October 30, 2015

How the U.S. Avoided Chronic Deflation by Relinquishing Monetary Control to Wall Street

The Eurozone today is going into the same deflationary situation that the U.S. did under Jackson’s destruction of the Second Bank, and the post-Civil War budget surpluses that deflated the economy. But whereas the Fed’s creation was designed to inflate the U.S. economy, Europe’s European Central Bank is designed to deflate it — in the interest of commercial banks in both cases.
1. Introduction
Deflation was the main U.S. financial problem prior to 1913. To replace the Treasury conducting its fiscal operations independently from the banking system, New York banks urged more power over public finances and to establish the Federal Reserve to increase the supply of money (a more “elastic” issue) in response to banking needs. Monetary policy since the Great Depression that started in 1929 has aimed at re-inflating the economy after downturns, fueling the post-2001 financial bubble and, since 2008, Quantitative Easing to provide banks with liquidity to support asset prices.
By contrast, Europe’s trauma of hyperinflation after World War I gave Europe’s bankers and bondholders a rationale for gaining power over governments to prevent them from monetizing their budget deficits. The rhetoric of fighting inflation has enabled German and French banks to impose tight money policies and smaller public self-funding than in the United States. On both continents, banks gained power over governments. But in America it was by insisting on more money creation and deficit spending, and in Europe by advocating limits on public money to finance deficits.
For most of the 19th century the U.S. Treasury conducted its monetary and fiscal policy in ways that imposed deflationary pressures on the banking system. President Andrew Jackson (1829-1837) of Democratic Party starved the economy of credit by his war on the Second Bank of the United States and removal of government deposits to sub- treasuries around the nation. His Democratic Party policy was backed by Southern plantation owners opposing Northern industry, seeing that its growth would increase urban industrial demand for food and other consumer goods. This would raise prices for the crops that plantation owners needed to feed their slaves.

October 29, 2015

This Is The $64 Trillion Question From Today's Fed Statement

While on the surface, there was something in it for both hawks and doves, with the Fed admitting, and adding, that "the pace of job gains slowed" boosting the domestic economic dovish camp (the language about business fixed investment increasing "at solid rates in recent months" will be promptly removed as the recent re-plunge in oil flows through the energy sector's cash flow statement), it was the hawkishness about the global environment that appears to have been the primary catalyst for today's rally as it gave the market the impression that the global economic jitters from the past three months are now well in the rear view mirror.
Specifically, it was the complete removal of the line that "recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term" and the addition that the fed is "monitoring global economic and financial developments" which were the kicker.
This is how Bank of America's Michael Hanson explained this change:
The October statement removed the notice that “recent global and financial developments” had posed some risks to economic activity and inflation “in the near term.” During the September press conference and in subsequent speeches, Fed officials stressed that they wanted to be prudent in the face of these risks, but had not fundamentally altered their outlook. The FOMC was concerned that downside risks could intensify into a significant global shock, which warranted their caution. But that did not happen, and other central banks have since stepped in to ease and support their domestic economies. Equivalently, the FOMC has indicated that September was an event that got their attention, rather than a shift toward systemic concern about global growth.
Read the entire article 

October 28, 2015

UPS Continues Its “Wreck the Post Office” Campaign, Presses for Increases on Parcel Prices

The United Parcel Service is very concerned that you might be paying too much for a postage stamp.  
If you’re wondering why UPS would be worried about something like that, it has to do with the way postal rates are set.  According to the law, each USPS product is supposed to cover its share of the Postal Service’s operating costs, which includes costs attributable to that product as well as a share of total institutional costs.  
UPS believes that market-dominant products — First Class mail, Standard mail, and periodicals — are covering more than their fair share of the Postal Service’s operating costs, while competitive products — Priority and most shipping services — are not paying enough.
As a result, argues UPS, the average customer who buys a First-Class stamp is paying too much because part of the stamp’s price is being used to subsidize competitive products.  UPS wants the cost allocation methodology changed so that competitive products pay a larger share of the Postal Service’s operating costs. 
Then the Postal Service will to have to raise the prices of the products that UPS competes with, which will put UPS in a better competitive position and increase its profits.  UPS doesn’t really care that some USPS customers are paying too much for postage.  UPS cares about UPS.

