Wednesday, October 24, 2012

The definition of insanity

Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein

Obama missed the opportunity to make the point that doing what George W. Bush did—cutting taxes, mostly for the rich, and increasing military spending—is exactly what busted the budget in the last decade and started down the path of trillion dollar deficits.

“The last president cut taxes for the rich and increased military spending, and did we get jobs?  Where are the jobs?  NO, we got financial crisis and a mini-depression that I inherited.  So why would doing the same thing again work this time?”

Oh, he tried to make the point, but he lacked the emotional force required to counter an attack dog like Romney.

The national spirit level has sunk to new depths in recent weeks.  The Republicans appear to have successfully scapegoated Obama. 

The American social contract is broken.

Tuesday, October 23, 2012

Stock market demographics

Via:  San Francisco Fed  h/t www.macrofugue.com

To examine the historical relationship between demographic trends and stock prices, we consider a statistical model in which the equity price/earnings (P/E) ratio depends on a measure of age distribution (for another example, see Geanakoplos et al. 2004). We construct the P/E ratio based on the year-end level of the Standard & Poor’s 500 Index adjusted for inflation and average inflation-adjusted earnings over the past 12 months. We measure age distribution using the ratio of the middle-age cohort, age 40–49, to the old-age cohort, age 60–69. We call this the M/O ratio.

Projected P/E ratio from demographic trends

Okay, in addition the current younger generation is saddled with record levels of student loan debt, the economy isn’t generating many good paying jobs, and we’re in a post credit crisis sucky cyclical recovery.

By these lights the bear market could go another ten years.

MMT hits the IMF

Via:  Telegraph  Ambrose Evans-Pritchard.  Article contains link to IMF study.  Recognition seems to be growing that it was a mistake to pile a bunch of private bad debt onto nation states’ sovereign debts.  Should have thought of that before.

One could slash private debt by 100pc of GDP, boost growth, stabilize prices, and dethrone bankers all at the same time. It could be done cleanly and painlessly, by legislative command, far more quickly than anybody imagined.

The conjuring trick is to replace our system of private bank-created money -- roughly 97pc of the money supply -- with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.

Specifically, it means an assault on "fractional reserve banking". If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.

The nation regains sovereign control over the money supply. There are no more banks runs, and fewer boom-bust credit cycles. Accounting legerdemain will do the rest. That at least is the argument.

Some readers may already have seen the IMF study, by Jaromir Benes and Michael Kumhof, which came out in August and has begun to acquire a cult following around the world.

Entitled "The Chicago Plan Revisited", it revives the scheme first put forward by professors Henry Simons and Irving Fisher in 1936 during the ferment of creative thinking in the late Depression.

Irving Fisher thought credit cycles led to an unhealthy concentration of wealth. He saw it with his own eyes in the early 1930s as creditors foreclosed on destitute farmers, seizing their land or buying it for a pittance at the bottom of the cycle.

The farmers found a way of defending themselves in the end. They muscled together at "one dollar auctions", buying each other's property back for almost nothing. Any carpet-bagger who tried to bid higher was beaten to a pulp.

Continues here.

Friday, October 19, 2012

NSFW "’99 problems’ remix

h/t Barry Ritholtz, too good not to post

When short-term irrationality is long-term rational, maybe—maybe not

Via:  Counterpunch 

The swing to Mitt may represent a desire to hurry up the final all-consuming crisis that will be necessary to precipitate reform in the Fourth Turning.  Certainly Obama has shown himself to be a pathetic creature.  Romney is merely simple-minded and barbaric, captive to the wealthy.  Romney has something of a touching tragic dimension as well:  the most moving moment in the last debate was when he spoke with almost teary-eyed pride of his best accomplishments in Massachusetts, upping the quality of the schools and providing health care to almost everyone in a plan he now disowns.  Our government is badly broken. 

The problem with thinking that by letting things get really bad under Mitt that things will get better quicker because people will “take to the streets” quicker is that Mitt may usher in a new Dark Age of neo-feudalism in which repression will be absolute.  The state has put all the tools in place for this to happen.  Norman Pollack is probably living comfortably on a generous pension and would like to watch the battle from a hillside somewhere.  Not sure I can buy into his argument, but I do feel the disgust with Obama and the pull to “try something different.” 

Under the Cloak of Liberalism

America on the Cusp of Fascism

by NORMAN POLLACK

I use “fascism” here not as a cliché, but as an historical-structural formation principally rooted in the mature stage of capitalism, in which business-government interpenetration (what the Japanese political scientist Masao Maryuma called the “close-embrace” system) has created hierarchical social classes of wide differences in wealth and power, the militarization of social values and geopolitical strategy, and a faux ideology of classlessness to instill loyalty for the social order among working people.  In fact, each of these factors is already present to a high degree in America–superbly disguised however by the rhetoric of liberalism, as in Mr. Obama’s presidency.

