What caused the 2008 Economic Collapse?

And without Keynesian intervention,
how can we rationally hope to avoid a second,
much worse collapse?

"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."
~ John Kenneth Galbraith

“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”
~ John Maynard Keynes

In this video clip Alan Greenspan pretty much admits that the cause of the financial system collapse in 2008 was his ignoring that Keynes truism. Quite a blind spot considering that the most wickedest of men were also his best friends!

"Political economy came into being as a natural result of the expansion of trade, and with its appearance elementary, unscientific huckstering was replaced by a developed system of licensed fraud, an entire science of enrichment."
~ Engels, Outlines of Political Economy (1844)

"A developed system of fraud" -- aka banksterism.

TAGS: Economics, Banksters, Alan Greenspan, Ayn Rand

What's Really Wrong With the Economy?

Adam Smith and the
Roots of Neo-Conservative Hypocrisy

You've doubtless seen recent headlines showing that unemployment in the US is above 10% officially, higher than it's been since 1983. But that's not the whole story.

New figures in Friday's jobs report from the Labor Department indicate that the broadest measure of unemployment—including those unemployed who have looked for work in the last four weeks, discouraged workers, and the "underemployed" (part-time workers looking for full-time work)—has hit its highest recorded rate. More than one in six, or 17.5 percent of workers, are unemployed or underemployed, and in some hard-hit states like California, Arizona, and Michigan, the figure can get as high as 20 percent. The current figure is almost a half-percent higher than the previously recorded high of 17.1 percent in December 1982, even though the official jobless rate remains lower than its peak in the 1980s.
(more details at The New York Times)

While all the Wall Street firms are flush with the money from the Bush bailout, Main street has yet to see full benefits from the Obama stimulus package. As always America's top-down priorities can be summed up as "comforting the comfortable." Station Agent's post today got me thinking about the whole 'too big to fail' meme, and this post is an expansion of my response there in comments.

Adam Smith is almost universally considered to be the father of economics. His book The Wealth of Nations was published in 1776, and that coincidence in date leads conservatives to regard it as though it was one of America's founding documents, like the Declaration of Independence. Much in Wealth can be used as an argument for unbridled and unregulated capitalism, but like the Bible (Old Testament, New Testament, or any religious writings for that matter) cherry picking of certain passages while ignoring others can lead to a conclusion far from the original intent.

It's no accident that people with mental illness are often referred to as 'unbalanced.' If your every thought and consideration pulls you in one direction it's just a matter of time before you're dragged over the edge. I haven't actually read Wealth of Nations, but I can tell you with a high degree of confidence that it has been cherry-picked mercilessly to present only one side of Smith's philosophy. Smith himself was seemingly quite aware that his own thoughts ran a considerable gamut.

On the road from the City of Skepticism,
I had to pass through the Valley of Ambiguity.
-- Adam Smith --

One can certainly cherry-pick through Smith's writings and assemble quotes backing every core conservative argument. He is presumed to have been against regulation and the welfare state, for instance. Quotes can easily be found to bear that out.

"Every man, as long as he does not violate the laws of justice,
is left perfectly free to pursue his own interest his own way,
and to bring both his industry and capital into competition
with those of any other man or order of men."

"Every man is, no doubt, by nature,
first and principally recommended to his own care;
and as he is fitter to take care of himself than of any other person,
it is fit and right that it should be so."

An argument mitigating the laissez faire effect of that first quote would focus on the underlined phrase. Smith lived and died well before the emergence of the modern multinational corporation. How would he have reacted to the idea of corporate lobbying, especially when the intent is so often to alter the laws so they no longer even resemble justice? What would he have thought of a government that was blatantly for sale to the highest bidder?

"A government that robs Peter to pay Paul
can always depend on the support of Paul."
-- George Bernard Shaw --

Just because you bribe or coerce the Legislature into making something legal that was once criminal doesn't make it right. And one other question; would Smith have seen the monopolistic practices of giants like Microsoft as constituting a form of market regulation of their own?

Those who might cite Smith in defense of the free market could in no way rely on him in the case of the crony capitalism that now dominates the global economy. He quite clearly abhorred monopolies, trusts, and price fixing.

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.

The whole justification for free-market capitalism can be summed up in a sentence; "it creates a free market environment where competition spurs excellence." That's fine in theory, but where the rubber hits the road you always see capitalists trying to merge into entities that are not just too big to fail, but too big to compete with. Whether they buy out anyone who challenges them, as for example Microsoft has always done, or collude with them and form a cartel, as you see in the oil and health insurance industries, the result is the same. No competition. No free market. Prices are fixed at artificially inflated values, and the public is screwed.

As the saying goes; "in theory, theory and practice are the same thing. In practice they are quite different." This is true in spades in the field of economics.

The sad truth about free market capitalism is that it inevitably leads to concentration of wealth in so few hands that the free market vanishes. You're left with crony capitalism. Which as I've already stated, is a kind of regulation unto itself. I'm absolutely certain that Smith would have considered the no-bid, cost-plus model that Cheney used to dole out cash to Halliburton and Blackwater as nothing less than criminal. I certainly do.

Happily my search for Adam Smith quotes led me to this brilliant post that contains the conclusion to the first book of Wealth of Nations. You should, indeed MUST read this post in its entirety.

It is my contention that much of today's discourse is seriously distorted by the near universal acceptance of some points which are, in fact, completely false. One of these is the idea that modern Conservative/Republican philosophy is strongly tied to the principals of free market capitalism as espoused by the like of Adam Smith.

The author then shows that Smith considered the investor class to be parasitic on the rest of the economy, and their interests contrary to general prosperity.

The plans and projects of the employers of stock regulate and direct all the most important operations of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension, of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin. The interest of this third order, therefore, has not the same connexion with the general interest of the society as that of the other two.
[...]
The proposal of any new law or regulation of commerce which comes from this order, ought always be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have upon many occasions, both deceived and oppressed it.

By taking the top-down investors-first approach to the economy Barack Obama's financial advisers (all members of the investor class and most alumni of the Goldman Sachs boardroom) ignore the lessons of history and all credible economic theory. Listening to those , "who have generally an interest to deceive and even to oppress the public, and who accordingly have upon many occasions, both deceived and oppressed it," would seem to constitute Obama's biggest mistake to date.

That mistake, to be blunt, has been to pick the wrong side in what is really a class struggle. Or, put another way, it's like investing in new draperies for a house whose foundation is crumbling. Even Republicans once recognized that prosperity is based in the working class. Anyone who looks at it honestly agrees to that, regardless of ideology. Even John McCain, caught in the absurd statement that the economy was strong while the banks were failing, tried to rescue himself by equating the American worker with the 'fundamentals.' For once he was right.