October 27, 2015

Schadenfreude - How The US Is Helping China Create A New Financial Order

Here we have an image of a Chinese banknote, featuring Chairman Mao, followed by a seemingly incongruous German word - schadenfreude. Is there an error here?
Happily, no. We’ll begin with the word, schadenfreude, which means “harm-joy.” It’s used to express an occurrence that’s destructive, yet brings about happiness.
This would seem to be a conflict in terms, but, looked at a bit more deeply, it could be said that the killing of an enemy may mean that peace will soon prevail - and so the event brings happiness. Or, another analogy: the bulldozing of an old structure may mean that a new one - a better one - will soon be under construction.
And that’s the case here. The world’s most powerful (and most oppressive) political/economic power structure has begun to go under the bulldozer. Its replacement will hopefully be a better one.
The Brussels SWIFT system is currently the largest economic settlement system in the world. Almost all financial transfers are made possible through this system. As such, those who control SWIFT have the power to threaten financial institutions and sovereign nations that, if they don’t do as they’re told, can be denied access to the system.

October 26, 2015

The Mechanics Of The Fed As Seen By The Eurodollar Curve

For a while, in that brief period between the August flash crash and the terrible September jobs report, it seemed that things may revert back to normal: bad news are bad news, good news are good news, and the economic cycle - as in the recession - is allowed to make a long-overdue repeat appearance from under the suffocating pressure of central banks.
Alas, it was not meant to be.
This is how DB's Alekandar Kocic explained it:
Last week’s developments in Europe (more QE, negative rates) and Asia (China cutting interest rates) are further reducing the probability of Fed liftoff. In all likelihood, we are one weak number away from a full relent and the market is already on the way to pricing it. But, to fully embrace this scenario, the market will likely wait for an explicit statement from the Fed. We continue to believe that repricing of the curve will follow a two step procedure with initial bull steepening followed by a bull flattening. This rates and macro view is roughly consistent with the curve approaching its shape of the late 2011, post low-for-long and operation twist, environment.
And while many - mostly those with no money on the table - debate daily what, how and when the Fed should move, for a specific subset of massively levered traders, even more so than the HFT algos who frontrun the equity market, every hiccup, stutter and vomit by Janet Yellen can mean the difference between early retirement and suicide (we hope this is a joke).

October 23, 2015

Presenting America's New Debt Ceiling: $19,600,000,000,000

Even as the bond market has been rather concerned about another possible debt ceiling showdown as we showed before, and which earlier today prompted the Treasury to announce the purposefully dramatic step of postponing the auction of 2 Year Notes next week, the reality is that one way or another, with an equity-driven wake up call for the GOP or without, the debt ceiling will be raised.

The only question is how much.

As a reminder, the reason why the total US debt held by the public hasn't budged from $18.1 trillion since March 16, 2015 is because that is when the last debt ceiling limit was hit. In the seven month since, the US Treasury has been cruising along on emergency cash measures, even as the total debt - if only for reporting purposes - has not budged (in reality it has grown by about half a trillion).

It will budge very soon, because no matter what the outcome of the upcoming week of debt ceiling negotiations, one thing is certain: the US has to be able to borrow more in order to survive.

And as The Hill reported, when one gets beyond the traditional posturing, the outcome will be the following:

Read the entire article

October 22, 2015

Negative Interest Rates Are Here

Not so long ago, a bank was by definition a business that took deposits from customers, paid them for the use of their money, and lent the cash to other customers at a profit. But that’s not how it works anymore:

Negative interest rates can take many forms, including higher fees that lower or negate the interest a bank pays for deposits, or limitations on what customers can do with deposited funds that lower the real value of those funds. So banks charging fees on deposits are functionally the same as banks offering negative rates to customers.

