The Animal Spirits Page

Bretton Woods super-nova reprise

2012-01-28T12:22:00.001-08:00

My central thesis is the current debt super-cycle will end in a race to inflate and cause currency depreciation by all the world’s central banks that foolishly adopted the Western fractional reserve monetary system with the U.S. greenback as its reserve currency, that was at first pegged to gold up till Richard Nixon’s abandonment of the gold peg in 1971.

What a conservative, Nixon. Wage and price controls, abandonment of any shred of monetary discipline for the entire world.. but he went to China…. What a dude!

Just as virtually every American must go up a learning curve with credit cards—many marriages have a “credit card moment” where the cards get cut up and a new fiscal regime begins—so the entire world has traveled down the borrow-and-spend-because-we’re-worth-it path that has led to the current mountain of debt on the shoulders of the global Sisyphus, as the world tries to push the boulder back up to the mountaintop.

The world is now on the steepest upward slope of the credit learning curve.

But central banks are not like people. Central banks print money. Too much money chasing too few goods equals inflation. Inflation equals reduced purchasing power, and hence reduced real debt burdens. This is all undisputed by all brands of economists. The disagreement is whether the central banks, who have stated publicly that a little more inflation would definitely be a good thing, can get an inflation going in a liquidity trap, where, because everyone already has too much debt, they don’t want any more.

Ah, but even as all fractional reserve fiat money is technically credit debt, it is also a medium of exchange used for transactions for goods and services, including labor.

If an inflation is a sustained rise in the general price level, a working definition that should be acceptable here, then it is a labor market phenomenon as well as a monetary phenomenon. I’ve gone so far as to say that “Inflation is always and everywhere a labor market phenomenon—a wage-price spiral—accommodated by monetary policy.”

So to get an inflation going in an admittedly quite deflationary environment (deflation is what happens when asset values supported only by bad debts on the liability side of the social balance sheet collapse as the badness of the liabilities is recognized, however slowly) you need to have some prices rise, perhaps because of a supply shock, and then to have businesses accommodate the however feeble demands for increased compensation to maintain real wages, a move that businesses would make only out of a renascent sense of social responsibility to labor and out of the record share of GDP they have garnered to capital in recent years.

Then it is simply a matter of supply costs maybe going up a little more, maybe as the result of a different supply shock from a different sector—say the first was oil, as a war gets going in the Middle East, and the second is due to crop failures around the world because of a summer drought—and rather than send their economies into depression, the central bankers will accommodate as necessary, although with the level of excess reserves available in the banking system it may not take much accommodation in the initial phases of the new inflation.

And so a wage-price spiral is born that can support a sustained rise in the price level that can reduce the real value of outstanding debts.

The nation that gets the inflation going first wins in the super-nova of Bretton Woods. Everybody’s got too much debt (in the Western world) and the first nation to depreciate its currency and the value of its debt picks up exports while paying down debt. They reach the top of the mountain first.

And as I pointed out recently, the quickest way to get an inflation going—and I would maintain this applies even in a deflationary environment—is via the supply shortages and rationing that accompany a big hot war.

Hence I believe Daddy Warbucks and his military-industrial complex friends are pushing the United States toward war as quickly as possible.

But what will happen when the entire Western world rushes to follow, as I don’t believe the Europeans will be able to avoid the temptation in the event?

Collapse of the world financial system is a distinct possibility. A galloping inflation or hyperinflation across the Western world would make international transactions highly uncertain. Barter arrangements might be made for big ticket items like energy (already happening between Iran and China).

In the U.S. inflation and a return to positive real interest rates would at least kill the carry trades that have enriched the financial elite for a decade or more, would pull many homeowners into positive equity, and would most benefit those who locked in to super low rate financing as they leverage the funds into commodities.

When this will happen is anyone’s guess. There are credible predictions by Charles Nenner, John Robb and others that a major war will begin this year or next.

China will implode into authoritarianism as their bifurcated economy tanks. There will be no war with China this time, except for a possible skirmish or two in the Caucasus.

The neocons, including Obama, who faces reelection, for which a war is always a useful ruse, will argue that we need to occupy the Middle East to assure supplies of “our” oil. Israel will encourage the U.S. to decimate the populations of several Middle Eastern countries that it considers a threat to its survival.

All across America, Americans are transfixed by a Republican primary race that rivals the tackiest daytime soap opera for lurid content and lowbrow appeal. Keep that TV on so you don’t have to think!

All the talk about taking America back will be put on hold for a moment as Chaos rears its ugly head and the last vestige of normality in the economy vanishes.

But then, as the world enters a period of Total Uncertainty, there will be an opportunity for revolutionary change. For an amendment to the Constitution to declare that corporations are not people. For progressive taxation that recognizes that the people sitting at the top of our corporations are not doing all the work, and that returns after-tax income distributions to levels found in healthy societies (cf. Wilkinson).

Because if we’ve learned anything in the years since Hank Paulson announced that if he didn’t get his way, a depression would start on Monday and martial law would need to be declared—if we’ve learned anything, it’s that the false god of Econ has lied to us lo these three or four decades. Lied abjectly. And the psychologists and epidemiologists, whose best work is ignored by behavioral economist whores running investment management businesses, have shown us that happiness and human welfare do not increase with GDP in any meaningful way, that more income above a level that satisfies some basic human wants and needs does not make us better off, but that what makes us happy and vibrant and alive and long-lived and healthy is living in an interconnected, more-equal-than-now human community, with a sense of interconnectedness and a lack of the chronic status insults, social stratification and isolation and personal degradation that accompany life in latter day banana republics like the United States.

The last world war produced the most pronounced leveling of the American income distribution in recorded history (cf. Income, inequality, debt, crisis and depressions). There is a secret hope within the Beltway, methinks, that we can pull off the same trick again with the right conflict, started by the right false flag incident.

But the public is smarter than it has ever been. IQ scores have been rising. Information is instantly available around the world. It’s hard to create a bogey man today. The people know all the Hollywood tricks. And they’re sick of war.

It’s no accident that folks in the U.S. military services overwhelmingly support Ron Paul.

So the next time the world enters a historical moment of Total Uncertainty, let’s be ready to use it to get what the 99 percent want, starting with a Constitutional amendment that corporations are not people, and from there on to a clean up of the laws that should govern this land, that the 1 percent who currently live above them may rejoin the human fold.

The readiness is all.

Peace.

Bomb bomb bomb, bomb bomb Iran

2012-01-25T07:43:00.001-08:00

Via: www.ResilientCommunities.com John Robb in a really bad mood. He believes the neocons long-desired war will happen. The President was banging the war drums in his speech last night. Remember, historically a war is the quickest way to get an inflation started—to inflate out our debt and beat everyone else in the super-nova of Bretton Woods to the punch.

I’ve spent a considerable amount of time over the last decade working on “what if” scenarios for the Pentagon, CIA, and NSA.

One of those scenarios, naturally, was a war with Iran (one of the world’s top oil exporting countries).

A little known conclusion of that scenario analysis was that a war with Iran greatly increased when deep sanctions were applied.

Why? Simply:

Sanctions disconnect the Iranians from the global economy which soften the impact of a war with them.

Sanctions also accelerate societal and economic decay in Iran, making it highly likely that it would start a conflict.

The reason I’m bringing this up, is that these deep sanctions are now being put in place.

In particular, the EU is about to start a boycott Iranian oil and the Chinese are already looking for alternatives.

This means one thing: our governments have radically increased the probability of a war with Iran.

Oh joy.

So, what does a war with Iran mean? I could spend hours on this analysis, but most of that really would not matter to you. What does matter is that a war with Iran will ripple through the world as energy prices zoom and economies already on the brink crump.

It will be a global train wreck, and through tight coupling, you will be along for the ride.
___________

So, what can you do? Most of the advice you will get will be hedge your finances. That’s fine, but that’s only a small part of the solution and clearly insufficient given the exposures involved.

No, what you really need to do is decouple your future from the world’s future. To find a way to stay connected to the benefits of a huge global economy while eliminating your exposure to its downsides.

The best ways, and likely the only way, to do this is to live in a resilient community. A community that produces most of what it needs and is not dependent on continuous support from an increasingly unstable global network.

The crumbling edifice of American financial fascism

2012-01-21T08:26:00.001-08:00

I’m a little late to just how far the dumping of the dollar as a transactions currency has gone:

Via: www.zerohedge.com

Two weeks ago we wrote a post that should have made it all too clear that while the US and Europe continue to pretend that all is well, and they are, somehow, solvent, Asia has been smelling the coffee. To wit: "For anyone wondering how the abandonment of the dollar reserve status would look like we have a Hollow Men reference: not with a bang, but a whimper... Or in this case a whole series of bilateral agreements that quietly seeks to remove the US currency as an intermediate. Such as these: "World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade", "China, Russia Drop Dollar In Bilateral Trade", "China And Iran To Bypass Dollar, Plan Oil Barter System", "India and Japan sign new $15bn currency swap agreement", and now this: "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says."" Today we add the latest country to join the Asian dollar exclusion zone: "India and Iran have agreed to settle some of their $12 billion annual oil trade in rupees, a government source said on Friday, resorting to the restricted currency after more than a year of payment problems in the face of fresh, tougher U.S. sanctions." To summarize: Japan, China, Russia, India and Iran: the countries which together account for the bulk of the world's productivity and combined are among the biggest explorers and producers of energy. And now they all have partial bilateral arrangements, and all of which will very likely expand their bilateral arrangements to multilateral, courtesy of Obama's foreign relations stance which by pushing the countries into a corner has forced them to find alternative, USD-exclusive, arrangements. But yes, aside from all of the above, the dollar still is the reserve currency... if only in which to make calculations of how many imaginary money one pays in exchange for imaginary 'developed world' collateral.

Only Ron Paul, of all the candidates in either mainstream party, is speaking anything remotely resembling the truth about America’s status in the world.

The rise of the reptile brain

2012-01-17T06:49:00.001-08:00

As the world economy begins its turn into contraction, there is a natural tendency for the reptile brain to take control. Your loss is my gain. A blood sacrifice is required. You must pay.

Fight against that as hard as you can, even if you are the object of reptilian anger. And if you feel the necessity to make ritual sacrifice of your people, your employees or country folk, think twice about what you are doing.

When the Lord comes to you on your last day and asks, “Where are the people you sacrificed to the false god of Econ?”

Will you say, “Am I my brother’s keeper?”

And the Lord will put a stain on your soul and your children’s souls that will last for all time.

Martin Luther King had different take in Loving Your Enemies, quoted at length in John Hussman’s weekly comment.

Love.

Secular exhilaration confirmed

2012-01-13T07:59:00.001-08:00

My forecast of bettering “animal spirits” is confirmed in the pop of the Michigan sentiment series today. With the bally-hooed unemployment rate—still the headline variable, even though just about everyone knows U6 and what’s going on with the labor force matter much more—now below its adaptation level, “animal spirits” are positive for the first time in the current “recovery.” I am showing my freehand forecast of the unemployment rate and its implications for “animal spirits” below. As I mentioned a couple of posts ago, the situation today most resembles early 1973, at right about the time of a stock market peak and about a year before the onset of recession. [This is research, not investment advice. You invest at your own risk, unlike the Wall Street banks, who also invest at your risk.]

Technically, my model shows “animal spirits” going negative, and the next “recession” (collapse of confidence accompanied by accelerating losses of income and product) beginning in mid-year 2013.

However, Europe’s recession and deceleration of Chinese growth may quicken things a bit.

It’s 1973 all over again, the year before a major social and economic crisis. Watch my brother Marvin sing about it.

The Automatic Earth

2011-12-29T09:54:00.000-08:00

The Automatic Earth:

http://theautomaticearth.blogspot.com/2011/12/december-29-2011-trends-2012-end-of.html

Excellent summary and collected articles on the situation in Europe, which is getting glossed over in the MSM. Must read.

Ron Paul for president

2011-12-22T09:43:00.001-08:00

Absolute disgust with the state of America fills the writers in the blogosphere that I read (most of it referenced to the left, but I also recommend www.theburningplatform.com ‘s last few posts).

I share it. And after considerable thought about the possible downside risks, I have come to support Ron Paul for president. He is the only candidate who is uncompromised.

I supported Obama, despite the Clinton’s warnings that he was not authentic, and have come to view him as a servant of the ruling class.

On the issue of class: class exists, always has. When one class rigs the system for its own benefit, and another class resents it and fights back, that’s justified.

The corporate oligarchy has assumed control of the world’s capital, not as owners, but as pirates looting the treasuries of their corporations, and when those run dry, the taxpayers.

I hesitated a long time to support Ron Paul because he would not regulate the markets, and I feared that complete lack of regulation would collapse the economy. But we have regulation now that has been captured by the regulated to worse effect than no regulation at all (cf. MF Global; watch this). Our financial markets are rigged, just like the big corporations that are decimating small business. Wall Street bankers whose banks would have failed without bailouts of taxpayer funds paid themselves their biggest bonuses ever after being bailed out. They know their time is running short.

Dr. Paul is a physician. I trust him to take care of the innocent people who are being hurt by the collapse of our system.

The other cause requiring immediate support is an amendment to the Constitution to undo the Citizens vs. U.S. decision that declared “corporations are people” when it comes to funding—anonymously even—political campaigns. I view this decision as treasonous, as the source of such funding could be coming from anywhere in the world.

And finally, until the dominant mythology of our age—neoclassical economics—is replaced by an understanding of the prime true driver of human welfare, namely, living a fully connected life in a just society (one that the empirical results suggests will have considerably less inequality than America currently suffers under)—until the pernicious mythology of Economics is cast aside, we will suffer further at the hands of an oligarchy armed with bogus ideas of entitlement to justify their greed. See Wilkinson talk at ted.org for the effects of inequality on human welfare.

Happy Chanukah and Merry Christmas, all.

Secular exhilaration! take 2

2011-12-10T07:05:00.001-08:00

So what happened to the stock market in the early ‘Seventies episode, you might ask.

The market peaked right at the New Year of 1973. By analogy we might expect the same for 2012. From the previous post note the leading nature of the Michigan Sentiment series, which recently had its own pop to the upside. Expect some delusional holiday cheer out of Old Europe to keep the fake rally going, but after New Year’s Eve and the first few trading days of 2012, it might be time to say “risk off.”

N.B. This is research, not investment advice. You invest at your own risk, unlike the Wall Street banks, who also invest at your risk. Just wait until the Euro sovereign CDSs come home to roost, how the Wall Street bankers come to Uncle Bernie with their hands out (Uncle Sam doesn’t have the cojones to give them any more money, afraid of being tarred and feathered).

Secular exhilaration!

2011-12-02T06:28:00.001-08:00

The unemployment rate has dropped below its adaptation level—and our “animal spirits” metric has become positive—for the first time since November 2007.
Let the secular exhilaration begin!

The green line is the Michigan survey measure of consumer sentiment. The forecast of the unemployment rate is judgmental and follows the pattern of the early ‘Seventies approximately.
Confidence has a momentum of its own, visual examination of the series suggests. The unemployment rate rarely crosses quickly back above its moving average once it has crossed below. It happened a few times in the 'Fifties and ‘Sixties but did not signal the imminent start of a recession. We may expect positive economic momentum for several quarters in the U.S.
If we track the early ‘Seventies episode, when the Michigan series was in the dumps as it is now but our “animal spirits” metric went positive, we can expect about a year of positive economic growth before the next collapse of confidence.

Why Shiller and Akerlof didn’t cite the important 1996 paper in the Journal of Economic Psychology on “animal spirits” published by an obscure professor at a small, non-snob school somewhere in fly-over land, is simply evidence of how long our neo-feudal class system has been forming. Denial is so easy when the little people are so far removed of our social sphere of reference.

