Prelude: Financial Meltdown 2008 Structural Causes
Lack of Bank Regulation

High Leverage
Short-Term Reserves Were in Euros When Dollar Were Required
Academic Economist Under Estimated Economic Effects of Financial Market

Winners and Loses #1
Debtors
Can't or Won't Pay,
Deflation Kills Wage Growth
Real Debt
Value Increases
making refinance difficult
Many Creditors Lost Except in US


Winners and Loses #2
 

World's Very Poor Benefited

 

Return on Capital-R Greater Than Economic Growth Rate-G.
Top 1% received 90% of Income Gains  
Since 2012, 70% of that 90% went to Top 1/10 of 1%.

 

 

Government Fiscal Policy Helps Bottom
 Creating Middle Income Envy

 

Part 1 Neoliberal's Caused Financial Collapse

1. Neoliberal Economic Orthodoxies Wrong
A. Finance does affect real economy.

B. Finance system can falter.

C. Markets Need Regulation.

D. Many economist wrong because of
politics. see Fake News Warning 7


2. Real Economy Trade Imbalances did not cause
2007-08 FINANCIAL CRASH


A. The earlier Dotcom Bubble Crash
did not cause a banking crises because investors took the loss.

B. World trade imbalances, the Balance of Financial Terror were not the root cause the crash.

1. U.S. negative trade balance, as many predicted, did not cause assets and a dollar crash.
a. As of 6/18 both have appreciated.
b. See
The New Financial Geopolitics:
        Post-Cold War Geopolitics in a World of ‘Long and Low.’
96 min
 

2. Loans to Greece from Germany's trade surpluses were not the problem
as France and the Benelux nations controlled the transatlantic dollar flows
needed for international trade and to maintain Exorbitant Dollar Privilege.
a. France runs a small negative trade balance.
b. South Korea currency tanked even
though she had a positive trade balance
and ample dollar reserves


C. South Korea and the WEST could not get dollars needed
to fund substantial daily borrowing needs for international commerce.
 

3. Almost all banks were very highly leveraged
with substantial short term $ borrowing used
as Euro collateral needed for daily operations


A. When Lemans $180 billion
over-nigh funding needs were
not met by the International Funding Market, the entire market  crashed.
1. Worldwide credit flows stopped and ATMs would soon be empty.
2. Bad housing loans were not the problem, rolling over short term
daily funding dollar needs with poor mortgage debt as collateral
immediately would quickly crash the entire financial system.

B. Credit stopped
1. Europe's banks had become the world's hedge fund for world dollar flows.
Loans were highly leveraged borrowed in dollars with Euro denominated collateral

2. Thatcher deregulation of London's financial system had made it the hub of dollar
denominated European bank sponsored debt which flowed into and out of the U.S.
3. The U.S. eventually deregulated to loosened housing mortgage rules and
help financing of Clinton's expand minority housing Community Reinvestment Act.
4. Credit-default swaps failed. Created to safeguard  the resulting low credit rating
housing loans were exempted from regulation by the Gramm-Leach-Bliley Act
which repealed banking industry safeguards provided by the Glass-Steagall Act.5. Many banks did not have the dollar reserves to meet the needs of the banking
and corporate world.
6. Walls Street's model of an extremely leverage wholesale funding model running
out of NY and London would crash.

4. Is FED Involvement in a Geopolitical World Appropriate?

A. No
as a sovereign debt crisis requires Euro Central Bank was the appropriate agency.
B. No as Max Plank Institute blames dysfunctional Euro participants.
C. Yes, it was a failure in the Transatlantic Dollar Flows as described by Mark Blyth.
 

5. Stability Needs Dollar Supremacy

A. World trade is stable because the world, through Europe's banks, completes the
circular flow of dollars back to the US by investing in U.S. companies.