With the global economy slowing dramatically, led by plunging corporate profits, US interest rates will have to fall in 2016. And cash will have to be marginalized or made obsolete in order to get rates down to where they have a stimulative effect.

So the story of 2016 will be the emerging negative interest rate world and its many, many unintended consequences.

October 21, 2015

Economists Stunned By "Irrational Consumers" Who Used Gas Savings To Buy More Expensive Gas

Over the past year, we have repeatedly given the quantitative answer that has stumped so many: where did all those overhyped US "gas savings" go, because they certainly did not go into the broader economy, or toward discretionary purchases, as countless economists had said they would. The answer: more gas.
Gallup confirmed as much most last week when it reported that Americans' reported changes in spending have remained stable in most categories of goods and services over the past year - except for gasoline, with 35% reporting they spent more on gasoline in the August-September period.
Paradoxically, Gallup found the inverse of what had become erroneous conventional wisdom: "not only were Americans not spending more, they are spending less than they did in the past year on discretionary purchases such as retirement investments, leisure activities, clothing, consumer electronics, dining out and travel."
But while we knew the quantitative answer, namely that Americans bought more gas with their gas savings, we were missing the qualitative one. Courtesy of the NYT we now learn that not only did consumers not redirect their spending to other discretionary items, but engaged in an act that has stunned economists around the globe: they don’t just buy more gasoline; they bought more expensive gasoline!
And this is how a product that was essentially a staple good, suddenly provided the satisfaction of a discretionary splurge, even though it is virtually the same just more expensive.
The NYT explain this observation which is just the latest mockery of macroeconomist models, and once again shows why theory never applies to the real world.

October 20, 2015

Europe Secretly Starts Imposing TTIP “Trade” Deal Despite the Public’s Overwhelming Opposition

The terms of Obama’s proposed TPP ‘trade’ treaty with Asian countries won’t be made public until the treaty has already been in force for at least four years. The terms of Obama’s proposed TISA (Trade In Services Agreement) with 52 nations won’t be made public until the treaty has already been in force for at least five years. Obama’s proposed TTIP treaty with European countries has been so successfully hidden, that even the number of years it will be kept from the public isn’t yet known. Hello, international fascism — all in secret, until too late for the public to do anything.

But in Europe, things are being rushed, just in case secrecy breaks and the treaty fails to pass. The European Union is already secretly imposing provisions from the secret Transatlantic Trade and Investment Partnership (TTIP) treaty, even before anyone has signed it, and even before it has been formally approved in any nation. This was revealed over the last weekend in two places:

On the night of October 17th, Phillip Inman of the online version of the Guardian bannered (in an article that the Guardian  declined to publish in its printed edition), “Prospect of TTIP already undermining EU food standards, say campaigners,” and he reported that,

Nick Dearden, director of anti-poverty group Global Justice Now, says the EU’s chief trade counsellor, Damien Levie, has let slip that free trade means undermining current minimum standards agreed by the EU.

Dearden says that according to a report in the  [subscription-only] newsletter Washington Trade Daily, Levie told a conference held by US free market thinktank the Cato Institute [which is owned by America’s passionately anti-regulatory billionaire oil-investors, the Koch brothers] that genetically modified crops and chemically washed beef carcasses were being allowed into the EU ahead of a deal.

