Notes From Underground: Indulge Me During Times of Quiet Markets

In yesterday’s Financial Times, one of the giants of the economics profession, Luigi Zingales, wrote an op-ed, “A Strong Free Press Is Our Best Defence Against Crony Capitalism.” Zingales takes the financial media to task for failing to be a watchdog against the corruption that exists in global capital markets.He poignantly states:”While nowadays almost all the world professes itself to be capitalist,not everybody experiences the same type of capitalism.In fact,the form of capitalism prevailing in most of the world is very distant from the ideal competitive and meritocratic system we economists theorise in our analyses and most of us aspire to. It is a corrupt form, in which incumbents and special-interest groups shape the rules of the game to their advantage, at the expense of everybody else: it is crony capitalism.”

This is a very powerful indictment of the financial media, especially the electronic, visual media that is dependent upon the immediacy of breaking news and thus NEEDS AND DEMANDS ACCESS TO THE POWERS THAT BE. The producers do not challenge the presumed powers for fear of not having access and maybe not be called on at the next FED press conference. The beauty pageant of financial media had its birth in the days of the self-proclaimed MAESTRO for the Greenspan put was beloved of a bullish Wall Street. The higher the market, the greater the advertising revenue so the paychecks of the media were dependent on the strength of the market and the ratings that it garnered. The market needs detailed, in-depth analysis so as to allow capital markets to operate in a more efficient manner.

This Thursday, the ECB will hold its press conference and the questions European journalists ask ECB President Draghi are much more incisive and less dependent on the need of access. Listen for yourselves and juxtapose it to Chair Yellen’s news conference last month. The questions asked to the likes of IMF Director Lagarde in one-on-one interviews are so soft as though they were vetted ahead of time. This need for ACCESS OVER SUBSTANCE maintains the foundation of crony capitalism over quality capital formation. In January 2016, the media will sprint to Davos, Switzerland for the mother-lode of ACCESS as global crony capitalists pay hundreds of thousands of dollars to cavort with the world’s policy-makers.

What type of information gets exchanged in many meetings that all closed to all but most-powerful (and this is with public officials also being involved)? The father of modern-day global free market capitalism, Adam Smith, warned of such aggregation of power elites: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Again, in a plea I make annually as a KAPITALIST: PEPPER SPRAY DAVOS.

Zingales sums up the argument for a vigilante press in a powerful closing paragraph: “Inquisitive, daring and influential media outlets willing to take a strong stand against economic power are essential in a competitive capitalist society. They are our defence against crony capitalism. When the media outlets in any country fail to challenge power, not are they only not part of the solution, they become part of the problem.”

***The biggest news story was the election in Canada where Justin Trudeau was elected prime minister as the Liberal Party won an absolute majority. From a global-macro perspective, the significance of Trudeau’s victory is that his key economic adviser was Larry Summers. The backbone of the Liberal economic platform was placing forward the need for fiscal stimulus to offset the economic drag from low energy prices since fossil fuels are Canada’s key export. The Canadians under defeated Prime Minister Stephen Harper have run a tight budget even through the global credit crisis, so they are actually well-positioned to increase fiscal stimulus. Larry Summers has been pushing for a global fiscal stimulus initiative so for him this is a victory and certainly provides for instituting his plans for increased public investment. It will be interesting to see if Justin Trudeau appoints Professor Summers as finance minister. (I don’t know if a foreigner can be a cabinet official or if a cabinet secretary must be a member of Parliament.)

The Canadian dollar held today even as a Conservative government was rejected. Will Canada begin to set the G-7 agenda on widespread public investment and increased fiscal stimulus? If so, monitor firms that have the potential to garner large contracts for massive infrastructure projects for there are few publicly held global firms that have the wherewithal to create massive infrastructure projects. Are the days of QE numbered as governments look to fiscal stimulus and its large multiplier effect? Paul Krugman had a blog post today about the need for fiscal stimulus in Japan. It seems that the St.Louis Fed paper about the ineffectiveness of QE has found an audience. Be attentive to a change in policy.

