We note that the FT have banned ("gagged", in actual fact) Joseph Belbruno until the end of August (!). So we will have to ask fellow participants to follow us for further comments at our own ongoing online commentary site on FT and stories from major world media sources on a new website that will start in days at www.eforum21.com

We note that Martin Wolf’s Column today analyses (impeccably - after all, if you are intelligent and fair and you are very knowledgeable on a subject, why should your analysis be mistaken?) the BIS Report that we signalled only yesterday at the Gavyn Davies Blog, so we will turn briefly to what Wolf does not say. Over a number of months now, Joseph Belbruno has been pursuing this line of analysis but basing it on a different theoretical framework, either in comments to Martin Wolf’s Columns or at the Gavyn Davies Blog or at the Economists' Forum - so you can follow him there or you can check his archive in a few days at the site linked above.

We note in this regard, Paul Krugman’s assessment of his own analytical-predictive record to date here - http://krugman.blogs.nytimes.com/2011/06/28/3-5-out-of-4/

Krugman gives himself a 3.5 out of 4 predictive score – failing only on the “downward rigidity of nominal wages”. We defy any reader here to look back over our record in the past year, therefore, and tell us whether our score is not a resounding 4 out of 4! The “downward rigidity of nominal wages” has been one of our cries de Coeur, so to speak!

Martin Wolf in his latest Column writes correctly:

“The BIS is right: normalisation of monetary and fiscal policy is needed. But it is impossible to eliminate structural fiscal deficits until either the private sector structural adjustment is complete or we see big shifts in the external balances. It is impossible, finally, for this external adjustment to occur without big changes in the surplus economies.”

The question is then: if what Wolf suggests is right, then why is it not "implemented"? What are the "obstacles" and "who" is posing them? In a nutshell, the obstacles are set by the fact that the world economy through the Great Moderation was operating on the basis that what was produced cheaply in China and other "emerging economies" (BRICs, for instance) could then be "exported" in large part to the United States where real and nominal wages could remain low (no inflation) and the capital accumulated could be re-invested through the Western financial institutions (in "core" centres like New York and London). The upshot was that much of this capital could simply no longer be invested "profitably" by producing real goods for consumption - because this would entail a rise in living standards of workers, which in turn would "emancipate" them politically and cause (you guessed it) inflation and political upheaval.

Not used to such largesse, Finanzkapital had to invest the capital earned on the blood and sweat of poor workers in China and other places by beginning a phenomenal wave of "speculation" on "real assets", from mortgages to commodities, because when there is such a "surplus" of capital it is better to "go for safety" and buy "real assets" instead that are essential to the reproduction of capitalist society. And this is precisely what happened, initiating a speculative wave that gathered tsunami strength until inevitably it hit the shores of Western capitalist financial institutions - resulting in the Great Financial Crisis. Once you understand this new "framework of analysis", the rest pretty much follows. But rather than bore you further here, we will ask you to follow us at the Gavyn Davies Blog and, again in a few days, at the website linked above. Cheers to all.