B. Dollar investments are dependent on
high Intellectual Property generated

C. Distribution of these profits
has resulted in more income inequality.

D. Trump's disrupting this process
has many academics apprehensive.

Source

Crashed: How a Decade of Financial Crises Changed the World with Adam Tooze

The New Financial Geopolitics ─ Europe: Helper, Spoiler, Risk Generator?


from
Watson Institute: International/ Public Affairs 86 min

See The Thirteen Commandments of Neoliberalism

Documentary Of The Week: Steve Bannon At Oxford  2 hr video

Return to Political Economy Book Summaries  11/21/18  view horizontally   Please share!

Part 2 Democracy Failures Caused Popularism

summarized from Francis Fukuyama: Democracy's Failure to Perform

1. Development of Illiberal Democracy
     
A. Causes
          1. Foreign Policy Failures of Developed Democracy
             
enhanced by U.S. foreign policy failures i.e. Middle East  wars
          2. Non-Liberal Democracy success, especially China
          3. Poor Liberal Democracy Performance i.e. economic
              slowness, immigration concerns, wealth accumulation
     B. Definitions, nominal
         1. States: monopoly on the legitimate use of force.
             from Max Weber States are about Power!        
         2. Rule by Law: sovereignty sets the law i.e. China

         3. Rule of Law: sovereignty responsible to same laws
             as the governed. Laws limit power.

         4. Democratic Accountability requires free political parties
             with guarantee substantive accounting and a governments
             that serves the entire population, not just the rich and the poor.
             Liberals missed this effect of their policies.

Everyone Got More, Some Just Got More More Than Others!

C. Modern Political System
1. Generate tremendous power limited by the rule of law and is democratically accountable

2. Patrimonialism: rulers own political system, resources , distribute wealth Who You Know

3. Neo-Illiberal States: look democratic, limited representation, leaders follow the money
  

D. U.S. Failures at State Building
1. Focus: Build a Liberal Democracy
2. Required focus: moving from Patrimonial State to Modern Political System

a. Iraq and Afghanistan: got the liberal democracy but did not move from
a patriarchal state. Both states moved to Oligarchy where a few wealthy people
form a  Plutocracy. Neither protect citizens or provide services to a limited population.

2. Three Main Forces Are Blowing Up Global Politics

Would a more Federalist Approach decrease the animosity
created by the movement toward traditional liberalism?
Deciding some issues at the state and local level might help!

Return to Political Economy Book Summaries  11/21/18   Please share!

 

Part 3 Understanding Left-Right Populism
S
ummarized of Understanding Right and Left Populism by
Samir Gandesha
an Associate Professor in the Department of the Humanities and the
Director of the Institute for the Humanities at Simon Fraser University.
 by 

1. Growth of Populism

Right-wing populist parties
 

Erdogan's Turkey 2003, Modi's India 2014,  Trump's American 2016,
Batten's United Kingdom 2016, also in
Austria, Hungary, and Poland 

Left-wing populism
Tahrir Square generated the Arab Spring.
Zuccotti Park [NYNY] 2016
signaled rising support for Bernie Sanders and Jeremy Corbyn.
Latin America Uprisings in Bolivarian, Venezuela Bolivia and Argentina

Right and left populism affected neoliberal globalization.

2. Causes of Populism

Empirical study by Norris and Inglehart (2016) emphasized
1) anti-establishment
2) authoritarian

3) nativism

Theoretical account by Ernesto Laclau (decades) saw an equivalential chain”
of different demands from
 democratic, horizontal and egalitarian discourse.

3. Populism: Economic Insecurity or Cultural Backlash?

Three distinct elements
1) anti-establishmentism  
vs.
1) representative democracy

2)  authoritarianism             vs. 2) liberalism

3) nativism                        vs. 3)osmopolitanism

Two distinct axes: economic and cultural
1) evils of state economic management
2) conservative” vs. “progressive” values.

Three approaches
1) the rules of the game
2) the “supply-side” party politics
3) the “demand-side” of party politics

Two reactions
1) response to economic insecurity
2)
 backlash by older white males

Norris and Inglehart argue that the latter is the most convincing argument:
“We believe that these are the groups most likely to feel that they have become
strangers from the predominant values in their own country
who were
left behind by progressive tides of cultural change which they do not share…

The silent revolution of the 1970s appears to have spawned an angry and
resentful counter-revolutionary backlash today.”

