting that people can know for sure that they aren’t.

If we start bombing people over what we think we know, we could find out that we were wrong all along, as we have found out many times before.

While you are at it, you might want to read the other Consoritum News article Where the Real ‘Iran Threat’ Lies by Lawrence Davidson

The investigative reporter and author Gareth Porter has recently published a book entitled  A Manufactured Crisis: The Untold Story of the Iran Nuclear Scare. An impressively written and researched work, it is also frightening in its implications. For if Porter’s allegations are accurate, it is not Iran that the American people should fear – it is their own politicians, bureaucrats and an “ally” named Israel.

According to Porter, there has never been a serious nuclear weapons program undertaken by Iran. By the way, this is a conclusion that is supported by the heads of all American intelligence agencies reporting annually to Congress. Unfortunately, this repeated determination has been scorned by the politicians and poorly reported by the media.

This still involves the reporting by Gareth Porter, so I am not claiming that there are two sources for this information (well, other than our own intelligence agencies).

The Real News Network has the interview Tapering of Quantitative Easing Is Throwing Emerging Markets into Chaos – And Big Banks Are Getting Richer.

The interview was going along very well, until Jan D’Arista said the following:

But as in every other case, the Asian crisis, etc., and the one that we’re facing today, there’s a tipping point, the tipping point when the exchange rate becomes overvalued. And that means that while imports are cheaper, exports become more expensive, and you develop a current account deficit, meaning the difference between what the country imports and exports widens and it’s exporting less. And, therefore, to make up that difference it has to start using its foreign exchange reserves.

When Jane D’Arista said “And, therefore, to make up that difference it has to start using its foreign exchange reserves” about the trade deficit of the emerging countries, she left an awful lot of the explanation to our imaginations. The main reason why this situation might cause a loss of foreign reserves would be that the countries had pegged the value of their currencies to some external factor like another country’s currency. If the emerging market economies had floating rates, then this would not be so big a problem.

But at the beginning of the paragraph she said “But as in every other case, the Asian crisis, etc., and the one that we’re facing today, there’s a tipping point, the tipping point when the exchange rate becomes overvalued.” That implies that these countries had floating exchange rates. That is also why they had a trade deficit; because their currencies became overvalued.

So why exactly do these countries have to make up for the loss of foreign reserves? Did they start borrowing denominated in foreign currencies? This would be a very dangerous thing to do, but countries or citizens of those countries do seem to do this.

Perhaps the inflow of foreign capital buying up local debt instruments led to an excess of foreign reserves which the countries hated to see diminish when it started flowing out so they thought they had to replace the diminishing foreign reserves?

In any case, it would be nice if the interviewer had caught this, and had asked her to explain.

Maybe one of you astute readers can figure out what she was trying to say.

FT Magazine has the story Welcome to Bakersfield, California: How an ordinary town became one of the home foreclosure capitals of America.

It is difficult to find an excerpt that gives you the flavor of the article, but here is my attempt.

Crisp & Cole began paying straw buyers up to $20,000 each so they would pose as home buyers on loan application documents, federal prosecutors say. The properties were then flipped from “owner” to “owner”, generating fees for the firm and profits for people with pieces of the deals. “What we found is that local people with knowledge of how the system worked were taking advantage,” says Kirk Sherriff, an assistant US attorney in Fresno, California, where the case is being prosecuted.

I hope that those who still think that Barney Frank, Freddie Mac, Fannie Mae, and home ownership promoting politicians created the great financial collapse will read articles like this.  They will see examples of how the crisis was really started.  This is not to say that the people mentioned in the first sentence of this paragraph might have been more aware of what was going on and should have tried harder to stop it.  Of course, with deregulation fever affecting almost everyone, they might have known that they couldn’t get any enforcement actions to stop these frauds.

Naked Capitalism has the story Twitter 2, JP Morgan, 0: Bythe Masters Withdraws After One Day Appointment as CFTC Advisor.

No, this was not a world-record revolving door stint. Blythe Masters, head of JP Morgan’s commodities group, was announced yesterday as having joined a Commodities Futures Trading Commission advisory committee. I didn’t bother writing it up because what could you say beyond what appalling evidence it was of how much the Administration was willing to toady to JP Morgan (Acting CFTC Commissioner Mark Wetjen was responsible for this tasteless idea). The Federal Energy Regulatory Committee settled with JP Morgan for $410 million over charges of manipulating the energy markets. Masters also got away with – lying to regulators during the FERC inquiry. She was lucky to escape civil charges. And that’s before we get to the fact that the missing-in-action-as-far-as-big banks-crimes-are-concerned Department of Justice, was, predictably, not willing to take up the case. By any commonsense standard, Masters should have been under the hot lights.

Now this is definitely something that deserves a Congressional investigation. Even before that, you would expect the Whitehouse to do its own investigation. Perhaps the DOJ should be investigating how this appointment could happen. Maybe the acting CFTC Commissioner Mark Wetjen should be summarily fired.  This cannot be allowed to quietly disappear.

Perhaps Elizabeth Warren will save the day by insisting on an investigation.

Reader MardyS suggested that I watch the Bill Moyers episode David Simon on America as a Horror Show.

David Simon, journalist and creator of the TV series The Wire and Treme, talks with Bill about the crisis of capitalism in America.

In the interview they discussed David Simon at the Festival of Dangerous Ideas in Australia.

At the time of this writing, I have only been able to watch the first 14 ½ minutes. I really liked his description of what was right and what was wrong with the ideas of Karl Marx.

His conclusion was that Karl Marx was an excellent diagnostician of what can and will go wrong with capitalism. He was just a very poor physician (I forget if that is the word he used) at coming up with and prescribing a solution.