Why Ron Paul is right on Iran

2011-12-02T06:00:00.001-08:00

Sunspot cycle ramping up

2011-11-28T08:09:00.001-08:00

Sunspots have historically been associated with major market tops (2000), wars and social unrest.

http://solarscience.msfc.nasa.gov/images/ssn_predict_l.gif

‘Animal spirits’ update

2011-11-27T10:57:00.001-08:00

Recall that the theory of “animal spirits” that we channel from an obscure article in the Journal of Economic Psychology in 1996, “Adaptation level and ‘animal spirits,’ callously and dishonestly ignored in Shiller and Akerlof’s book on “animal spirits,” posits that the general level of confidence or “animal spirits” in America is largely determined by where the unemployment rate is relative to a recent adaptation level represented by an exponential moving average relative to the standard deviation of the unemployment rate over the past 48 months:

A = – (U – UMEAN)/Sigma(U)

where the minus sign makes the measure a positive confidence measure.

Currently the adaptation level of the unemployment rate is 8.8 percent, while the current reading is 9.0. The adaptation level is also rising. So the possibility that I have mentioned before of a secular exhilaration in 2012 is still before us; if the reported U3 unemployment rate falls to 8.8 or below before the election, “animal spirits” as proxied in this model will “go positive:”

As can be seen from the history, when the A metric crosses below the zero line from above the economy has generally been at the onset of recession (an acceleration and change of sign of the real growth rate).

The situation today, with the abysmal levels of survey-reported consumer confidence (the Michigan sentiment series is in green) most resembles late 1971-1972, when there was a brief swing into positive “animal spirits” during the election year, followed by up-till-then most serious recession of the postwar period.

In 1972 the A metric went positive in exactly the election month of November and continued upward until October 1973, almost exactly coincidental with start of the severe early ‘Seventies recession (when I was working my first job out of college, and was required to take a ten percent cut in pay from $8,000 annually in New York City—I went to graduate school). Note the anticipatory pattern of the Michigan index, then created quarterly.

By whatever means—civilian labor force participation rate shrinking faster than employment contracts—the psychologically sensitive unemployment rate may decline in coming months enough to trigger a secular exhilaration, that is likely to be followed by deepening depression unless the unbalanced nature of the U.S. distribution is altered quickly, which appears unlikely.

2012 is going to be an interesting year.

Thank God for Bruce Bartlett

2011-11-22T07:25:00.001-08:00

Here’s some tax truth from a Republican:

The truth is that the federal surpluses resulted from specific legislation enacted in 1990 and 1993 that virtually every Republican opposed. In particular, taxes were increased and tight budget controls were put in place that prevented taxes from being cut or spending increased unless offset by tax increases or spending cuts. These budget controls are commonly referred to as “paygo,” for pay-as-you-go.

What happened can be seen in Congressional Budget Office data. When the 1990 budget deal took effect in fiscal year 1991, federal spending was 22.3 percent of G.D.P. and revenue was 17.8 percent. The deficit was 4.5 percent of G.D.P. Revenue rose steadily to 19.9 percent of G.D.P. by fiscal year 1998 and spending fell to 19.1 percent, yielding a budget surplus of almost 1 percent of G.D.P.

Revenue continued to rise to 20.6 percent of G.D.P. in fiscal year 2000, and spending fell to 18.2 percent. The surplus reached 2.4 percent of G.D.P.

These results run 100 percent contrary to Republican dogma, which is that tax increases, especially on the rich, do not yield additional revenue because people will cease working and investing, and the economy will stagnate. Yet the hallmarks of the 1990 and 1993 budget deals were an increase in the top income tax rate; first to 31 percent from 28 percent, and then to 39.6 percent. Revenue clearly rose, as did the economy.

This is a must-read article:

Balancing the Budget, for Real – New York Times

Bernanke serves his Wall Street masters

2011-11-22T06:26:00.001-08:00

The Top 0.1% Of The Nation Earn Half Of All Capital Gains – Forbes

Capital gains are the key ingredient of income disparity in the US-- and the force behind the winner takes all mantra of our economic system. If you want even out earning power in the U.S, you have to raise the 15% capital gains tax.

Income and wealth disparities become even more absurd if we look at the top 0.1% of the nation's earners-- rather than the more common 1%. The top 0.1%-- about 315,000 individuals out of 315 million-- are making about half of all capital gains on the sale of shares or property after 1 year; and these capital gains make up 60% of the income made by the Forbes 400.

It's crystal clear that the Bush tax reduction on capital gains and dividend income in 2003 was the cutting edge policy that has created the immense increase in net worth of corporate executives, Wall St. professionals and other entrepreneurs.

Bernanke Speech Moves Markets: No New Stimulus – ABC News

The effectiveness of first two QEs has been questioned. Critics acknowledge that easing has brought temporary benefits, but they argue those have accrued primarily to the stock market. They question whether flooding the markets with yet more cheap money is a good thing for the economy long-term.

Just so that it’s perfectly clear what’s going on. The country’s markets are being looted by the central bank to benefit of the ruling class. I personally, while supposedly a “sophisticated investor,” am terrified of our totally rigged and corrupt stock market.

Have a good day.

For Deficit Panel, Failure Cuts Two Ways - NYTimes.com

2011-11-22T05:59:00.000-08:00

For Deficit Panel, Failure Cuts Two Ways - NYTimes.com: "WASHINGTON — The latest Congressional failure to agree on a plan for balancing the government’s books could yield a surprising result: a sharp reduction in annual federal deficits, larger than anything contemplated by the special panel that reached its fruitless finale on Monday."

Leading from behind.

Graphic of the day

2011-11-21T13:24:00.001-08:00

Source: Occupy the Hamptons via The Big Picture (www.ritholtz.com)

Lenders Flee Debt of European Nations and Banks - NYTimes.com

2011-11-19T09:43:00.000-08:00

Lenders Flee Debt of European Nations and Banks - NYTimes.com: "Nervous investors around the globe are accelerating their exit from the debt of European governments and banks, increasing the risk of a credit squeeze that could set off a downward spiral."

Either multiple miracles are going to occur--simultaneous resolutions of European and American debt crises--or this is a no-brainer from an investing standpoint.

The world appears to be entering a monumental clusterfork in the road.

Do not harden your heart, as the only thing that will keep you alive is love.

The great sorting-out

2011-11-17T07:05:00.001-08:00

Americans are becoming more and more divided along class lines, even geographically. This does not bode well for social cohesiveness or the ability to execute effective social policies. (And you can say “government is the problem” all you want, but I tell you we will have government for the rest of our lives, and I’d rather have government that works.)

Middle-class areas shrinking in US: study – yahoo.com

I recently reread my oldie-but-goodie, “On the coming neo-feudalism,” from two and a half years ago, and was amazed at its prescience.

What Mankiw doesn’t teach: the costs of inequality

2011-11-06T07:39:00.001-08:00

I posted on Wilkinson over a year ago, and I’m glad to see www.angybearblog.com [corrected] covering his work. This is an oldie but goodie, definitely must-watch even if you’ve seen it before.

Thirty-some years ago, having completed an honors English degree from Yale, I decided to get a Ph.D. in Economics to study the dominant mythology of our age. It can’t fall soon enough….

Review of ‘Margin Call’

2011-11-05T09:07:00.001-07:00

Saw the hot new Wall Street movie “Margin Call” last night with a special appearance from New York City via Skype of the director, whose father, it turns out, was a New York City investment banker.

The movie sugar coats the cynicism of the investment bankers. Kevin Spacey gives a nice portrayal of a long time investment banker and trader who knows that screwing one’s customers is not good for repeat business.

But the movie merely makes the greatest sin of its Goldman Sachs-like fictional firm (GS-like because it doesn’t go bankrupt) the beat-the-crowd unloading of its tons of merde, toxic MBS assets that a young engineer quant has figured are going to bankrupt the firm in an environment of increasing levels of market volatility, due to the extreme leverage the firm has put on.

No, JC Chandor backs off of showing what really happened, which was that some investment banks and colluding hedge funds actually shorted the same securities they were selling at the same time.

Most people would call that fraud.

JC Chandor missed the opportunity to capture the truly depraved language of the traders, which has been displayed in transcripts of Enron’s traders’ conversations and emails.

Source:

When a forest fire shut down a major transmission line into California, cutting power supplies and raising prices, Enron energy traders celebrated, CBS News Correspondent Vince Gonzalesreports.

"Burn, baby, burn. That's a beautiful thing," a trader sang about the massive fire.

Four years after California's disastrous experiment with energy deregulation, Enron energy traders can be heard – on audiotapes obtained by CBS News – gloating and praising each other as they helped bring on, and cash-in on, the Western power crisis.

"He just f---s California," says one Enron employee. "He steals money from California to the tune of about a million."

"Will you rephrase that?" asks a second employee.

"OK, he, um, he arbitrages the California market to the tune of a million bucks or two a day," replies the first.

Source:

Though Mr. Tourre was a more junior member of the Goldman team, the S.E.C. case against him was bolstered by colorful e-mails he wrote, calling mortgage securities like those he created monstrosities and joking that he sold them to “widows and orphans.”

I have a number of investment banking and hedgie friends, and I find all of them extraordinarily double-minded when it comes to the ethics of what they do. In that regard, Spacey’s character accurately reflects the tensions some, if not all, folks in the toxic Wall Street environment feel.

But the movie Disney-fies the moral dimensions of what Wall Street has become in recent years.

Too bad.

The tombstone blues

2011-11-05T07:42:00.001-07:00

As of now, democracy and the rule of law are pretty dead in America. Bill Black, who sent a lot of crooks to prison in the aftermath of the S&L crisis twenty years ago, knows from personal experience. How far we have fallen. Must watch.

Western economy growth rates portend recession

2011-11-05T07:35:00.001-07:00

This indicator has been making the rounds. Recession soon follows when real GDP year-over-year falls below two percent, as it has for the past two quarters. The indicator has a pretty good track record over the past 60+ years, never having missed signaling an ensuing recession a year or so in advance with no false positives.

And the situation in Europe is similar, with a garnish of extreme political instability thrown on for seasoning:

Growing Economies, Stagnant Wages - NYTimes.com

2011-11-04T07:59:00.000-07:00

Growing Economies, Stagnant Wages - NYTimes.com: "The United States was on the lower end. From 2000 to 2007, median pay increased at a quarter of the pace of output per capita. In other words, the typical American worker did not share much in the country’s growing wealth even when the economy was good."

Capital has become concentrated and internationally mobile. It is beggaring labor everywhere. The new ruling class is the international corporate elite, who have no national loyalties to speak of.

Move to amend

2011-11-02T12:50:00.001-07:00

The national campaign to Abolish Corporate Personhood and Defend Democracy.
Sign the Petition: http://MoveToAmend.org/motion-to-amend

* * *

Good morning Benign

Last night Boulder became the second city in the nation to pass a ballot measure
calling for an amendment to the US Constitution that would state that corporations
are not people and the legal status of money as free speech! At midnight, with 93%
of the ballots counted, the measure was handily winning with 74% of voters in support.

Boulder’s campaign is the latest grassroots effort by Move to Amend, a national coalition
working to abolish corporate personhood.

“From Occupy Wall Street to Boulder, Colorado and every town in between, Americans are
fed up with corporate dominance of our political system,” said Kaitlin Sopoci-Belknap, a
national spokesperson for Move to Amend. “Local resolution campaigns are an opportunity
for citizens to speak up and let it be known that we won’t accept the corporate takeover
of our government lying down. We urge communities across the country to join the Move
to Amend campaign and raise your voices.”

Earlier this year voters in Madison and Dane County, Wisconsin overwhelmingly approved
similar measures calling for an end to corporate personhood and the legal status of money
as speech by 84% and 78% respectively. Next week voters in Missoula, Montana will have
an opportunity to vote on a similar initiative in their community.

Move to Amend volunteers in dozens of communities across the country are working to place
similar measures on local ballots next year.

“Working on this campaign was electrifying,” said Scott Silber, a local Move to Amend organizer
in Boulder. “We had such an outpouring of enthusiasm from our community. Folks were so thrilled
to finally have an opportunity to have their voices heard and resoundingly call for an end to
corporate corruption of our democracy. From here we’re taking the campaign to Denver, and then
on to Washington, DC.”

Move to Amend’s strategy is to pass community resolutions across the nation through city councils
and through direct vote by ballot initiative. “Our plan is build a movement that will drive this issue
into Congress from the grassroots. The American people are behind us on this and our federal
representatives will see that we mean business. Our very democracy is at stake,” stated
Sopoci-Belknap.

WHAT YOU CAN DO

Help Move to Amend get on the Daily Show with John Stewart and the Colbert Report!
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Mexican standoff

2011-11-01T21:34:00.001-07:00

We have entered one of those periods when things are happening so fast it’s difficult to update one’s mental maps in a meaningful way. You know what was there, but you don’t know what’s there now. The last time I felt this way was in the fall of 1990 when the Iron Curtain fell. The map was crumbling.

In the past week we’ve learned that because of “language arbitrage,” another word for sharp business dealings, the entire CDS market is compromised. The Greek default may be deemed “voluntary” by the banks who wrote the worthless paper, and, surprise surprise, also comprise the “regulatory agency” that makes the rules about what is and is not a default.

As the formidable Reggie Middleton says, the CDS market is shot to hell one way or the other, and the five big banks that hold the vast majority of the trillions of dollars of exposure and now effectively unhedged.

It’s a Mexican standoff. Can we trust bankers to honor the rules of Mutual Assured Destruction? Not hardly. Look at how Hank Paulson took advantage of the opportunity to nuke Lehman. At the first whiff of blood in the water the sharks will attack.

The miracle cure of inflation, which really would have been a better way to get out from under bad debt, is not going to happen in a debt deflation. In the banks unwillingness to recognize that their bad debt is not going to be repaid in full, and the whorish accounting profession’s willingness to let them carry it at fictitious values on their books, the downward spiral of debt deflation is guaranteed.

One of the scariest things I’ve seen this Halloween was an interview with Larry Fink of Blackrock Investments on FT in which he (licking his lips) expressed a willingness on the part of the trillions of dollars of Big Money parked on the sidelines worldwide to participate in the rebuilding of some of these troubled economies at equity-like rates of return (with credit enhancements provided by governments and the IMF, if they could only learn how to behave and keep mostly out of the way)….

If the Greeks are smart they’ll tell the EU to shove and just default on their debts. Once bad debts are written down, it’s amazing how quickly new money can appear.

The world economy will stagnate and tend toward war until honesty returns to the financial statements of the big banks.

As John Hussman has pointed out recently, and as I’ve pointed out all along, the failure of big financial institutions does not necessarily mean the economy falls into depression. In the 1930s, the problem was that deposits were wiped out. All the Feds had to do when the crisis hit was to tell Americans their deposits were insured. When a bank fails, the biggest change from a depositor’s point of view is that the sign changes.

Would the investors in the bank, equity holders and probably most bond holders, have been wiped out? Sure. That’s what risk taking is all about.

But our leaders elected to send good money after bad, and bail the banks out on the taxpayers’ backs. The Germans and French and Americans should just admit they made some really bad loans—and were stupid enough to believe the toilet paper CDSs they were selling each other were actually going to protect them from anything. But then, the big banks were stupid enough, in some cases, to hold the “AAA'” securitizations of sub-prime mortgage paper that Wall Street conned them into creating on their own balance sheets.

There’s plenty of equity-backed liquidity sitting on corporate balance sheets.

