Housing bottom?

Amid all the talk of us now hitting the housing bottom, keep in mind that housing is a purchase “on time,” and that when mortgage interest rates go up to 6 percent, housing prices will fall about 20 percent, income levels remaining constant.

I view the current bottom as local, not global, and a bear trap from an investment point of view.  It’s strictly a cash-flow play at this point, which is why the big boys with unlimited access to zero percent money are piling in.

It may take ten years for rates to go up, but during that period the potential for price appreciation is limited by highly indebted and skittish Millennials, downsizing Boomers, and a generally sluggish economy.

What if we inflate?  Interest rates adjust to inflation much more quickly than housing prices.  I think the affordability would fall quickly.  Of course, if you’re betting on a strong inflation later in the decade, as some are, the time to buy is now, as a debt-deflation is probably just as likely, this isn’t the bet it was for the sixty years up to 2005.

I just can’t get excited about the talk of a housing bottom.

US tax policy: Wild West vs. Sweden

Via:  nytimes.com  Sure a flat tax or VAT is okay *if* it is accompanied by a commitment to good health care and education and social services for *everyone*.  This is the best discussion of the underlying issues I’ve seen, in that it’s clearest about the kind of *social contract* that underlies a tax system. Everyone will have to pay more to get to a good place; lowering taxes will send us into neo-feudalism, which is what the 1 percent would love.  I get very impatient with the ever-so-puerile libertarians about this….  Now if we can just get to a single-payer health care system….

November 27, 2012

Combating Inequality May Require Broader Tax

By EDUARDO PORTER

Rarely have we experienced such a confluence of arguments in favor of raising taxes on the rich. After a hard-won re-election fought mainly over taxes and spending, President Obama arguably has a mandate from voters to tap the wealthy to address our budget woes.

What’s more, raising more money from the wealthy might go a long way toward righting our lopsided economy — which delivered 93 percent of our income growth in the first two years of the economic recovery to the richest 1 percent of families, and only 7 percent to the rest of us.

Yet while raising more taxes from the winners in the globalized economy is a start, and may help us dig out of our immediate fiscal hole, it is unlikely to be enough to address our long-term needs. The experience of many other developed countries suggests that paying for a government that couldhelp the poor and the middle class cope in our brave new globalized world will require more money from the middle class itself.

Many Americans may find this hard to believe, but the United States already has one of the most progressive tax systems in the developed world, according to several studies, raising proportionately more revenue from the wealthy than other advanced countries do. Taxes on American households do more to redistribute resources and reduce inequality than the tax codes of most other rich nations.

But taxation provides only half the picture of public finance. Despite the progressivity of our taxes, according to a study of public finances across the industrial countries in the Organization for Economic Cooperation and Development, we also have one of the least effective governments at combating income inequality. There is one main reason: our tax code does not raise enough money.

This paradox underscores two crucial lessons we could learn from the experience of our peers around the globe. The first is that the government’s success at combating income inequality is determined less by the progressivity of either the tax code or the benefits than by the amount of tax revenue that the government can spend on programs that benefit the middle class and the poor.

The second is that very progressive tax codes are not very effective at raising money. The corollary — suggested by Peter Lindert of the University of California, Davis in his 2004 book “Growing Public” — is that insisting on highly progressive taxes that draw most revenue from the rich may result in more inequality than if we relied on a flatter, more “regressive” tax schedule to raise money from everybody and pay for a government that could help every American family attain a decent standard of living.

Consider government aid for families. According to the O.E.C.D. study, our Temporary Assistance for Needy Families is the most progressive program of cash benefits for families among 22 advanced countries, accurately targeted to serve the poor.

But American family cash benefits are the least effective at reducing inequality. The reason is that they are so meager. The entire budget for cash assistance for families in the United States amounts to one-tenth of 1 percent of the nation’s economic output. The average across the O.E.C.D. nations is 11 times bigger. Even including tax breaks and direct government services, we spend a much smaller share of our economic output on family assistance than almost any other advanced nation.

The same pattern can be found across a range of government programs. The reason is always the same: their relatively small size. Over all, government cash benefits in the United States — including pensions, disability, unemployment insurance and the like — contribute about 10 percent to household income, on average, according to the study. The average across industrial nations is twice that.

Our budget reveals a core philosophical difference with other advanced countries. In the big-government social democracies like those of Western Europe, government is expected to guarantee a set of universal public services — from health care to child care to pensions — that are considered basic rights of citizenry. To pay for this minimum welfare package, everybody is expected to contribute proportionately into the pot.

Government in the United States has a different goal. Benefits are narrower. Social Security and Medicare follow a universal service template, but only for older Americans. Other social spending is aimed carefully to benefit the poor. Financed through a more progressive tax code, it looks more like charity than a universal right. On top of that, our philosophical stance virtually ensures a small government.