One wonders whether the authors don’t seriously underestimate the threat right-wing
populism poses to the institutions of liberal-democracy in the United States
.


A worrying inference that the authors explicitly draw from their
progressivist premises is that populism will eventually die
out.

The study therefore fails to sufficiently appreciate the ways in which populist governments
seek to institutionalize their agendas, thereby changing the rules of the game.
This has become most drastically evident in the case of Poland, for example,
in which Andrzej Duda (leader of the right-populist Law and Justice party) has significantly
limited the autonomy of the judicial branch of government.  Other such examples abound.

4. Neoliberal globalization is comprised of four processes:

accumulation by dispossession  
de-regulation

creation and re-distribution of wealth
economic insecurity and cultural anxiety

Together they have increased
the creation of surplus peoples  
rising global inequality
threats to identity

Anxiety from neoliberal globalization has ammunition from right and left populists.

Neither Norris and Inglehart nor Laclau adequately account for such insecurity
in their theorization of populism.

the people” are differentially deployed by right and left and they themselves
must be understood in terms of the respective enemies through which
the peopleis constructed
And this is the decisive dimension of populism.

5. Synthesis

Right populism defines "the people" as those confronting an external enemy.
Islamic terrorism 
Refugees
European Commission,
International Jewish Conspiracy ...

Left populism defines “the people” as social structures/institutions
1) state and capital that thwart its aspirations for self-determination
2) allows hospitality towards the other
 

Right populism defines the enemy in personalized terms.
Insecurity and anxiety are necessary and unavoidable
even a favorable result of capitalist social relations.
Acceptable fear of the strangers and a punitive state result.

Left populism
defines the enemy in terms of socio-economic structures.
Insecurity and anxiety are caused by a dismantling of the welfare state
and
workforce casualisation.
These egalitarian solutions that can also turn authoritarian

See The Populists (article) | The Gilded Age | Khan Academy

 

Part Four Populism is the Reset Mechanism

Populism is not an economic distribution complaint,
it is driven by 3 decades of market driven globalization

It is not just about wage stagnation and loss of jobs

It is about disempowerment, social exclusion, unfairness, and humiliation.

Many Trump Populists seek recognition, having a meaning,
a say in shaping the forces that govern their collective lives.

from Michael Sandel: Populism, Trump, and the Future of Democracy

See

George McGovern the populist who lost, Trump Won,  Why, was it the man, the media, why were people unhappy

Important Question: is Kantian Morality Enough for the Public Sector,
especially since some think it is too much!

Should public discussion go beyond safe and delimiting morality
and moral duty, beyond the legality of rights and human dignity.

Should respect for work and be part of the discourse?

Should competing conceptions of the "good life" be on the table of public discussion?
Update from Ian Bremmer
Populism in Europe & America  1/24/19

 

Battle is not over between right and left populists.

 


Populist power will increase
as European Parliamentary Elections, the big 2019 story.
Dysfunction between bureaucrats and politicians will weaken Europe.
Difficult to govern, harder to manage geopolitically arrangements between
countries.

Data Trump's increased popularity with his base indicates
his brand of Populism is working.

 

Editor's Note: Michael wants more that Kant. Kant is enough.

Michael Aandel is a lot like Charles Murray who is basically correct,
but wants too much control of what constitutes correct morals and ethics.

Extreme conservatives want too much control, extreme liberals want no control.

Left wing populism is economic, the main stream view feels this is the starting point

Right wing populism is about the cultural loss caused by immigration, not prejudice

Summary of Summary

Neoliberal globalization
increased economic insecurity and cultural anxiety.

Insecurity may need more attention by populist theory.

These are key to understanding the difference between right and left forms of populism

Related Studies Nazism And Neoliberal Mythmaking

German Reconstruction As State-Phobia
     

The State As Killer   

Europe and the Centre-Left Fall under Hayek’s Spell

A Map of Hayek's Delusion

 

Part 5 Crisis Through the 2020's

from Development in an Age of Uncertainty
George Friedman Lecture on POWER at 3rd Lisbon Conference May 2018

Prelude
1. Fall of the Soviet Union made US only Global Power in 1991.
    United States, an unorganized organizes, needed a new appropriate global strategy.
2. European Union created in 1993 and soon expanded beyond a free trade zone.
 