"Labor is prior to, and independent of, capital.
Capital is only the fruit of labor,
and could never have existed if Labor had not first existed.
Labor is superior to capital,
and deserves much the higher consideration."
-- Abraham Lincoln --

“Labour was the first price, the original purchase -
money that was paid for all things.
It was not by gold or by silver, but by labour,
that all wealth of the world was originally purchased. ”
-- Adam Smith --

"Capital is dead labor,
which, vampire-like, lives only by sucking living labor,
and lives the more, the more labor it sucks."
-- Karl Marx--

By this yardstick there is only one thing that could be more dangerous than the gloomy unemployment statistics at the head of this post. And that danger is that the blood-sucking investor class can continue to shop for fancy draperies (paid for by the taxpayer) while the nation's foundation crumbles beneath them. Conservative philosophy revealed itself to be unsustainable practically speaking with the banking crisis last year. Hopefully this post shows that it is and always has been a sham on the theoretical side as well.

~~~~~~~~~~~~~~~~~~~

UPDATES: There are a couple of pertinent links to add to this, which have just appeared on the web since I posted on Friday.

Ellen Brown has a new post up at Truthout: "Shifting the Burden from Main Street to Wall Street: Why We Need a Tobin Tax"

The BBC has released the results of a new poll: "Free market flawed, says survey"

Twenty years after the fall of the Berlin Wall, a new BBC poll has found widespread dissatisfaction with free-market capitalism.In the global poll for the BBC World Service, only 11% of those questioned across 27 countries said that it was working well. Most thought regulation and reform of the capitalist system were necessary. There were also sharp divisions around the world on whether the end of the Soviet Union was a good thing.

So, as some celebrate the fall of the Berlin Wall (which was after all a good thing) others regret the collapse of communism that brought it about.

TAGS: Economics, Adam Smith, Republican Hypocrisy
Cherry-picking the Facts to Support an Unsustainable Argument

No Real Public Option?

We still have a long way to go, but Congress looks like they have no problem handing the president a piece of trash and call it heal care reform.

If they do Mr. President, you have to throw that bill away.

You put a couple of big tin garbage cans out on the White House lawn. Take the garbage legislation Congress is about to give you, and drop it in there. Then tell the country that between now and November 2010, you'll be campaigning for members of and candidates for Congress that will pass a public option or single payer health care reform. Starting with Max Baucus, you show up in the districts and states of every Democrat and Republican that would not allow Americans the right of health insurance. We would rather wait two MORE years than allow the lobbyists to pass a "bi-partisan" piece of turd that does nothing but make this country even more unhealthy and even more economically unjust.

And if that doesn't work, roll out the trash can again and try to pass proper reform in 2012 and keep on pushing until it gets done right.

UPDATE: Ezra Klein has an opposing view.

UPDATE 2: Jane Hamsher says that Ohio's Sherrod Brown and the progressives in the Senate will not give up on the public option so easily.

TAGS: Health Care Reform, Public Option, Barack Obama, Election 2010

Canadian Study a Lesson for Teabaggers

"Three in Four Suffer From Cuts to Public Spending"

From CBC.ca:

Tax cuts could diminish the standard of living for the vast majority of Canadians who enjoy the public services that they fund, according to a study (pdf HERE) by the Canadian Centre for Policy Alternatives released on Wednesday.

The majority of Canadian households enjoy a higher quality of life because of the public services their taxes fund, the study argues.
[...]
"What passes for a tax cut debate in Canada is really only half the debate," said study co-author Hugh Mackenzie, an economist. ..."The suggestion we often hear, that taxes are a burden, hides the reality that our taxes fund public services that make Canada's standard of living among the very best," he said.

The study uses Statistics Canada data on government revenues and expenditures to compare public spending in categories including health care, education, social services, old-age security benefits and employment insurance. ...Using the statistics, the report finds that the average per capita benefit from public services in Canada in 2006 was about $16,952.
[...]
"The overall impact of tax cuts — and the cuts in public services that accompany them — has not been addressed in any substantive way," the study states. "Tax cuts are always made to sound like they're free money to middle income Canadians. They are anything but," Mackenzie said. "We're far better off with the public services our taxes fund than we are with tax cuts." Any reduction in income tax results in an equivalent constraint on public spending, the study says, and about three in four Canadians suffer from cuts to public spending.

Overall, the tax cuts implemented in Canada in the last 15 years have had the net effect of reducing the living standards of most Canadians, the reports says.

The study also finds that the number of public services used by Canadians appears to increase as household income and size increase. This is particularly true for households that have children who are accessing publicly funded elementary and secondary schools and seniors who are more likely to use the public health-care system. "Families with young children will tend to benefit relatively more from the health-care system, whereas families with older children will tend to benefit from the public education system to a greater extent than other types of families," the study states.

It's not hard to predict the kind of reaction that this report is going to get from the conservative movement in the US. Reports based on provable facts and confirm-able statistics are not to their liking anyway. They much prefer to rely on ideologically-based theory drawn out of thin air (or worse) - thin air that evidently gets compressed and heated, then spewed out of bloviators' blowholes at FOX "news" in support of this tea-bagging movement. Which, by the way, is an excellent example of astroturfing as defined by Wikipedia, "formal political, advertising, or public relations campaigns seeking to create the impression of being spontaneous "grassroots" behavior, hence the reference to the artificial grass, AstroTurf."

Nor should the motive behind this campaign escape anyone but the morans (sic, see photo) it is directed towards. (or should that be against?) The conservative movement has been pretty successful in the past at getting the poorly educated to vote against their own interests based on simplistic slogans. "Read my lips, just say no, drill baby drill" etcetera. My guess is that they're trying to bring back the glory days of monosyllabic right-tard propaganda -- in spite of being utterly discredited by the spectacular economic disaster wrought from their trickle-down 'free market' policies. My hope is that they're wrong, and that even the worst of the low-information voters will wake up once they've lost their jobs and their homes, and are living in cardboard boxes and depending on food stamps. But then, past experience has been that really poor people don't vote at all, and the GOP has made it nearly impossible for the homeless to even register to vote, so that hope might be a bit optimistic.

The Economist just hosted a debate on whether it's time that the rich be required to pay more in taxes. Just reading some of the closing remarks by Chris Edwards of the Cato institute, arguing against the motion, reveals the paucity of the conservative argument. Unable to attack the logic of his opponent, he mounts a personal, ad hominem attack. "[Parisian economist Thomas] Piketty's understanding of the nature of income is very European, " he whinges. Name calling is rightly regarded as the lowest rung on the scale of debating technique, (see triangular diagram near the bottom) and is characteristic of someone who can't base their argument on facts or logic. So I would say the pro-tax side won the argument.

