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Response to Ann Pettifor’s ‘Recession is not over’ blog June 12, 2009

Posted by thedukeofurl in Economics.
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[Do read Ann’s new blog –   http://debtonation.org/2009/06/no-the-recession-is-not-over/. She is right; green shoots in the financial sector, if there even are any, do not mean a lot.]

I couldn’t agree with Ann Pettifor more. The entire thing is disgusting. Although some of the regular and financial economists, like Nassim Taleb and Vince Cable, spoke up, they were studiously ignored. And the rest never seemed to notice. Like her, I don’t think there is any reason at all for trusting the bankers. The data compiled by Eichengreen and O’Rourke show that this depression and the one in 1929 are not too dissimilar (http://www.voxeu.org/index.php?q=node/3421).

Nothing has been done about job creation, mortgage foreclosures, or business survival. Nor has anyone been indicted for the massive fraud that has gone on. The case of Deepak Moorjani provides good reasons for us to be enraged – cf. https://thedukeofurl.wordpress.com/2009/05/28/deepak-moorjani-deutsche-bank-the-nyt/. The claim that Brown is the only one to get the country through the recession is a joke.

In 1929 in the US, while the feds did nothing about mortgage foreclosures, many states individually initiated moratoria. I think there may be a good reason, from the point of view of the bankers and some politicians, that nothing be done; because they hope to recreate the bubble, thinking that this will end the recession and thereby render structural reform of the financial sector irrelevant. Even should some recovery take place, this will only postpone the inevitable reckoning that must occur. Besides, it is dangerous. Even now, some of the banks are back to their nefarious practices.

As she points out, such a “solution” is only applicable to the financial sector, and it is a short-term fix in any case. The real economy is being squeezed. As Moggridge argues for the Depression, structural reform and putting a substantial number of people to work, however artificially, is what is required. The notion that we “can’t afford it” is absurd, as anyone familiar with the arguments of Keynes, Minsky, Moggridge, and a few others should be able to see. What we can’t afford is to pretend that the debt can be paid down; it is too large – more money than the world possesses.

What will it take for there to be an uprising? My take on the rage at MP’s expenses is that it is partly displacement activity due to the bankers not being punished by the politicians who soon after the financial debacle were discovered lining their own pockets. People can’t get at the bankers, so they are getting at the politicians who haven’t gone after the bankers.

I see no reason to think that Brown either will, or even can, change. And Cameron has returned the Tories to Thatcherism, a disaster in every possible way – political, economic, psychological, social, cultural – in the making. As one flawed 20th century innovator once wrote, what is to be done?


Deepak Moorjani, Deutsche Bank, & the NYT May 28, 2009

Posted by thedukeofurl in Economics.
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On 10 May 2009, Zero Hedge published a story about an employee of Deutsche Bank Japan, Deepak Moorjani, who had been trying to get the bank to reform its risk practices and management. In a letter sent to the New York Times and published in their Dealbook section on 16 April 2009, Moorjani sets out his case against Deutsche Bank’s risk culture. Zero Hedge tired to link to the letter but found a 404 error instead – the Times had removed the piece, presumably on advice of legal counsel after being contacted by Deutsche Bank or its lawyers.  Moorjani was involved in litigation with a unit of Deutsche Bank at the time and, presumably, still is. Fortunately, you can find the letter in its entirety here: http://www.scribd.com/doc/14757881/Another-View-Deutsche-Banks-Culture-of-Risk. This document is a damning indictment of Deutsche Bank’s practices.

The removal of this entry by the New York Times is not quite the same action as that taken by the Daily Telegraph in regard to their Patterson report. In the case of the Telegraph, no legal case was being brought by any of the parties involved, although the Telegraph might have had concerns that one might suddenly materialize. It is unfortunate that Zero Hedge did not obtain any legal opinion concerning whether the Times may have had to remove the Dealbook entry for legal reasons.

Moorjani is a rather courageous individual and Deutsche Bank have acted like bullies, employing legal means to attempt to silence him. Fortunately, new Japanese labor law* protects Moorjani from arbitrary dismissal, which is what such dismissal would have amounted to in his case, although DB would no doubt differ with me on this.

* For a summary of Japanese labor protection, see http://www.scribd.com/doc/13453568/DLA-Piper-Legal-Background (provided by Moorjani at Scribd).

Update: There have been reports that Deutsche Bank has been engaged in “naked short selling”, a dubious activity at best, which the SEC has only recently, and reluctantly, decided to address – http://www.deepcapture.com/deutsche-bank-sold-massive-amounts-of-phantom-stock/.  DB have also been accused of fraud – http://www.dbankfraudinfocenter.com/information.php, and the list of bank fraud news sites is uncomfortably long.