Progressive taxes make it hard to raise money because they distort people’s behavior. They encourage taxpayers to reduce their tax liability rather than to increase their pretax income. High corporate taxes encourage companies to avoid them. High taxes on capital income also encourage avoidance and capital flight. High income tax rates on top earners can discourage work and investment, too. So trying to raise a lot of money with our progressive tax code would probably not achieve the goal and could damage economic growth.

Big-government social democracies, by contrast, rely on flatter taxes to finance their public spending, like gas taxes and value-added taxes on consumption. The Nordic countries, for instance, have very low tax rates on capital income relative to income from work. And they have relativelyhigh taxes on consumption. In Denmark, consumption tax revenue amounts to about 11 percent of the nation’s economy. In the United States, sales taxes and excise taxes on cigarettes and other items amount to roughly 4 percent.

Liberal Democrats have long opposed them because they fall much more heavily on the poor, who spend a larger share of their incomes than the rich. But these taxes have one big positive feature: they are difficult to avoid and produce fewer disincentives to work or invest. That means they can be used to raise much more revenue.

Public finances are under strain today on both sides of the Atlantic, as governments struggle to cope with our long global recession and the aging of the baby boom generation. In Southern Europe, the pressure to pare back universal welfare systems is intense. In the United States, political leaders on both sides of the partisan divide have realized that even our relatively meager package of social goods cannot be sustained with our slim tax take.

But the United States has one option that most of Europe’s flailing economies do not. Its tax revenue is so low, comparatively, that it has more space to raise it. A more efficient, flatter tax schedule would allow us to do so without hindering economic activity.

Bruce Bartlett, a tax expert who served in the administrations of Ronald Reagan and George H. W. Bush, told me last week that he thought federal tax revenue could increase to 22 percent of the nation’s economic output, well above its historical average of 18.5 percent, without causing economic harm. If President Obama tries to go down this road, however, he may have to build a flatter tax code.

“We should reform the tax system, no question,” William Gale, a tax policy expert at the Brookings Institution and co-director of the nonpartisan Tax Policy Center, wrote in an e-mail. “We are going to need to move beyond the current set of tax instruments to raise the needed revenues — a VAT and or a carbon tax seem like the obvious ways to go.” And Mr. Bartlett, who writes a column for The New York Times’s Economix blog, also pointed out: “We can’t get all the revenue we need from the rich. Eventually, everyone will have to pay more.”

It’s the distribution, stupid

Infrastructure investment is what we need, let the Treasury print greenbacks to pay for it, or borrow, it doesn’t matter, that’s what we need… yada yada yada.  Gimme that old infrastructure investment.

The problem is, as I pointed out many years ago, the distribution is broken.  As the estimable Emmanuel Saez has shown, 93 percent of the total personal income gain as reported by tax returns in 2010 went to the top 1 percent of the income distribution.  Much of the gain presumably came from the Obama stimulus packages (see here for timeline).

So, the power of capital to dominate labor in capitalism (aptly named) from time to time produces concentrations of wealth and hence (rentier-style, both in terms of property and social advantage) of income generating ability.  The signature of an economy in or going into depression is a huge debt to income ratio and extreme concentration of wealth and income.  And we might add, today, a record high share of national income going to profits.

I am not a socialist, in that I don’t favor the state’s owning of the means of production.  But I am a redistributionist, in that any country, especially any rich country, that abuses its poor, is doomed to collapse.  It’s called a “failure of effective demand.”  When most people don’t have enough money, the economy collapses.

Call it judgment, if you will. 

Light posting

I’ve been sick, possibly with heartache for our unraveling republic, or possibly as my spouse points out because I was on an airplane last week with a bunch of germs my immune system wasn’t quite ready for.

But the ongoing purge of the military doesn’t inspire confidence….

Some budget sanity

h/t Jesse

Music streaming income away from musicians

Via:  www.pitchford.com  Spotify and Pandora exist not to help musicians but only to make their founders rich by fleecing greedy venture capitalists and speculative investors.  Money quotes:

Damon Krukowski of Galaxie 500 and Damon & Naomi breaks down the meager royalties currently being paid out to bands by streaming services and explains what the music business' headlong quest for capital means for artists today.

"Galaxie 500's 'Tugboat' was played 7,800 times on Pandora in the first quarter of 2012, for which its three songwriters were paid a collective total of 21 cents, or seven cents each."

"When I started making records, the model of economic exchange was simple; now, it seems closer to financial speculation."

But here's the rub: Pandora and Spotify are not earning any income from their services, either. In the first quarter of 2012, Pandora-- the same company that paid Galaxie 500 a total of $1.21 for their use of "Tugboat"-- reported a net loss of more than $20 million dollars. As for Spotify, their latest annual report revealed a loss in 2011 of $56 million.