(Parenthetically, it could, should and must be said that this debate is just one battle being fought in an ongoing and increasingly bitter war between the classes. Because this whole unfortunately named teabagging movement is nothing more than a propaganda effort to perpetuate the Reagan tax cuts. The rich would prefer that you pay for the jackboot that presses against your own neck. If you don't mind, there's a good boy.)

One of the comments at The Economist succinctly expresses why certain functions should not and can not be left to the marketplace.

Of course, the free market doesn't provide universal quality education: thus we must rely on governments to provide this service, and others like it that also serve the greater good but generate no profit. Isn't that the point of taxes in the first place?

You'll often hear Thom Hartmann make the same point in a slightly different way on his radio show. "Don't we already have socialist fire services, socialist police forces, socialist roadways, and a socialist armed forces?"

I would add an observation of my own to that argument. When governments contract out to private enterprise to provide necessary services, they almost invariably do so under a system that is more crony capitalism than healthy competitive free enterprise. Can you say 'cost-plus, no-bid?' It is far better for the public that the money be spent within a government department where it can be more carefully controlled, and where there is recourse for diversion, mis-spending and waste. The whole 'privatization is more efficient' argument falls apart under any close examination.

Certainly the argument against paying taxes for government corruption is a valid one, but just as certainly the remedy is to attack the corruption, not the taxation. Ironically the same type of people who want to spare their buddies the burden of paying their fair share tend to be the type who want to pay off those same buddies through graft. A kind of self-fulfilling prophecy which if you think of it is hardly surprising considering that they want the government to fail. Or at least they claim to; really what they want is a government under their control - maximizing and guaranteeing their profits, socializing their losses, and calling out the guard should the hoi-polloi ever get fed up with the arrangement. In a word, fascism.

Going back to the comment made in The Economist, I think the author chose the perfect example. There is no better investment that a government can make than providing the public with free quality education. A better-educated citizen will earn much more during his lifetime, eventually paying back all the taxes gone into his schooling with interest. Which a wise government will then re-invest on educating his kids.

Maybe it's high time that the wise taxpayer learned that simple lesson. It would certainly be preferred to being conned into participating in some phony protest against your own interests.

ADDENDUM: Just as one example of the COST of LOWER taxes, here's a study of what it cost Americans to NOT have universal health care. (From the National Coalition on Health Care.) Just one fact from this piece forms a conclusive argument. The US spends 17% of GDP on health care and 40% of people are either not covered or not sufficiently covered. Canada covers EVERYBODY for 9.7% of GDP.

TAGS: Tax Day, Public Policy
Conservative "Ideology", vs. Common Sense

A Wonderful Lie

Glenn Greenwald's post yesterday leaves very little left to be said about the bailout - quite brilliantly covering all the bases.

The virtues of public anger and the need for more:

The public rage we're finally seeing is long, long overdue, and appears to be the only force with both the ability and will to impose meaningful checks on continued kleptocratic pillaging and deep-seated corruption in virtually every branch of our establishment institutions. The worst possible thing that could happen now is for this collective rage to subside and for the public to return to its long-standing state of blissful ignorance over what the establishment is actually doing.
[...]
...the financial crisis is a fundamental indictment on the way the country functions and of its ruling class. What would be unhealthy is if there weren't substantial amounts of public rage in the face of these revelations.
[...]
(Quoting The Rolling Stone's Matt Taibbi:)
The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. . .Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?
[...]
(Quoting Atrios:)
The issue is that [Geithner] and friends never distinguished between bailing out the system and bailing out the players. There was a way to do that, and they didn't do it.
(Quoting Krugman:)
"The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system."

If you were to do nothing this weekend other than read this tour de force of a blog post and click a few links to Glenn's sources you would end up better informed about this issue than the vast majority. And a hell of a lot angrier.

Speaking on clicking on source links, if I have one criticism of Glenn it's that he truncated the Krugman quote robbing it of some of its impact. The original reads:

The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank.

Now that inevitable brings to mind the famous George Bailey speech from It's a Wonderful Life. Trying to prevent a run on an essentially sound bank, Bailey points out that the money isn't cash sitting in the bank's vault, it's invested in the homes and businesses of Bedford Falls.

A Community Chest

Try to translate that to the current system and you get,
"Well, shucks Joe, your life savings are tied up in Goldman Sachs' CDO's and Goldman Sachs is heavily into Merrill Lynch's Credit Default Swaps, and Merrill Lynch is putting it into Lehman hedge funds. Then Lehman leverages it back into Goldman and we all make a tidy profit."

No matter how homespun your cloth coat or how endearing your accent, you're going to come off more like the despicable Mr. Potter than the lovable George. Lending out money to build assets makes sense. Lending money to tear down structure is unremittingly wrong-headed.

The bottom line of this post is the source of all this righteous anger. As Glenn says, "When it comes to its primary challenge, the administration elected on a platform of "change" is, above all else, viciously devoted to preservation of the status quo." Greenwald's underlying point, that it is well past time for an angry population to re-exert some influence on their government echoes a Thomas Jefferson sentiment - one I have always heartily agreed with.

"When the people fear their government, there is tyranny;
When the government fears the people, there is liberty."

So, keep those pitchforks sharp and be ready to light those torches at a moments notice.

TAGS: Kleptocracy, Bailout, Anger AGAINST Management
AIG - The Pirates of Wall Street

My Financial Back Pages

The News Behind the Headlines

The big headlines these days are about the continuing effort to forestall another Great Depression, and this week's news on that front is of course the DJIA falling below 8,000, to a level that it hasn't seen since 1997. Analysts are predictably predicting that the market will soon recover sharply as investors take advantage of the record low prices. Investment analysts are of course under a certain obligation to interpret all news in as upbeat a manner as possible. This is because their predictions have a measurable effect on the market's performance, due to psychological factors - more investor confidence equals a better market. I'm not an analyst, so I see things a little differently. In fact, I tend to see high finance as being distinguishable from piracy only in the fact that the former avoids the necessity of a ship and crew. The question I want to ask is; "which investors are in position to take the greatest advantage?"

The really important economic stories often don't make the headlines, because they're subtle, and it takes some thought to see their significance. Here's one aspect of the current economic crisis that hardly anybody seems to want to talk about - I wonder why? From a diary by the Coffin Brothers at Kitco.com (a gold/metals stock tracker and currency trader):