Can the global financial oligarchy survive a Mexican standoff? That’s what this historical moment will decide.

And if the oligarchs turn to fratricide, and the strongest become even stronger, and exercise their greed even more, how long until the population of the world coalesces into a hard-edged resistance to financial feudalism through outright rebellion?

In Praise of Papandreou's Referendum Decision; Eurocrats Terrified of Democracy; Parade of Cowards – Mish

Give the People a Vote on Bank Bailouts? Markets and Politicians Horrified at the Thought – Economic Populist

America’s Exploding Pipe Dream - NYTimes.com

2011-10-31T07:47:00.000-07:00

America’s Exploding Pipe Dream - NYTimes.com: "We are slowly — and painfully — being forced to realize that we are no longer the America of our imaginations. Our greatness was not enshrined. Being a world leader is less about destiny than focused determination, and it is there that we have faltered."Click at the end of this short article to the data.

Hussman Funds - Weekly Market Comment: Penny Wise and Euro Foolish - October 24, 2011

2011-10-25T08:23:00.000-07:00

Hussman Funds - Weekly Market Comment: Penny Wise and Euro Foolish - October 24, 2011: "[...] Add in just over $7 billion in research through the National Science Foundation, and about $120 per citizen a year is spent by the government on essential medical and non-military scientific research through these agencies. These figures pale in comparison to the amounts that are increasingly demanded in order to make bondholders whole on their voluntary, bad investments. "

Must read. Our national priorities are almost incalculably screwed up. Thanks to the money the corporations and the rich in general are pouring into Congress to protect their own assets. And of course thanks to the Fed, who grovels before Wall Street just because the reality distortion field of being in New York or Washington seems to demand it."And that's what we've come to - government of the banks, by the banks, and for the banks (because banks are people too) ."

Wages, Expectations, and Prospects for Inflation :: Brent Meyer :: Economic Trends :: 05.27.11 :: Federal Reserve Bank of Cleveland

2011-10-24T07:30:00.000-07:00

Wages, Expectations, and Prospects for Inflation :: Brent Meyer :: Economic Trends :: 05.27.11 :: Federal Reserve Bank of Cleveland: "Wages, Expectations, and Prospects for Inflation

Brent Meyer

Over the past six months, food and energy prices have risen at an annualized rate of 17 percent, prompting speculation of a possible price-wage spiral that will result in rampant inflation. A wage-price spiral occurs when wage earners start to demand higher nominal wages just to keep up with rising inflation (trying to hold real incomes constant). In turn, these wage increases raise the costs of production, which squeezes margins and induces business owners to raise prices. These even-higher prices then push wage earners to try and negotiate even higher wages, which again prods businesses to raise prices, and so on¦resulting in a rapid run-up in inflation."

Not happening if demand continues to collapse. Check out the graphs.

Europe on the breadline: 'Chaos is a Greek word' | World news | guardian.co.uk

2011-10-22T07:18:00.000-07:00

Europe on the breadline: 'Chaos is a Greek word' | World news | guardian.co.uk: "Jon Henley is travelling through Portugal, Spain, Italy and Greece to hear the human stories behind the European debt crisis. Here are some of the responses of readers who have written to him with insights into some of the problems Greece's citizens face amid the crisis"

Read. Conditions on the ground.

When No. 1 Financial-Strength Ranking Spells Doom - Bloomberg

2011-10-21T20:32:00.000-07:00

When No. 1 Financial-Strength Ranking Spells Doom - Bloomberg: "Less than three months ago the European Banking Authority said Dexia SA (DEXB) had passed its so- called stress test with ease. The French-Belgian lender’s July 15 news release carried this headline: “2011 EU-wide Stress Test Results: No Need for Dexia to Raise Additional Capital.”

Then last weekend, 86 days after getting its clean bill of health, Dexia took a government bailout to avoid collapsing. Nobody was surprised this happened. Nor should anyone have been."

Americans for Greater Inequality - NYTimes.com

2011-10-21T07:45:00.000-07:00

Americans for Greater Inequality - NYTimes.com: "As Rich Oppel and I wrote in an article today, the Republican presidential candidates have been steadily promoting flatter — and therefore more regressive — tax overhaul plans. Flatter taxes have of course always been the holy grail for many in the conservative base, but now such proposals seem to be gathering broader support, too....

Ms. Kuziemko, a professor at Princeton, and Mr. Norton, a professor at Harvard, argue that greater opposition to redistributive policies may actually be a predictable reaction to having slipped in the distribution oneself:

People exhibit a fundamental loathing for being near or in last place — what we call “last place aversion.” This fear can lead people near the bottom of the income distribution to oppose redistribution because it might allow people at the very bottom to catch up with them or even leapfrog past them.

This statement is based on a study of theirs based on survey data. The surveys found that people making just above the minimum wage are the most likely to oppose an increase in it."

I see this as a perverse extension of the "you too can be rich" thinking that Ronald Reagan exploited in getting his regressive tax agenda under way. It's also part and parcel of the "beggar thy neighbor" complex that arises in contractionary periods in international trade. I continue to be hopeful that humankind can effect a major evolutionary shift in thinking that will lead to greater equality and peaceful conflict resolution.

Occupy Wall Street needs to occupy Congress and lobbyists - The Washington Post

2011-10-19T06:51:00.000-07:00

Occupy Wall Street needs to occupy Congress and lobbyists - The Washington Post: "There is an unfocused financial rage in the United States.

It was born in the late 1990s on an unholy trinity of accounting swindles, the dot-com collapse and analyst scandals. It grew on a housing boom and bust that created 5 million (and counting) foreclosures, leaving more than a quarter of bank-financed homes worth less than their mortgages. It matured on a growing wealth disparity that eviscerated the middle class and brought back the plutocracy of the 1920s. It reached its peak with the bailout of reckless bankers, who were rewarded for their irresponsibility with what may be the greatest wealth transfer in human history."

Worth a read. Barry's three-pronged reform program makes a lot of sense.

Consumption going down

2011-10-17T08:18:00.001-07:00

More Important than Historical Statistics--Private Debt Decline – Comstock

I’ve been saying for years that Consumption at 70% of GDP is unsustainable. Comstock calls a double dip recession in the works, as Rosenberg does in last post, but the implications of Consumption falling back to its long-term average percent of GDP are secular, not cyclical.

The central bank shell game

2011-10-17T07:14:00.001-07:00

Per David Rosenberg, h/t www.patrick.net

Banks pump and dump bad debt on to securitization markets (with the help of greedy fee-earning Wall Street banks and whoring ratings agencies)… bad debt spreads to banks across the face of the Earth, destabilizing financial markets… central banks buy up bad debt to hide it on their opaque balance sheets… sovereign governments back the bad debt purchased by the central banks… commercial banks in the meanwhile load up on sovereign bonds to have some assets on their balance sheets while consumers and businesses are not doing a lot of borrowing… and, mirabile dictu, the sovereigns start to wobble and the commercial banks are back where they started from….

Thanks Richard Nixon, for putting the world on fiat money. Thanks Alan Greenspan and Ben Bernanke for saying there’s no loan that can’t be made.

If the Republicans win the White House, we will have fiscal contraction that will precipitate a second financial crisis as the bad debt pigeons come home to roost (not to mention the trillions of dollars of derivative bets that were made by institutions collecting “free money” by selling un-backed “protecition” on sovereign debt and all manner of other hideous paper out there….

Out of options – David Rosenberg

Hussman Funds - Weekly Market Comment: Talking Points for the "Occupy Wall Street" Protesters - October 10, 2011

2011-10-15T07:36:00.000-07:00

Hussman Funds - Weekly Market Comment: Talking Points for the "Occupy Wall Street" Protesters - October 10, 2011: "1) "Failure" only means that corporate bondholders don't get every penny

Background: When Wall Street talks about the "failure" of a bank or other financial institution it means the failure of the company to pay off its own bondholders. It does not mean that depositors, counterparties or other bank customers lose money ...."

Definitely worth reading if you're struggling to articulate what's wrong with Wall Street and Washington today.

The 12 years war

2011-10-11T07:00:00.001-07:00

It occurs to me that it will probably take a dozen years—if it ever happens—to amend the Constitution to take the money out of politics, to recognize that democracies are made up of human beings, not corporations.

As I pointed out a couple of posts ago, it will probably have to come up from the grass roots, through the state legislatures, and not through Congress, which is hopelessly corrupt.

The John Roberts Supreme Court has done its best to hand the country over to the plutocrats with a decision that is stunning in its idiocy, namely, that corporations are people. We now have super-pacs that are able to accept unlimited amounts of money on an anonymous basis to interfere with any political campaign in the country. Do you think all that money will come from onshore?

The “conservative” members of the Roberts court should be prosecuted for treason.

It’s going to be a long war, that will be fought in meetings with neighbors and local politicians, to take back our state and local governments first. The money will come down to the local level and poison the atmosphere, for sure. The battle comes down to convincing the conservatives that democracy is for people, not corporations. It’s all about conserving our democracy.

Let’s make our goal amending the Constitution to overturn Citizens vs. United States—at least. Even better, let’s introduce spending limits on campaigns and make them stick.

Let’s see if we can get this done by 2023, close to the forecasted end of the fourth turning.

Why Obomba is a loser

2011-10-11T06:43:00.001-07:00

Jeffrey Immelt has his head up his butt. Look at the smugness on that self-satisfied face. This picture is worth a thousand words about how far out of touch our ruling class is with the American people.

We are both smug and out of touch with reality.

From www.firedoglake.com:

In a 60 Minutes interview on Sunday, Obama’s chosen go-to guy on job creation, General Electric’s chairman and CEO Jeffrey Immelt, our Jobs Czar, had this to say about the misconceptions of those protesting Wall Street in over 800 cities across the nation by the tens of thousands,

I want you to root for me. Look, every one in Germany roots for Siemens, everyone in Japan roots for Toshiba, everyone in China roots for China South Rail, I want you to say, win GE.

I think this notion that it’s the population of the US against big companies is just wrong.

Well Jeff, let’s take an unvarnished look at the differences between those companies in Japan and Germany as regards the ratio of pay for a ceo to that of the average worker compared to ceo’s like yourself in American corporations, shall we?

In Japan the ratio of pay for a ceo compared to that of the average worker is…… 11 to 1,

In Germany that ratio expands to a dizzying…… 12 to 1,

and in the the old US of A Jeff ?….. it’s 475 to 1.

In addition Jeff, your company has one of the worst records of any American corporation for exporting American jobs overseas. Since you assumed control of GE, you have cut one-fifth of your company’s U.S. work force while increasing the number of your companies overseas employees dramatically. Your company, the largest corporation in America, paid no taxes in 2010 despite making $145.2 billion in profits and receiving nearly over $5 billion in federal subsidies in that same period.

The adage “with friends like you, who needs enemies” comes to mind.

You and your ilk, as well as those who appointed you to the position you now hold in government, belong in jail for destroying the economic well being of millions here and abroad, and for forcing the American population into the streets to address the problem because of the harm you have caused to the machinery of democracy in America.

Neither capitalism nor democracy

2011-10-06T06:59:00.001-07:00

America has neither capitalism nor democracy currently.

Capitalism would require that government let bankrupt firms fail. Capitalism would require that the owners of capital—not corporate managements—would have a majority say in how companies are run. Capitalism would never permit the rich to impose their personal investment losses on the rest of tax-paying Americans. In-your-face bonuses paid to Wall Street executives whose firms and jobs were saved on the taxpayers’ back would not have happened under a capitalist system.

Democracy would require that “persons” be people, human beings, not cash-bloated corporations. Democracy would require that the desires of the people would be effected, to a reasonable and rational degree, by their elected representatives, not cynically ignored as they grovel for their campaign dollars before their moneyed donors, a rich class that controls not only the politicians but corporate governance (which they’ve lock up tight), and to an increasing degree, national governments around the world.

In reflecting upon what it would take to amend the Constitution, the phrase “no exit” occurred to me. Here’s the process:

Article V of the Constitution spells out the processes by which amendments can be proposed and ratified.

To Propose Amendments

Two-thirds of both houses of Congress vote to propose an amendment, or

Two-thirds of the state legislatures ask Congress to call a national convention to propose amendments. (This method has never been used.)

To Ratify Amendments

Three-fourths of the state legislatures approve it, or

Ratifying conventions in three-fourths of the states approve it. This method has been used only once -- to ratify the 21st Amendment -- repealing Prohibition.

The Supreme Court has stated that ratification must be within "some reasonable time after the proposal." Beginning with the 18th amendment, it has been customary for Congress to set a definite period for ratification. In the case of the 18th, 20th, 21st, and 22nd amendments, the period set was 7 years, but there has been no determination as to just how long a "reasonable time" might extend.

Of the thousands of proposals that have been made to amend the Constitution, only 33 obtained the necessary two-thirds vote in Congress. Of those 33, only 27 amendments (including the Bill of Rights) have been ratified. (source)

It will require a Congress, or two thirds of the state legislatures—both of whom are dependent on rich donors—willing to vote above their own narrow self-interest to get an amendment even proposed. I would guess that it will remain impossible for inside-the-Beltway politicians ever to achieve that state of mind. A proposal to amend will have to come from the state legislatures.

What we have now is a semi-feudal system, a class system supported in principle and in effect by the Republican party, who, as shown a few posts ago, are the party of increasing inequality. So the red states will be hard to get on board with a proposal to amend unless the commoners suddenly wake up to their exploited state.

The Reid tax proposal, to impose a 5 percent surcharge on incomes over a million dollars a year is estimated to generate about half a trillion in incremental revenue, or about a third of the projected deficits near-term. That’s how unequal things are. If only the average Republican could see that they’re being snookered with a load of Reaganite bunkum….

It will take a sea-change of popular opinion about government, taxes, sharing, work, reward, democracy for America to exit the one-way street to neo-feudalism we’re on now.

"We the corporations" | Move to Amend

2011-10-05T11:31:00.000-07:00

"We the corporations" | Move to Amend: ""We the corporations"
On January 21, 2010, with its ruling in Citizens United v. Federal Election Commission, the Supreme Court ruled that corporations are persons, entitled by the U.S. Constitution to buy elections and run our government. Human beings are people; corporations are legal fictions.

We, the People of the United States of America, reject the U.S. Supreme Court's ruling in Citizens United, and move to amend our Constitution to:

* Firmly establish that money is not speech, and that human beings, not corporations, are persons entitled to constitutional rights.

* Guarantee the right to vote and to participate, and to have our vote and participation count.

* Protect local communities, their economies, and democracies against illegitimate "preemption" actions by global, national, and state governments.

The Supreme Court is misguided in principle, and wrong on the law. In a democracy, the people rule. We Move to Amend."

The "revolution" is a joke. As we learned with Katrina, Americans live in an occupied land where mercenaries can spring out of the woodwork at the slightest sign of civil unrest. While Occupy Wall Street might be a start, only Constitutional amendment has a chance of making real, lasting change.

Meltdown

2011-10-01T07:40:00.001-07:00

h/t zerohedge.com

Part 1 here. This Aljazeera documentary is chockerblot with high-profile insiders from the Western financial world. What does that tell you?

If you haven’t watch Inside Job, watch it now. It used to be available for free online, but I don’t find it now.

America and Europe: Saving the Rich and Losing the Economy

2011-09-29T07:55:00.001-07:00

For years, Paul Craig Roberts has decried the behavior of corporate America (really, the international corporate ruling class) for being like a cancer upon the developed world, trashing their countrymen and women for personal gain. I am reproducing this from globalresearch.ca. This ruling class currently has a death-grip on the American political system that will only be broken loose by concerted democratic action.

