Wednesday, February 24, 2010

Microsoft Takes Down

Microsoft reveals its true colors, accomplishing what the NSA failed to do.  So much better if the (capital-G) Government doesn’t do it.  The story is on in their Threat Level blog.

Network Solutions locked the domain.  John Young has filed a counter suit.  Wired is publishing the document that offended Microsoft.

I went to check on and it wasn’t there….

Update: mirrors.

Tuesday, February 23, 2010

Announcement and links

I have taken the ads off the site and gone non-commercial.  I don’t want even the subconscious influence of making money through advertising upon my writing.  I have a day job, and am glad of it.

Let me know if any ads pop up.

I commend to you the writings and links on my recommended blogger sites to the left.  These colleagues provide consistently high quality, linked-to-authoritative-sources copy with an intelligent organizing principle behind it that puts the mainstream propaganda-blathering press to shame.

Everything I read reinforces the impression that American society has ceased to cohere, that not just the government but the social contract is broken.  While “animal spirits” are increasing (because hope springs eternal and humans try to adapt) the potential for very negative social psychology in the next downturn is great—whether it’s outright repression a la Hank Paulson’s dream of martial law implemented by Blackwater/Xe—or simply a loss of long-term “animal spirits” in the context of a rigidified neo-feudalism that kills the dreams in Americans breasts—or sends them deep underground—any of the above is awful to contemplate.  The current repositioning of the Republican party as “libertarian” is the latest in the charade of the do-nothing two-party system and is just another ruse to lower taxes on rich people (a la  Peter Schiff).

Among MSM-sanctioned talking heads, Marc Faber has been most vocal in warning that the hidden powers behind the American throne are clamoring for a big war.  I fear we have some very sick people pulling the strings behind the scenes.  A population in a state of fear is easier to manipulate than otherwise.  Be wary of news of “provocations” from “enemies.”  George Washington has addressed the issues of “false flag” attacks here and here.  Hitler famously used a false flag attack to cement his hold on the German psyche.  Be wary.

As I have suggested many times, the appropriate response to the current maldistribution-induced failure of effective demand to to provide health care and livable workfare to those who need it, funded by progressive increases in marginal tax rates on the super-rich (say, the top 5 percent of the income distribution that receives ~37 percent of income per Saez).  With personal income currently running at $12 trillion and un- and underemployment totaling 25 million, a simple diversion of a trillion dollars, 8.3 percent, from the richest to the most needy would provide $40,000 to each unemployed person and would reignite a healthy circular flow of income and product domestically.  Half that amount would get things going, and the other half could go to health care.

You say this would kill growth, Neocon?  American growth rates were highest in the early postwar period when marginal income tax rates were highest, when we had a sense of shared sacrifice paying off the war debt, when we had a viable social contract.

Here are a few recent links I found interesting or amusing (sorry no hat tips):

The doomsday cycle - Peter Boone, Simon Johnson, VoxEU
US Military Drone pilots will have a front-row seat slaughtering citizens resisting Federal Tyranny
Terrorism Derangement Syndrome
Cheney Confesses to War Crimes
General Petraeus: Torture is Unnecessary, Hurts O...
"Only 21% Say U.S. Government Has Consent of the G...
Yet Another Congressman Questions 9/11

"Of all the enemies to public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few. In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors, and emoluments is multiplied; and all the means of seducing the minds, are added to those of subduing the force,of the people. The same malignant aspect in republicanism may be traced in the inequality of fortunes, and the opportunities of fraud, growing out of a state of war, and in the degeneracy of manners and of morals engendered by both. No nation could preserve its freedom in the midst of continual warfare."

- “Political Observations” (1795-04-20) and Letters and Other Writings of James Madison (1865), Vol. IV, p. 491

Thursday, February 11, 2010

Links 2/11

Some recent posts that have made an impression on me:

We've Been Neoconned – Ron Paul
Ridicule of Conspiracy Theories Focuses on Dispersing Criticism of the Powerful – George Washington
It Is Now Official: The US Is a Police State - Paul Craig Roberts

These posts all deal in some way with what appears to be a pathological pseudo-paranoia in Washington and New York and across the ruling class.  I interpret this state as reflecting the desperation of defensive moves against a redistribution of power away from these people.  I am an optimist.  I believe the collective human spirit will prevail in restoring human rights in a non-violent way.  Choose truth.

