Another Bank in Crisis?

May 2024 Forums General discussion Another Bank in Crisis?

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  • #241557
    alanjjohnstone
    Keymaster

    Although very vocal on the internet, do the Modern Money theorists have any standing among the orthodox economists?

    Has their policy been followed anywhere?

    Even Major Douglas’s social credit movement tried and failed to implement his ideas …in NZ and some Canadian provinces.

    #241558
    Ozymandias
    Participant

    According to these two we are headin for a spreadin. They long for the halcyon days when Capitalism was a bit kindlier. Their task is to make money by advising investors how to negotiate the coming holocaust.

    #241570
    Anonymous
    Inactive

    Bank of America is getting a rain of cash deposits because the FDIC has said that they will protect and insured all depositors, why Bank of America is not creating a rain of money ?
    https://www.bostonglobe.com/2023/03/15/business/bofa-gets-more-than-15b-deposits-after-svb-failure/. Bank of America gets more than 15 billion in deposits after SVB failure

    #241594
    ALB
    Keymaster

    MMT theorists don’t say that individual banks can make money out of thin air.

    They share the mainstream academic view that only the whole banking system centred on the government Central Bank can do this. In a sense this is true as the monetary authorities can issue as much money-tokens as they want. The trouble is that, if they overdo it, this will lead to a depreciation of the currency and so to a rise in the general price level. No new wealth will be created (only the application of human labour to materials that originally came from nature can do that). All that happens is that the price of already-existing wealth goes up. What these days is called “inflation”.

    MMT say that this is not much of danger, at least not below the full employment (of resources as well as workers) level. It’s a new version (with a different theoretical justification) of the Keynesian view that a government can spend its way out of a slump. Which of course has been tried — and failed. So you could say that the policy has been tried even if not as such.

    If applied again, the result is likely to be no more than a short-lived boost to production. The longer term result would be a rise in the general price level (“inflation”) like that that occurred in the 1970s. Stagnation + Inflation, or Stagflation.

    The result wouldn’t be so bad as if the currency crank theory about banks causing problems by creating too much money out of thin air was to be implemented. Artificially limiting the amount of loans that a bank can make when it has the money to make them would provoke a financial crisis and slump because it would restrict business investment, the driver of the capitalist economy. It would be impeding banks’ role as financial intermediaries between those with money to lend and those who want to borrow money.

    #241597
    alanjjohnstone
    Keymaster

    Yanis Varoufakis analysis.

    https://www.commondreams.org/opinion/financial-crisis-silicon-valley-bank-capitalism

    “When inflation forced the Fed to stop printing new money (i.e. no more quantitative easing), the flow of funds that were keeping the shares of Big Tech companies in the stratosphere also stopped. Thus, Big Tech shares deflated. As these companies (Google, Amazon, Meta, Twitter, Netflix, Airbnb, Uber, etc.) based their funding on loans taken out by putting up their overvalued stock prices as collateral (e.g., that’s how Elon Musk bought Twitter), Big Tech suddenly ran out of cash. That’s why they started pulling their deposits from banks like SVB.
    In short, at the same time as SVB’s capital base was being reduced, depositors were asking for their deposits back. As soon as the news got out that SVB was late in returning depositors’ funds, a classic bank run began.”

    His solution falls short in the end.

    “…austerity for the banks, with nationalisation of those who cannot survive. And socialism for workers – a basic income for all, a return to collective bargaining and, further out, new forms of participatory ownership of high- and low-tech companies.”

    #241600
    ALB
    Keymaster

    Here’s a better solution:

    #241607
    Anonymous
    Inactive

    Now the new theory is woke capitalism to blame the bank defaults, another conspiracy theory created by the US ultra right winger

    https://en.wikipedia.org/wiki/Woke_capitalism

    https://www.nytimes.com/2022/12/02/opinion/mccarthy-desantis-capitalism.html

    #241608
    ALB
    Keymaster

    Pity that New York Times is not on open access. The title suggesting DeSantis should read Karl Marx is intriguing. What does the article say?