America and Europe: Saving the Rich and Losing the Economy

by Dr. Paul Craig Roberts

Economic policy in the United States and Europe has failed, and people are suffering.

Economic policy failed for three reasons: (1) policymakers focused on enabling offshoring corporations to move middle class jobs, and the consumer demand, tax base, GDP, and careers associated with the jobs, to foreign countries, such as China and India, where labor is inexpensive; (2) policymakers permitted financial deregulation that unleashed fraud and debt leverage on a scale previously unimaginable; (3) policymakers responded to the resulting financial crisis by imposing austerity on the population and running the printing press in order to bail out banks and prevent any losses to the banks regardless of the cost to national economies and innocent parties.

Jobs offshoring was made possible because the collapse of the Soviet Union resulted in China and India opening their vast excess supplies of labor to Western exploitation. Pressed by Wall Street for higher profits, US corporations relocated their factories abroad. Foreign labor working with Western capital, technology, and business know-how is just as productive as US labor. However, the excess supplies of labor (and lower living standards) mean that Indian and Chinese labor can be hired for less than labor’s contribution to the value of output. The difference flows into profits, resulting in capital gains for shareholders and performance bonuses for executives.

As reported by Manufacturing and Technology News (September 20, 2011) the Quarterly Census of Employment and Wages reports that in the last 10 years, the US lost 54,621 factories, and manufacturing employment fell by 5 million employees. Over the decade, the number of larger factories (those employing 1,000 or more employees) declined by 40 percent. US factories employing 500-1,000 workers declined by 44 percent; those employing between 250-500 workers declined by 37 percent, and those employing between 100-250 workers shrunk by 30 percent. http://www.manufacturingnews.com/

These losses are net of new start-ups. Not all the losses are due to offshoring. Some are the result of business failures.

US politicians, such as Buddy Roemer, blame the collapse of US manufacturing on Chinese competition and “unfair trade practices.” However, it is US corporations that move their factories abroad, thus replacing domestic production with imports. Half of US imports from China consist of the offshored production of US corporations.

The wage differential is substantial. According to the Bureau of Labor Statistics, as of 2009, average hourly take-home pay for US workers was $23.03. Social insurance expenditures add $7.90 to hourly compensation and benefits paid by employers add $2.60 per hour for a total labor compensation cost of $33.53.

In China as of 2008, total hourly labor cost was $1.36, and India’s is within a few cents of this amount. Thus, a corporation that moves 1,000 jobs to China saves saves $32,000 every hour in labor cost.These savings translate into higher stock prices and executive compensation, not in lower prices for consumers who are left unemployed by the labor arbitrage.

Republican economists blame “high” US wages for for the current high rate of unemployment. However, US wages are about the lowest in the developed world. They are far below hourly labor cost in Norway ($53.89), Denmark ($49.56), Belgium ($49.40), Austria ($48.04), and Germany ($46.52). The US might have the world’s largest economy, but its hourly workers rank 14th on the list of the best paid. Americans also have a higher unemployment rate. The “headline” rate that the media hypes is 9.1 percent, but this rate does not include any discouraged workers or workers forced into part-time jobs because no full-time jobs are available.

The US government has another unemployment rate (U6) that includes workers who have been too discouraged to seek a job for six months or less. This unemployment rate is over 16 percent. Statistician John Williams (Shadowstats.com) estimates the unemployment rate when long-term discouraged workers (more than six months) are included. This rate is over 22 percent.

Most emphasis is on the lost manufacturing jobs. However, the high speed Internet has made it possible to offshore many professional service jobs, such as software engineering, Information Technology, research and design. Jobs that comprised ladders of upward mobility for US college graduates have been moved offshore, thus reducing the value to Americans of many university degrees. Unlike former times, today an increasing number of graduates return home to live with their parents as there are insufficient jobs to support their independent existence.

All the while, the US government allows in each year one million legal immigrants, an unknown number of illegal immigrants, and a large number of foreign workers on H-1B and L-1 work visas. In other words, the policies of the US government maximize the unemployment rate of American citizens.

Republican economists and politicians pretend that this is not the case and that unemployed Americans consist of people too lazy to work who game the welfare system. Republicans pretend that cutting unemployment benefits and social assistance will force “lazy people who are living off the taxpayers” to go to work.

To deal with the adverse impact on the economy from the loss of jobs and consumer demand from offshoring, Federal Reserve chairman Alan Greenspan lowered interest rates in order to create a real estate boom. Lower interest rates pushed up real estate prices. People refinanced their houses and spent the equity. Construction, furniture and appliance sales boomed. But unlike previous expansions based on rising real income, this one was based on an increase in consumer indebtedness.

There is a limit to how much debt can increase in relation to income, and when this limit was reached, the bubble popped.

When consumer debt could rise no further, the large fraudulent component in mortgage-backed derivatives and the unreserved swaps (AIG, for example) threatened financial institutions with insolvency and froze the banking system. Banks no longer trusted one another. Cash was hoarded. Treasury Secretary Paulson, browbeat Congress into massive taxpayer loans to financial institutions that functioned as casinos. The Paulson Bailout (TARP) was large but insignificant compared to the $16.1 trillion (a sum larger than US GDP or national debt) that the Federal Reserve lent to private financial institutions in the US and Europe.

In making these loans, the Federal Reserve violated its own rules. At this point, capitalism ceased to function. The financial institutions were “too big to fail,” and thus taxpayer subsidies took the place of bankruptcy and reorganization. In a word, the US financial system was socialized as the losses of the American financial institutions were transferred to taxpayers.

European banks were swept up into the financial crisis by their unwitting purchase of the junk financial instruments marketed by Wall Street. The financial junk had been given investment grade rating by the same incompetent agency that recently downgraded US Treasury bonds.

The Europeans had their own bailouts, often with American money (Federal Reserve loans). All the while Europe was brewing an additional crisis of its own. By joining the European Union and (except for the UK) accepting a common European currency, the individual member countries lost the services of their own central banks as creditors. In the US and UK the two countries’ central banks can print money with which to purchase US and UK debt. This is not possible for member countries in the EU.

When financial crisis from excessive debt hit the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) their central banks could not print euros in order to buy up their bonds, as the Federal Reserve did with “quantitative easing.” Only the European Central Bank (ECB) can create euros, and it is prevented by charter and treaty from printing euros in order to bail out sovereign debt.

In Europe, as in the US, the driver of economic policy quickly became saving the private banks from losses on their portfolios. A deal was struck with the socialist government of Greece, which represented the banks and not the Greek people. The ECB would violate its charter and together with the IMF, which would also violate its charter, would lend enough money to the Greek government to avoid default on its sovereign bonds to the private banks that had purchased the bonds. In return for the ECB and IMF loans and in order to raise the money to repay them, the Greek government had to agree to sell to private investors the national lottery, Greece’s ports and municipal water systems, a string of islands that are a national preserve, and in addition to impose a brutal austerity on the Greek people by lowering wages, cutting social benefits and pensions, raising taxes, and laying off or firing government workers.

In other words, the Greek population is to be sacrificed to a small handful of foreign banks in Germany, France and the Netherlands.

The Greek people, unlike “their” socialist government, did not regard this as a good deal. They have been in the streets ever since.

Jean-Claude Trichet, head of the ECB, said that the austerity imposed on Greece was a first step. If Greece did not deliver on the deal, the next step was for the EU to take over Greece’s political sovereignty, make its budget, decide its taxation, decide its expenditures and from this process squeeze out enough from Greeks to repay the ECB and IMF for lending Greece the money to pay the private banks.

In other words, Europe under the EU and Jean-Claude Trichet is a return to the most extreme form of feudalism in which a handful of rich are pampered at the expense of everyone else.

This is what economic policy in the West has become--a tool of the wealthy used to enrich themselves by spreading poverty among the rest of the population.

On September 21 the Federal Reserve announced a modified QE 3. The Federal Reserve announced that the bank would purchase $400 billion of long-term Treasury bonds over the next nine months in an effort to drive long-term US interest rates even further below the rate of inflation, thus maximizing the negative rate of return on the purchase of long-term Treasury bonds. The Federal Reserve officials say that this will lower mortgage rates by a few basis points and renew the housing market.

The officials say that QE 3, unlike its predecessors, will not result in the Federal Reserve printing more dollars in order to monetize US debt. Instead, the central bank will raise money for the bond purchases by selling holdings of short-term debt. Apparently, the Federal Reserve believes it can do this without raising short-term interest rates, because back during the recent debt-ceiling-government-shutdown-crisis, the Federal Reserve promised banks that it would keep the short-term interest rate (essentially zero) constant for two years.

The Fed’s new policy will do far more harm than good. Interest rates are already negative. To make them more so will have no positive effect. People aren’t buying houses because interest rates are too high, but because they are either unemployed or worried about their jobs and do not see a recovering economy.

Already insurance companies can make no money on their investments. Consequently, they are unable to build their reserves against claims. Their only alternative is to raise their premiums. The cost of a homeowner’s policy will go up by more than the cost of a mortgage will decline. The cost of health insurance will go up. The cost of car insurance will rise. The Federal Reserve’s newly announced policy will impose more costs on the economy than it will reduce.

In addition, in America today savings earn nothing. Indeed, they produce an ongoing loss as the interest rate is below the inflation rate. The Federal Reserve has interest rates so low that only professionals who are playing arbitrage with algorithm programmed computer models can make money. The typical saver and investor can get nothing on bank CDs, money market funds, municipal and government bonds. Only high risk debt, such as Greek and Spanish bonds, pay an interest rate that is higher than inflation.

For four years interest rates, when properly measured, have been negative. Americans are getting by, maintaining living standards, by consuming their capital. Even those with a cushion are eating their seed corn. The path that the US economy is on means that the number of Americans without resources to sustain them will be rising. Considering the extraordinary political incompetence of the Democratic Party, the right-wing of the Republican Party, which is committed to eliminating income support programs, could find itself in power. If the right-wing Republicans implement their program, the US will be beset with political and social instability. As Gerald Celente says, “when people have have nothing left to lose, they lose it.”

Dr. Roberts was Assistant Secretary of the Treasury for Economic Policy and Associate Editor of the Wall Street Journal.

Income growth under Republican and Democrat presidents

2011-09-25T08:09:00.001-07:00

The first thing Bartels did was break down economic performance by income class. The unsurprising result is shown in the chart….

Under Democratic presidents, every income class did well but the poorest did best. The bottom 20% had average pretax income growth of 2.63% per year while the top 5% showed pretax income growth of 2.11% per year.

Republicans were polar opposites. Not only was their overall performance worse than Democrats, but it was wildly tilted toward the well off. The bottom 20% saw pretax income growth of only .6% per year while the top 5% enjoyed pretax income growth of 2.09% per year. (What's more, the trendline is pretty clear: if the chart were extended to show the really rich — the top 1% and the top .1% — the Republican growth numbers for them would be higher than the Democratic numbers.)

In other words, Republican presidents produce poor economic performance because they're obsessed with helping the well off. Their focus is on the wealthiest 5%, and the numbers show it. At least 95% of the country does better under Democrats. (source)

The Republicans are salivating over the opportunity to send America into the twenty-first century as the first developed nation to return to a state of feudalism.

The 2005 Kevin Drum article cited as source above (based on the Bartels paper and subsequent book) goes on to show that Republican presidents tend to produce their best economic performance in the year of the election, to induce lower income groups to vote for them.

So it would appear the Pyrrhic victory sought by the Republicans—an economic collapse under President Obama to usher in their king—is part of a longer pattern of election year economic manipulations of long standing.

God help us.

What you’re not seeing on the mainstream media

2011-09-23T08:32:00.001-07:00

In Class Warfare, Guess Which Class Is Winning

2011-09-20T06:31:00.000-07:00

In Class Warfare, Guess Which Class Is Winning - New York Times:

[...] It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office. Further, in conversation it came up that Mr. Buffett doesn’t use any tax planning at all. He just pays as the Internal Revenue Code requires. “How can this be fair?” he asked of how little he pays relative to his employees. “How can this be right?”

Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.

“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

As I've said before, we now have an international class of corporate elite who consider themselves gamesmen above the reach of national governments.

Seems like only in countries with high across-the-population kinship coefficients that egalitarian income distributions and tax systems can exist in today's international cut-throat business world (i.e., Sweden, Denmark, Norway, Germany, Japan and a few others). Might these countries not enjoy a long-term competitive advantage, as the costs of throwing more and more people into prison and social discord and non-cooperation mount in the big developed banana republics like the United States?

The closest analog to the Scandinavian "socialist" egalitarian mind-set in America is Minnesota, heavily settled by Germans and Scandinavians, which has most recently produced Michelle Bachman... not an encouraging sign for where we're going...

America is arguably in a pre-fascist state.

The theft of the American pension - Economics - Salon.com

2011-09-19T08:15:00.000-07:00

The theft of the American pension - Economics - Salon.com: "The theft of the American pension
In the last decade, the country's biggest companies have raided worker benefits for profit. An expert explains how"

America is in the midst of a retirement crisis. Over the last decade, we've witnessed the wholesale gutting of pension and retiree healthcare in this country. Hundreds of companies have slashed and burned their way through their employees' benefits, leaving former workers either on Social Security or destitute -- and taxpayers with a huge burden that, as the baby boomer generation edges towards retirement, is likely to grow. It's a problem that is already affecting over a million people -- and the most shocking part is, none of this needed to happen.

As Ellen E. Schultz, an investigative reporter for the Wall Street Journal, reveals in her new book, "Retirement Heist," it wasn't the dire economy that led these companies to plunder their own employees' earnings, it was greed. Over the last decade, some of the biggest companies -- including Bank of America, IBM, General Motors, GE and even the NFL -- found loopholes, abused ambiguous regulations and used litigation to turn their employees' hard-earned retirement funds into profits, and in some cases, executive compensation. Schultz's book offers a relentlessly infuriating look at the mechanisms they used to get away with it.

Whose cash?

2011-09-19T07:22:00.001-07:00

I keep hearing that “corporations have $2 trillion of cash on their balance sheets,” and that if they would just spend it, the economy would recover.

This is further evidence to me of the separation of ownership and control of the American corporation, in effect since Berle and Means' seminal book of the same title (link). From one of the reviews of the book: “The plain and simple bottom line is that unless you're an insider, you're nothing more than overhead to be tolerated.”

This money supposedly belongs to the shareholders, many of whom are pension funds (remember Peter Drucker’s dream of pension fund socialism)? He got off that horse quickly and joined the board of GE to tutor Jack Welch and feed his five kids.

The gang leaders of today’s dominant gangs, the modern multinational corporations, are simply waiting the for the right moment to loot their corporate treasuries, again.

Perhaps we can see CEO salaries climb to a thousand times the (declining) median household income! They can start to give themselves titles, and perhaps permanent inheritable seats in Congress, so that they don’t have to buy every election!

Who will be king? Don’t we need a king to complete the picture?

‘It’s the debt, stupid,’ redux

2011-09-07T06:48:00.001-07:00

Watch for unprecedented manipulation of the unemployment rate, as the administration comes to terms with the fact it is the relationship of the unemployment rate to its adaptation level that is the strongest single determinant of confidence in the United States of America. The general public, including unsophisticated investors and even types like yours truly with a Ph.D. in economics, distrust the stock market and look at any manufactured gains there as simply more evidence of the expropriation of the public by the kleptocracy.

We learned in macro thirty-five years ago that when effective demand collapses in the depression, increased monetary “stimulus” is like “pushing on a string”—the public and businesses don’t want to borrow in a collapsing economy. The only lesson Bernanke seems to have taken from his studies of the Depression (and from his current crop of colleagues) is that banks can’t be permitted to lose any money.

