Category Archives: Economics

Weekly Spotted

Due to other personal obligations, I am finding way too little time to write on TES. However, I am collecting noteworthy stuff everyday by myself and referrals. I will begin to simply put some of the links in a weekly or fortnightly format.  The idea is to provide some dots to connect (or argue against) – and every now and then some own piece. Of course you’ll get all of this served with occasional sarcasm:

FED basically confirms that it was front-run until June 2013

On 13th of May the Businessweek referred to an academic study that strongly suggests (’empirically robust’) that information about what next decision the FED would take, have been consistently leaked at least from 1997 to 2013.  Soon thereafter Businessweek updated their article adding the FED statement. It says that the FED took measures last October (2013) to avoid this in the future. Of course, using the following contemporanous approach, nobody could expect that to happen. How could cow-bell-ringing possibly not be appropriate anymore in 2013 to make sure nobody leaks it before?

In response, Federal Reserve spokesman Joe Pavel said that the Fed “enhanced its media release security procedures” last October “to better protect the information against premature release.” The Fed used to ring a cowbell to announce when news media could send out reports over open lines. Now it seals reporters off from the outside world during the “lockup” and flips a switch to open the communications circuit when the news embargo is lifted.

Inflation starts with the Economists sentiments towards it

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Labor Day Food for Thought: For who are we working for?

For a lot of people worldwide the labor day means a day off work. The perfect moment to reflect, for who we are actually working. Who is harvesting the value added of your work? Welcome to Neofeudalism.



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Heartbleed (OpenSSL Lücke) und die NSA

Was schon viele Kritiker (ChaosComputerClub, Jakob Applebaum, u.v.m.) ansprachen wurde nun wieder einmal eindrücklich offenbart: Die Internet-Überwacher lassen absichtlich entdeckte Fehler in Programmen wie Windows, Mac, iOS u.v.m. offen. Dieses mal zeigt sich dies besonders gravierend bei der OpenSSL Sicherheitslücke mit dem Namen “Heartbleed” offen.

Anstatt, dass sie die Öffentlichkeit oder Entwickler bei Entdeckung informieren, nutzen sie die Lücken für sich – und Kriminelle gleichwohl. Dies schadet der Sicherheit, hat aber den netten Vorteil für die Überwacher, erst ihre Existenzberechtigung zu schaffen – oder zumindest zu bestärken. Man kann jetzt lang und breit darüber lamentieren ob dies “richtig” oder “falsch” ist. Immerhin könnten die Überwacher wie üblich behaupten, der Wissensvorsprung um Sicherheitslücken habe in der Summe mehr Sicherheit geschaffen durch verhinderte Terrorangriffe (Lacher unbeabsichtigt, 1). So liegt der Fall aber nunmal nicht. Stattdessen weiss die “NSA” ganz genau, dass es falsch ist sowas zu tun. Deswegen dementierte sie zuerst, von der OpenSSL Sicherheitslücke “Heartbleed” gewusst zu haben (weiterer, unbeabsichtiger Lacher), anstatt es zuzugeben. Das Kleinkind wurde also wieder beim Lügen erwischt. Zusammengefasst durch

Wie der Branchendienst Bloomberg unter Berufung auf zwei mit der Materie vertrauten Personen berichtet, wusste die NSA seit mindestens zwei Jahren über die jetzt als Heartbleed bezeichnete Lücke in der Kommunikation zwischen Servern Bescheid. Eine E-Mail aus dem Büro des Direktors der Geheimdienste leugnet eine Kenntnis vor 2014 jedoch. Die Kenntnis dieser Lücke ermöglichte der Agentur die Beschaffung von Passwörtern und anderen sensiblen Daten, die sie braucht, um ihre Lauschaktionen durchzuführen und Netzwerke zu unterwandern. Die Praxis, solche Lücken geheim zu halten und auszunutzen anstatt sie abzustellen, ist übliche Vorgehensweise, wenn auch sehr kontrovers diskutiert. Die jeweilige Sicherheitslage entscheide über die Vorgehensweise, die beim Direktor der Agentur festgelegt wird.


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The “Demonetization of Gold” Agenda

The abolishment of the Dollar-Gold-Standard in 1973 is usually forgotten. Surprisingly even in economics it is not teached or discussed even though it provides a great example to economists about monetary policy, an economists role, and how important to the comma exact regressions are in reality (hint: less than you think). However, with the little which is provided now in historical archives of this incident we can already see the bottom line:

1. The US had a clear Agenda of demonetizing the gold. The goal in the longer run which they achieved was to get the Gold out of the monetary system. The reason is clear: Gold would have restricted the US empire to put the cost of its wars and expansion on the shoulders of others (especially the Europeans).

2. Central banks are not independent. All the above decisions were made in the oval office, i.e. the state not the FED. FED officials are supposed to serve a function. They are under constant political pressure and have to make compromises. Some crucial monetary variables are even fully out of their control like the decision of a gold standard or not or government debt management. In that case it doesn’t even matter how benevolent the FED is.

3. Reserve currency status is untouchable. Any theat to the reserve currency status and the enormous importance of the US banking (clearing) system is monitored with high attention. Foreign policy is used to maintain the status. A reserve currency allows the homeland to keep the peripheral dependent and always ‘linked’ to the center. Once you are dependent on dollars, you are at their will. In capitalism power expresses itself in and is reinforced by the monetary system as the appearence of money produces intended human behavior. Hint: In the current Ukrainian-Russian-USA conflict we see Putin exactly playing with the reserve currency status of the dollar as he knows how much it matters to the US while Western is not getting the full range of this.

My conclusion of this is as short as sad: Points 1-3 are all relevant to understand monetary economics. These facts have to be taken into account if economists want to really add value to public discussion (and if there are any, who feel that craving to actually understand the monetary phenomenon). Questions suddenly appear: Which is the White House’s agenda on the dollars position in the world today? To what extent does such an agenda influence todays monetary policy both at the FED and the White House? What are their instruments (IMF, DOJ, etc.)

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Rajan & Zingales about populism & (central) banking

Mark Roe quoted in Rajan & Zingales (2003). Presented without comment:

“The U.S. financial system on the eve of World War I was primarily a much fragmented banking system. As Roe (1994) argues, this fragmentation has historically been the result of a populist fear of large financial institutions. In part, this fear was motivated by political rivalry between states and the fear that, if unchecked, New York would control the rest of the country through its strong banks” (p. 3).

Rajan, R. G. & Zingales, L., (2003). Banks and Markets. The Changing Character of European Finance. Cambridge, Mass (NBER working paper series).

Roe, M. J., (1994). Strong Managers, Weak Owners: The Political Roots of American Corporate
Finance. Princeton University Press, Princeton.

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