According to the report, Levie said EU member states “have been stepping up case reviews and approving new genetically modified organisms [GMOs] with five new products approved so far”. …

Read the entire article

October 19, 2015

"The Bankers Have Gone Through This Before. They Know How It Ends, And It’s Not Pretty"

When even the commodity traders got caught in the crossfire of the energy rout - those supposedly smartest men (and women) in the room who were so smart, they not only never saw the commodity price crash nor did they hedge for any such possibility, leading to such snafus as both Glencore and Noble Group calling their investors and assuring them day after day that they won't go bankrupt overnight - one question many have asked is how have the major banks gotten through unscathed so far.
This is especially true when one considers that the energy exposure of the big 3 TBTF banks is just over $150 billion. According to Bloomberg calculations Citigroup’s energy portfolio, including loans and unfunded commitments, swelled to $59.7 billion as of June 30, Bank of America’s to $47.3 billion, and JPMorgan’s to $43.6 billion, according to company filings.
And while some smaller banks such as Jefferies took massive charge offs on their energy prop book, which pushed Q3 FICC revenue negative for the first time ever, none of the big banks have disclosed any material, or even immaterial impairments on their tens of billions in energy loan books.
One explanation, and by far the simplest and most logical one, is that banks floating on $2.5 trillion in excess reserves, can not reveal, or otherwise mark to market, their loan book simply because they are, well, soaking in liquidity. This is what happened in late 2008, when instead of excess reserves banks were huddled by the Fed's discount window liquidity spigot, pledging such "collateral" as the stock of bankrupt companies (as we have previously shown). That, and also cranking up leverage to 35x, 40x or more. The repricing of all this leverage and Fed generosity once Lehman could no longer kick the can on its day to day funding, is what led to the great financial crisis. 
This time, everyone is in on it, and if a TBTF bank fails, it will drag not only the Fed, but all central banks down with it, and everyone knows it, so why would or should Jamie Dimon bother telling the truth about his true energy exposure? It is not as if the regulators will make him tell the truth, even if they know he is lying: case in point - all those "unsavory" events that JPM has spent $35 billion in legal settlements "neither admitting nor denying" they happened.

October 16, 2015

Visualizing The Demise Of The Once Mighty Euro

The European Union has always been primarily a political project. The idea of the union was to take peoples that had long and complicated histories, and to place them in a situation where they must work together and shed their differences in order to achieve success.
From the political angle, it can be argued that this objective has been achieved. War and conflict within Western and Central Europe has mostly been stymied. Considering the continent’s lengthy history in these areas, this is great news.
However, it’s particularly the countries that adopted the euro as common currency that put themselves into a more precarious economic position. The problem is simple: countries maintain certain political and fiscal responsibilities, but do not control the fate of their common currency.
The result is that eurozone politicians have very different fiscal policies, but don’t have the flexibility of monetary policy to help accompany them. Some countries are trying to spend their way out of trouble, while others are maintaining strict austerity. Either way, the European Central Bank (ECB) controls the plight of the currency and can make unilateral decisions that have a big impact on every country. For example, in the beginning of June 2015, the ECB announced the minimum of a $1.14 trillion quantitative easing program that will add new currency units that together are larger than the economies of Ireland, Greece, Portugal, Finland, Luxembourg, and Slovenia combined.

October 15, 2015

World's Largest Leveraged ETF Halts Orders, Citing "Liquidity Constraints"

First The Bank of Japan destroyed the Japanese bond market, and then, back in May we warned that The Bank of Japan had 'broken' the stock market. Now, it appears the all too obvious consequences of being the sole provider of buying power in an entirely false market are coming home to roost as Nomura reports the "temporary suspension" of new orders for 3 leveraged ETFs - the largest in the world - citing "liquidity of the underlying Nikkei 225 futures market."

As Bloomberg reported previously on Nomura's funds,
Money is being shredded at an unprecedented rate in a souped-up exchange-traded fund tied to Japan’s most famous stock index.

Since mid-August, investors have poured a record $4.5 billion into the Next Funds Nikkei 225 Leveraged Index ETF, a security designed to rise or fall twice as fast as its namesake equity gauge. That’s too bad, considering that twice the Nikkei 225 Stock Average’s loss over that period comes out to about 21 percent.