Three links by sources I trust sum it up pretty well:

It's A Long Hard Road – www.contraryinvestor.com (may be in the archives after September 2011)

An Imminent Downturn: Whom Will Our Leaders Defend? – John Hussman. Hussman has developed a robust logistic model on more than just the yield curve, something I would do if I were paid to to do.

‘Helicopter Ben’ risks destroying credit creation – Bill Gross. An almost comical whine seemingly on behalf of the banks by Bill Gross, who points out that the proposed contortionist “Operation Twist” will not help the banks to create credit, of course missing the main point that in a multi-generational deflationary collapse of effective demand very few want to borrow except the carry trade operators who are having fun blowing bubbles right and left to sucker the poor forcibly “risk on” public in to parting with more of their money.

By the way, I may have been the first to coin the phrase, “It’s the debt, stupid,” but I welcome any contributions to substantiating that claim. Here’s the earliest reference I can find on the site:

The Animal Spirits Page: It's the debt, stupid

‘Animal spirits’ update

2011-09-02T07:23:00.001-07:00

There is still the potential for an election year secular exhilaration if the unemployment rate declines even marginally, as the government forecasts it to:

This would bring our “animal spirits” measure up above zero:

Thus from our point of view an Obama reelection appears possible in spite of the high unemployment rate. See Never Wrong Forecasting Model Predicts an Obama Victory In 2012. Last time we had a Republican Congress and a “liberal” Democratic president we ended up with a surplus, not that this would be likely this time, the problems are too big after Georgy-Porgy Budget Buster and Obomba the guns and butter reactionary Democrat.

Any sustained increases in the unemployment rate will, however, destroy our implicit confidence determinant utterly, and it will fall to match the levels of the Michigan sentiment measure (green in lower graph).

It is pretty much guaranteed that we’ll get infrastructure stimulus with money printed by the Fed, unless the Republicans decide it is more important to torpedo Obomba and the economy and probably the viability of their party for some time to come.

The mood in 2012 promises to be pretty weird.

25 Signs That The Financial World Is About To Hit The Big Red Panic Button

2011-08-31T14:20:00.000-07:00

25 Signs That The Financial World Is About To Hit The Big Red Panic Button: "25 Signs That The Financial World Is About To Hit The Big Red Panic Button"

Nice compendium with good links. Sentiment is still so bearish the market may yet rally in the historically weakest month of the year....

This is not investment advice. You trade at your own risk, unlike the Wall Street banks, who also trade at your risk.

Bruce Bartlett: The Case Against a Payroll Tax Cut - NYTimes.com

2011-08-30T07:45:00.000-07:00

Bruce Bartlett: The Case Against a Payroll Tax Cut - NYTimes.com: "It’s rare for Republicans to find a tax cut they don’t support, but last week The New York Times reported on just such an exotic creature. Many leading Republicans, it seems, are extremely cool to the idea of extending the temporary cut in the Social Security tax that took effect on Jan. 1 and expires on Dec. 31. It has lowered employees’ share of the payroll tax to 4.2 percent, from 6.2 percent."

How about just taking the income cap off and leaving the tax cut in place? It's a flat tax that conservatives should be able to support, right? My guesstimate is that taking the income cap off would increase revenues.

Laura D'Andrea Tyson: Recovering From a Balance-Sheet Recession - NYTimes.com

2011-08-29T08:05:00.000-07:00

Laura D'Andrea Tyson: Recovering From a Balance-Sheet Recession - NYTimes.com: "Recovering From a Balance-Sheet Recession"

This whole thing is worth a read. When unemployment is concentrated among the less skilled, doesn't it make sense to launch public works infrastructure programs, as FDR did? Can it be done without the pork all ending up in the hands of rich friends of Barack?

If the Tea Party has its way, we have some pretty big pot holes in our future.

Hussman - A Reprieve from Misguided Recklessness [Please!]

2011-08-29T07:38:00.000-07:00

Hussman Funds - Weekly Market Comment: A Reprieve from Misguided Recklessness - August 29, 2011: "Over the past three years, Wall Street and the banking system have enjoyed enormous fiscal and monetary concessions on the self-serving assertion that the global financial system will "implode" if anyone who made a bad loan might actually experience a loss. Because reversing this mantra is so difficult, policy makers are likely to continue fitful efforts to "rescue" this debt for the sake of bondholders, through mechanisms that are increasingly distasteful to the broader population. The justification for those policies will therefore have to be coupled with rhetoric that institutions holding these securities are too "systemically important" to suffer losses.

On this note, it is critical to remember that nearly all financial institutions have enough capital and obligations to their own bondholders to completely absorb restructuring losses without customers or counterparties bearing any loss at all. So keep in mind that the debate here is not about protecting customers or counterparties - it is really about whether the stockholders and bondholders of banks and other financial institutions should bear a loss. The "failure" of a bank only means that existing stockholders and bondholders are disenfranchised - the company simply takes on a new life under new ownership. Existing stockholders lose everything, unsecured bondholders typically lose something, and senior bondholders get any residual obtained as a result of the sale or transfer of the company. If the global economy is fortunate, the financial system two or three years from now will look much the same as it does today, but the ownership and capital structure will have changed almost entirely. A major restructuring of debt is the clearest path to long-term economic recovery, and the accompanying losses to those who recklessly made bad loans would be the highest realization of Schumpeter's idea of "creative destruction."

From that perspective, Warren Buffett's $5 billion investment in Bank of America preferred stock last week was essentially a defense of the old guard. Buffet observed, "It's a vote of confidence, not only in Bank of America, but also in the country."

Yes - to be specific, it's a vote of confidence that the country will bail out Bank of America in any future crisis. We should all hope that Buffett's investment is successful - provided there is no future crisis - and we should equally hope that Buffett loses the entire investment otherwise."

The monetary madness continues. Hussman's statistically infallible indicators of recession indicate we're already in one; see also Mish here citing the work of several others.

See also Barry Ritholtz's article on the banking crisis at A how-to guide for fixing America’s banks

I will do an "animal spirits" update Friday if the unemployment rate is published. I don't think we've seen the downward acceleration phase of the alleged current recession yet.

Consumer-led recession beginning?

2011-08-28T20:29:00.001-07:00

From www.zerohedge.com:

The slow disappearance of the American working man

2011-08-27T07:30:00.000-07:00

disappearance-american-working-man-businessweek: Personal Finance News from Yahoo! Finance: "The portion of men holding a job—any job, full- or part-time—fell to 63.5 percent in July—hovering stubbornly near the low point of 63.3 percent it reached in December 2009. These are the lowest numbers in statistics going back to 1948. Among the critical category of prime working-age men between 25 and 54, only 81.2 percent held jobs, a barely noticeable improvement from its low point last year—and still well below the depths of the 1982-83 recession, when employment among prime-age men never dropped below 85 percent. To put those numbers in perspective, consider that in 1969, 95 percent of men in their prime working years had a job....

The bottom line: As women saw workplace gains in recent decades—68 percent of those 25 to 54 have jobs—men's prospects have diminished."

The numbers behind the headline numbers.

Education & class: can you say “indentured servitude”?

2011-08-26T09:35:00.001-07:00

While it is well known that “education pays,” at least for the seasoned worker, the barriers to entry into well-paying jobs are being raised. The popping of the student debt bubble promises to be extremely unpleasant, with many heavily indebted graduates entering a state of virtual indentured servitude. Like health care, education in America seems to be only for those that can afford it. The ruling class tightens its grip on the country.

A few excerpts from articles worth reading in their entirety:

Student debt in America will surge past $1 trillion next year and has already surpassed credit card borrowing, promising to turn out the most hocked generation of college graduates in history.
http://moneywatch.bnet.com/retirement-planning/blog/bank-dad/students-in-debt-1-trillion-hole-and-more-dropouts/740/#ixzz1W9OR3MSE

Student loans are tough. They can follow you for a long time after graduation and can be hard to manage with other debts you take on. Generally, you can't get rid of student loan debt in bankruptcy. This is non-dischargeable debt, which means it remains after bankruptcy and you must pay it.

However, there is one exception you should know about. Some student loans may be considered an undue hardship, and can be discharged, or eliminated, if the loan payments put an extreme burden on you or your family.

Show Your Hardship to the Bankruptcy Court

The first step to filing for undo hardship is to file a separate motion with the court and then meet with the judge to explain your hardship. This isn't easy to do. You have to show three things to prove undue hardship:

That in your current situation, you can't maintain a minimum standard of living and repay your loans

Your bad financial situation is likely to continue

You made honest efforts to pay off the loans

It's almost impossible to show undue hardship unless you're physically unable to work and your situation isn't likely to improve in the future. So, if your student loans make up most of your debt, it probably isn't wise to attempt this unless you're disabled.

In the past, some privately funded student loans could be discharged in a Chapter 7 bankruptcy. However, the law changed with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Now, any education loan that qualifies for a tax deduction is non-dischargeable, unless you show "undue hardship."
http://bankruptcy.lawyers.com/consumer-bankruptcy/Student-Loans-In-Bankruptcy.html

Just like the labor force as a whole, recent college graduates have seen a near doubling of their unemployment rates. This pattern is similar to the labor market experience of recent college graduates during the cyclical recession of 2001.
http://www.frbsf.org/publications/economics/letter/2011/el2011-09.html

Now evidence is emerging that the damage wrought by the sour economy is more widespread than just a few careers led astray or postponed. Even for college graduates — the people who were most protected from the slings and arrows of recession — the outlook is rather bleak.

Employment rates for new college graduates have fallen sharply in the last two years, as have starting salaries for those who can find work. What’s more, only half of the jobs landed by these new graduates even require a college degree, reviving debates about whether higher education is “worth it” after all.

“I have friends with the same degree as me, from a worse school, but because of who they knew or when they happened to graduate, they’re in much better jobs,” said Kyle Bishop, 23, a 2009 graduate of the University of Pittsburgh who has spent the last two years waiting tables, delivering beer, working at a bookstore and entering data. “It’s more about luck than anything else.”

The median starting salary for students graduating from four-year colleges in 2009 and 2010 was $27,000, down from $30,000 for those who entered the work force in 2006 to 2008, according to a study released on Wednesday by the John J. Heldrich Center for Workforce Development at Rutgers University. That is a decline of 10 percent, even before taking inflation into account.

Of course, these are the lucky ones — the graduates who found a job. Among the members of the class of 2010, just 56 percent had held at least one job by this spring, when the survey was conducted. That compares with 90 percent of graduates from the classes of 2006 and 2007. (Some have gone for further education or opted out of the labor force, while many are still pounding the pavement.)

Even these figures understate the damage done to these workers’ careers. Many have taken jobs that do not make use of their skills; about only half of recent college graduates said that their first job required a college degree.

The choice of major is quite important. Certain majors had better luck finding a job that required a college degree, according to an analysis by Andrew M. Sum, an economist at Northeastern University, of 2009 Labor Department data for college graduates under 25.

Young graduates who majored in education and teaching or engineering were most likely to find a job requiring a college degree, while area studies majors — those who majored in Latin American studies, for example — and humanities majors were least likely to do so. Among all recent education graduates, 71.1 percent were in jobs that required a college degree; of all area studies majors, the share was 44.7 percent.
http://www.nytimes.com/2011/05/19/business/economy/19grads.html

SACSIS.org.za » News » The World » Why Iceland Should Be in the News, But Is Not

2011-08-26T06:48:00.000-07:00

SACSIS.org.za » News » The World » Why Iceland Should Be in the News, But Is Not: "An Italian radio program's story about Iceland’s on-going revolution is a stunning example of how little our media tells us about the rest of the world. Americans may remember that at the start of the 2008 financial crisis, Iceland literally went bankrupt. The reasons were mentioned only in passing, and since then, this little-known member of the European Union fell back into oblivion."

The EU would seem to be in deep doo-doo.

The Cause Of Riots And The Price of Food - Technology Review

2011-08-25T06:45:00.000-07:00

The Cause Of Riots And The Price of Food - Technology Review: "The Cause Of Riots And The Price of Food
If we don't reverse the current trend in food prices, we've got until August 2013 before social unrest sweeps the planet, say complexity theorists"

Big trouble ahead - macrobusiness.com.au | macrobusiness.com.au

2011-08-22T06:27:00.000-07:00

Big trouble ahead - macrobusiness.com.au | macrobusiness.com.au: “The world economy is now in the grips of a damaging feedback loop involving deteriorating fundamentals, lagging policy responses and destabilized financial markets. If policymakers do not act boldly, and do so in a globally coordinated fashion, the world risks slipping into a prolonged recession with worrisome institutional, political and social consequences”.

Very nice summary of the global financial mess, and the reasons some of the best minds are pessimistic. The focus on aggregate demand rather than distribution is unfortunate, but that reflects the dominant economic paradigm. The world is awash in excess supply....

Study shows powerful corporations really do control the world's finances

2011-08-19T13:22:00.000-07:00

Study shows powerful corporations really do control the world's finances: (PhysOrg.com) -- For many years conventional wisdom has said that the whole world is controlled by the monied elite, or more recently by the huge multi-national corporations that seem to sometime control the very air we breathe. Now, new research by a team based in ETH-Zurich, Switzerland, has shown that what we’ve suspected all along, is apparently true. The team has uploaded their results onto the preprint server arXiv.
Using data obtained (circa 2007) from the Orbis database (a global database containing financial information on public and private companies) the team, in what is being heralded as the first of its kind, analyzed data from over 43,000 corporations, looking at both upstream and downstream connections between them all and found that when graphed, the data represented a bowtie of sorts, with the knot, or core representing just 147 entities who control nearly 40 percent of all of monetary value of transnational corporations (TNCs).

Tax the super-rich or riots will rage in 2012 - Paul B. Farrell - MarketWatch

2011-08-17T06:42:00.000-07:00

Tax the super-rich or riots will rage in 2012 - Paul B. Farrell - MarketWatch: "SAN LUIS OBISPO, Calif. (MarketWatch) — What a year. Rage in London, Egypt, Athens, Damascus. All real. Just a metaphor in the new “Planet of the Apes” film? No, much more. Warning: More rage is dead ahead. Across our planet a new generation is filled with rage. High unemployment. Raging inflation. Dreams lost. Hope gone. While the super -rich get richer and richer.

Listen to that hissing: The fuse is rapidly burning, warning us. Wake up before the rage explodes in your face. This firestorm is endangering America’s future. From forces outside, yes. But far more deadly, from deep within our collective psyche. We have lost our moral compass. We are self-destructing.

Crackpot warning? No. This warning comes from the elite International Monetary Fund. A recent IMF report looked at 'the causes of the two major U.S. economic crises over the past 100 years, the Great Depression of 1929 and the Great Recession of 2007,' writes Rana Foroohar, an economics editor at Time magazine.

'There are two remarkable similarities in the eras that preceded these crises. Both saw a sharp increase in income inequality and household-debt-to-income ratios.' And in each case, 'as the poor and middle-class were squeezed, they tried to cope by borrowing to maintain their standard of living.'"

Economic History 101, The Distributional Dynamics of Revolutions. A fine rant by Paul Farrell, who has brought views put forth by this blog for years into the mainstream.

Mainstream Economist: Marx Was Right. Capitalism May Be Destroying Itself | AlterNet

2011-08-14T07:46:00.000-07:00

Mainstream Economist: Marx Was Right. Capitalism May Be Destroying Itself | AlterNet: "Karl Marx had it right. At some point, Capitalism can destroy itself. You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand. That's what has happened. We thought that markets worked. They're not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else's income and consumption. That's why it's a self-destructive process."

