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Tag Archives: Credit markets

Marshall Auerback: We Are Clearly Living in a Bizarro Capitalism Era—And It’s Time to Change How the World Manages Economies

Lambert here: For those not familiar with “Bizarro World”: More pertinently: By Marshall Auerback, a market analyst and commentator. This article was produced by Economy for All, a project of the Independent Media Institute. Remember “Bizarro Superman,” the character who represented the polar opposite of Superman and all that he stood for? Today we have an economic equivalent in the form of Bizarro Capitalism. In the good old days, borrowers paid interest on the money that was loaned to...

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Life, Deferred: Student Debt Postpones Key Milestones for Millions of Americans

By Natalia Abrams, the Executive Director of Student Debt Crisis, and Cody Hounanian, the Program Director of Student Debt Crisis. Originally published at openDemocracy Student debt has been solely responsible for the majority of my decision-making as an adult(Erin – Portland, Maine) The student debt crisis is not the burden of a single generation. It impacts Baby Boomers in their 60s and 70s; Gen Xers in their 40s and 50s; Millennials in their 20s and 30s – as well as Gen Z high school...

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Even Larry Summers Denounces World Bank’s “PEF” Ebola Bonds That Enriched Investors at Expense of the Sick in the Congo

Even Larry Summers, the former World Bank chief economist who recommended sending garbage to poor countries, thought an Ebola financing scheme cooked up by his former employer went too far. As recounted by another former World Bank economist, Olga Jonas, in of all places Nature, the World Bank was enamored of the idea of having the private sector somehow participate in getting money to countries stricken by Ebola if and when they needed it in the wake of the 2014-2016 outbreak that killed...

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How Richard Vague Discovered Gravity: An Interview + Book Review of A Brief History of Doom: Two Hundred Years of Financial Crises

Yves here. As John Siman describes below, Richard Vague, who has done considerable work on the economic damage done by high levels of private debt, extended it by making an in-depth study of financial crises. Vague documents that private debt growth over time exceeds GDP growth, creating the need for writeoffs. If they don’t come voluntarily or through state-mediated processes like bankruptcy, they come involuntarily, via crises. By John Siman I do not doubt the existence of God, nor that...

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Bleak Financial Outlook for US Fracking Industry

Yves here. Some astute financial commentators were early to point out that fracking was uneconomical and depended on access to cheap funding. For instance, we cited the Financial Times’ John Dizard in a 2014 post: John Dizard at the Financial Times (hat tip Scott) gives a more intriguing piece of the puzzle: the degree to which production is still chugging along despite it being uneconomical. The oil majors have been criticized for levering up to continue developing when it is cash-flow...

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Michael Hudson: Why Frances Coppola’s “The Case for the People’s Quantitative Easing” Is for Banks, Not the People

Yves here. I must confess to not having read Frances Coppola’s new book, but based on Martin Wolf’s and Michael Hudson’s recap of its thesis, I am at a loss to understand how Coppola could see her “people’s quantitative easing” as anything other than another subsidy to banks and bank lending. More and more economists have concluded that the level of financialization in advanced economies serves as a drag on growth. The IMF determined that the optimal level of financial development was that...

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Mark Blyth’s Incisive Post-Crisis Takedown: “A Brief History of How We Got Here and Why”

Mark Blyth, the Brown political scientist of “The Hamptons are not a defensible position” fame, has a must-watch video of a presentation, A Brief History of How We Got Here and Why, which we’ve embedded below. We’re featuring it despite the lack of a transcript. Even though Blyth presents a fair bit of detail that is familiar to readers, he manages the difficult task of synthesizing it in a way that generates novel observations. It doesn’t hurt that Blyth is also colorful and a high bit rate...

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Families Drowning in Debt to Stay in the Middle Class

The Wall Street Journal has an important story on how people with what seems like pretty good household incomes are getting more and more indebted in keeping a middle class lifestyle. The Journal gives a sympathetic portrayal, using some recent work by Georgetown law professor Adam Levitin to show how much significant costs have risen relative to wages From the story: Median household income in the U.S. was $61,372 at the end of 2017, according to the Census Bureau. When inflation is taken...

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China: The Covert Credit Superpower

An new working paper by Sebastian Horn, Carmen Reinhart and Christoph Trebesch on China’s foreign lending has some important findings, such as that China accounts for more than 40% of the external debt of 50 developing countries. We’ve embedded the document at the end of this post. The study is an ambitious undertaking, seeking to track China’s foreign lending from the start of the current regime, in 1949 to 2017. They identified 1,974 loans and 2,947 grants to 152 countries totaling...

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Everything’s Fine Until Suddenly it Isn’t: How a “Leveraged Loan” Blows Up

Yves here. Wolf’s account of the price collapse of a particular leveraged loan is both a good primer as well as reminder as to how lending goes bad: gradually, then suddenly. Also bear in mind that a lot of junk bond funds hold leveraged loans, along with a lot of public pension funds, both directly and through credit funds….managed by those friendly private equity firms. By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive...

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