So fast have the country’s individual investors been plowing money into the fund that even as a fifth was lopped off its price, its market value more than doubled. It’s the largest security of its kind in the world, and is now big enough to affect the whole stock market as overseers rush to buy and sell securities to meet its price target, according to BNP Paribas Investment Partners Ltd.
Read the entire article 

October 14, 2015

The Numbers Say That A Major Global Recession Has Already Begun

The biggest bank in the western world has just come out and declared that the global economy is “already in a recession”.  According to British banking giant HSBC, global trade is down 8.4 percent so far this year, and global GDP expressed in U.S. dollars is down 3.4 percent.  So those that are waiting for the next worldwide economic recession to begin can stop waiting.  It is officially here.  As you will see below, money is fleeing emerging markets at a blistering pace, major global banks are stuck with huge loans that will never be repaid, and it looks like a very significant worldwide credit crunch has begun.  Just a few days ago, I explained that the IMF, the UN, the BIS And Citibank were all warning that a major economic crisis could be imminent.  They aren’t just making this stuff up out of thin air, but most Americans still seem to believe that everything is going to be just fine.  The level of blind faith in the system that most people are demonstrating right now is absolutely astounding.
The numbers say that the global economy has not been in this bad shape since the devastating recession that shook the world in 2008 and 2009.  According to HSBC, “we are already in a dollar recession”…

October 13, 2015

"We've Never Seen Anything Like This" - Dumbfounded Central Bankers Brace For "Rolling Series Of Crises"

One of the most important things to grasp about the Fed’s September (in)decision is that the FOMC had no viable options when it came to emerging markets. 

The combination of low commodity prices, falling demand, slumping global trade, a decelerating China, and the yuan devaluation have all served to accelerate capital outflows for EM and there’s certainly an argument to be made for the contention that a Fed hike and a subsequent spike in the dollar would be just about the last thing EM needs when it comes to stopping the bleeding. 

That said, there’s another line of argumentation which says the Fed missed its window to hike long ago and so now, all they’re doing in the Eccles Building is fostering continued uncertainty which is also causing capital to flow out of EM. 

In the simplest terms possible: no one really has any idea whether it’s best to rip the band-aid off or not, and adding to the confusion is the fact that the Fed has now telegraphed its own uncertainty by explicitly acknowledging the reflexivity problem, meaning EMs (and everyone else for that matter) are desperately trying to figure out how to incorporate themselves into their own outlook for what the Fed may or may not do. 

Here’s how one former Treasury economist framed the latter argument:

Read the entire article

October 12, 2015

Fed Quietly Revises Total US Debt From 330% To 350% Of GDP, After "Discovering" Another $2.7 Trillion In Debt

For those who have not seen it, as well as for those who are familiar with this chart, take a long look, because this is the last update of this particular data series, pulled straight from the Fed's Z.1 Flow of Funds (section L.1), you will ever see.
So did the Fed spontaneously terminate the reporting of what until the second quarter's update of the Flow of Funds, was the most comprehensive official summary of Household, Financial, Corporate and Government debt in existence? And if so why?
Many Fed watchers assumed that this is precisely what happened, and indeed, searching high and low for the infamous L.1 Section revealed nothing.
We can only assume that the vocal outcry that emerged in the aftermath of the Fed's release of its Q2 Flow of Funds statement missing this most critical of data sets on September 18, was so loud that three weeks later, this past Friday on October 9, the Fed released an official follow up explanation what exactly happened.
Here is what happened to the missing so very critical data series, straight from the horse's mouth:

October 9, 2015

Why Are The IMF, The UN, The BIS And Citibank All Warning That An Economic Crisis Could Be Imminent?