The "mainstream economist" is Roubini. As I've said in the past, the "immiseration of the proletariat" was not supposed to happen because "a rising tide lifts all boats." The latter was true when there was some modicum of decency governing what management and traders took out of their companies and the economy. No longer.

The big question now is whether the nation-state has the ability to tell multinational corporations what to do, or will they be blackmailed with threats to "do what we say or we'll take it all offshore."

That's where the front lines are.

Do marginal tax rates affect income inequality?

2011-08-13T21:21:00.001-07:00

Source: The Nation

It's the Economy, Dummkopf! | Business | Vanity Fair

2011-08-13T08:41:00.000-07:00

It's the Economy, Dummkopf! | Business | Vanity Fair: "It’s the Economy, Dummkopf!
With Greece and Ireland in economic shreds, while Portugal, Spain, and perhaps even Italy head south, only one nation can save Europe from financial Armageddon: a highly reluctant Germany. The ironies—like the fact that bankers from Düsseldorf were the ultimate patsies in Wall Street’s con game—pile up quickly as Michael Lewis investigates German attitudes toward money, excrement, and the country’s Nazi past, all of which help explain its peculiar new status."

Incredible reporting on how Wall Street dirt-bombed the Euro, to protect the dollar's reserve status and to make a lot of money for a bunch of fraudsters good at lying. Who can you trust anymore?

Consumer confidence crashes

2011-08-12T08:53:00.001-07:00

The last two times we saw this configuration (1972 and 1980) the economy went into recession—growth accelerated downward—within a year.

Consumer Confidence Plummets To May 1980 Level | ZeroHedge

2011-08-12T07:05:00.000-07:00

Consumer Confidence Plummets To May 1980 Level | ZeroHedge: "UMichigan consumer confidence just printed at 54.9, on expectations of 63.0. This is the lowest since May 1980. And what's worse, inflation expectations were unchanged. Looks like those high inflation expectations are starting to get anchored. In the meantime, with the Chairsatan saying to expect at least two more years of recession, is this really a surprise to anyone?"

Can the Middle Class Be Saved? - Magazine - The Atlantic

2011-08-12T07:01:00.000-07:00

Can the Middle Class Be Saved? - Magazine - The Atlantic: "Can the Middle Class Be Saved?
The Great Recession has accelerated the hollowing-out of the American middle class. And it has illuminated the widening divide between most of America and the super-rich. Both developments herald grave consequences. Here is how we can bridge the gap between us."

Thoughtful analysis that implies the development of a class society in America.

Income inequality is bad for rich people too - Glenn Greenwald - Salon.com

2011-08-12T06:23:00.000-07:00

Income inequality is bad for rich people too - Glenn Greenwald - Salon.com: "Given that this rise in wealth has been accompanied by an increase in the power of those at the top, is there any hope for achieving a more just society? Bizarrely, the self interest of the upper crust argues in favor of it. Profoundly unequal societies are bad for everyone, including the rich."

Yves does a nice job summarizing some of this research, that I have covered in the past. See also the references (including a great video) here

This is not investment advice

2011-08-11T11:47:00.001-07:00

The first chart is from www.angrybear.com, the second from www.stockcharts.com.

This is research, not investment advice. You trade at your own risk, unlike the Wall Street banks, who also trade at your risk.

The S&P 500 is about to make a “death cross” when the 50 day moving average crosses below the 200 day moving average. Downward momentum could easily build.

When will confidence finally fail?

2011-08-10T07:47:00.001-07:00

It is the hypothesis of this web site that the entrance into recession is most distinctly characterized by the crossing of the unemployment rate above its recent exponential moving average.

Now if the unemployment rate trends downward as forecast by the blue line, there will be a secular exhilaration, even as survey measures like the Michigan series are still very low; this was the case in the early ‘Seventies. We could have a few quarters of slow but positive economic growth.

Recall that our confidence measure is given by A = – (U – UMEAN)/Sigma(U).

Here’s a close-up of what would drive a (weak) secular exhilaration:

However, given the wave of fear sweeping the globe, how likely is it that businesses will add enough to employment—even with labor force participation rate trending down—to lower the unemployment rate? At this point, there might be a yin-and-yang, goal-gradient-climbing desire for a return of confidence (as Baby Boomers hope desperately for growth in their retirement portfolios), but methinks it will be dashed by several months of increasing unemployment rate reports, in which case we will fall into a “double dip” as we did in the early ‘Eighties. Why should this one number hold such power over popular psychology? Because since the Great Depression, it has been the focus of most macroeconomic policy.

However, any such turning “positive” of our “animal spirits” measure between now and election time is likely to be as short-lived as was the early ‘Seventies upturn, which ceased almost immediately with the reelection of President Nixon—whose pathetic economic policies, including wage and price controls and taking the U.S. off the gold standard and throwing the world into the chaos of Bretton Woods II, are yet another indication that our political parties stand for absolutely nothing other than pork.

Any increases of the unemployment rate in the current environment will be truly “high-powered” in determining when confidence will “finally” collapse in this cycle.

Just to be perfectly clear

2011-08-10T06:15:00.001-07:00

Another two or more years of ZIRP (zero interest rate policy) is a subsidy to banks carrying bad debt at inflated “extend and pretend” values permitted by today’s phony accounting.

The Fed is willing to bleed the rest of the American economy to subsidize the banks.

The “bad banks” will not “grow solvent” as a result of this policy. The enormity of the bad debt is simply too great.

ZIRP hasn’t helped the economy yet, so why should it going forward?

However, those who fear inflation in the intermediate term are premature. Bad debts don’t get repaid, they only get papered over until their failure is so absolutely plain to see it can’t be covered up any more…. Deflation lies between now and the future Great Inflation.

Which is why we’re probably in for another round of “quantitative easing” in which the Fed buys bad debt from weak banks and hides it away where bad debts never see the light of day.

At this point, some of the Modern Monetary Theory solutions to our problems seem actually attractive. Why shouldn’t the Fed write off (i.e., charge off, write down to a zero value) the U.S. Treasury debt it holds. That’s not a default, it’s more like the kind of favor rich people do for each other (as when the board of a Colorado savings and loan “charged off” a $100,000 loan to a son of George H.W. Bush).

We’ve been here before. The Fed pursued a ZIRP in the 1930s. It didn’t end well.

See also the estimable Joseph Stiglitz’s four-part solution to our problems here.

Upper-class people less empathetic than lower-class people: study | The Raw Story

2011-08-09T19:38:00.000-07:00

Upper-class people less empathetic than lower-class people: study | The Raw Story: "A study published in Psychological Science in November, for instance, found that people of upper-class status have trouble recognizing the emotions other people are feeling. People of lower-class status do a much better job.

'What I think is really interesting about that is, it kind of shows there’s all this strength to the lower class identity: greater empathy, more altruism, and finer attunement to other people,” Keltner said.

“One clear policy implication is, the idea of nobless oblige or trickle-down economics, certain versions of it, is bull,' Keltner added. 'Our data say you cannot rely on the wealthy to give back. The ‘thousand points of light’—this rise of compassion in the wealthy to fix all the problems of society—is improbable, psychologically.'"

Matt Stoller: Standard & Poor’s Predatory Policy Agenda « naked capitalism

2011-08-09T13:13:00.000-07:00

Matt Stoller: Standard & Poor’s Predatory Policy Agenda « naked capitalism: "Standard & Poor’s was the most aggressive of the three agencies, however. And on January 16, 2003, four days after the Georgia General Assembly convened, it dropped a bombshell. Because of the state’s new Fair Lending Act, S&P said that it would no longer allow mortgage loans originated in Georgia to be placed in mortgage securities that it rated. Moody’s and Fitch soon followed with similar warnings.

It was a critical blow. S&P’s move meant Georgia lenders would have no access to the securitization money machine; they would either have to keep the loans they made on their own books, or sell them one by one to other institutions."

These slime are now responsible for a new cascade of fear that may prove to rival the fear inspired by the death of Lehman.

Comment on the S&P downgrade

2011-08-06T07:28:00.001-07:00

Could we have a more obvious example of a rating agency serving its oligarchic Wall Street masters more servilely?

S&P participated in the massive frauds of the real estate boom, certifying junk as AAA, and enabling Wall Street to dispossess many Americans of their homes at taxpayer expense after having profited from the pump-and-dump (and short, in some vile cases), so why shouldn’t they enable their masters to further enhance their relative social and financial position by sending the remains of the American middle class into old-age serfdom? www.angrybear.com has the best data on Social Security, and it says the system if funded for decades to come if Treasury obligations are honored. Moreover, relatively small changes to the payroll tax, like taking the ceiling off, would render the system solvent indefinitely, if I am not mistaken.

Obama should strike back, and take S&P to court for fraudulent activities during the real estate fraud boom. It’s time to put the rating agencies completely out of business.

S&P should have downgraded the entire Bretton Woods II monetary system.

Author: U.S. may be on the verge of another revolution | Raw Replay

2011-07-29T10:56:00.000-07:00

Author: U.S. may be on the verge of another revolution | Raw Replay: "On last night’s The Big Picture with progressive talk show host Thom Hartmann, author Neil Howe discussed how he and William Strauss came to accurately predict today’s political crisis in their 1997 book “The Fourth Turning,” and offered speculation as to what might happen next.

The two essentially agreed that the United States may be in for a series of events on the magnitude of the revolution, civil war or great depression.

Speaking of the generational differences between today’s new guard and the retiring baby boomers, Howe said that cultural forces have essentially forced this crisis, with “culture warriors” and “values voters” in direct contention with “gen x” for control of the national budget.

“Are we on the verge of another ‘fourth turning’ — another major crash leading to a world war and a world-wide depression?” Hartmann asked.

“No,” Howe said. “I hope it won’t be bad. I hope the destructive will be avoided to the furthest extent possible and the constructive, which always comes out of a fourth turning… will be maximized.”"

Click through to watch the video.

US debt breakdown (pun intended)

2011-07-29T07:01:00.001-07:00

Via: New York Times

Click through for an excellent graphic showing which administrations accrued the debt and who holds it. Note that China holds less than ten percent of the debt, and that the lion’s share of the debt was accumulated under George W. Bush.

Via: Foreign Affairs – How Scary Is the Deficit – Setser and Roubini. Very, in their view.

Competitive inflation or deflation?

2011-07-28T19:20:00.001-07:00

It has been widely asserted that the only way for the Western world out of its debt problems is competitive inflation. But it is hard to get an inflation going during a debt deflation. If we are on the verge of a deflation, what will the competition involve?

Deflation is the reverse of inflation. Therefore, if winning involved having the fastest inflation rate in competitive inflation, then the country with the slowest fall in prices should win, as, just like inflation, it will relatively reduce the value of its debt the best.

Europe stands a pretty good chance of deflation if the EU fails and debt loads collapse economies (see Simon Johnson’s analysis here). Europe’s debt problems are worse than America’s.

And, as always in deflations, commodities fall, U.S. Treasury interest rates fall, risk premia rise, stocks fall, and the vastly neglected real economy tanks yet again. More people lose their jobs, and more children go hungry in the emerging banana republics of the developed world.

Then a bigger war and the big inflation begin, if history rhymes.

Is crisis necessary? Apparently.

2011-07-28T07:19:00.001-07:00

If one subscribes to the hypothesis of The Fourth Turning, the answer is yes. There is a truly Old Testament feel to Strauss and Howe’s uncannily accurate “prophesy” from fifteen years ago. American society enters a crisis phase every eighty years or so (1780, 1860, 1940… 2020). There is abundant macro evidence that our situation resembles the 1930s in many ways—high debt-to-GDP load, rampant inequality, labor beaten down—with a couple of significant differences. In the 1930s the common people had a strong ally in Roosevelt; today the well-heeled direct the President. In the 1930s, the United States was the world’s greatest creditor nation, today it is the world’s greatest debtor. In the 1930s, a lot of bad debts were charged off and banks allowed to fail, today bad debts are being shuffled between banks and governments (taxpayers) in countries ‘round the world.

There seems to be a need for a depression to shake the society out of its old ways, or at least to increase the likelihood of radical change. There is no guarantee America will reform itself. Devolution into several centuries of neo-feudalism, a la late Roman Empire, is a distinct possibility.

So I watch the debt ceiling charade believing it is rehearsal for a more major screw-up to come. It seems to be required by the nonlinear dynamics of history. Phase change begins soon.

Ranks of hungry children swell, worrying doctors - The Boston Globe

2011-07-28T06:36:00.000-07:00

Ranks of hungry children swell, worrying doctors - The Boston Globe: Doctors at a major Boston hospital report they are seeing more hungry and dangerously thin young children in the emergency room than at any time in more than a decade of surveying families.

Many families are unable to afford enough healthy food to feed their children, say the Boston Medical Center doctors. The resulting chronic hunger threatens to leave scores of infants and toddlers with lasting learning and developmental problems.

Before the economy soured in 2007, 12 percent of youngsters age 3 and under whose families were randomly surveyed in the hospital’s emergency department were significantly underweight. In 2010, that percentage jumped to 18 percent, and the tide does not appear to be abating, said Dr. Megan Sandel, an associate professor of pediatrics and public health at BMC.

“Food is costing more, and dollars don’t stretch as far," Sandel said. “It’s hard to maintain a diet that is healthy."

The emergency room survey found a similarly striking increase in the percentage of families with children who reported they did not have enough food each month, from 18 percent in 2007 to 28 percent in 2010.

Pediatricians at hospitals in four other cities - Baltimore; Little Rock, Ark.; Minneapolis; and Philadelphia - also reported increases in the ranks of malnourished, hungry youngsters in their emergency rooms since 2008. But Boston’s increases were more dramatic, said Sandel, a lead investigator with Children’s HealthWatch, a network of researchers who track children’s health. Researchers said higher housing and heating costs in Massachusetts probably exacerbated the state’s surge.

BMC has also seen a 58 percent increase, from 24 in 2005 to 38 in 2010, in the number of severely underweight babies under the age of 1 who were referred by family physicians to its Grow Clinic, where doctors provide intensive nutritional, medical, and other services to boost babies’ growth. Such malnourishment is similar to what is more typically seen in developing countries, Sandel said.

Bruce Bartlett: Are the Bush Tax Cuts the Root of Our Fiscal Problem? - NYTimes.com

2011-07-26T09:19:00.000-07:00

Bruce Bartlett: Are the Bush Tax Cuts the Root of Our Fiscal Problem? - NYTimes.com: "If one allocates the interest cost proportionally, the Bush tax cuts were responsible for increasing the debt by $3.2 trillion — 27 percent of the fiscal deterioration since 2001.

These facts notwithstanding, it has become a Republican talking point that the Bush tax cuts did not, in fact, reduce revenue at all — something the Bush administration itself never asserted.

Last year, Mitch McConnell of Kentucky, the Senate minority leader, said: “There’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue because of the vibrancy of these tax cuts in the economy.”

On June 10, former Minnesota Gov. Tim Pawlenty said, “Keep in mind, whether it be the Bush tax cuts, the Reagan tax cuts or other tax cuts, they always produce an increase in revenue.”"

Worth reading the whole article, written by a Republican.

Consumer sentiment tanks

2011-07-15T08:19:00.001-07:00

NEW YORK (Reuters) - Consumer sentiment deteriorated in early July to the lowest level since March 2009 on increasing pessimism over falling income and rising unemployment, a survey released on Friday showed.

Confidence in government economic policies also curdled, the Thomson Reuters/University of Michigan survey showed. U.S. lawmakers are wrangling over a budget deal that would allow the government to raise the debt ceiling -- needed so the United States can fund its obligations next month.