" While western banks continue to undergo a period of deleveraging and retrenchment, Chinese firms are making use of the oldest form of leverage – available cash in a down market. That has come to the aid of Rio Tinto (RTP-L) which went into debt to purchase Alcan (Aluminum Company of Canada) in 2007. Chinalco (Aluminum Company of China) has agreed to take various minority stakes in aluminum, copper and iron producing Rio subsidiaries for US $12.3 billion, which is a reasonable sum for interests that earned $2.2 billion in 2008. Added to this are $7.2 billion of convertible bond purchases, which at significantly above market strike prices would bring Chinalco’s stake in Rio Tinto Group to 18%. "

It's no coincidence that the Chinese ideogram for crisis = danger + opportunity. Having used their cheap workforce to accumulate cash while the US and other countries have accumulated debt, the Chinese are now very smartly using the cash to take advantage of the crisis caused by the debt. One could call this economic warfare with little fear of contradiction except for one thing. US corporations like WalMart have been the prime movers of the trade arrangements that have undermined the US economy, and US consumers have happily maxed out their credit cards for the unbelievably cheap tube socks and wide screen TVs that have been dangled as bait. Once feared as a communist threat to the US, the Chinese now appear to be a much greater threat as capitalists.

The background for this depressing news cycle has been the CPAC conference featuring the bloated bloviations of the newly anointed Republican heir apparent Rush Limbaugh. One could hardly imagine that the conservative movement could retreat even further from reality than they already were, but they seem to have done so yet again. While choosing to blithely ignore the massive transfer of wealth upward that has been going on at an accelerated rate for nearly three decades, they express a shocked outrage at the slightest attempt to transfer the least bit of it back to the middle class. Because stealing from the middle class to give to the rich is The American Way™, don'tcha know, but turn it around and it becomes Class Warfare. If they are to be believed, Socialism, The Red Menace has come to America's shores personified as President Barack Obama.

What should be tragically obvious by now (but again, what nobody's even daring to talk about) is that mechanisms that transferred wealth from the American middle class to the ultra-rich didn't bother to ensure that they were transferred to America's ultra-rich. The most benefit went to Middle East oil sheiks and, of course, the Chinese. The scope of this economic treason is almost unimaginable, only measurable by the TRILLIONS of dollars being spent to try to deal with its consequences.

No matter how well-intentioned Barack Obama might be, he'll never be able to transfer that wealth back where it belongs. It's gone forever. His only option is to borrow even more foreign money to try to solve a problem that was created by the US government (and its people) borrowing too much foreign money. And to my mind borrowing money to try and solve a problem that was created to begin with by borrowing too much money has a very low probability of success.

"We can't solve problems by using the same kind of thinking
we used when we created them."
-- Albert Einstein --

A couple of years ago one of my first ever blog posts sought to compare the modern system of corporate feudalism with its eighteenth century counterpart - the system that patriots' blood was shed to overthrow in the American Revolution.

One distinction differentiates the modern corporate baron from the Peers of Olde England in the 18th century. The peers' capital was tied up in land, and could not conveniently be transferred to another country, whether that be a bank in the Caymans or a factory on the low-wage island of Saipan. This forced a noblesse oblige on the ruling class that is not in effect in this brave new world.

Project for the OLD American century posted this link today;

Cheneys Betting on Bad News
(The linked article deals with the fact that the Cheneys' investment portfolio includes instruments that pay off if the US dollar loses value - which, guess what, it DID some time after I wrote my post. As Condi would say, "who could have predicted that?")

The 'nobility' of old could not act as Cheney and his cohorts have, against the interests of their own country, for to do so would have been to act against their own interests. It has taken over two centuries, but the American system has finally achieved the worst of all possible worlds.

In the system we have seen emerge in America going back all the way to the Robber Barons there is no noblesse, no oblige, just a sense of entitlement without accountability that the Marquis de Sade himself would have envied. The conservative movement, in America and around the world, is no better than a gang of criminals. Should they continue to evade justice the system itself must be assumed to be complicit and in league. The only solution then is not political, but revolutionary. And I should warn you, the power structure that must be overthrown isn't confined to any one nation or even continent. This is a global problem that will require a global revolution.

The rhetorical question I asked in the first paragraph has some unexpected and unsettling implications. If you listen to Sparky and his gang, a large injection of foreign capital into the stock market will be a good thing. The market will go up, and the investment class (that diminishing segment of the population not struggling just to make their payments) will earn a profit. Confidence will rise. But the long term consequences are profound. As a greater proportion of American business is foreign owned, it becomes that much harder to pay back the enormous debt, and even if you do get to pay back some, it only gives China and other foreign interests more money to buy up more American business. The US now owes its soul to the company store, and that company's head office is in Beijing.

Under the current system this is a no-win scenario. Only by changing the system can there be any hope for a solution.

And for no better reason than that my title gives me an opening, I hereby present one of my favorite Bob Dylan songs - quite clear, no doubt, somehow.

MY BACK PAGES

UPDATE: Ellen Brown just came out with an article proposing what steps might be taken to get out of the fatal death spiral of debt. Not being a professional economist, Ms. Brown is in the habit of a) thinking out of the box and b) dealing with models that have a more practical than theoretical basis. It should come as no surprise considering what I've written above that her potential solution is NOT about saving the old system (and the privileged parasites who cling to it) but creating a whole new system where the central banks are owned and controlled by the government.


TAGS: Economic Crisis, CorporateFeudalism, Financial Piracy, National Debt

That Mysterious Fleet of Buses

Is the Government Still Gearing up for a Police State?

Here's an interesting story from Ellen Hodgson Brown, writing at Global Research.ca

On a recent visit to Tucson, Arizona, where I was invited to give a presentation on monetary reform, I was disturbed by a story of strange goings on in the desert. A little over a year ago, it seems, a new industrial facility sprang up on the edge of town. It was in a remote industrial zone and appeared to be a bus depot. The new enterprise was surrounded by an imposing security fence and bore no outward signs identifying its services. However, it soon became apparent that the compound was in the business of outfitting a fleet of prison buses. Thirty or so secondhand city buses were being reconfigured with prison bars in the windows and a coat of fresh paint bearing the “Wackenhut G4S” logo on the side.

The new Wackenhut operation is shrouded in mystery. It has been running its fleet of empty prison buses night and day, apparently logging miles on a Department of Homeland Security (DHS) contract. Multiple buses can be seen driving all over town and even on remote desert back roads. Oddly, except for the driver and one escort guard seated in front, these buses are always empty.

Wackenhut Services was founded by George Wackenhut in 1954 to provide prison guard services to state and federal governments. Wackenhut Services is now owned by the Danish corporation G4S.

Observers originally thought that the purpose of the new Wackenhut operation was to outfit prison buses to be distributed in other parts of the country. But it soon became apparent that none of the buses was leaving the Tucson depot. Recently, a passerby observed what appeared to be a training operation there. In what seemed to be strange activity for 10:30 PM on a Saturday night, the depot yard was fully illuminated, the entire fleet of buses was up and running, and drivers and guards were scrambling around the yard. The question is, what were they training for?

First off I should tell you that Ellen Brown does a fair bit of economics blogging, and has written a book Web of Debt on the "shocking truth about our money system" as it stands. Private interests like the Federal Reserve control the issuance of US currency, and don't think they are doing it out of the goodness of their heart. But I'm just saying that to give you a bit of background on the source of the story. Ellen also has a Web of Debt Blog, which I recommend. She is not an economist, which ironically gives her an edge when discussing how the economy really works. I first blogged about her last October, in a post that discussed The Working Group on Financial Markets, also known as the Plunge Protection Team. Set up by the Reagan administration in 1988 the PPT was established to stabilize the financial markets, but like all things Republican it a) operates without any real oversight and b) has a great potential for corruption.

To segue back to the buses story, one could see this as just a continuation of the corruption and waste that has prevailed through the Bush administration. The DHS is after all still largely in the same hands as it was on Jan. 19. It will undoubtedly take the new President months if not years to weed out the Repugnicant operatives that have been embedded in DHS and other agencies of government; in fact many of them are in supposedly non-political civil service positions, protected by law, the proverbial headless nails.

Some time ago I pondered how taking over the government from Bush would be like taking the controls of the Hindenburg after it had burst into flames. I never considered that a mutinous crew would also be part of the disastrous equation. And you can rest assured that as long as it is in their power these same Republican hirees will be handing out as many no-bid contracts to as many cronies as they possibly can. And maybe these buses are just part of that.

In fact, one should fervently hope that it's as simple as that. As Ms. Brown explains:

Fraud and waste aside, this mysterious activity has sinister implications. Why the obvious secrecy? Since the World Trade Center disaster in 2001, the Department of Homeland Security has grown to monster proportions, claiming a projected $50 billion of the federal budget in 2009. DHS includes the Federal Emergency Management Agency (FEMA), which earned notoriety in 2005 for its gross mishandling of the Katrina disaster in New Orleans. Al Martin, a retired naval intelligence officer and former contributor to the Presidential Council of Economic Advisors, has linked the remilitarization of FEMA to the civil unrest anticipated along with economic collapse. He wrote in a November 2005 newsletter called “Behind the Scenes in the Beltway”:

“FEMA is being upgraded as a federal agency, and upon passage of PATRIOT Act III, which contains the amendment to overturn posse comitatus, FEMA will be re-militarized, which will give the agency military police powers. . . . Why is all of this being done? Why is the regime moving to a militarized police state and to a dictatorship? It is because of what Comptroller General David Walker said, that after 2009, the ability of the United States to continue to service its debt becomes questionable. Although the average citizen may not understand what that means, when the United States can no longer service its debt it collapses as an economic entity. We would be an economically collapsed state. The only way government can function and can maintain control in an economically collapsed state is through a military dictatorship.”

All of this is quite ominous. It is also a good argument for considering radical funding alternatives. There are other ways to deal with the federal debt besides relying on the waning appetites of the Chinese and the Japanese for U.S. securities. Some innovative alternatives for funding both the federal debt and President Obama’s new economic stimulus package will be the subject of followup articles. Stay tuned.

So, the obvious pertinent questions to ask here are,

1) Can Barack Obama pull off a miracle and forestall economic collapse in spite of eight years of Republican policy?

2) If he can't, would he contemplate becoming America's Stalin, ruling with an iron fist to maintain some civil control?

The latter question is undoubtedly an imponderable. We may get some indications of the former in the upcoming week, when several important economic indicators will be released. To put it simply, the country is about to get the official report card on how the economy did in the last 3 months of 2008.

From CNN Money: Earnings, economy - here comes 'terrible'

From MarketWatch: Economy in free fall in fourth quarter

If there's one thing that seems to be more obvious every day, it's that the infamous Bush 'bailout' and its continuance into the Obama presidency seems geared not to actual economic recovery but to further insulation of the plutocracy from accountability. Nothing would suit the corporate feudalists more than to see the Cheney wet dream of a police state implemented by their political rivals. And I for one wouldn't put such a Machiavellian plan past them. Barack Obama would be well advised to remember the Bay of Pigs fiasco handed to Democratic President John F. Kennedy by a largely Republican intelligence community. Sometimes these guys play dirty.

TAGS: Republican Recession, Epic Fail, Bush+Legacy, Ellen Brown

‘Buy Nothing Day’ - Absurd, Empty, Symbolic Salve

Surely you've heard of Buy Nothing Day, the consumption protest conceived of by Adbusters, a glossy waste of paper dedicated to making you spend $8.00 an issue to feel really guilty. But like so many American-made protests, 'Buy Nothing Day' is just a symbolic substitute for real attitude change about consumption.

Instead, how about all agree that we consume too much, buy too much, waste too much, and dedicate ourselves to a Buy Smart Year. In a buy smart year we might decide, for example, to put off the purchase of a new MacBook till the second generation comes out—not only saving a chunk-o-change, but extending the life of a existing product and allowing us to avoid the notoriously buggy first generation of Apple-anything.

In a buy smart year, we'll decide to save up a bunch of necessary purchases and buy them all on Black Friday. Why would we do that? Well for one thing, Black Friday is when you get the mad discounts. So get out there and save yourself a bit of cash while at the same time saving gas by doing all your shopping on one trip.

In a buy smart year, we'll buy just one box of Ziploc freezer bags and make it last the whole year. We'll turn 'pizza night' into 'make something from whatever is in the fridge night'. We'll stop worrying so much about gas mileage and buy a used car instead of a new car. We'll commit to walking to every destination that is within a mile of our homes.

Finally...in buying smart for a whole year, we'll permanently change our habits and attitudes about consumption and make an empty gesture like 'Buy Nothing Day' irrelevant.

TAGS: Buy Nothing Day, Black Friday

Conservative Fiscal Policy as Grand Larceny

Alan Greenspan, The Alpha Dog of Crony Capitalism

The economy is undeniably THE story these days, with everybody on the edge of their seats wondering if it's really going to 'crater' or will the global intervention that's going on save the day.

When Jon Stewart had Greenspan on The Daily Show (Sept. 18, 2007) he brought up a very interesting point, and I think he nailed Greenspan on his low-interest policies. What Stewart points out is that the existence of the Fed means that there isn't really a free market at all. And after letting Greenspan pontificate on the supposed fundamentals of monetary policy Stewart smoothly demonstrated who was the smartest person in the room.