Tuesday, February 9, 2010

Fiscal policy in a classical failure of effective demand

As Professor Saez has shown, the top 1 percent of the income distribution receives 20 percent of income; the top 10 percent 50 percent of income.  This represents a level of inequality greater than that preceding the Great Depression.  Effective demand is failing because most people don’t have enough money, and many people who would like to work can’t get a job.  The current Great Recession is primarily affecting the folks at the bottom.

About half of Americans, the bottom half of the income distribution, pay no federal taxes other than Social Security.  This is where demand is failing.  A tax cut will do them no good.

Now, other things equal, a simple transfer of ten percent of the top 10 percent’s incomes to the bottom 90 percent would contribute greatly to aggregate demand and production.  Or, a tax-financed infrastructure program paid for by the rich would create jobs and incomes for many in the bottom tiers. 

The problem is, no one trusts our government to do anything right.  The Congress is full of pimps representing their Big Money sponsors.  The President is an appeaser.

It is common to say that we’re suffering because wages are converging to global norms.  But what explains the huge increase in income multiples of the people at the top?  Why should the distribution have widened?

Rather, a global ruling class seems to be making its appearance, giving rise to speculation on neo-medievalism, or as I have called it, neo-feudalism, and Dani Rodik’s worry that

democracy, national sovereignty and global economic integration are mutually incompatible: we can combine any two of the three, but never have all three simultaneously and in full. (link)

My belief is that we let the rich have their way out of a delusion that we would be joining them, and that once that dream is over, the scales fall from our eyes, and we begin actively to shame the rich, that the sheer force of human imagination will restore the balance.

If you don’t believe in the power of thought to affect the world directly, read Lynn McTaggart’s books, The Field and The Intention Experiment.  (I’m not linking so you can choose your bookstore.)

I’ve seen the power of thought in an experiment you can try with friends.  Have one person face away from the group, with arms extended horizontally, facing another who puts their fingers on the subject’s wrists, pressing down.  Let the group signal whether it permits the subject to resist the downward pressure—thumbs up—or not—thumbs down.  I’ve seen this done several times, and every time the subject was unable to keep their arms extended when the group signaled thumbs down.

Direct your thoughts to envision social justice in this world.  It will happen if enough of us get beyond the lies.

Saturday, February 6, 2010

The state of the labor market


The employment/population ratio has fallen while mean and median duration of unemployment has risen to levels previously unrecorded in the postwar period. 

Friday, February 5, 2010

‘Animal spirits’ set to rise for several years toward zero level

Whether you believe the government’s unemployment number or not, it is useful for modeling purposes (until no one believes in it at all).  “Animal spirits” or general confidence levels continue to climb out of negative, depressed territory toward a projected return to the zero line in about 2012.  This is bad news to anyone hoping for some reform of a broken American system, as it virtually assures that Congress and the President will do nothing significantly productive for the next several years.  (Click on charts to see larger image.)


Our NBER-defined recession indicator also shows about zero probability of another collapse of confidence and double-dip recession in the coming year.  The major GDP aggregates will chug upward, probably slowly.


Very slow growth is indicated by the weakness of final domestic sales that are stalled on a year-over-year basis at zero growth and by the weakness of demand from our trading partners, all of whom have their own serious economic problems.  Domestically, we have high unemployment, loss of jobs, increased saving, and collapsing housing prices.  Final domestic sales will remain weak. 


The stock market is still riding the wave of adaptation level-theoretic emotion coming off the March lows as measured by the venerable Coppock Guide.  There may be a strong rally out of the current correction before putting in the final top.  I thought the top would come in the winter, but it may come later.