The preliminary reading for the consumer sentiment index dropped to 63.8 in July from 71.5 the month before, falling far short of expectations of an increase to 72.5, according to a Reuters poll of economists.

The survey's barometer of current economic conditions fell to 76.3, the lowest since November 2009, from 82.0. The gauge of consumer expectations was also at its lowest since March 2009, tumbling to 55.8 from 64.8.

"Whenever the Expectations Index has been this low in the past, the economy has been in recession," survey director Richard Curtin said in a statement.

The tanking of the venerable Michigan series at this point resembles nothing so much as its similar tanking in the abortive recovery of 1980-1981 that led into the double dip into the serious recession of 1981-1982.

I have pointed to the divergence between survey measures before, and have alluded to work citing the fading credibility of the unemployment statistics itself as well as the growing awareness of the U6 measure and the average duration of unemployment. The 1981-1982 downturn was caused by tight money to combat inflation. The current divergence and any subsequent downturn will occur in the context of an over-indebted economy in a liquidity trap.

At this point, any tightening of the fiscal reins, especially if not accompanied by increases in taxes on the top income tiers, will not only destroy “animal spirits” and plunge the economy into recession, but will challenge the confidence of most Americans in the very system under which they live, as is consistent with the operating hypothesis here, that the American social contract is broken and can only be fixed by quite revolutionary changes (violence not required).

There is a fetid whiff of depression in the air.

The Fed Is Dead… Long Live The Fed?

2011-07-12T06:59:00.001-07:00

Here is some mind-bending stuff that I’m just getting on to (h/t/ patrick.net).

The Fed Is Dead… Long Live The Fed

Chancellor Plays Hide The Trojan

As Government Aid Fades, So May the Recovery - NYTimes.com

2011-07-11T14:23:00.000-07:00

As Government Aid Fades, So May the Recovery - NYTimes.com: "Because benefit payments tend to be spent right away to cover basic needs like food and rent, they provide a direct boost to consumer spending. In a study for the Labor Department, Wayne Vroman, an economist at the Urban Institute, estimated that every $1 paid in jobless benefits generated as much as $2 in the economy."

As Government Aid Fades, So May the Recovery - NYTimes.com

2011-07-11T08:35:00.000-07:00

As Government Aid Fades, So May the Recovery - NYTimes.com: "An extraordinary amount of personal income is coming directly from the government.

Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics. In states hit hard by the downturn, like Arizona, Florida, Michigan and Ohio, residents derived even more of their income from the government."

‘Animal spirits’ update

2011-07-08T07:49:00.001-07:00

Recall that the primary driver of confidence levels of Americans, in my view, is whether the unemployment rate is above or below an exponential moving average of where it’s been over the past four years. Obviously, it’s been above what we’re used to for a while, which is depressing. The blue line is a forecast, indicating that we might enjoy a transient, weak secular exhilaration in mid-2012. Notice how the unemployment rate shoots up after it crosses from below to above the adaption level, as people lose confidence quickly and a self-organized criticality overtakes the labor market.

This is our “animal spirits” metric: A = – (U – UMEAN)/Sigma(U), shown below.

Symmetrically, a great coincident indicator of the onset of a recession is the A metric falling below zero. Confidence collapses as people start discounting losses instead of gains. Currently, A is trying to rise above zero, as it would have done long ago in a normal expansion, but has failed to do in this jobless “recovery.” Note that the green line, the Michigan Consumer Sentiment series, is lagging in this cycle, as folks look beyond the headline unemployment rate to the truly sick state of the labor market (cf. CR’s graphs).

Here is my judgmental forecast of the unemployment rate up close:

If the unemployment rate manages to dip below 8.9 percent in 2012 there will be the slightest of technical reasons for “animal spirits” to revive. The run-up to a Presidential election year tends to be euphoria-inducing, no matter which side one is rooting for. But any movement toward fiscal tightening, which seems inevitable, will quickly deflate aggregate demand and send unemployment higher, and “animal spirits” back into the hopper. The resulting slump would be the 2010 decade’s analogue to the 1938 slump during the Great Depression, which was an almost 20 percent decline in Personal Income from peak to trough.

CHART OF THE DAY: If Congress Does Nothing, The Deficit Will Disappear | TPMDC

2011-06-26T12:53:00.000-07:00

CHART OF THE DAY: If Congress Does Nothing, The Deficit Will Disappear | TPMDC: "[T]he medium-term budget outlook is perfectly fine if Congress adheres to the law as it's currently written. That means no repealing the health care law, for one, but more significantly it means allowing the Bush tax cuts to expire, and (unfathomably) allowing Medicare reimbursement rates for doctors to fall to the levels prescribed by the formula Congress wrote almost 15 years ago. In other words, no more 'doc fixes.'

Helpfully, CBO juxtaposed these two alternative futures in a pair of graphs and, just as last time, it projects that deficits will disappear entirely by the end of President Obama's second term (if he gets a second term) if Congress were to just sit on its hands and do nothing.

Take a look."

How Capitalist is America? - Mark Roe - Project Syndicate

2011-06-26T12:39:00.000-07:00

How Capitalist is America? - Mark Roe - Project Syndicate: "American law gives more authority to managers and corporate directors than to shareholders. If shareholders want to tell directors what to do – say, borrow more money and expand the business, or close off the money-losing factory – well, they just can’t. The law is clear: the corporation’s board of directors, not its shareholders, runs the business.

Someone naïve in the ways of US corporations might say that these rules are paper-thin, because shareholders can just elect new directors if the incumbents are recalcitrant. As long as they can elect the directors, one might think, shareholders rule the firm. That would be plausible if American corporate ownership were concentrated and powerful, with major shareholders owning, say, 25% of a company’s stock – a structure common in most other advanced countries, where families, foundations, or financial institutions more often have that kind of authority inside large firms.

But that is neither how US firms are owned, nor how US corporate elections work. Ownership in large American firms is diffuse, with block-holding shareholders scarce, even today. Hedge funds with big blocks of stock are news, not the norm."

It's a class system, with the corporate elite on top. In a generation or so, they'll start awarding themselves titles.

A Modern Monetary Theory fairy tale

2011-06-24T06:31:00.001-07:00

Money is as money does. Money is as money was. Factories idle, millions unemployed, a mountain of bad debt on their backs, how to prime the pump? Haven’t we been here before? How to produce to capacity when the Fed chief is confused between keeping the banks open (letting money circulate) and bailing out his Wall Street handlers (keeping bad debts on the books and fatally constipating the monetary economy).

With apologies in advance to all MMT’ers who may be offended, here’s what I take away from the MMT story, which is usually preceded with claims that it is the most amazing discovery in the history of humankind:

The Congress decides to set up their own printing presses (accounts at the Treasury backed by nothing, just like the rest of our money) and start spending money on the things that America needs: supporting women and children in poverty; a massive infrastructure jobs program; basic research; early childhood and primary and secondary education; and so on.

The new money looks and feels just like the old money. No currency even needs to be created; the old play money still works. People get contracts to do work for the government and money shows up in their bank accounts.

Because the economy is in a deadly liquidity trap that the Fed chairman fails to understand will not be cured by zero interest rates, with a gigantic overhang of bad debt on the books of the banks that they are sending the American people into poverty to collect (after they’ve taken their homes), and because the labor market has been beaten down by Republican-inspired ideologues in Congress to the point where the labor share of national income is at its lowest level in a century, and because the Supreme Court has consistently ruled for corporations’ rights over worker rights, even giving the corporations carte blanche to buy politicians, and because Americans have let themselves become fat and stupid as their government has lulled them into a cowed stupor with terrifying pat-downs at airports, and Nazi-style police behavior (or whoever those people are), and with an unending televised onslaught of misinformation about taxes, the economy, terrorists threats, and all the other reasons they have to be afraid—for all these reasons working Americans have given up fighting and are cowering in their homes and apartments hoping they are not the next to be sent into hell, to live in their cars as long as they still own them, and then onto the streets, where they can see all around them in increasing numbers the end game of the American Dream (i.e., the capitalists—the corporate elites—won , and labor lost).

For all these reasons, inflation is not really a problem. (And let’s be clear, Ron Paul, inflation is a general increase in the price level, not of the money supply alone).

So Congress continues to print money merrily, and ordinary Americans can feel the blood returning to their cheeks and money to their checking accounts as the miraculous circular flow of income and product expands, that which is necessary for an economy to be healthy, and which is terminally infarcted when most of the money ends up in the hands of a very few people. (The Fed objects that the money Congress is printing isn't backed by anything at the Fed, but Congress tells the Fed to shut up.)

When, years down the road and ten percentage points closer to potential output, a little bit of inflation does occur, the Congress orders the Fed to increase reserve requirements. We don’t want so much of that credit money, Congress says, and Jamie Dimon whines that he can’t make a decent living anymore and moves to Russia. Congress allows a mild inflation, however, which over the span of a number of years whittles away much of the real value of the debt.

The Congress also realigns the overall budget with sane national priorities (what a concept), reducing military adventures abroad and setting up a single-payer national health care plan, as American doctors, now mostly salaried but still doing well, have requested. The health insurance companies whine that it is now too hard to make a decent living anymore and all open offices in developing countries. And taxes are adjusted so that those who are taking the most out of the American economy are also expected to be those putting the most back in, proportionally speaking.

A general awareness of the social welfare benefits of a more equal distribution of income and wealth inspires other policies that make everyone except the greediest persons feel much, much better about living in America.

It takes some practice but Congress learns that with reserve requirements approaching a hundred percent—with the big leverage gone from the banking system—that Wall Street- and bank-induced credit bubbles are much rarer and that control of the money supply is much easier. Banks, of course, were prohibited from investment banking by the reinstitution of Glass-Steagall early in the reform period. Capital ratios on investment banks were raised to twenty percent and any investment bank that goes bust in the new regime, goes bust. No bailouts. Banks are limited in size to two percent of GDP in assets. Financial research proved long ago that big banks offered no economies of scale or scope.

After so many years, no one remembers that there had been a change in the money they are using. It still looks and feels the same. It is true that large numbers of one hundred dollar bills still go unaccounted-for, but that is considered a small price to pay compared to the massive wealth transfer from working Americans to the rich that occurred in 2008 and following years. A Congressional office is established with a mandate to keep reserve requirements above ninety percent, and the Fed is disbanded. The Church of Scientology makes an offer for their Washington, D.C., temple, but it is declined. It becomes a museum dedicated to financial follies over the centuries.

With the aggressive use of the power of Congress to take over the control of the money supply, the value of the American dollar decreased on the international markets faster than that of the currencies of nations that hold to the fictions of fractional reserve banking, credit money, bailouts, the IMF, the World Bank, and other foolishness. The debasement of the currency, a failed goal of the prior Fed chair, is hailed by labor and industry alike as Chinese, Japanese and Indian companies rush to build factories and research centers in America. Since the dollar has fallen, and oil is now being priced in a basket of currencies most of which are as weak as the dollar, oil prices rise—but they rise for everyone, as global growth and peak oil collide. This factor as well makes it very advantageous for foreign companies to manufacture in America, which is still the second- or third-biggest market in the world. The dollar even depreciates against the loonie and the peso, killing any chance of a North American monetary union (the example of the EU had pretty much killed enthusiasm for that idea anyway).

And America rises phoenix-like from the ashes of debt deflation, deleveraging, and depression.

(All right, MMT’ers, you’ve got to comment on this….) [corrected 6/25]

Washington's Blog

2011-06-23T07:26:00.000-07:00

Washington's Blog: "In July 2009, Congressman Henry Waxman stated:

In a 13 month period from May 2003 to June 2004, the Federal Reserve sent nearly $12 billion in cash, mainly in $100 bills from the United States to Iraq. To do that, the Federal Reserve Bank in New York had to pack 281 million individual bills ... onto wooden pallets to be shipped to Iraq. The cash weighed more than 363 tons and was loaded onto C-130 cargo planes to be flown into Baghdad...

The Los Angeles Times reported at the time:

Prior audits by Stuart W. Bowen Jr., the special inspector general for Iraq reconstruction, found that more than $8.8 billion in such funds could not be properly accounted for."

George is really ripping the Fed today. See second story below.

A high stink of corruption emanates from Washington and New York.

Washington's Blog

2011-06-23T07:24:00.000-07:00

Washington's Blog: "In 'Bernanke Admits He’s Clueless On Economy’s Soft Patch', Forbes blogger Agustino Fontevecchia notes:

Brutally honest, Bernanke admitted that he had no clue what was actually causing the current fragility in the U.S. economic recovery. While the FOMC statement assigned blame outside of the U.S., pointing at Japan along with rising food and oil prices, Bernanke was put on the spot by a reporter who noted the inconsistency behind that explanation and a lowering of long term forecasts. Bernanke took the hit, admitting only some of the factors were temporary and that he didn’t know exactly what was causing the slowdown, but that it would persist. “Growth,” said Bernanke, “will return into 2012.”
Specifically, Bernanke said today:

We don't have a precise read on why this slower pace of growth is persisting.
Well, it is obvious to anyone who has been paying attention what's causing the slow down, and if Mr. Bernanke doesn't know, he should be fired."

George is ripping the Fed today. The post goes on to quote numerous warnings from the BIS and others to the Fed before the crisis that things were getting out of hand--warnings the Fed chose to ignore. Why? Because its Wall Street controllers were making gobs of money from the risky and often fraudulent practices it was condoning.

Why the Jobs Situation Is Worse Than It Looks - US News and World Report

2011-06-22T08:55:00.000-07:00

Why the Jobs Situation Is Worse Than It Looks - US News and World Report: "The Great Recession has now earned the dubious right of being compared to the Great Depression. In the face of the most stimulative fiscal and monetary policies in our history, we have experienced the loss of over 7 million jobs, wiping out every job gained since the year 2000. From the moment the Obama administration came into office, there have been no net increases in full-time jobs, only in part-time jobs. This is contrary to all previous recessions. Employers are not recalling the workers they laid off from full-time employment.

The real job losses are greater than the estimate of 7.5 million. They are closer to 10.5 million, as 3 million people have stopped looking for work. Equally troublesome is the lower labor participation rate; some 5 million jobs have vanished from manufacturing, long America's greatest strength. Just think: Total payrolls today amount to 131 million, but this figure is lower than it was at the beginning of the year 2000, even though our population has grown by nearly 30 million.

The most recent statistics are unsettling and dismaying, despite the increase of 54,000 jobs in the May numbers. Nonagricultural full-time employment actually fell by 142,000, on top of the 291,000 decline the preceding month."

Bruce Bartlett: Are Taxes High or Low? A Further Look - NYTimes.com

2011-06-22T06:01:00.000-07:00

Bruce Bartlett: Are Taxes High or Low? A Further Look - NYTimes.com: "A couple of weeks ago, I discussed the low level of federal taxes as a share of the gross domestic product in the United States, both historically and in comparison with other developed economies. I noted that total federal revenue — income, corporate and payroll taxes combined –– has been below 15 percent of gross domestic product for three years in a row, its lowest level since 1950 and well below the postwar average of about 18.5 percent of G.D.P.

Judging by their comments, a great many readers were incredulous. For years, Republicans have told them over and over again that taxes in the United States are exceptionally high and the primary obstacle to growth, and that a huge tax cut would do more to raise growth than any other policy."

Read. The author is a Republican, by the way.

Bill Gross channels FDR

2011-06-21T06:59:00.000-07:00

PIMCO | Investment Outlook - School Daze, School Daze Good Old Golden Rule Days: "School Daze, School Daze
Good Old Golden Rule Days
The past several decades have witnessed an erosion of our manufacturing base in exchange for a reliance on wealth creation via financial assets.
Fiscal balance alone will not likely produce 20 million jobs over the next decade. Government must take a leading role in job creation.
A growing number of skeptics wonder whether college is worth the time or the cost."