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15 Responses to “Notes From Underground: Indulge Me During Times of Quiet Markets”

  1. sobata416 Says:

    Hi Yra,

    My name is Shane Obata and I am a big fan of writings. I also enjoy watching you on the Santelli Exchange.

    For your interest, here is a short report about US wage inflation:

    If you like it then please forward it to Rick!


  2. jlb1973 Says:

    Read about Justin and the fiscal stimulus got Canada. Canadian dollar????

  3. fredhavell Says:

    This indictment is more important than most people realize. Thank you.

  4. yra Says:

    Shane –thanks very much for the kind words–will hope readers open this and read it.Also,i see that Larry Summers just posted a blog post following up what I wrote about the Canadian election and a victory for anti-austerity

  5. the american limey Says:

    Hi Yra
    I also am concerned about this closed door bollocks. I was musing with the chaps in Ceres about the merits of hiring the fine fellows in anonymous to dig around a bit in both the city ( Chicago for there is only one) and the federal agencies.

    I went to the same school as Mr Fawkes and am tending towards the digital version of his approach. As my fav movie character once paraphrased

    “People should not be afraid of their governments. Governments should be afraid of their people.”

    ESPECIALLY when if we take 10% of the population ask them to contribute $10 to a go fund anonymous reward initiative and pay for any credible data release that causes those that would subjugate us to head to the toilet…

  6. Chicken Says:

    QE is a meal ticket for crony capitalism. Hopefully fiscal stimulus can achieve something.

  7. Alex Says:

    Fat chance the 4th estate keeping a tabs on crony capitalism because crony capitalism owns most of the media.

    Watch “Orwell Was Right”, it’s a great documentary movie and is available on Youtube. Made about 10 years ago I believe but even more true today.

    PS. Pepper spray Davos! Yra, you’re too nice. That mob need more than pepper spray.

  8. Philippa Dunne Says:

    Hi–was just thinking about this myself the other day. Thanks for the work. P

  9. yra Says:

    Philippa–thanks so much coming from you as the Liscio report in the true spirit of John is anything but this

  10. Rob Syp Says:

    Is it safe to say someone like yourself Yra and others who speak their minds have been relegated to just the Santelli Exchange or on the overnight session compared to appearing at various times throughout the day on CNBC.

    Back in the day the Chicago contingent appeared much more frequently then they do now.

    Thank you Alex for posting the film… it’s truer today then when it was made.

  11. yra Says:

    Rob Syp—i am extremely biased but I agree with you–as Paul Simon sings –these are the days of miracles and wonder–the age of millionaires and billionaires—or as Teyva sang in Fiddler—when you are rich they think you really know

  12. Asherz Says:

    Alex-Did you watch “Orwell Was Right”? If you think Michael Moore and Bernie Sanders are the heroes of unbiased media, and the ogres are Rupert Murdoch, the NY Post and Fox News are the main culprits in controlling the news, and can’t see a decided agenda in the film makers presentation, than you are one of the unfortunate residents of Orwell’s Oceana and don’t even know it.
    However there is no question that journalism has evolved in the wrong direction and no longer serves the purpose of conveying news in a factual manner untainted by editorial slants. Democracy is therefore at risk.

  13. Rob Syp Says:

    Same can be said for short sellers like Bill Fleckenstein who they always gave the mic too but hardly see him anymore. He’s better off for it hanging out in the beautiful pacific northwest.

  14. Alex Says:


    Yes, I have watched the documentary and nope, I’m not that easily led. I also live in England not some fabled land.

    Of course there are agendas from both sides, it’s war out there, so the first casually is the truth (from both sides). Whatever the case, the media is a shadow of its former self and the conflicts of interest are a disgrace. Money/power has won whereas truth and accountability should be the rightful winners.

  15. Chicken Says:

    Latest misleading story to become exposed involves health care, apparently.

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