    #241609
    ALB
    Keymaster

    Managed to access that article by another route and what it says about Marx is not bad:

    “Throughout his work, Marx emphasized the revolutionary character of capitalism in its relation to existing social arrangements. It annihilates the “old social organization” that fetters and keeps down “the new forces and new passions” that spring up in the “bosom of society.” It decomposes the old society from “top to bottom.” It “drives beyond national barriers and prejudices” as well as “all traditional, confined, complacent, encrusted satisfactions of present needs, and reproduction of old ways of life.”
    Or, as Marx observed in one of his most famous passages, the “bourgeois epoch” is distinguished by the “uninterrupted disturbance of all social conditions.” Under capitalism, “All that is solid melts into air, all that is holy is profaned, and man is at least compelled to face with sober senses his real conditions of life, and his relations with his kind.”
    In context, Marx is writing about precapitalist social and economic arrangements, like feudalism. But I think you can understand this dynamic as a general tendency under capitalism as well. The interests and demands of capital are sometimes in sync with traditional hierarchies. There are even two competing impulses within the larger system: a drive to dissolve and erode the barriers between wage earners until they form a single, undifferentiated mass and a drive to preserve and reinforce those same barriers to divide workers and stymie the development of class consciousness on their part.” (my emphasis).

    This echoes any discussions about feminism, gay liberation, etc with some arguing that these are challenges to capitalism and so have a revolutionary potential. But it is clear that they are quite compatible with capitalism and even accord with its logic of only being interested in labour-power as such and not with the particular characteristics of its bearer, ie its drive “to dissolve and erode the barriers between wage earners until they form a single, undifferentiated mass.”

    ”Woke capitalism” is what you would expect. The likes of DeSantis are just backwoodsmen tilting at windmills.

    #241610
    Anonymous
    Inactive

    The concept of woke capitalism came from a New York Times columnist

    #241612
    Anonymous
    Inactive

    OPINION
    JAMELLE BOUIE
    Before He Takes On ‘Woke Capitalism,’ Ron DeSantis Should Read His Karl Marx

    Jamelle Bouie
    By Jamelle Bouie
    Opinion Columnist

    With their new majority, House Republicans are planning to take on “woke capitalism.”

    “Republicans and their longtime corporate allies are going through a messy breakup as companies’ equality and climate goals run headlong into a G.O.P. movement exploiting social and cultural issues to fire up conservatives,” Bloomberg reports. “Most directly in the G.O.P. cross hairs is the U.S. Chamber of Commerce, which is under pressure from the likely House Speaker Kevin McCarthy to replace its leadership after the nation’s biggest business lobby backed some Democratic candidates.”

    I wrote last year about this notion of “woke capitalism” and the degree to which I think this “conflict” is little more than a performance meant to sell an illusion of serious disagreement between owners of capital and the Republican Party. As I wrote then, “the entire Republican Party is united in support of an anti-labor politics that puts ordinary workers at the mercy of capital.” Republicans don’t have a problem with corporate speech or corporate prerogatives as a matter of principle; they have a problem with them as a matter of narrow partisan politics.

    That the governor of Florida, Ron DeSantis, railed this week against the “raw exercise of monopolistic power” by Apple, for example, has much more to do with the cultural politics of Twitter and its new owner, Elon Musk, than any real interest in the power of government to regulate markets and curb abuse. (In fact, DeSantis argued in his book, “Dreams From Our Founding Fathers,” that the Constitution was designed to “prevent the redistribution of wealth through the political process” and stop any popular effort to “undermine the rights of property.”)

    Nonetheless, there is something of substance behind this facade of conflict. It is true that the largest players in the corporate world, compelled to seek profit by the competitive pressures of the market, have mostly ceased catering to the particular tastes and preferences of the more conservative and reactionary parts of the American public. To borrow from and paraphrase the basketball legend Michael Jordan: Queer families buy shoes, too.
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    Continue reading the main story

    Republicans have discovered, to their apparent chagrin, that their total devotion to the interests of concentrated, corporate capital does not buy them support for a cultural agenda that sometimes cuts against those very same interests.

    Here it’s worth noting, as the sociologist Melinda Cooper has argued, that what we’re seeing in this cultural dispute is something of a conflict between two different segments of capital. What’s at stake in the “growing militancy” of the right wing of the Republican Party, Cooper writes, “is less an alliance of the small against the big than it is an insurrection of one form of capitalism against another: the private, unincorporated, and family-based versus the corporate, publicly traded, and shareholder-owned.” It is the patriarchal and dynastic capitalism of Donald Trump against the more impersonal and managerial capitalism of, for example, Mitt Romney.

    To the extent that cultural reactionaries within the Republican Party have been caught unaware by the friction between their interests and those of the more powerful part of the capitalist class, they would do well to take a lesson from one of the boogeymen of conservative rhetoric and ideology: Karl Marx.

    Throughout his work, Marx emphasized the revolutionary character of capitalism in its relation to existing social arrangements. It annihilates the “old social organization” that fetters and keeps down “the new forces and new passions” that spring up in the “bosom of society.” It decomposes the old society from “top to bottom.” It “drives beyond national barriers and prejudices” as well as “all traditional, confined, complacent, encrusted satisfactions of present needs, and reproduction of old ways of life.”

    Or, as Marx observed in one of his most famous passages, the “bourgeois epoch” is distinguished by the “uninterrupted disturbance of all social conditions.” Under capitalism, “All that is solid melts into air, all that is holy is profaned, and man is at least compelled to face with sober senses his real conditions of life, and his relations with his kind.”

    #241613
    Anonymous
    Inactive

    For most USA politicians Marx and Engels are two baseball players, they have never read anything about them. Ex president Joaquin Balaguer who was a reactionary anti communist read Marx, Engels and Lenin and in some of his speeches he mentioned Lenin State and the revolution, despite the fact that his favorites personalities were Machiaveli, and Fouche. Hugo Chavez who was a military men read Marx, Lenin and Trotsky, and he asked the workers to read them

    #241616
    Anonymous
    Inactive

    GOP blames Silicon Valley Bank’s collapse on ‘ESG’ policies. Here’s what to know.
    The investing world is being drawn into the culture wars and hit by a conservative backlash to “wokeism.”

    By Julian Mark

    A wind farm in McCook, Tex. Republicans have come out against banks that consider a company’s environmental and social decisions before investing. (Delcia Lopez/McAllen Monitor/AP)

    The recent implosion of Silicon Valley Bank escalated culture war arguments, as some conservative politicians who were already targeting certain investing approaches blamed the bank’s downfall on “woke” practices.
    House Oversight Committee Chairman James Comer (R-Ky.) called SVB “one of the most woke banks” because of its “ESG-type” policies — a reference to environmental, social and corporate governance-driven investing that has been embraced by billion-dollar asset managers and scorned by conservatives of late.
    Florida Gov. Ron DeSantis, widely believed to be gearing up for a 2024 GOP presidential bid, said Sunday that Silicon Valley Bank’s diversity, equity and inclusion requirements “diverted from them focusing on their core mission.” And on Monday, Fox News host Tucker Carlson said diversity and inclusion standards are why “big banks are now increasingly incompetent.”

    The reactions from prominent GOP members come amid a conservative backlash to “wokeism,” a loosely defined concept that conservative critics use to describe policies related to climate action and diversity initiatives. ESG, in particular, has become a flash point in Republican-controlled state legislatures and in Congress. Earlier this month, Congress voted to overturn a Biden administration rule that lets retirement plan managers consider a company’s environmental and social decisions before investing in it. Biden has vowed to veto the bill, which was backed by most Republicans and a few Democrats.
    As “woke capitalism” becomes a hot-button issue, here’s what to know about ESG investing.
    What is ESG?
    The acronym represents measurements that some investors use to assess a company’s environmental, social and corporate governance decisions.

    “E” stands for environment, or how well a company treats the environment and works to reduce its carbon footprint. Investors can evaluate that company using an array of factors, including, for example, how much a manufacturer pollutes water or reduces carbon emissions.
    “S” stands for social, or how well a company treats its labor force, communities and clients. Investors might consider a company’s workplace safety history and employee diversity, as well as whether its products are safe and made with ethically sourced materials.
    “G” stands for governance, or how well a company holds itself accountable. Investors may evaluate, for example, a company’s accounting practices and executive compensation decisions.
    While ESG has become a catchall term for a type of investing, experts say it really refers to the data that investors use when undertaking “sustainable” or “socially responsible investing.”

    Major investment advisers such as BlackRock, Vanguard and State Street have all, to some degree, embraced ESG investing.
    BlackRock, for example, has called climate change “a defining factor in companies’ long-term prospects” and voted against hundreds of prospective board members over their lackluster records on climate issues. JPMorgan Chase has stopped lending to new coal mines or coal-fired power plants.
    Larry Fink, BlackRock’s chief executive, has pushed back against claims that his company is pushing a liberal agenda.
    “We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients,” Fink wrote in January, in his annual open letter to CEOs.
    In 2021, global asset managers controlled $18.4 trillion in “ESG-related assets,” according to PwC, which projected that number to grow to nearly $34 trillion by 2026. In 2020, an estimated 85 percent of investors used ESG measurements in their investments, according to Gartner.
    What’s the point?
    Some investors use ESG purely to evaluate how certain environmental and social conditions might impact the bottom line.