And it wasn't Greenspan. Not by a long shot.

Alan Greenspan Bums Out Jon Stewart

(Those of you outside the United States can watch this on Canada's Comedy Network.)

Stewart: "So the Fed - or whoever's leading it - could in fact, if they wanted to, goof on all of us."
Greenspan: "They wouldn't want to"
[...]
(Greenspan pontificates at length on fiscal policy - why there is a need for a central bank. Stewart goes along playing dumb to a point. Then he pounces.)
[...]
Stewart: So we're not a free market then. There's an invisible 'benevolent' hand that touches us.
Greenspan: Absolutely, you're quite correct. To the extent that there is a central bank governing the amount of money in the system that is not a free market and most people call it regulation.
Stewart: And so we're really just deciding , , because when you lower the interest rate and drive money to the stocks that lowers the return people get on savings in effect.
Greenspan: Yes indeed.
Stewart: So they've made a choice 'we would like to favor those who invest in the stock market and not those who invest in a bank, that helps us.'
Greenspan: God, no. That's the way it comes out, but that's not the way they think about it.
Stewart: (laughs) Explain that to me, because it seems to me that we favor investment but we don't favor work. The vast majority of people work. They pay payroll taxes and they use banks. Then there's this whole other world of hedge funds and short betting - it seems like craps - and they keep saying, "no no no, don't worry about it, it's the free market, that's why we live in much bigger houses." But it really isn't, it's the Fed. Or some other thing, no?
Greenspan: I think you'd better re-read my book.
Stewart: Alright. But am I wrong in saying that we penalize work by making a choice?

That last question never really got answered, Greenspan going into a rant about psychology versus economic models, admitting that the latter were pretty much useless in the face of the former. To which Stewart replies, "You've just bummed the shit out of me." Which I guess is why they call economics the Dismal Science.

The important point here is that Jon Stewart went up against the presumed alpha dog of conservative economics and utterly defeated him, tearing down a central pillar of laissez faire theories. The markets are not free and fair; no way, no how. The 'invisible hand' is in fact under the control of certain interests, who make choices that enrich some segments of society at the expense of others. The Fed functions as an economic weapon of mass destruction in the Great War on The Middle Class. And frankly it undermines the real fundamentals of the economy in doing so.

This was all predicted a long time ago. I remember reading an article in The Economist back in Reagan's reign warning of the very mechanism Stewart points to. I remember it so well because they called Reaganomics by a term that was new to me - the Rentier Economy. Essentially it's the same thing - a system that rewards ownership above work. The Economist recognized that such a situation was a recipe for disaster, and undermined the strengths of a free market. Indeed they likened the system to a type of feudalism - whereby the wealthy landowners forced the peasants to work, then reaped the benefits of their toil come harvest time. Under such a system their was little incentive for the peasant to work very hard, because he knew the fruits of his labors would just be stolen from him. Nor was there much incentive for the Lords of the Manor to compete or introduce new efficiencies. They already lived on opulent estates in houses with more rooms than they could occupy, and had lots of money to spend on gambling and hookers. It's no wonder that free market economics replaced this system of corruption and greed. The problem is that the free market has devolved into a system of crony capitalism, which I and others have recognized as little better than a system of corporate feudalism.

Crony capitalism ignores a fundamental of economics that's been with us forever, perhaps best expressed by a president known for his honesty.

"Labor is prior to, and independent of, capital.
Capital is only the fruit of labor,
and could never have existed if Labor had not first existed.
Labor is superior to capital,
and deserves much the higher consideration."
-- Abraham Lincoln --

A healthy economy must MUST MUST be based on production somewhere along the line. Flipping real estate and trading paper 'instruments' just don't feed the bulldog. Ignoring that is what has led America into a spiral of debt, with the balance of trade increasing every year, and both the government and the general public living beyond their means in the blithe expectation that the bills will never come due. Worse than that is the fact that the base of paying jobs, particularly in manufacturing, has been eroded by outsourcing during the same time, undermining the ability of the economy to pay back the debt. This is an issue to which Mr. Greenspan seems to have turned a blind eye and a deaf ear, actually going on record as denying that this is harmful.

Bernie Sanders confronts him on the issue in this video. Watch this, Bernie rips him a couple of new ones. You want to start setting America on the right path? Hand Nancy Pelosi's gavel over to Bernie. (Not sure on the date of this exchange, sorry.)

The country clubs and the cocktail parties are not real America. The millionaires and the billionaires are the exception to the rule. You talk about an improving economy while we have lost 3 million private sector jobs in the last two years, long term unemployment has more than tripled, unemployment is higher than it has been since 1994, we have a $4 TRILLION national debt, 1.4 million Americans have lost their health insurance, millions of seniors can't afford prescription drugs, middle class families can't send their kids to college because they don't have the money to do that...CEOs make more than 500 times what their workers make, the middle class is shrinking, we have the greatest gap between the rich and the poor of any industrialized nation - and this is an economy that is improving? I'd hate to see what would happen if our economy was sinking.

...Today you reached a new low, I think, by suggesting that manufacturing in America doesn't matter. It doesn't matter where the product is produced. We lost 2 million manufacturing jobs in the last two years alone, 10% of our workforce. Walmart has replaced General Motors as the major employer in America, paying people starvation wages rather than living wages, and all of that doesn't matter to you?

This is by no means the only time that Greenspan has been confronted by people willing and able to shred his theories. Naomi Klein confronted him on the phone over his definition of corruption and crony capitalism on this segment of Democracy Now dated Sept 24, 2007. In this case she had no argument with his definition, just his refusal to admit that it applied in spades to the Bush administration. And NOBEL PRIZE WINNER Paul Krugman (Congratulations!) pinned a lot of blame for the current crisis on Greenspan and McCain economic adviser Phil Gramm in this interview with NBC's David Gregory. Do a search on Alan Greenspan at YouTube, I'm sure you'll find lots of similar material proving that Greenspan is more ideologue than theorist, and his ideology has driven the country off of a cliff.

CNN's Anderson Cooper has gotten a start on a new feature: 10 Most Wanted: Culprits of the Collapse, where he introduces America to the usually anonymous 'Captains of Industry' who have most contributed to the current economic crisis. So far positions 8, 9 and 10 are occupied by SEC Chairman Chris Cox, Lehman Brothers' Richard Fuld and AIG's Joe Cassano respectively. It will be interesting to see if Alan Greenspan ends up occupying one of the top spots, if not THE top spot. You could also expect to see Treasury Secretary Henry Paulson and the current chairman of the Federal Reserve, Ben Bernanke, along with John McCain's chief economic advisor (and likely Treasury Secretary should McCain defy the odds and get elected) Phil Gramm in top spots. If not, there is no justice. And these are the fools, damned fools and deluded popinjays that the Republican Party would put in charge of finding a solution.

Sad, but true.