Leaving aside why these companies are bothering to chisel hundredths of a cent from already ridiculously low "royalties," or paying lobbyists to work a bill through Congress that would lower those rates even further-- let's instead ask a question they themselves might consider relevant: Why are they in business at all?

"Pandora and Spotify are doing nothing for the business of music-- except undermining the simple cottage industry of pressing ideas onto vinyl, and selling them for more than they cost to manufacture."

The answer is capital, which is what Pandora and Spotify have and what they generate. These aren't record companies-- they don't make records, or anything else; apparently not even income. They exist to attract speculative capital. And for those who have a claim to ownership of that capital, they are earning millions-- in 2012, Pandora's executives sold $63 million of personal stock in the company. Or as Spotify's CEO Daniel Ek has put it, "The question of when we'll be profitable actually feels irrelevant. Our focus is all on growth. That is priority one, two, three, four and five."

Industrial production may have peaked

Industrial production with 12 and 18 month moving averages:

Data to October 2012.

Winds of war

I will confess that I sometimes read the updates of Benjamin Fulford, a former Forbes financial journalist and self-described insider to the true power structure of the world.  He indicates that there has been an attempted putsch by the military against President Obama, in planning for years, by the right-wing “Christian” faction associated with George W. Bush and Mitt Romney.  He credits the election of Obama of at least postponing the start of World War III.

Fulford often sounds crazy, but he points out that there have been a lot of military brass who have lost their jobs recently.  With the events unfolding in Gaza the atmosphere is ripe for a false flag attack, any spark.  America is severely cracking.  Make sure to read to the bottom of the attached—it was written by a senior editor of “Veterans Today".”

Hence, a quick search turned up the following:

Via:  presstv.com

US military planned mutiny on the Bounty to topple Obama

By Gordon Duff

Mon Oct 29, 2012 4:41PM GMT

The Obama administration has had American military, both on domestic and foreign bases on high alert since October 1. However, there has been no known terrorist enemy threatening the US. The enemy is called “domestic” but its origins are far from American.

Today, Rear Admiral Charles M. Gaouette was “fired” from his command of one of the three carrier battle groups back to Bremerton, Washington to face an investigation.

It is impossible to adequately state how unusual this is and how serious.

The Navy was clear that the charges had nothing to do with his personal conduct, no rape or sexual misconduct, no stolen money, no drug use, the things that usually bring down careers in the Navy, that and crashing ships into each other.

Gaouette was sent back because the Secretary of Defense found him unfit for command, sent him across the world in the middle of one of the largest combat exercises in history, one both timed prior to an election and one at a critical location, near the Straits of Hormuz in the Persian
Gulf.

Gaouette commanded nearly one third of the Naval and air combat forces in the region.

The decision was made based on a conversation with the Secretary of Defense who, at the end of the talk, believed Gaouette was part of a group of military officers who have been under suspicion for planning a “Seven Days in May” type overthrow of the US government if President Obama is re-elected.

This is not conjecture, dozens of key officers face firing, hundreds are under investigation, all with direct ties to extremist elements in the Republican Party and the Israeli lobby.

Reports received are sourced at the highest levels of the Pentagon and indicate that the administration has been aware of these plans for months.

It is not just the Obama administration. This happened before.

The Air Force moved against the Bush administration in 2007 when it loaded up to nine nuclear weapons on a B 52 aircraft at Minot Air Force Base. We know now that up to three of those nuclear weapons are listed as “missing,” the military expression for this is “Broken Arrow.”

From Veterans Today:
Minot-Barksdale, The forgotten mutiny
In August 2007, at least six nuclear warheads were stolen from Minot Air Force Base in North Dakota. The moment they were loaded, they disappeared from America’s nuclear inventory, “location unknown,” something that is not supposed to happen. There is no possible “misinterpretation” of orders, no mistake, no “wrong label” issue. These weapons were stolen, pure and simple. Discussions of individual commanders having authority to deploy weapons, stories of accidents, confusion or political alignments within the Air Force are “red herrings.”

Nothing is more controlled, more secure, more restricted, more classified, more protected than the nuclear arsenal of the United States. However, on that fateful day in 2007, a half dozen or more, hydrogen bombs, were plucked out of a secure bunker with no paperwork, no orders, nothing.

This is the military. People are jailed for losing flashlight batteries.

They were loaded into the weapons bay of a B-52 long-range bomber for transport to places unknown, for purposes unknown. The plane had no orders, was part of no mission, operated under no legal command structure, in fact, the moment the weapons were loaded, was no longer an American plane at all. A mission, even under the most innocent possible circumstances, that would have required the knowledge of the President and his staff, certainly the Joint Chiefs of Staff and likely the National Security Council as well, seem to have authorized itself, out of “thin air.”

Though the plane later landed at Barksdale Air Force Base in Louisiana, there is no evidence supporting this as the intended destination, far from it.

The theft, hijacking, you pick the term, these are the best two so far, happened outside the command authority of the United States government, contravening all protocols for the storage, handling and deployment of nuclear weapons. The incident was also a violation of treaties requiring America to safeguard her stockpile of nuclear weapons, not just from environmental disasters but also, as with this incident, from a mutiny by members of the military and civilian branches of our government, acting outside authority, acting as civilians, an act of piracy, mutiny, an act of insurrection.

Today’s “relief of command” is a response to a similar threat.

The “Barksdale Nukes” were believed to be heading to Diego Garcia for use against Iran as part of a false flag war, one started by a naval admiral who was tasked by an extra-governmental agenda to start a war.

This was the Air Force part of a joint operation that is said to have involved 5th Fleet commander, Admiral Cosgriff who as reported to the Secretary of State by Gwyneth Todd, then Chief Political Advisor to the fleet. Todd, who has recently retold her story to the Washington Post and other media outlets, received a death threat this morning after a stalking incident against her by an FBI agent stationed at the US embassy in Canberra, Australia.

Similarly, top defense consultant John Wheeler III, who knew of these issues quite well was mysteriously murdered and his body found in a garbage heap in Delaware in late 2010. No suspects have been arrested; no real investigation has ever been made.

That was then.

Today, key members of the military more loyal to Israel and Wall Street than the United States are said to be planning a mutiny to take place after the presidential election.

Their task, upon seizing power, is to facilitate a massive terror attack inside the United States, possibly using a stolen nuclear weapon, declare martial law, move troops into Iraq and to attack Iran with aid from Saudi Arabia and the Gulf States.

Turkey is to attack Syria with aid from Israel and civil war between the Kurdish regional government and the national government in Baghdad is to begin with the US brokering a peace and re-establishing what “newly appointed President Romney” would describe as the “Status of Forces Agreement” he mentioned during the debates.

His real intent is to occupy Iraq and attack Iran. In the process, America intends on “neutralizing” the nuclear capability of Pakistan.

This is the plan, it is known, not just in the Department of Defense, but by all intelligence agencies, the plotters have all been recognized, are all under surveillance and they have not been very careful.
All information here has more than one official source.

Step one, Benghazi

Those involved in the plot, those outside the military, are those who are spreading “conspiracy theory” rumors about US complicity or malfeasance in the handling of the murder of the US ambassador to Libya, Chris Stephens.
Today, CIA Director, General Petraeus clearly stated that the CIA had received no requests for help. A month ago, the State Department also made it clear, the attack was military, well coordinated and that no forces were available capable of making a difference.

In fact, the “conspiracy theorists,” those attempting to use their wild theories in order to implement an “October Surprise” are directly aligned with those who planned and executed the attack.

This is one of the advantages of a “false flag” attack on an American diplomat by America’s own friends and allies, or those mistaken for being such, any attempt to characterize those known to be guilty, prior to an election, would be used to discredit anyone giving out actual accurate information.

This is the role of the controlled press in terror operations, providing “deception and cover.”

Thus, it was necessary to invent a non-existent “Al Qaeda cell” in Libya and to hunt down minor third party assets while the real killers, well trained special operations military from the Gulf States and “other nations” were able to escape and will remain unaccountable.

Security services of both Britain and France had reported the presence of a special operations team well in advance of 9/11 but the target was a mystery.

The Benghazi attack required incredible coordination. What debunks conspiracy theories is that even the most amateur attacks use radio frequency jammers. They are common even to the Taliban much less to groups this sophisticated, a force now said to number at least 120 with 50 or more being trained special operations forces.
This backs up General Petraeus’ statement that no messages were received.

One incredible inconsistency in the “conspiracy media” came from Fox News. They reported that the US compound in Benghazi was relieved by a large force of friendly militia at 3am, a full hour before the lethal mortar attack is said, by Fox News, to have begun. Jennifer Griffin wrote this exclusive account for Fox News:

“They were killed by a mortar shell at 4 a.m. Libyan time, nearly seven hours after the attack on the consulate began - a window that represented more than enough time for the U.S. military to send back-up from nearby bases in Europe, according to sources familiar with Special Operations. Four mortars were fired at the annex. The first one struck outside the annex. Three more hit the annex.

A motorcade of dozens of Libyan vehicles, some mounted with 50 caliber machine guns, belonging to the February 17th Brigades, a Libyan militia which is friendly to the U.S., finally showed up at the CIA annex at approximately 3 a.m.”

Fox was so busy gloating over their misdirection that they totally missed how thoroughly they discredited themselves. Nothing written in any of the recent versions remotely depicts eyewitness reports. They made the whole thing up.

All of those who report a “hodge-podge” of conflicting calls for help through jammed communications, reminiscent of the jamming during the attack on the USS Liberty, are now potential suspects in the planning and execution of the attack itself.
Additionally, there is little possibility the attack in Benghazi could have been carried out without the presence of foreign agents within the State Department and the well-timed distraction of the Terry Jones telethon financed and supported by the CATO Institute and Republican National Committee, of which I am, sadly, a longtime member.

Israel rule

The planned overthrow and subsequent declaration of martial law is a massively financed operation with billions of dollars available. The primary impetus for this action is a belief by members of the “dispensationalist” pseudo-Christian heresy that pervades America’s military service academies that the United States should be subservient to the State of Israel.

Over the past three decades, religious extremists have taken over the Air Force Academy, Annapolis and West Point, teaching mandatory classes in obscure religious beliefs, hatred of Islam and stressing obedience to an “Apocalypse Cult” that stresses pre-emptive nuclear war in order to bring on the “end times” and destroy all life on earth.

Some find these beliefs inconsistent with oaths sworn by all members of the military:

“I, _____, having been appointed an officer in the Army of the United States, as indicated above in the grade of _____ do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign or domestic, that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservations or purpose of evasion; and that I will well and faithfully discharge the duties of the office upon which I am about to enter; So help me God." (DA Form 71, 1 August 1959, for officers.)”

Oaths, so easy to take, so convenient to break, and so it goes…

GD/MA

 

Gordon Duff is a Marine Vietnam veteran, a combat infantryman, and Senior Editor at Veterans Today. His career has included extensive experience in international banking along with such diverse areas as consulting on counter insurgency, defense technologies or acting as diplomatic representative for UN humanitarian and economic development efforts. Gordon Duff has traveled to over 80 nations. His articles are published around the world and translated into a number of languages. He is regularly on TV and radio, a popular and sometimes controversial guest. More Press TV articles by Gordon Duff

Throwing the baby out with the bathwater

Via. ft.com 

Richard Koo doesn’t address the problem of bad debts being carried in the banking system by “extend and pretend” or by having been bought by the Fed and subsequently disappearing into that black hole of unreported charge offs.  I have taken a fair use chunk of Koo’s article but encourage readers to read the whole thing. 

I have this inkling that because all the derivative bets are off the books, the capital class, those holding financial assets, is not really aware of the risks of a general deflation, and can only see the “problem” of fiscal spending supporting “deadbeats” (the 47 percent) who are dependent on the government for basic needs.  We shall see.

Explain the disease to help US citizens

By Richard Koo

In 2008, Barack Obama told the US people the nation’s economic crisis would take a long time to overcome. In 2012, many of those voters are losing patience, because they have not been told why this recession has lasted so long or why his policies were the correct response. Here is the missing explanation – based on not only the US experience, but also that of Japan and Europe.

Today, the US private sector is saving a staggering 8 per cent of gross domestic product – at zero interest rates, when households and businesses would ordinarily be borrowing and spending money. But the US is not alone: in Ireland and Japan, the private sector is saving 9 per cent of GDP; in Spain it is saving 7 per cent of GDP; and in the UK, 5 per cent. Interest rates are at record lows in all these countries.

This is the result of the bursting of debt-financed housing bubbles, which left the private sector with huge debt overhangs – notably the underwater mortgages – giving it no choice but to pay down debt or increase savings, even at zero interest rates.

However, if someone is saving money or paying down debt, someone else must be borrowing and spending that money to keep the economy going. In a normal world, it is the role of interest rates to ensure all saved funds are borrowed and spent, with interest rates rising when there are too many borrowers and falling when there are too few.

[continues here]

Swedish vs. Japanese models

Via:  Trust Your Instincts  h/t Jesse

In imposing even “balanced austerity” and not confronting the load of bad debt that has been made to be an obligation of the US taxpayers, Obama is engaging in what Bill Black calls a “great betrayal” of progressive principles.  Here’s a nice collection of simple explanations of the Swedish vs. Japanese (and US in the 1980s) approaches to a crisis of solvency due to bad debt clogging up the banking system.  We may wait a very long time for it to be cleared by natural attrition.  Iceland is the poster child of how clearing the debt by requiring banks to mark to something like market and take their losses can liberate the private economy to start up again. 

Swedish versus Japanese Model

There are two basic models for how to deal with a bank solvency driven financial crisis.

Under the Japanese model, losses on the excesses in the financial system are only recognized as banks generate the capital to absorb them.  This is good for banks, particularly their book capital, because the model involves hiding their true condition and pursuing policies designed to boost bank earnings.  It is bad for the economy because it distorts asset prices and access to capital (for proof, look at the performance of Japan's economy).

The alternative is a Swedish model that is bad for banks and good for the economy.  It is bad for banks, particularly their book capital, because they are required to recognize the losses on the excesses in the financial system today.  It is good for the economy because it avoids the distortion in asset prices and access to funding associated with hiding the losses under the Japanese model (for proof, look at the performance of Sweden's economy).

The following are a series of posts which examine these models and their implications:

Confirmation that Japanese Model being used and losses are being hidden
RBS's Stephen Hester's confession that bank hiding losses with regulators' blessing
Just how sizable are the losses being hidden by banks?

Choosing between Japanese and Swedish models
Its not to late to adopt the Swedish model and stop the financial crisis
Response to solvency crisis:  Swedish vs Japanese model
Liam Halligan:  EU policy choice is between Swedish and Japanese models
Europe's banks are addicted to ECB's money

Proof Swedish Model Works
Iceland confirms that Swedish model for bank solvency works

Iceland shows that forcing banks to take losses works to end financial crisis

Toxic Side-Effects from Implementing Japanese Model
Repealing Disclosure Laws seems Reasonable
Greece is Heading for Hell

Problem with the Japanese model is that there is no easy exit

Background
Is there any truth to bank earning presentations under Japanese model?
Hiding losses does not restore confidence in banking system
The policy of 'what is good for banks is good for the economy' has failed
Do nations exist for capitalism or their citizens?
What interest rate would central bank policy be set at if the Swedish model had been used?

Ike’s mind-blowing warning

h/t www.theburningplatform.com  Can you imagine an age when such intellectual honesty was possible from a President?

Almost every issue is a wedge issue

Sometimes you have a great notion.  Today I’m having one about how we think about things.  It’s that almost every issue in the modern discourse is a wedge issue, or can profitably be used as one.  That “profitably” is a hint as to the exception, by the way.  And then if you can link issues in voters’ minds, you can create a web of divisive issues.

Let’s start with “economics.”  Every school of economics is bullshit being used by some interest group to further their own advantage.

How about “freedom”?  Same thing.  I’m rich, I want to be free.

How about “socialism”?  We already have socialism for Wall Street.  The government redistributes the money from hard working folks to Wall Street when their big derivative bets don’t pay off the way they hoped.  The government rewrites rules and regulations that even people like me with a Ph.D. in economics have trouble understanding, but which rewrites almost universally have the effect of letting the financial institutions skim a heftier slice out of our hides.

How about “capitalism”?  Sure, we got capitalism, crony capitalism.  See the last point.

I’m not going to belabor the point.  I could dredge up more buzzwords (“abortion,” “family values,” “gun rights,” “welfare,” and so on) but I won’t.  I won’t even touch “democracy,” which has gotten to be a big joke.

The one issue that really matters now is the distribution of wealth, and derivatively, the distribution of income.  America is still a rich country but the rich always seem to have an excuse for letting the poor get poorer.  “You can’t fix that because [raising taxes is linked to being pro-abortion] [raising taxes is not freedom] [that’s socialism]!” 

We may not have free markets—they are horribly concentrated and monopolistic in too many cases—but we do have enough capitalism that those who own stuff (or act as if they did by manipulating the stock price to their own advantage—I’m referring to our non-owner, stock option loaded American management gangsta class) largely get to call the shots for those who don’t own the means of production or get to act as if they did, i.e., labor, working folks.

Until this imbalance is righted the situation is not going to get better.  The greatest danger lying ahead is a global neofeudalism.

Will “socialism” destroy us?  Hardly.  I have pointed to the Scandinavian countries as working models of how a greater degree of social justice can produce a more prosperous nation.  And anyway, it’s not socialism because the state doesn’t own the means of production.

So long as Americans are so easily divided the raw economics of the ownership class’s interests and its power over the politicians will determine our course.

The first tiny step toward equity is a more progressive tax system. 

So if Obama has any backbone he will let us go over the fiscal cliff, and then cut taxes for the 98 percent. 

If not, if he compromises without effecting any significant increase in the progressivity of the tax system, then will in truth be a Manchurian candidate, a total sycophant, good little Barry whose mother worked for the Foundation and knew how to be nice around rich people.

He who oppresses the poor shows contempt for their Maker,
but whoever is kind to the needy honors God.

When calamity comes, the wicked are brought down,
but even in death the righteous have a refuge.

Wisdom reposes in the heart of the discerning
and even among fools she lets herself be known.

Righteousness exalts a nation,
but sin is a disgrace to any people.

--Proverbs

Reference:  Michael Hudson, Obama Wins for whom?

A couple of recent article from Der Spiegel about how Germans see America now (the Germans, having some history of their own to deal with, don’t mince words):

Americans Don't Want The Truth In US Election, He Who Lies Wins

Destroyed by Total Capitalism America Has Already Lost Tuesday's Election

P.S.  Mish has declared that California will fail because they’ve enacted tax reform.  I’ll take the other side of that bet.  California is a very dynamic state; and being a state, and not a country with the ability to print money, they have to balance their budget over the long term.  Is it an accident that so much technological innovation has come out of California, with its (formerly?) great educational system? 

I still expect the global fiat money debt dilemma to be “resolved” in some sort of monetary catastrophe, with possibly multiple “bang points,” including deflation and (possibly hyper-) inflation. 

Dig that Coppock bounce!

The most famous of long-term momentum oscillators has just made one of its biggest bounces in history!  While the Coppock guide is a bottom indicator, almost always signaling long-term upward momentum when it turns up from a negative reading, it has only had bounces like this one a few times before, and they have always preceded big bear markets.

Remember:  This is research, not investment advice.  You invest at your own risk, unlike the Wall Street banks, who also invest at your risk (if you are a US taxpayer).

Today’s most depressing blog posts

We are doomed.  The historical dynamic will not be reversed.

Via:  www.nakedcapitalism.com

Obama Wins, the System is Broken

[…] There is a reluctance to recognize how large the gap between Obama’s persona and his mode of operation is, and there is a similar failure to appreciate what most of his compromises are about. Like Br’er Rabbit’s pleas not to be thrown in the briar patch, concessions for Obama are typically a vehicle to get him where he wanted to go anyhow.

More at The Real News

This is the money quote from this interview:

JAY: So what does the U.S. economy look like in four years? Whoever is the presidential nominee for the Democrats, it seems the plate gets set for a far-right candidate of the Republican Party to say, look, you had eight years and couldn’t do it.

JOHNSON: It looks like Brazil before Lula. It looks like it’s heading in that direction—in other words, favelas. You know, Lula’s made some strides in reversing—Lula and his successor, excuse me, have made some strides in reversing the inequality and alleviating poverty and invigorating education there. They were in a deep ditch of violent inequality of income and wealth, and they’ve made some positive strides. We’re going in the other direction as—faster than they turned things around.

Read more at http://www.nakedcapitalism.com/2012/11/obama-wins-the-system-is-broken.html#SqueqEfJmSuPzADS.99

See also:

Obama and progressives: what will liberals do with their big election victory? – Glenn Greenwald in The Guardian

Obama’s political economic calculus

One of the best pieces of advice anyone can give a new President or reelected President in an economy that experiences a recession on average once every four or five years—keeping in mind that the long cycles of recent decades plausibly represent a period doubling characteristic of a phase transition to chaos—is, “Take your recession early in your term.”

Ronald Reagan did this, taking credit for Jimmy Carter’s ending the ‘Seventies inflation by appointing Paul Volcker in 1978.  Jimmy’s problem was that he didn’t understand how our monetary system works until after bringing a bunch experts to Camp David and learning about it midterm.  He followed his principles, ultimately whipped inflation, and lost the election.  Paul Volcker was a monetarist who did what he said he was going to do, and tightened credit, the source of credit-money in a fiat fractional reserve monetary system.

Obama won the election by brilliant data mining and positioning in swing states, and because Romney was such an unappealing personality.

Obama was lucky.

Like Carter, he didn’t understand the problems that confronted him in his first term—a corrupt and fraudulent Wall Street, excessively leveraged and coddled by the Treasury and the Fed when their bad derivative bets blew up.  Franklin Roosevelt had a better understanding and a stiffer backbone in his dealings with the bankers.  Heads rolled.  Obama let hundreds of billions of dollars of bad debt be piled onto the Treasury’s sovereign debt.

Obama does understand that America’s middle class is being hollowed out.  His solution is to raise marginal tax rates on high income people, in part.  In my view, this is a terribly important part, as I believe a sickness of self-regard (“we are gods”) has entered the American elites and nothing would benefit the polity more than taking some of the starch out of their shirts and bringing them back down to Earth with the rest of us working folk. 

I would love to see the payroll tax rate lowered and the ceiling removed, for example.  Imagine that!  Or the Bush-Obama tax cuts on the over-250 thousand dollars brackets removed.  Or better, those rates increased to Reagan levels around 50 percent.

There should be a wealth tax, and a financial transactions tax (the high frequency traders are already imposing such a tax and pocketing the proceeds).

But the larger problem is the debt that was largely created because it was so easy to do so after Nixon removed the dollar’s tether to gold 41 years ago.  Only monetary reform will address some of the root causes of American inequality at this point, a preponderance of which originates in the financial sector.

Glass-Steagall needs to be reinstated.  Was it an accident that America went from the ‘Thirties to the Oh-Oh decade without a major financial crisis?  The derivatives markets need to be made transparent and regulated (such a move is likely to reveal a house or horrors, however, showing many big banks to be effectively insolvent).  The big banks need to be downsized “by fiat” or required to maintain capital ratios such that they do it by themselves.  Perpetrators of fraud need to be prosecuted. 

And perhaps the Fed needs to buy up a bunch of federal debt and forgive it before the Fed itself is shut down.  The failure of fiat, fractional reserve banking is writ large across the entire Western world.  It will be a miracle if the BRICs don’t also emulate us in this regard.  But they may benefit by leapfrogging in this area as in others.

What to replace the Fed?  Something not owned by the banks at a minimum, something owned by the American people.  Ron Paul and Andrew Jackson get this right.  The American people accurately perceived the self-dealing of Wall Street via the Fed in the crisis.  Those with the expertise and access to see and understand it up close have been nauseated by the level of corruption that Obama did not “begrudge.”  This has been his major failing.  There was a moment when he could have marshaled support from both the far right and the far left and explained to the American people why reform was needed.  He sold out.  (He may have considered health care a more important priority in a nation about to collapse, a point of view I have sympathy with.  See the Wilkinson video below.)

If gridlock wins in Obama’s second term—because Obama is a consummate politician and may not attempt anything that he deems impossible—or may he, in a second term?—it will be because our system is broken, and the absolute failure and gut-wrenching Crisis apparently required in America to forge a new national identity and social contract (and this is per The Fourth Turning, which has been so durably prophetic lo these past couple of decades)—it will be because that Crisis has not yet come to a head, and Americans remain divided and willing to go down with their parties “on principle” instead of compromising.

I’d also like to see “economic policy” replaced with “social policy.”  What I mean by that is democratic capitalism within the following constraints: 

First, workfare and health benefits for the economically displaced (i.e., unemployed; health care is available for everyone). 

Second, a tax system sufficiently progressive to produce a more “optimal” after-tax distribution of income, consumption and wealth.  Here I am relying of the results of Wilkinson et al. that I take to be the most sweeping condemnation of the narrow, money-based approach to welfare adopted by economists.  Can we pull off an enlightened Scandinavian-type democratic capitalism (not really socialist, because the state doesn’t own the means of production, just influences the distribution of product)?  I hope so.  The Scandinavian countries have recently been ranked as the most prosperous in the world.

It may take the next generation to get us there.  It was nice to see youth breaking for Obama.

Capitalism is great, but it needs to function within a moral framework providing social justice while not encouraging dependency.  Libertarianism and traditional Republicanism leave that to the market, and markets fail to provide it.  Ultimately increasing inequality will cause aggregate demand to collapse as most people simply don’t have enough money.  We’re halfway there.  We may have to go all the way for everyone to get the point.  We may not have to wait that long to get there.  And then we will see as well to what purpose the President puts all the sinister powers he and George W. Bush accrued that have so eroded the Constitutional rights of the American people.  To what means, and to what ends? 

It may all be determined in the Crisis to come.

W socialist, O capitalist in first term

via:  www.businessinsider.com

The left side of the chart shows the first Bush years. The right is Obama's.

The red line represents the trajectory of private sector jobs, while the blue and green lines represent the trajectory of state and local government jobs. All are set at 100 to the beginning, just for the sake of normalizing each number to the same point.

As you can see, under Bush's first term, private sector jobs never got to their start point, while public sector jobs soared.

Under Obama private sector jobs have now easily surpassed the level they were when he started, while public sector employment is way down, with no comeback having yet commenced.

Read more: http://www.businessinsider.com/jobs-bushs-first-term-vs-obamas-first-term-2012-11#ixzz2BMSMbeCb

Social Security, just the facts

Via:  www.firedoglake.com   It is so difficult to get past the relentless propaganda.  Best line:

“Alan Simpson, the loud-mouthed, factually-challenged, -one who would reduce your future Social Security to a range of 9 to 15 K per year, calls people like me “Greedy Geezers”, then turns to you and tells you to resent me because I am going to receive something he wants to take away from you.”

You may have heard that Social Security is funded through about 2030.  The plutocrats and their henchmen, including Obama, desperately seek your neofeudalization.

Must watch:

The Obama record

Yes, I know the principled arguments for voting for a third party candidate if you live in a non-swing state (and I already have, writing in for Ron Paul, the only candidate who got the gestalt of decaying overweening military-industrial crony capitalist country-hollowing empire, or was brave enough to say it), but if you live in a swing state and vote for Romney, the blood of the next American civil war will be on your hands.  Romney is not a conservative, he is a vampire, ready to to suck the blood out America for the benefit of his capitalist class.

Via:

Whitney TOOLSON - Why I Am Voting for Obama