This said, my provocative hypothesis (only slightly tongue-in-cheek) is that in the coming election Romney is preferable to Obama.  Why? In broad terms, we see varying degrees of sophistication in the mad dash across the finish line (i.e., fascism proper, midway between nascent and full-blown), with Romney and Republicans representing plebeian fascism, and Obama and Democrats a sophisticated corporatist form.  Everything charged against Romney may be true, from Social Darwinist beliefs and gut-militarism to cultural intolerance and xenophobia, and perhaps even more so for the party as a whole, though that is a moot point–an overt negation, on all grounds,of what we mean by democracy.  (Not that America has honored or achieved that state of political-economic development through most of its history!)   To pursue the candidacy of Romney involves one in a societal nightmare of unrestrained wealth (and the perks that go with it, from horribly skewed taxation policy to categorical setbacks to unions, wage rates, and an antilabor climate) and severe cuts in the social safety net.  All this is known, predictable, transparent–part of my argument for viewing Romney as preferable to Obama.  Clearly, Trotsky in popularized form is in the back of my mind.

By contrast, Obama is unassailable, enjoying the protective cloak of the state secrets doctrine (which, also as the National Security State, he invokes constantly), the liberal glossing on all policy matters, thanks to the extremely able spinmeisters Axelrod and Rhodes, and an adoring, submissive, uncritical base, in deep denial and for whatever reasons unwilling to examine the administration’s record.  That record confirms the long-term political, economic, and moral bankruptcy of the Democratic party, whose differentiating character setting it apart from the Republicans lies in the magnitude of skilled evasion and/or deception surrounding policies which themselves replicate the central elements in those of their opponents.

Republicans sincerely criticize Obama because they are too ignorant to recognize, in their rush to antigovernment rhetoric, that he takes the same position as they smoothed out to please a base at best composed of pretend-radicalism and, equally, to ward off criticism from those who desperately want to believe his earlier promises.  This comes down to political theater at its cruelest.

The list of actual betrayal is long and virtually covering his public policy without exception.  (A good start can be found in the critical essays inHopeless, a true icebreaker for the uninformed prepared to listen.)  Let me select several obvious examples.  1) Health care, in which Obama savaged the single-payer system, thus preparing the way for the same on the public option, meanwhile silencing, or rather, delegitimating all dissident voices, at the same time as exempting health insurers from antitrust prosecution and favoring Big Pharma; 2) Civil liberties, a good litmus test of democratic governance, in which Obama’s Department of Justice argued against granting habeas corpus rights to detainees, invoked the Espionage Act against whistleblowers, carried surveillance beyond that of previous administrations, with the National Security Agency one of the culprits practicing the black magic of eavesdropping, while renditions and “black holes” continue and even agencies like FDA spy on its employees; 3) militarism, from which foreign policy, including trade policy, cannot be excluded, in which the drone–as Obama’s signature weapon–terrorizes whole populations reeking destruction from the skies, naval power displayed from the South China Sea to the Mediterranean, a whole new generation of nuclear weapons in the pipeline (exempt from potential budgetary sequestration), a military budget itself second to none, and what appears to be a permanent state of war; 4) the omissions, which by their absence speak volumes about the purposes and policies of his administration, in which job creation and foreclosures have not been addressed, climate change, wholly disappeared, gun control, nonexistent, poverty never, never mentioned, and business and banking regulation the compounding of phoniness on phoniness, not unexpected considering Obama’s belief in deregulation and bringing in the Clinton-Rubin crowd of free marketeers.

How much more or worse damage can Romney and the Republicans do? They might fuss about same-sex marriage and contraception, while Obama, in his Pacific-first geopolitical vision and concrete strategy, wants to encircle China, and press for an economic agenda promoting further corporate-wealth concentration.

If Republicans come across as Taliban on cultural issues, Democrats almost surreptitiously advance the financialization of the total economy, with the consequent distortions introduced–loss of manufacturing, increasing wealth concentration, and capitalism’s Achilles heel, underconsumption.  Why Romney?  Because his transparency as a Neanderthal may, just may, bring people into the streets, while under Obama passivity and false consciousness appear almost irreversible.  I for one will stay home.  The lesser-of-two-evils argument is morally obtuse, and dangerous, the first, because it means complicity with policies ultimately destructive, the second, because it induces an undeserved self-righteousness which next time around would yield further compromise.  If the people are gulled and lulled into the acceptance of mock-democracy, courtesy of Goldman Sachs and waterboarding apologist Brennan, with Obama presiding over the bread-and-circuses routine, heaven help us.

Thursday, October 18, 2012

Currency wars & monetary policy

Here’s a great explanation of the currency was prevailing now between the US and China.

It’s great up until Rickards throws a 1 percent canard out at the end that tax cuts after WWII was what got us out of the Depression.  Note:

Via:  www.usgovernmentrevenue.com

You just can’t trust a plutocrat anymore, not matter what his seeming political stripes.

Sunday, October 14, 2012

The extraction of America

A couple more references on the extraction of America by the 1 percent.  The financial elite have set America up to go broke so they can buy up the assets at steep discounts.  It’s the old pump and dump and buy back in strategy.

The stupidity of the American people in not being able to see through Mitt Romney’s pandering to the 1 percent is evidence that part of the extraction plan was dumbing the American people down virtually to “useless eater” status, perhaps in advance of a “regrettable” liquidation through deprivation of health care and poverty and abuse by perpetually lowered socioeconomic status.  General Petrov sounds the same themes as the Gamble scion in his video a couple of posts ago.  Note that Petrov also is careful to state his conspiracy theory is not about any one religious or ethnic group, i.e., the Jews, and I agree.  The international financial elite are multicultural, united in their greed and enabled in global expropriation by weakened national states the world around.

The Self-Destruction of the 1 Percent Chrystia Freeland, New York Times