~~~~~~~~~~
UPDATE: More insight into this story is to be had at Ice Station Tango.
Roll to the pole!
~~~~~~~~~~

---

AUTHOR'S ENDNOTE: The picture at the head of this post is of George W. Bush presenting Alan Greenspan with the Medal of Freedom. Which, if I was just trying to point out that Greenspan was a useless asswipe, would have sufficed by itself. A picture really is worth a thousand words. I could have saved myself a lot of research and composition. Alas, I didn't even go looking for the picture until I'd put in the hours of work, not least of which was creating the transcript segments from the Daily Show video and the one with Bernie Sanders. Oh well, c'est la vie.

TAGS: Economic Crisis, Alan+Greenspan, Fiscal Irresponsibility
Car, cliff...OH MY GOD!!!

McCain's Economic Guru

Have You Finished Greenspan's Book Yet Mr. McCain?

It's well-known by now that John McCain claims no strength on economic matters. When asked about the subject on January 17, 2007, The Senior Citizen Senator From Arizona infamously said "The issue of economics is not something I've understood as well as I should - but I've got Greenspan's book."

At the time he also promised that filling the void would be a priority when selecting a vice-presidential nominee. Which leads me to wonder which of the FIVE colleges Sarah Palin attended in her quest for a degree in journalism schooled her on the subject. Which leads me on further reflection to the realization that it's a moot point. A journalism major who can't even name a single newspaper that she reads may have absorbed even less from an economics minor, if indeed she ever took one.

Having broken his pledge to find a Vice Presidential running mate with the economics chops to fill the enormous void in his own knowledge, can we really expect that Mr. McGoo McCain has even read the book? He was after all quite willing not only to vote for, but to bang the drum in support of Prince Henry of Paulson's original 'rob from the middle class, give to the rich' so-called bailout scheme without bothering to read the THREE PAGE text of the proposal. So I don't exactly see him as a threat to clean out the shelves at the local library.

There is in fact considerable evidence that McCain has NOT read Greenspan's book - including the fact that Greenspan himself went on the record last month repudiating McCain's economic policies. Think Progress put out a post with video. Greenspan was most vehemently opposed to McCain's extension of the Bush tax cut, which would increase the deficit -already at $10 TRILLION - a guaranteed burden on you, your children, and your grandchildren. AKA The Bush Legacy.

After endorsing Bush’s massive tax cuts for the wealthy which turned Clinton-era record surpluses into record deficits, Greenspan has much to atone for. Telling the truth about McCain’s agenda is a good start.

As the Wonk Room has noted, McCain’s tax cuts would produce the highest federal deficit in 25 years. After inheriting Bush’s $407 billion deficit, yearly deficits under McCain would increase sharply, beginning with at least $505 billion in FY2009.

McCain has not specified how he would pay for his tax cuts, though he claims he will balance the budget in his first term. Recognizing that McCain’s math doesn’t add up, McCain’s top economic adviser Douglas Holtz-Eakin has said, “I would like the next president not to talk about deficit reduction.”

So the bad news about McCain is that he doesn't understand the economy, he has not addressed his weakness with a smart pick of running mate, and he hasn't bothered even to read a book on the subject. The much worse news is that even if he had read the book, it's the wrong damn book. It's Greenspan's policies, driven more by conservative ideology than common sense, that got the country into the mess it's in now. And as Albert Einstein wisely noted, "We can't solve problems by using the same kind of thinking we used when we created them."

This cartoon from Tom Tomorrow brilliantly illustrates how Greenspan's policies for decades have been nothing but a thinly disguised mechanism to transfer wealth to the already obscenely wealthy, unremittingly greedy and shamelessly irresponsible 'entrepreneurial class.' That isn't working out too well. Do we really want to continue on with this kind of thinking?

(Originally published Nov., 2007)

TAGS: John McCain, Economic Policy, Alan Greenspan, Disaster Capitalism

The Two Faces of John McCain

Seriously, You Think This Guy Could Be President?

McCain Making Dubya Look Like an Economic Genius

Could it be that when he says that the fundamentals of the economy are strong he's only referring to his and Cindy's situation? Maybe he's looking for beer sales to go up as people struggle to drown their sorrows.

TAGS: Economics, John McCain, Disaster Capitalism
Hypocrisy

What's Really Going On Here?

Wall Street Is Using the "New Sheriff Strategy!"

(Inspired by EdNSted asking the question in comments,
"OK, now explain to me what happens if the government does not bail out these institutions?")

TAGS: Economic Crisis, Blazing Saddles, America Held Hostage
"We Will Not Negotiate With Terrorists"

The Biggest Story in Living Memory

"A Crime of the Highest Order"

Glennzilla's post on the 'rescue' of AIG (and by extension Wall Street) is enough to curl your hair, straighten it out again, then make it fall out altogether. He's also posted what 'details' of the plan anyone is likely to see before it's implemented, and probably ratified without even a reading by the feckless Congress.

Here is the current draft for the latest plan. It's elegantly simple. The three key provisions:

(1) The Treasury Secretary is authorized to buy up to $700 billion of any mortgage-related assets (so he can just transfer that amount to any corporations in exchange for their worthless or severely crippled "assets") [Sec. 6];
(2) The ceiling on the national debt is raised to $11.3 trillion to accommodate this scheme [Sec. 10]; and
(3) best of all: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." [Sec. 8].

Put another way, this authorizes Hank Paulson to transfer $700 billion of taxpayer money to private industry in his sole discretion, and nobody has the right or ability to review or challenge any decision he makes.

In one respect this has all the makings of the USA PATRIOT Act - something rushed through because of a 'crisis' (and like the USA PATRIOT Act these 'emergency' measures seem suspiciously well developed, as if this plan had been sitting ready in a man-sized safe somewhere all along.)

It also bears comparison to the Military Commissions Act in its provisions for making secret decisions that fundamentally change the way society operates, then taking steps to put those decisions beyond any scrutiny. I say that's a bunch of bullshit.

Nor does this escape the sharp eyes of Mr. Greenwald. Some gleanings from the aforementioned post:

As Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking, Housing and Urban Affairs Committee, put it Friday morning on the ABC program "Good Morning America," the congressional leaders were told "that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally."

At least they didn't recycle the 'smoking gun' or 'mushroom cloud' language, although 'complete meltdown' is a suitable substitute I suppose. Why am I calling this the Biggest Story in Living Memory? How could it be bigger for instance than 9/11, the invasion of Iraq, or the devastation of New Orleans when Katrina hit?

...whatever else is true, the events of the last week are the most momentous events of the Bush era in terms of defining what kind of country we are and how we function -- and before this week, the last eight years have been quite momentous, so that is saying a lot. Again, regardless of whether this nationalization/bailout scheme is "necessary" or makes utilitarian sense, it is a crime of the highest order -- not a "crime" in the legal sense but in a more meaningful sense.
[...]
..what's probably most amazing of all is the contrast between how gargantuan all of this is and the complete absence of debate or disagreement over what's taking place. It's not just that, as usual, Democrats and Republicans are embracing the same core premises ("this is regrettable but necessary"). It's that there's almost no real discussion of what happened, who is responsible, and what the consequences are.

Glenn laments at length the fact that no-one in the beltway elite, either on the political or the media side of the trough, is questioning this government bailout of America's wealthiest on the back of everyone else. But he makes it plain that that is exactly what is taking place.

We've retroactively created a win-only system where the wealthiest corporations and their shareholders are free to gamble for as long as they win and then force others who have no upside to pay for their losses.
[...]
More amazingly, they're free to walk away without having to disgorge their gains; at worst, they're just "forced" to walk away without any further stake in the gamble..
..This is "redistribution of wealth" and "government takeover of industry" on the grandest scale imaginable -- the buzzphrases that have been thrown around for decades to represent all that is evil and bad in the world. That's all this is; it's not an "investment" by the Government in any real sense but just a magical transfer of losses away from those who are responsible for these losses to those who aren't.

Greenwald makes plain not only who benefits from this corporate welfare - the very ones whose greed created the crisis - but to whom the burden is passed:

If there is any "pitchfork moment" -- an episode that understandably would send people into the streets in mass outrage -- it would be this..
..Whatever else is true, generations of Americans are almost certainly going to be severely burdened in untold ways by the events of the last week -- ones that have been carried out largely without any debate and mostly in secret.