Click through and read the whole article--sounds like FDR's 1933 inaugural: what we need is more government involvement in the economy, not less; a plan of action to put people to work.

Ritholtz on Obomba's big botch

2011-06-20T07:49:00.000-07:00

The Big Picture: "In case you missed it, Joe Nocera had an outstanding column in Saturday’s NYT. It began with that quote above, circa January 1933. Yes, the banking industry has been railing about regulation for nearly a century. What they really want is to have it both ways — as little regulation as possible, but Taxpayer Bailouts there when they periodically blow themselves up.

But the heart of Nocera’s column discusses how unique the Glass Steagall act was, changing the banking environment form one of speculation (and massive depositor losses) to a boring, modestly profitable, cornerstone of the national economy."

Click through and read Barry's article, then click through to the Nocera piece. Obomba has indeed turned out to be the Manchurian Candidate.

UK banks abandon eurozone over Greek default fears - Telegraph

2011-06-19T11:05:00.000-07:00

UK banks abandon eurozone over Greek default fears - Telegraph: "Senior sources have revealed that leading banks, including Barclays and Standard Chartered, have radically reduced the amount of unsecured lending they are prepared to make available to eurozone banks, raising the prospect of a new credit crunch for the European banking system.
Standard Chartered is understood to have withdrawn tens of billions of pounds from the eurozone inter-bank lending market in recent months and cut its overall exposure by two-thirds in the past few weeks as it has become increasingly worried about the finances of other European banks."

Preparing for collapse

2011-06-19T11:02:00.001-07:00

Practical advice.

The Automatic Earth is an eclectic site that features intuitive analysis in a style similar to my own (minus the obsession with “animal spirits”). This video is from their site and recommends steps that mirror my own preparations (including asset allocation) pretty closely. I haven’t sold my house and bought a farm, and I don’t think that’s a feasible move for most people. If you’ve got a job, keep it, and maybe start a garden, would be my counsel. But the monetary chaos that is likely to be upon us fairly soon is unimaginable. So dollar cash reserves are probably as safe as one can get, maybe better in a Treasury money fund than in a bank, although I can only hope that the Feds have learned the lesson they botched in 2008, namely, that it would have been a whole lot better to guarantee all deposits and let anyone take their money out who wanted to, while nationalizing the banks, so that no one worried that their bank would fail. And then they should have let the banks charge off their bad debts, which would have meant a lot of them would have failed. And heads should have rolled like they did when FDR threw out the moneychangers, and that Obomba was too much of a chickenshit Establishment puppet to do.

I’m reprinting FDR’s 1933 inaugural address below. I’ve been meaning to do this for a while. As a challenge to the reader—as we may lurch Hard Right in the next presidential election—I challenge readers to write the inaugural address the nation may hear in 2013—or the one they’d like to hear.

Via: http://www.bartleby.com/124/pres49.html

Franklin D. Roosevelt

First Inaugural Address

Saturday, March 4, 1933

The former Governor of New York rode to the Capitol with President Hoover. Pressures of the economy faced the President-elect as he took his oath of office from Chief Justice Charles Evans Hughes on the East Portico of the Capitol. He addressed the nation by radio and announced his plans for a New Deal. Throughout that day the President met with his Cabinet designees at the White House.

I AM certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our Nation impels. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.

In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.

More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.

Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind's goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.

Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.

Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now.

Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources.

Hand in hand with this we must frankly recognize the overbalance of population in our industrial centers and, by engaging on a national scale in a redistribution, endeavor to provide a better use of the land for those best fitted for the land. The task can be helped by definite efforts to raise the values of agricultural products and with this the power to purchase the output of our cities. It can be helped by preventing realistically the tragedy of the growing loss through foreclosure of our small homes and our farms. It can be helped by insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced. It can be helped by the unifying of relief activities which today are often scattered, uneconomical, and unequal. It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definitely public character. There are many ways in which it can be helped, but it can never be helped merely by talking about it. We must act and act quickly.

Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order; there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people's money, and there must be provision for an adequate but sound currency.

There are the lines of attack. I shall presently urge upon a new Congress in special session detailed measures for their fulfillment, and I shall seek the immediate assistance of the several States.

Through this program of action we address ourselves to putting our own national house in order and making income balance outgo. Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy. I favor as a practical policy the putting of first things first. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.

The basic thought that guides these specific means of national recovery is not narrowly nationalistic. It is the insistence, as a first consideration, upon the interdependence of the various elements in all parts of the United States—a recognition of the old and permanently important manifestation of the American spirit of the pioneer. It is the way to recovery. It is the immediate way. It is the strongest assurance that the recovery will endure.

In the field of world policy I would dedicate this Nation to the policy of the good neighbor—the neighbor who resolutely respects himself and, because he does so, respects the rights of others—the neighbor who respects his obligations and respects the sanctity of his agreements in and with a world of neighbors.

If I read the temper of our people correctly, we now realize as we have never realized before our interdependence on each other; that we can not merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective. We are, I know, ready and willing to submit our lives and property to such discipline, because it makes possible a leadership which aims at a larger good. This I propose to offer, pledging that the larger purposes will bind upon us all as a sacred obligation with a unity of duty hitherto evoked only in time of armed strife.

With this pledge taken, I assume unhesitatingly the leadership of this great army of our people dedicated to a disciplined attack upon our common problems.

Action in this image and to this end is feasible under the form of government which we have inherited from our ancestors. Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form. That is why our constitutional system has proved itself the most superbly enduring political mechanism the modern world has produced. It has met every stress of vast expansion of territory, of foreign wars, of bitter internal strife, of world relations.

It is to be hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure.

I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require. These measures, or such other measures as the Congress may build out of its experience and wisdom, I shall seek, within my constitutional authority, to bring to speedy adoption.

But in the event that the Congress shall fail to take one of these two courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me. I shall ask the Congress for the one remaining instrument to meet the crisis—broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.

For the trust reposed in me I will return the courage and the devotion that befit the time. I can do no less.

We face the arduous days that lie before us in the warm courage of the national unity; with the clear consciousness of seeking old and precious moral values; with the clean satisfaction that comes from the stern performance of duty by old and young alike. We aim at the assurance of a rounded and permanent national life.

We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it.

In this dedication of a Nation we humbly ask the blessing of God. May He protect each and every one of us. May He guide me in the days to come.
26

Eisenhower's worst fears came true. We invent enemies to buy the bombs | Simon Jenkins | Comment is free | The Guardian

2011-06-19T09:27:00.000-07:00

Eisenhower's worst fears came true. We invent enemies to buy the bombs | Simon Jenkins | Comment is free | The Guardian: "Why do we still go to war? We seem unable to stop. We find any excuse for this post-imperial fidget and yet we keep getting trapped. Germans do not do it, or Spanish or Swedes. Britain's borders and British people have not been under serious threat for a generation. Yet time and again our leaders crave battle. Why?

Last week we got a glimpse of an answer and it was not nice. The outgoing US defence secretary, Robert Gates, berated Europe's 'failure of political will' in not maintaining defence spending. He said Nato had declined into a 'two-tier alliance' between those willing to wage war and those 'who specialise in 'soft' humanitarian, development, peacekeeping and talking tasks'. Peace, he implied, is for wimps. Real men buy bombs, and drop them."

Deus ex sol?

2011-06-18T07:45:00.001-07:00

Telling us to chill? Make love not war? Throw the bums out and get a government that actually works for someone other than rich capitalists?

Original URL: http://www.theregister.co.uk/2011/06/14/ice_age/

Earth may be headed into a mini Ice Age within a decade

Physicists say sunspot cycle is 'going into hibernation'

By Lewis Page

Posted in Science, 14th June 2011 17:00 GMT

What may be the science story of the century is breaking this evening, as heavyweight US solar physicists announce that the Sun appears to be headed into a lengthy spell of low activity, which could mean that the Earth – far from facing a global warming problem – is actually headed into a mini Ice Age.

Ice skating on the Thames by 2025?

The announcement made on 14 June (18:00 UK time) comes from scientists at the US National Solar Observatory (NSO) and US Air Force Research Laboratory. Three different analyses of the Sun's recent behaviour all indicate that a period of unusually low solar activity may be about to begin.

The Sun normally follows an 11-year cycle of activity. The current cycle, Cycle 24, is now supposed to be ramping up towards maximum strength. Increased numbers of sunspots and other indications ought to be happening: but in fact results so far are most disappointing. Scientists at the NSO now suspect, based on data showing decades-long trends leading to this point, that Cycle 25 may not happen at all.

This could have major implications for the Earth's climate. According to a statement issued by the NSO, announcing the research:

An immediate question is whether this slowdown presages a second Maunder Minimum, a 70-year period with virtually no sunspots [which occurred] during 1645-1715.

As NASA notes [1]:

Early records of sunspots indicate that the Sun went through a period of inactivity in the late 17th century. Very few sunspots were seen on the Sun from about 1645 to 1715. Although the observations were not as extensive as in later years, the Sun was in fact well observed during this time and this lack of sunspots is well documented. This period of solar inactivity also corresponds to a climatic period called the "Little Ice Age" when rivers that are normally ice-free froze and snow fields remained year-round at lower altitudes. There is evidence that the Sun has had similar periods of inactivity in the more distant past.

During the Maunder Minimum and for periods either side of it, many European rivers which are ice-free today – including the Thames – routinely froze over, allowing ice skating and even for armies to march across them in some cases.

"This is highly unusual and unexpected," says Dr Frank Hill of the NSO. "But the fact that three completely different views of the Sun point in the same direction is a powerful indicator that the sunspot cycle may be going into hibernation."

Long-term stock market valuation

2011-06-15T10:15:00.001-07:00

This is research, not investment advice. You trade at your own risk.

Source: Robert Shiller’s home page

Note also the current ratio of corporate profits to GDP:

And this:

Shrinking profits (forecast) imply shrinking market capitalization. Corporations would have to buy back an inordinate amount of stock to maintain prices, methinks.

The hard truth about health care - The Washington Post

2011-06-08T06:04:00.000-07:00

The hard truth about health care - The Washington Post: "Everyone knows — or should know — that the United States spends much more than any other country on health care. But the Kaiser Family Foundation broke that spending down into two parts: the government’s share and the private sector’s share (both measured as a percentage of total gross domestic product), then compared the results to figures from 12 other countries that are members of the Organisation for Economic Co-operation and Development. And here’s the shocker: Our government spends more on health care than the governments of Japan, Australia, Norway, the United Kingdom, Spain, Italy, Canada or Switzerland."

And we are are not as healthy as the citizens of the countries paying much less for their health care.

Bruce Bartlett: Health Care Costs and the Tax Burden - NYTimes.com

2011-06-07T06:41:00.000-07:00

Bruce Bartlett: Health Care Costs and the Tax Burden - NYTimes.com: "Last week I showed that total taxes at the federal level — individual and corporate income taxes, payroll taxes and so on — are at a 60-year low as a share of the broadest measure of income, the gross domestic product.

Some readers took issue with my failure to include state and local taxes in the calculation. I have now done that, using data from the Organization for Economic Cooperation and Development, which represents the major developed countries. Among its most important responsibilities is the collection of internationally comparable data on a wide variety of topics, including taxes and health care spending.

The table below shows total taxes, including state and local government taxes, as a share of G.D.P. in 2008, the latest year for which there is complete data. The table makes clear that the United States has very low taxes by international standards."

The Animal Spirits Page

Bretton Woods super-nova reprise

Bomb bomb bomb, bomb bomb Iran

Contrary to Widespread Claims, There Is NO EVIDENCE that Iran Is Building a Nuclear Weapon

Iran Is NOT Building a Nuclear Bomb

The crumbling edifice of American financial fascism

The rise of the reptile brain

Secular exhilaration confirmed

The Automatic Earth

Ron Paul for president

Secular exhilaration! take 2

Secular exhilaration!

Why Ron Paul is right on Iran

Sunspot cycle ramping up

‘Animal spirits’ update

Thank God for Bruce Bartlett

Bernanke serves his Wall Street masters

For Deficit Panel, Failure Cuts Two Ways - NYTimes.com

Graphic of the day

Lenders Flee Debt of European Nations and Banks - NYTimes.com

The great sorting-out

What Mankiw doesn’t teach: the costs of inequality

Review of ‘Margin Call’

The tombstone blues

Western economy growth rates portend recession

Growing Economies, Stagnant Wages - NYTimes.com

Move to amend

Mexican standoff

In Praise of Papandreou's Referendum Decision; Eurocrats Terrified of Democracy; Parade of Cowards – Mish

Give the People a Vote on Bank Bailouts? Markets and Politicians Horrified at the Thought – Economic Populist

America’s Exploding Pipe Dream - NYTimes.com

Hussman Funds - Weekly Market Comment: Penny Wise and Euro Foolish - October 24, 2011

Wages, Expectations, and Prospects for Inflation :: Brent Meyer :: Economic Trends :: 05.27.11 :: Federal Reserve Bank of Cleveland

Europe on the breadline: 'Chaos is a Greek word' | World news | guardian.co.uk

When No. 1 Financial-Strength Ranking Spells Doom - Bloomberg

Americans for Greater Inequality - NYTimes.com

Occupy Wall Street needs to occupy Congress and lobbyists - The Washington Post

Consumption going down

The central bank shell game

Hussman Funds - Weekly Market Comment: Talking Points for the "Occupy Wall Street" Protesters - October 10, 2011

The 12 years war

Why Obomba is a loser

Neither capitalism nor democracy

"We the corporations" | Move to Amend

Meltdown

America and Europe: Saving the Rich and Losing the Economy

Income growth under Republican and Democrat presidents

What you’re not seeing on the mainstream media

In Class Warfare, Guess Which Class Is Winning

The theft of the American pension - Economics - Salon.com

Whose cash?

‘It’s the debt, stupid,’ redux

‘Animal spirits’ update

25 Signs That The Financial World Is About To Hit The Big Red Panic Button

Bruce Bartlett: The Case Against a Payroll Tax Cut - NYTimes.com

Laura D'Andrea Tyson: Recovering From a Balance-Sheet Recession - NYTimes.com

Hussman - A Reprieve from Misguided Recklessness [Please!]

Consumer-led recession beginning?

The slow disappearance of the American working man

Education & class: can you say “indentured servitude”?

Show Your Hardship to the Bankruptcy Court

SACSIS.org.za » News » The World » Why Iceland Should Be in the News, But Is Not

The Cause Of Riots And The Price of Food - Technology Review

Big trouble ahead - macrobusiness.com.au | macrobusiness.com.au

Study shows powerful corporations really do control the world's finances

Tax the super-rich or riots will rage in 2012 - Paul B. Farrell - MarketWatch

Mainstream Economist: Marx Was Right. Capitalism May Be Destroying Itself | AlterNet

Do marginal tax rates affect income inequality?

It's the Economy, Dummkopf! | Business | Vanity Fair

Consumer confidence crashes

Consumer Confidence Plummets To May 1980 Level | ZeroHedge

Can the Middle Class Be Saved? - Magazine - The Atlantic

Income inequality is bad for rich people too - Glenn Greenwald - Salon.com

This is not investment advice

When will confidence finally fail?

Just to be perfectly clear

Upper-class people less empathetic than lower-class people: study | The Raw Story

Matt Stoller: Standard & Poor’s Predatory Policy Agenda « naked capitalism

Comment on the S&P downgrade

Author: U.S. may be on the verge of another revolution | Raw Replay