The warnings are getting louder.  Is anybody listening?  For months, I have been documenting on my website how the global financial system is absolutely primed for a crisis, and now some of the most important financial institutions in the entire world are warning about the exact same thing.  For example, this week I was stunned to see that the Telegraph had published an article with the following ominous headline: “$3 trillion corporate credit crunch looms as debtors face day of reckoning, says IMF“.  And actually what we are heading for would more accurately be described as a “credit freeze” or a “credit panic”, but a “credit crunch” will definitely work for now.  The IMF is warning that the “dangerous over-leveraging” that we have been witnessing “threatens to unleash a wave of defaults” all across the globe…
Governments and central banks risk tipping the world into a fresh financial crisis, the International Monetary Fund has warned, as it called time on a corporate debt binge in the developing world.
Emerging market companies have “over-borrowed” by $3 trillion in the last decade, reflecting a quadrupling of private sector debt between 2004 and 2014, found the IMF’s Global Financial Stability Report.
This dangerous over-leveraging now threatens to unleash a wave of defaults that will imperil an already weak global economy, said stark findings from the IMF’s twice yearly report.
Read the entire article 

October 8, 2015

Global Financial Meltdown Coming? Clear Signs That The Great Derivatives Crisis Has Now Begun

Warren Buffett once referred to derivatives as “financial weapons of mass destruction“, and it was inevitable that they would begin to wreak havoc on our financial system at some point.  While things may seem somewhat calm on Wall Street at the moment, the truth is that a great deal of trouble is bubbling just under the surface.  As you will see below, something happened in mid-September that required an unprecedented 405 billion dollar surge of Treasury collateral into the repo market.  I know – that sounds very complicated, so I will try to break it down more simply for you.  It appears that some very large institutions have started to get into a significant amount of trouble because of all the reckless betting that they have been doing.  This is something that I have warned would happen over and over again.  In fact, I have written about it so much that my regular readers are probably sick of hearing about it.  But this is what is going to cause the meltdown of our financial system.
Many out there get upset when I compare derivatives trading to gambling, and perhaps it would be more accurate to describe most derivatives as a form of insurance.  The big financial institutions assure us that they have passed off most of the risk on these contracts to others and so there is no reason to worry according to them.

October 7, 2015

Commodity Trading Giants Unleash Liquidity Scramble, Issue Record Amounts Of Secured Debt

Earlier today, in its latest attempt to restore confidence in its brand and business model after suffering a historic stock price collapse, Glencore - whose CDS recently blew out to a level implying a 50% probability of default - released a 4 page funding worksheet which was meant to serve as a simplied summary of its balance sheet funding obligations and lending arrangements to equity research analysts who have never opened a bond indenture, and which among other things provided a simplied and watered-down estimate of what could happen if and when the company is downgraded to junk.
Meanwhile, in a furious race to shore up as much liquidity as possible, Glencore - which a month ago announced a dramatic deleveraging plan - and its peers have been quietly scrambling to raise billions in secured funding. Case in point none other than Glencore's biggest competitor and the largest independent oil trader in the world, Swiss-based, Dutch-owned Vitol Group, whose Swiss unit Vitol SA earlier today raised a record $8 billion in loans.
It is not alone.
As Bloomberg reports, another name profiled previously here, privately-held (but with publicly-traded debt) Trafigura  "won improved terms on a $2.2 billion loan refinancing deal on Oct. 1 via a group of 28 banks. Swiss commodity traders Gunvor Group Ltd. and Mercuria Energy Group Ltd. are also marketing credit facilities totaling $2 billion."

October 6, 2015

World's Largest Sovereign Wealth Fund Is Forced To Begin Liquidating Assets

Populist rhetoric aside, the SWF will have no choice but to sell: "capital coming into to the fund has already started to dwindle. Inflows were just 17 billion kroner in the first half of this year, compared with a quarterly average of 60 billion kroner over the past 10 years. Central bank Governor Oeystein Olsen, who oversees the fund as head of the bank’s board, said in February that oil around $60 would mean transfers to the fund "may come to a halt."
Oil is now nearly 20% lower, and as goes the price oil, so go the inflows into the fund. Which means that any month now, if not already, Norway will shift from net buyer of global financial assets to a net seller, in the process joining the Emerging Markets and, of course, China in soaking up even more liquidity, mostly USD-denominated, out of the market, in the process removing much of the liquidity injected by the Fed and its peer central banks.
This situation will only deteriorate that much further, and force the wealth fund to sell even more assets should the Fed hike rates, pushing the dollar even higher, and sending the price of oil crashing below. In fact, the coordinated selling of US-denominated assets will be precisely the catalyst that sends the global stock market tumbling, and ultimately serve as the catalyst for NIRP and/or QE4.
The only question is whether Yellen has finally figured this out and will proceed straight to the NIRP/QE4 part or whether she will subject the market to 6-9 months of gut-wrenching volatility as the world's largest sovereign wealth fund realizes what it means to try to sell billions of assets into an illiquid, bidless, market.

October 5, 2015

Right Now There Are 102.6 Million Working Age Americans That Do Not Have A Job

The federal government uses very carefully manipulated numbers to cover up the crushing economic depression that is going on in this nation.  For the month of September, the federal government told us that 142,000 jobs were added to the economy.  If that was actually true, that would barely be enough to keep up with population growth.  Sadly, the truth is that the real numbers were actually far worse than that.  The unadjusted numbers show that the U.S. economy actually lost 248,000 jobs in September and the government added more than a million Americans to the “not in the labor force” category.  When I first saw that number I truly believed that it was inaccurate.  But you can find the raw figures right here.  According to the Obama administration, there are currently 7.9 million Americans that are “officially unemployed” and another 94.7 million working age Americans that are “not in the labor force”.  That gives us a grand total of 102.6 million working age Americans that do not have a job right now.

That is not an economic recovery – that is an economic depression of an almost unbelievable magnitude.

This is something that my friend Mac Slavo pointed out the other day.  I encourage you to read his analysis right here.  If we measured unemployment the way that we did decades ago, we would all be talking about how similar Obama’s economy is to the Great Depression of the 1930s.

Read the entire article

October 2, 2015

How ‘Competitive’ Tax and Incentive Policies Hurt Small U.S. Businesses

Recently we have written about how supposedly ‘competitive’ national policies on tax and the financial sector in Britain tend to favour large multinational firms over smaller, more locally-based ones, and how they also tend to lead to less competition in markets too.
This is the result of what we sometimes call the “Competitiveness Agenda”, which pushes the idea that you have to pamper and give subsidies to mobile capital, for fear that it will flee to more hospitable jurisdictions. Of course the firms that are most able to flee (or partly flee) to foreign jurisdictions are naturally the internationally-focused ones – and that usually means larger multinational corporations. The smaller locally-focused ones, which are most wholly embedded in the local economy won’t generally flee.
The result is that this ratchets up the tendency for the big to overwhelm the small, based on factors (such as tax breaks) that have nothing to do with wealth creation and everything to do with unproductive wealth extraction.
This morning Good Jobs First in the United States have published an important new report entitled In Search of a Level Playing Field: What Leaders of Small Business Organizations Think About Economic Development Incentives. Its findings very much reflect the workings of the Competitiveness Agenda.  Its summary states:

October 1, 2015

The American Public Will Get Screwed Again…Just Like in 2008

Wall Street legend Carl Icahn just posted a warning to America...
During the 1980s, Icahn built a reputation as a feared “corporate raider.” He buys huge stakes in “broken” companies…takes a seat on the board…and tries to turn the companies around. He’s an “activist investor,” and it’s made him one of the thirty richest people on the planet.
Now, Icahn says it’s America that’s broken. On Monday night, he released a 15-minute video called “Danger Ahead.” In the video, he talks about huge problems facing the U.S. economy.
Low interest rates are one of Icahn’s biggest worries. He calls them “a scary issue,” and says borrowing money is “like taking a drug.”
Here’s Icahn:
…low rates, by almost definition, [are] building bubbles; building real estate bubbles; building bubbles even in the art market.
•  For some Americans, Icahn’s message is a wake-up call…