    “We’re looking at ways in which climate, labor practices and human rights are going to affect the profits and losses,” said Witold Henisz, the vice dean of the University of Pennsylvania’s ESG initiative. “So the goal is just to do good investing.”
    Tensie Whelan, the director of New York University’s Stern Center for Sustainable Business, said ESG should be thought of as a system of measurement, from purely assessing an investment’s risk and opportunities, to trying to make an impact. Whelan argued the two can be correlated.
    “Companies that don’t embrace sustainability are going to end up like companies who didn’t embrace digitalization,” she said. “If you’re a coffee company or a property … insurance company and you’re not managing for climate change, you’re not going to be in business.”
    ESG critics contend that it is liberal policymaking disguised as business decisions. As they see it, companies have chosen — or are being pressured — to adopt liberal policies rather than serving their investors’ best interests. Rep. Garland “Andy” Barr (R-Ky.) called it a “cancer on our capital markets.”
    Who opposes ESG?
    Before taking a majority in the House in January, some congressional Republicans signaled they would aggressively scrutinize firms engaged in ESG investing.

    In February, the House voted 216-204 to overturn a Labor Department rule allowing money managers to use ESG criteria in pension investment decisions. The Senate passed the measure, 50-46, with Sens. Jon Tester (D-Mont.) and Joe Manchin III (D-W.Va.) crossing the aisle. Biden has vowed a veto, which would be the first of his administration.
    A group of 25 Republican state attorneys general have sued the Labor Department to block the rule. Republican officials in Florida, Texas and other states have sought to bar their state governments from doing business with banks that use ESG in investing.
    In some states, though, resistance to ESG is showing cracks. In Republican strongholds such as North Dakota, Indiana, Mississippi and Kentucky, legislators have voted down proposals to prevent state governments or pension funds from doing business with firms that have adopted ESG. In North Dakota, a pair of proposals were heavily defeated last month, although lawmakers there may take up watered-down versions.

    State-level efforts have been fueled by conservative dark-money groups.
    What is DEI?
    Diversity, equity and inclusion describes policies of employers that believe fostering a diverse and inclusive workforce will create long-term financial benefits. Like ESG investing, diversity and inclusion efforts have also been targeted by conservatives.
    In late February, for example, the New College of Florida voted to abolish its office that oversees the school’s DEI efforts. Six of the trustees had been appointed by DeSantis in January.
    Did Silicon Valley Bank have ESG and DEI programs?
    Yes. In August, SVB detailed its sustainable investing efforts, including an $11.2 billion community benefits plan that included small-business loans and a mortgage program for lower-income home buyers. It also detailed a $5 billion program to provide financing to support its clients’ sustainability businesses.

    Moreover, SVB detailed efforts to “build a workplace where all employees are connected, celebrated and supported,” including hiring practices that promote diversity.
    Did these programs cause SVB’s collapse?
    There’s no evidence that SVB’s sustainable investing or diversity initiatives contributed to its collapse.
    Experts have instead pointed to a perfect storm of SVB’s significant holdings in U.S. Treasurys and the Federal Reserve’s interest rate hikes. As the Fed raised interest rates, SVB’s bond holdings became less valuable, and the bank sold Treasurys and mortgage-backed securities at a $1.8 billion loss. The disclosure sparked panic, with depositors pulling $42 billion from the bank on Thursday.

    #241629
    Anonymous
    Inactive

    https://www.cfr.org/backgrounder/us-student-loan-debt-trends-economic-impact

    There is not money to bailout the students debts, but there is enough money to bail the banks and the rich peoples. It should light up the internal lights of millions of peoples who support and love capitalism, we should see that this system was created in order to benefit a small group of individuals. Several years ago the tuitions were practically free until banks and business took over the educational system, and some universities had medical coverage and books were sold at cost, and in some countries the universities had cafeterias and breakfast and lunch were practically free, and in some universities, the university senate was controlled by the students

    #241670
    robbo203
    Participant
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