by Gonzalo Lira

WEDNESDAY, FEBRUARY 1, 2012

This is the problem Ben Bernanke and the Federal Reserve currently have—and it’s their own stupid fault: They have promised to maintain interest rates at effectively 0% until at least the end of 2014—they have in fact announced this zero interest-rate policy (ZIRP) as the hallmark of their strategy to reignite the economy—

—but then they’re surprised when businesses aren’t borrowing more. They’re surprised when lending is in fact contracting. They’re surprised when the American economy doesn’t start borrowing—and thus growing—like crazy. 

So the American economy obviously doesn’t benefit from ZIRP. In fact, it stagnates because of ZIRP. 

Leaving aside the deplorable notion that debt-fueled consumption is “growth”, businesses are not going to borrow to expand during the announced period of ZIRP, because business owners will say, “I’m really not sure if my market is growing—and since I can get a low-interest loan for at least the next three years, I think I’m going to hold off on any expansion of my business, hold off on hiring new workers, and instead wait and see if the economy really does pick up. If it doesn’t pick up, I won’t have more debt to service. And if it does pick up, I can always borrow and expand later.”

“I can always borrow and expand later”: That’s what every sensible business owner is saying today. Why eat free chocolate now—when I can eat it for free later? Why borrow for free now—when I can borrow for free later? 

And of course, later becomes never. 

[…]

So then, if businesses—and the wider economy—do not benefit from ZIRP, who does?

Why, the banks and the Federal government! (Yeah, I know:How am I not surprised … ?) 

See, the banks get their 0% loan from the Federal Reserve—and promptly go out and buy U.S. Treasury bonds, yielding 2% or so. Sure, a 2% yield is nothing—but it’s a whole lot of something when it is risk-free, and adds massively to the banks’ bottom line. And ultimately to the banksters’ bonuses. After all, the Federal government isn’t borrowing twenty bucks for gas: It’s borrowing $1.6 trillion a year—every year. 

Thus the Federal government, that glutton for debt, also benefits from ZIRP. 

Worse still, ZIRP is a disincentive to reduce the deficit and the overall debt. Since Bernanke and the Federal Reserve are putting out 0% money over the next three years, the Federal government will be under zero-pressure to reduce the deficit and pay down the debt. In fact, ZIRP encourages fiscal irresponsibility. After all, it is the rising coupon payment which eventually leads to rising debt levels being choked off. 

ZIRP doesn’t eliminate the Minsky Moment—that is, the Day of Debt Reckoning. Rather, ZIRP merely postpones it—while making it a whole lot bigger. 

Thus the Federal Reserve’s zero interest-rate policy does not help businesses expand and thus hire more workers to restart the economy; it does not encourage banks to lend to economically productive sectors; and it does not get the Federal government to begin reducing the deficit, let alone the debt. 

In fact, ZIRP makes all these problems worse. 

Read more »

by Clay Shirky

posted on Wednesday, January 4th, 2012 

This may be the year where newspapers finally drop the idea of treating all news as a product, and all readers as customers.

[…]

There has never been a mass market for good journalism in this country. What there used to be was a mass market for print ads, coupled with a mass market for a physical bundle of entertainment, opinion, and information; these were tied to an institutional agreement to subsidize a modicum of real journalism. In that mass market, the opinions of the politically engaged readers didn’t matter much, outnumbered as they were by people checking their horoscopes. This suited advertisers fine; they have always preferred a centrist and distanced political outlook, the better not to alienate potential customers. When the politically engaged readers are also the only paying readers, however, their opinion will come to matter more, and in ways that will sometimes contradict the advertisers’ desires for anodyne coverage.

Read more »

by EYDER PERALTA  January 25, 2012  for npr

Yesterday afternoon Google announced it was making sweeping changes to its privacy policy beginning March 1. Users can’t opt out, so Google is beginning to send notice to its users via email and even on its homepage.

The big change is that Google will now track you across its services. In other words, Google will now, for example, be able to pair information it collects on its email service with information it collects on its search service to really target its advertising. In a blog post explaining the changes, Google says it will make the experience across its suite of products “more intuitive.”

But here’s how Danny Sullivan, a search expert, explains it for Marketing Land:

“It sounds like the Miranda warning so familiar to those who watch US cop shows: ‘Anything you can and do will be held against you in a court of law.’ On March 1, Google has a new privacy policy and terms of service that goes into effect. Anything you do on Google, under these new agreements, can and may be used to target you in a court of Google, so to speak.

In many ways, this is Google growing up into the new portal it has become. Rather than people signing up for individual products, Gmail, YouTube and so on, they’re now signing-up for Google — or at least a single set of terms (in most cases) for all the company’s products. It’s similar to how you sign-up for Facebook, rather than individual products within Facebook.”

Simplifying is good, said Sullivan. But then, he adds, you start thinking about what information Google can now use. In a Gmail account, Google can use your personal details, your contact list and your actual emails.

“We’re used to that being used to show us ads within Gmail,” he writes. “But does this now mean that information can be used to show us ads in regular web search? Or at YouTube? Or as we surf the web?”

In its story, The Washington Post answers yes to all those questions. They say this would mean that Google for example could surmise you are a basketball fan by all those YouTube videos you watch and then pair that with the Miami location you’ve set in Gmail. They would then serve ads for the Miami Heat.

“Google’s new privacy announcement is frustrating and a little frightening,” Common Sense Media chief executive James Steyer told the Post. “Even if the company believes that tracking users across all platforms improves their services, consumers should still have the option to opt out — especially the kids and teens who are avid users of YouTube, Gmail and Google Search.”

While Google is not providing a way for users to opt out of its new privacy policy, this tracking only happens when you are logged in.

Still Rep. Ed Markey (D-Mass.) told USA Today that the move opens questions about how much control users have over personal information. The paper adds:

“Critics worry the tech giants will open fresh opportunities for cybercrooks to prey on users of the sites.

“‘Both are racing to monetize our private information and in doing so creating collateral damage,’ says Alisdair Faulkner, chief product officer at security firm ThreatMetrix. ‘They are essentially indexing more and more private information and, in doing so, serving it up on a platter to cybercriminals.’”