Of course that is not a problem of Karl Marx alone. I have read many books by Krugman, Reich, Stiglitz, etc. These books are all very good at describing the problem. The last chapter where they talk about what to do is always a huge disappointment.

Well, it is not so disappointing anymore, because I no longer expect to find a solution at the end of the book.

Naked Capitalism has the article Philip Pilkington: Paul Krugman Pushes Factually Inaccurate Arguments About Argentina to Support Discredited Monetarist Ideas.

Paul Krugman is waving his true colours while his followers try to look the other way and pretend that he’s not making stuff up. Basically Krugman is saying, following that pundit Yglesias, that Argentina’s inflation problems have to do with their fiscal balance. Here is the quote from Krugman,

Matthew Yglesias says what needs to be said about Argentina: there’s no contradiction at all between saying that Argentina was right to follow heterodox policies in 2002, but it is wrong to be rejecting advice to curb deficits and control inflation now. I know some people find this hard to grasp, but the effects of economic policies, and the appropriate policies to follow, depend on circumstances. (My Emphasis)

Of course, Krugman — instead of engaging in tough guy rhetoric (“doing what needs to be done” etc.) — could have done two quick Google searches to see if Argentina had been running major deficits in the years when it was suffering from inflation. If he had he would have found that for many of the years after the 2001 default Argentina ran substantial fiscal surpluses.

With my newly found understanding of Modern Money Theory (MMT), it is above my pay grade to try resolve the dispute between economists who are far more knowledgeable about these matters than I am.

On the one hand, it might appear that the MMTers are trying to defend their position despite the evidence presented by the Argentina experience.  On the other hand, they appear to be right that Krugman is misrepresenting that evidence.  In either case, it presents a conundrum as to what the solution is to Argentina’s problem.

The solution proposed by Pilkington is summarized below with this excerpt:

During the 1990s the government tried to wring the inflation out of the system with a misguided currency board arrangement that fell apart in 2001. And I don’t think anyone would openly advocate that they try that again.

So, what are the solutions? Unfortunately, there are no easy solutions. In an ideal world the government would allow the burst of inflation that is going to accompany the recent devaluation of the peso to run through the system and then they would step in with well-enforced wage and price controls. Such controls, if history is to be any guide, are often less popular than inflation — with both trade unions and companies feeling their rights being encroached upon.

So, the likely path that Argentina will have to take is to try to keep economic growth buoyant while navigating the inflation. By not allowing incomes to fall too much the government can ensure that people do not experience their loss of purchasing power as an all-out impoverishment. Meanwhile, the government should bring the trade unions and the management of the firms to the table and try to make them gradually see reason. But again, that’s a tough game indeed.

This seems to go outside the solution I might have expected would have something to do with taxes.  However, it does seem reasonable.  To me it does seem to show that there is something else about the value of a fiat currency than the need to pay taxes.  The emphasis that MMT proponent L. Randall Wray puts on taxes as the driving force for the acceptance of fiat money is way over done in my opinion.  As I read his book, he just can’t seem to let this idea fade into the background.  He insists on continuing to drive it home.

Examples from L. Randall Wray.

MMP BLOG #8: TAXES DRIVE MONEY

We are now able to answer the question posed earlier: why would anyone accept government’s “fiat” currency? Because the government’s currency is the main (and usually the only) thing accepted by government in payment of taxes. To avoid the penalties imposed for non-payment of taxes (that could include prison), the taxpayer needs to get hold of the government’s currency.

MMP BLOG #12: COMMODITY MONEY COINS? METALISM VS. NOMINALISM, PART ONE

The state must take back its IOU in payments made to itself. “Taxes drive money”—these “money things” are accepted because there are taxes “backing them up”, not because they have embodied gold.

The Daily Show has a segment Bill O’Reilly, President Obama, and the Super Bowl Pre-Show. It seems that you have to click on the previous link to see all the pieces that follow the video below.

Bill O’Reilly sits down with President Obama before the Super Bowl to discuss important components of the Faux scandal grab-bag.

This is about as much of Faux Noise as I can stand to watch. The noisecasters on this network must be really good in that they don’t burst out laughing at some of the lines they are given.

I don’t know if The Colbert Report is a satire on Faux Noise or Faux Noise is a satire on The Colbert Report.

My previous post led to a discovery in some YouTube comments that the subject of the interview has a YouTube channel ProfSteveKeen.

The first thing I found on the channel was the lecture Keen: Bordeaux 2013 Debt Deflation.

My keynote speech at the KEDGE Business School “Finance and Society” conference. I give a live demonstration of switching from a model of Loanable Funds to Endogenous Money in Minsky, as well as explaining and modeling Minsky’s Financial Instablity Hypothesis.

He talks Australian fast, the topic is deeply technical, and it might take you a while to get your bearings. However, if you get about 10% of what is going on and make it to the conclusion, the results are startling and very worthwhile.

I have tried to capture a couple of his slides to give you an idea of where this lecture is leading.

On the Institute for New Economic Thinking web site, I found the interview Steve Keen: A Computer Simulation of Monetary Dynamics.  I think I have hit the mother lode, and it will take me a couple of blog posts to cover what I have just discovered.

The financial crisis that ran from 2007 to 2009 has been called a “Minsky Moment,” meaning it offered a much-needed reminder to all economists of Hyman Minsky’s neglected dictum that “capitalism is essentially a financial system.”

But even with this reminder, it is hard to know what to do next, since it is difficult to express Minsky’s vision using the standard equilibrium methods of economics. Arguably that is one reason that Minsky has remained a minority taste in economics.

This interview is just the beginning of the pay-off of my learning about this line of thinking.