1. Development theory centered on financing growth with exports.

2. Excess world capacity grew.

3. Exporters were dependent on markets, dependent and hostage to buyers.

4. 2008 Financial Crisis lower world demand, exports fell, growth slowed.

5. China's lowered her demand growth for industrial goods and natural resources.

Recent Geopolitical Positions

1. United States is back to normal.

2. Europe economy still stalled. Fragmentation continues.
    Germany
is export dependent, faces lower export demand and has a chaotic banking system.
    Expect bilateral trade agreements between Germany-GB, G-US, G-F, and GB-US.

3. China export growth was permanently slowed by increased Vietnam, Columbia ... lower cost competition.

4. Russia budget hindered by low export prices and was again forced to delay modernization.

5. Saudi Arabia lost export revenue and with it, Middle East dominance.

6. Iran has begun dominating "Iraq and Lebanon", has a "presence in Syria" and "operates in Yeoman."

7. North Korea's bomb development is for bargain with US and she also wants less US influence.
    South Korea fears N. Korea's military and like Japan, wants US protection.
    US wants no Korean bomb and less Chinese influence.
    China wants divided Korea and influence. Talks will continue with few resolutions.

8. Middle East franking means not as strategic, chaos continues, Iran is the problem.

1. 3rd world debt crisis caused easily managed geopolitical ripples.

2. Nations are now even more economically interdependent.

3. Financial crisis led to a trade crisis making for increased, more persistent ripples.

4. Europe succeeded during her one reason to exist, prosperity.
    Management during dysfunction is the real measure of success and she failed.

5. World Leaders have many credibility problems.

1. Brussels wants Nationalism to cease, but it will not.

2. China can not quickly slow her export mercantilism.

3. Putin needs pseudo geopolitical power to exist.

4. United States must act as world leader, but she will not.

Prelude:

Recent Unstable Geopolitical Eras
1. 1929: began an era economic depression and social upheaval
2. 1968: rioting in Chicago, upheaval in France, Stalinism in Russia,
     and proletariat revolution in China
3. 2018: a leaderless worlds run by interesting, unique, strong leaders
    Trump, Xi, Putin and None in Europe

Maturation of Core Technologies Intensify Problems.

1. Core Technologies spawn other technologies
    and rapidly expand economic growth.
   
Steam Engine, electricity, internal combustion engine, micro chip

2. Maturing Lower Productivity Technological Eras
    Late 1960's
internal combustion technology had matured.
    21st Century micro chip technology began maturing.

3. Technology Based Productivity Decline Not Recognized.
    Some thought flight would be powered by steam engines.
    Jetson's like flying cars were around the corner.

4. Coming Replacement Core Technology is Unknown
    Who thought the microchip would lead to Internet Shopping?
    AI is an extension of the microchip, not the next core technology.
    Core Technology Creation is Not Linear, it will be recognized
    when it dramatically increase production.

5. 2020's Will be a Classic Period of Geopolitical Dysfunction
   
Export crisis reinforced by financial crisis
    with mature technology cause slow growth.

Problems Have No Easy Fix

1. China: facing slower growth allowed Xi to extend his power.
   
He strengthened the Communist Party and attacked corruption,
    but can't decide who takes the pain from nonperforming loan. Think Euro!

2. Russia: Putin allowed to increase his strong man act
    while looking over his shoulder. He has directed attention from a slow economy
    and Russia's loss of geopolitical clout with local geopolitical interventions.

3. Europe: Rise of Nationalism Most Serious
   
because she has no individual identity.
    Germans are not Greeks
    Italians are not French
    the English are not European.
    Europe exist to provide shared prosperity and this has stauled.

4. United States has an import problem
    
as workers, displaced by cheap imports, revolt.

History will continue out-of rhythm until the US takes control.