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Economy

Systemic Flash Crash Vulnerability: Financial Crisis Root Causes: Part IV

The SEC/CFTC report on the May 6th "Flash Crash" helps confirm that automated index trading technology was a contributing cause of the 2008 Financial Crisis and why recent financial reforms are not enough to address the ongoing destructive systemic vulnerability that automated index trading technology increasingly poses for financial markets going forward.

 

Googleopoly VI -- How Google Monopolizes Consumer Internet Media (41 page PowerPoint Presentation)

The link is here to: "Googleopoly VI -- How Google is Monopolizing Consumer Internet Media and Threatening a Price Deflationary Spiral and Major Job Losses in a Trillion Dollar Sector" -- It is a 41 page PowerPoint presentation with 18 pages of pictorial analysis.

Below is the Executive Summary: (The PDF link is here.)

 

Executive Summary

Googleopoly VI – Seeing the Big Picture: How Google is Monopolizing Consumer Internet Media

And Threatening a Price Deflationary Spiral & Major Job Losses in a $Trillion Sector

By Scott Cleland* President of Precursor LLC, September 13, 2010

Net Neutrality Would Kill Jobs -- see new American Consumer Institute study for the evidence

If Congress and the Administration truly are focused on lowering unemployment and creating jobs, one of the easiest things they can do is tell the FCC to not kill potentially tens of thousands of jobs by preemptively regulating broadband Internet access to address a non-existent problem.   

Kudos to the American Consumer Institute for an excellent study on the job-killing impact of a net neutrality industrial policy which would effectively chose competitive broadband companies as job losers and much smaller and less job-intensive netopolies as winners. (See summary of study here.)

It is amazing that with one hand, the FCC is working on a National Broadband Plan to allegedly help the nation advance economically, while its other hand is totally working at cross-purposes economically -- pushing proposed net neutrality regulations that would kill jobs.

We will learn in the coming weeks/months whether the FCC appreciates the real world around them, a fragile economy, persistent high unemployment and underemployment, and less investment, or whether they operate in a bubble imagining that their actions can only have positive effects on the economy and not negative ones.

We also will see if the FCC cares about the economy, jobs, and unemployment, or if they view themselves as independent of, and shielded from such real world concerns.  

 

 

 

Systemic Uneconomics: Financial Crisis Root Causes: Part III

To discern the real “root” causes of the financial crisis of 2008, one must probe beneath the surface and examine the health of the “root system” of our capital markets “forest.” The roots of the capital markets forest are sound economics; the natural market function of automatically equilibrating supply and demand and risk and reward, that is commonly appreciated as Adam’s Smith’s “invisible hand.” We generally assume that the natural market strength of the capital market forest’s root system ensures that all the trees are not in danger of being blown over in the crisis of a storm.

 

In the fall of 2008, we all were shocked to learn that the root system of our capital markets, that we had always assumed was healthy and strong, was actually frighteningly weak and brittle requiring the slapdash reinforcement of multi-trillion dollar emergency scaffolding of whatever material was close at hand, a TARP, bailout lifelines, capital sandbags, etc. -- to buttress the main market “trees” from toppling over, trees that the Government judged to big to be allowed to fall.

 

“Systemic Risk Laundering” -- Financial Crisis Root Causes -- Part II

How could American taxpayers get stuck with a multi-trillion dollar tab that they weren’t even aware that they were running up? How could that huge tab still be allowed to run up unchecked today? For the Financial Crisis Inquiry Commission, the sad answer is one of the biggest root causes of last fall’s devastating financial crisis and one of the biggest continuing systemic risks to the financial system and the economic recovery.  

 

A decade ago, in what may prove to be the most expensive bipartisan legislative mistake in U.S. history, a bipartisan policy became law that effectively ensured that no Federal regulator had oversight or enforcement jurisdiction over derivative financial instruments. The Commodity Futures Modernization Act of 2000 (CFMA) created “legal certainty for excluded derivative transactions.” That law allowed a shadow derivative overlay system to be built literally on top of the public financial system, with none of the inherent accountability of the underlying financial system.  In other words, a deliberate bipartisan U.S. government policy change a decade ago unwittingly created an unaccountable “black hole” market that sucked enormous value out of public markets, (Bear Stearns, Lehman, AIG, Fannie, Freddie, securitized sub-prime mortgages, etc.) while laundering the risk to the U.S. taxpayer.

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Q&A One Pager Debunking Net Neutrality Myths