Entries Tagged 'Government' ↓

Review of Robert Reich’s 2013 Documentary “Inequality for All” – part 4 of 4

“You load sixteen tons, what do you get
Another day older and deeper in debt” (Merle Travis’ song, 1946)

During the last part of his 2013 documentary film, “Inequality for All,” Robert Reich asserts that a big lie was spread in this century. This lie says there exists a form of ‘class warfare’ against the very wealthy.

Those who disagree with higher taxes on the rich say that’s an attack on the ‘1 percent’. Supposedly these attacks come from the ‘99%’ and spring from envy.

Reich replies that this is the opposite of the truth. The middle class are the real “job creators,” not the rich. (See how Reich comes to this conclusion).

Another big lie promulgated in this century is that government is “bad” and financial markets are “good”.

In reality, governments, Reich says, are needed to create the rules by which financial markets function. This is necessary in order to construct and maintain our free market system.

Then Reich steps outside the usual realm of modern economics and harkens back to an earlier era of this field when it was called “political economy”. Reich makes a fourth assertion about income inequality:

High income inequality correlates directly with political polarization

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Right now there’s a lot of talk about negative interest rate government bonds. Let’s understand what this means for the US and the rest of the world. Are negative interest rate bonds a sign of recession?

Negative interest rate bonds

Most nations and some regions in the world have a central bank. Some central banks are run by the government. Others are privately owned. These central banks try to influence their national economy for the better.

Some of these central banks have tried quantitative easing to stimulate national economic growth. QE means that governments have been paying to buy back their own bonds. This hasn’t worked out well.

Now governments are going the other way. They are selling a new kind of government bond–long term government bonds that pay a negative rate of return upon expiration.

In other words, negative interest bonds are bonds that a government expects to make a profit from at the end of the bond’s lifetime.

Does this sound incredible to you? It is. Who would bet on a horse they knew would lose? Continue reading →

If you haven’t read Robert Reich’s explanation in the July issue of The Nation of how Goldman Sachs engineered Greece’s downfall you really ought to take a look. And please note this isn’t the only country in the world in which Goldman Sachs has become a persona non grata.

Reich’s allegations regarding Greece

Goldman Sachs came to the rescue, arranging a secret loan of 2.8 billion euros for Greece, disguised as an off-the-books “cross-currency swap”—a complicated transaction in which Greece’s foreign-currency debt was converted into a domestic-currency obligation using a fictitious market exchange rate.

As a result, about 2 percent of Greece’s debt magically disappeared from its national accounts.

The consequences were severe:

By 2005, Greece owed almost double what it had put into the deal, pushing its off-the-books debt from 2.8 billion euros to 5.1 billion.

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