Having already loosed numerous hollow-point rounds into the body of the American economy, the thief of the ages now delivers the coup de grace, point blank, right between the eyes. He knows he's going to have to get out of Dodge soon, and is making a final effort to cop as much swag as he possibly can.

TAGS: Insufferable Greed, Government As Criminal Enterprise, Kleptocracy, Goppers Gone Wild

We're All Leningrad Cowboys Now

Let's just change out "loving" for "money" and we've got a FABOO Socialist Song For Today's Wall Street!

Товарищ, дайте мне все ваши деньги!
(Comrade, give me all your money!)

Discuss our newfound and proud ownership in this open thread.



TAGS: It's Great to Socialize Risk and Privatize Profits!, We're all Socialist Cowboys Now, Can haz sum bailout 2 plez?

Nothing Wrong, Eh?

While chatting in the studio with Olympics host Bob Costas, President Bush had the temerity to object to Costas's premise that our country has it's own problems (h/t AmerikaGulag, Think Progress has the video).

COSTAS: This past week, you restated America’s fundamental differences with China. But given China’s growing strength, and America’s own problems, realistically, how much leverage does the U.S. have here?

BUSH: First of all, I don’t see America having problems. I see America as a nation that is a world leader that has got great values.

Today I walked through my local grocery store and I saw a woman at the customer service counter talking about how tight money had gotten for her and her family. As I passed out of earshot the last thing I heard her say was, "I'm one of the assholes with the adjustable rate mortgages."

After hearing each of these statements a chill went up my spine. I think it's clear which of these two people are the asshole. It's not the lady with the ARM. It's the man the American people have allowed to tell them nothing is wrong for eight years while he set about the task of making sure that for most Americans, lots of things are wrong.

So much so that what it means to be an American has changed. That's what Bob Costas was trying to tell the President. He was trying to tell him that the world is gathering for fun and games in a country that commits outrageous atrocities routinely while our deranged "friend" Putin sent his army to rough up one of it's democratic neighbors and we can't really say anything to either of them, can we? That's what "America's own problems" means.

TAGS: President Bush, Economy, Human Rights, Russia

The Common Good

The basic law of economics is quite simple: People respond to incentives. In fact, that basic law may explain human behavior much better than psychology and the behavior of humanity much better than sociology. It pervades us. We have quid pro quo. We go out of our way to get great deals at sales. We do uncomfortable things like working insanely long hours for a pittance of a pay raise. We may even do the dishes in order to raise our chances of our honey expending a bit of extra attention on us. No one, it seems, is immune. Even the ascetic giving up every material joy or possession is responding to an incentive deferred into the hereafter. We do things to get things.

This being a blog of politically minded readers, the discussion had to circle around to something political. Ted Stevens is loved in Alaska for his prodigious provision of pork (pardon the alitteration - can't resist!). Pork, in the political sense, illustrates what is known as externality. Like the SUV driver who destroys the environment in disproportionate measure to the price he pays for the privilege, a politician gets more from earmarks - pork - than the constituents pay for it. Example is Sen. Stevens's (R-indicted)"Bridge to Nowhere." No sane city planner would want to spend $300 million to connect 50 people adequately served by a ferry to a city with a modern, four-lane bridge. The benefit doesn't justify the cost. Now imagine if you can get the benefit without paying the entire cost - that calculus might just look a little different. This is the calculus of pork and of externality. The bridge still costs the same but the costs are no longer yours. I in Denver am paying a fraction of the cost of that bridge.

Now there are arguments that some pork is beneficial and I won't go there. If Sen. Allard (R-bushclone) gets extra money for the National Renewable Energy Lab in Golden, CO (unlikely - he would vote against funding it if he could), one could argue that the benefit accrues to the entire population. I won't say every earmark ever included in a bill under the cover of darkness and shielded from any debate was pork; however, I would certainly prefer the matter be opened to public scrutiny and Congressional debate.

A second political principle often ignored by the fiscally responsible (sic) right is that of the tragedy of the commons. Economics holds that people make rational decisions. Within limits, this is true, especially when we have use of a resource such as public land without having to pay the costs of its maintenance. We can trash the campground and, if we're not caught doing it, the State will have to pick up the tab (and hopefully the trash). Likewise, millions of people can make economically sound decisions such as funding businesses who never intend to make a profit, buying property on credit that is neither secured nor likely to be repaid, or buying barrels of oil (on credit) with the intention of selling them later. All of these are legal decisions and all of them can be profitable - accruing benefit to the shrewd (read lucky) trader.

The problem is that each of these decisions, taken as an unique case, make sense. In an economic sense, they are rational. On the whole they are destructive to the common good. The case for regulation is based on exactly the common good. No one in their right mind wants to strangle business or limit the entrepreneurial spirit. We live as we do today because of both. The problem begins when the entire cost of the activity do not accrue to the person receiving the benefit, as in the case of speculators or pharmaceutical companies. A pharma executive doesn't die or go bankrupt because of the cost of medication, a consumer does. A speculator suffers high oil prices but not in proportion to the profit gleaned from his or her speculative activities. And it is there that damage is done. It is there that Government regulation, the anathema of all good Republicans, has to step in and defend the common good.

TAGS: Common Good, Economics, Earmarks, Speculation

It's the Stupid Economy

Y'all know I don't do 'blink and link' blogging as a rule, but this post from ascap_scab at Reconstitution 2.0 deserves a look-in by all unrulies. Scabbers has done a fair bit of work on this, and documents the imminent collapse of the economy better than I've seen elsewhere. In fact Jolly Roger and his crew at Reconstitution do a fair bit of econ blogging, so I consider it a go-to site in that area.

When the dust finally settles on the Bush administration the smarter historians will look back at debacles such as the Iraq war, the gutting of the Constitution, the purging of the Department of Justice and such not just as crimes unto themselves. They will hopefully twig to the fact that all of the above were really committed to enable a much larger and more heinous crime - the transfer of America's wealth from the middle class into the hands of a tiny group who were obscenely wealthy to begin with. And while the chances of anyone ever being held accountable for all of these other crimes is slim to none, the chance that this wealth will ever be refunded to the thousands who have lost their homes, their jobs and their dignity is exactly zero.

Any bank robber would guess that the job gets easier if you have a guard on the inside in your pocket, even easier if you've also co-opted the cop that's most likely to respond to the alarm. the Bush crime syndicate has co-opted the entire federal government for Pete's sake! And they're wasting no time scooping up everything they can while they can. It's no co-incidence that all these bank failures are happening in the last months of Dumbya's term.

If the average American had any idea how directly Bush policies were aimed at sucking the last dollar out of his or her wallet, there would be massive riots on the streets of every city, town and village in the country. Get over to JR's place for a good read. Prepare yourself to be enraged.

TAGS: The Economy, Bu$hCo™, Housing Crisis, Bank Failures

Stealthy, Like a Ninja...

...Economic Woes Take the Media by Surprise

For the last five years a lot of extremely smart economists have written about the timebomb economics of the Bush administration. Yet the media consistently bought into the Bush administration's strenuous selling of a sunny view of the economy simplistically reinforced by pointing to growth and the stock market while the dollar radically devalued, national debt and the deficit skyrocketed, and salaries froze in place. Plenty of analysis showed that the growth we were experiencing only went to the richest Americans while the rest of the country lived a recessionary existence.

Now that the stock market is catching cold and the subprime crisis and the debt crunch have emerged as high profile news stories, the narrative of the impending collapse of the American economy is so plain to see that even the lamestream media can no longer ignore it.

Watch this clip from CNN. They're covering the economy like it's a natural disaster that just struck out of nowhere. Fear Factor~!


The economy is even sneaking up on the President, who was shocked, shocked, to hear that gas prices are projected to go above $4/gallon.

Crossposted at Ice Station Tango.

TAGS: Economy, Media, CNN, Bush Administration