The situation looks like the mid-Seventies to me, when the intermediate term outlook for the inflation-adjusted stock market was bad (one was better off in T-bills).  I agree with the estimable Barry Ritholtz that the next long-term buy in the market is still out about five years, and that capital preservation is the name of the game in the meanwhile.


The big question to me is what form will The Crisis finally take?  What will be the Resolution?

Monday, February 1, 2010

The Bush tax cuts

Correction: I favor leaving all the tax cuts favoring middle income households in place, and raising marginal rates on the super-rich.

Here is a summary of “the Bush tax cuts” that are set to expire at the end of the year via The heritage Foundation:

  • Child Credit: This credit will shrink from $1,000 to $700 per child on January 1, 2005.
  • The 10 Percent Bracket: The upper income level for this bracket will decrease by $1,000 per filer on January 1, 2005.
  • The 15 Percent Bracket for Joint Filers: On January 1, 2005, the upper limit of this bracket will shrink from 200 to 180 percent of the upper limit of the 15 percent bracket for single filers, creating a marriage penalty.
  • Standard Deduction for Joint Filers: On January 1, 2005, this will shrink from 200 to 174 percent of the standard deduction for single filers, creating a marriage penalty.
  • Alternative Minimum Tax: Exemptions will decrease by $6,500 per filer on January 1, 2005.
  • Bonus Depreciation: This provision, which changes depreciation schedules for businesses in a way that encourages investment, will expire on January 1, 2005.
  • Small Business Expensing: On January 1, 2006, the maximum amount that a business may deduct will fall from $100,000 to $25,000, which will not be indexed to inflation.
  • Capital Gains: Rates will rise to 10 or 20 percent, depending upon income, on January 1, 2009.
  • Dividends: Rates will rise to match standard income tax rates on January 1, 2009.
  • Child Credit: This credit will shrink from $700 to $500 per child on January 1, 2011.
  • The Income Tax: Rates will increase between 3 and 4.5 percentage points in each bracket on January 1, 2011.
  • The 10 Percent Bracket: The bracket will be eliminated on January 1, 2011, raising the income tax burden of many workers by 5 percentage points.
  • The 15 Percent Bracket for Joint Filers: On January 1, 2011, the upper limit of this bracket will shrink from 200 to 167 percent of the upper limit of the 15 percent bracket for single filers, creating a marriage penalty.
  • Standard Deduction for Joint Filers: On January 1, 2011, this will shrink from 200 to 167 percent of the standard deduction for single filers, creating a marriage penalty.
  • The Estate Tax: The top rate for this tax will increase to 60 percent on January 1, 2011, and the value of an estate exempt from taxation will shrink to $1 million, which is less than it is today.

Public perception is that the Bush tax cuts benefitted the rich primarily, but it is clear that many targeted lower middle income households.

Given the best available research on the income distribution as measured by Emmanual Saez using IRS data, I continue to maintain that marginal tax rates on the super-rich are way too low.

The share going to the top 1 percent is more than a twenty percent! The share going to the top 0.01 percent is 6 percent! (See this paper by Emmanual Saez.)

So when the discussion turns to whether to let the Bush tax cuts expire, let’s not let them expire [corrected],while agreeing with the President in his State of the Union address that households with incomes over $250,000 need to pay more.

Given the ruling class’s apparent control over its own compensation, I’d hazard a guess that raising tax rates on them would quickly be followed by their incomes increasing (a la Lloyd Blankfein’s $100 million bonus), so that raising tax revenues should be relatively easy! It would also highlight in the public mind, perhaps even in the minds of fiduciaries such as corporate directors (nah, forget that) that American corporations are being looted by their managements. It might accelerate the rebalancing of aggregate demand through more fair compensation in the workplace.

How about a 95 percent marginal tax rate on the portion of income over a couple of million dollars a year? That would provide for am approximate take-home income multiple of 2,000,000/50,000 = 40 times the median household income, a compensation ratio that prevailed during our most successful postwar growth years. And let the estate tax cut expire. We are already close enough to neo-feudalism.

Or do we need to have a depression to bring people to their senses? That is the way it appears (see this).

Via: Visualizing Economics: