earthli News 3.7 https://www.earthli.com/news/ 2026-02-08T16:39:45+01:00 https://www.earthli.com/news/icons/webcore_png/app/news_100px.png https://www.earthli.com/news/view_article.php?id=6032 2026-02-08T16:39:45+01:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=6016 2026-01-31T21:57:29+01:00 https://earthli.com/users/marco

discusses the "medical stupidity" of Nick Shirley. I have not embedded the video because no-one should have to suffer through watching that much footage of this dope talking. So why write about the video at all? Well, it illustrates an interesting point: even a... ]]>

discusses the "medical stupidity" of Nick Shirley. I have not embedded the video because no-one should have to suffer through watching that much footage of this dope talking. So why write about the video at all? Well, it illustrates an interesting point: even a blind pig finds a truffle once in a while, even when he doesn't know it. At one point, Shirley said that "we should crack down on all types of fraud." This is the truffle. He just doesn't know what he might mean by "all types of fraud". He's a desperately stupid racist, so he thinks that he's talking about fraud perpetrated by Blacks and Mexicans. However -- and you can probably see where I'm going with this -- I find myself agreeing with Nick: the U.S. should be cracking down on all types of fraud. The fraud he and his acolytes in Congress are laser-like focused on is, of course (and as ever) penny-ante fraud, often committed by the poor and the desperate. Some of these people do grow fat on their fraud, but most hustle for years and end up barely staying ahead of the game. So much fraud is committed by participants in an MLM, which seem to be ubiquitous. But let's stay focused on fraud that directly appropriates taxpayer money. [image]Instead of focusing on penny-ante fraud, I think we should root out and end high-level forms of government fraud, which is a million times worse. Literally. Where low-level fraudsters steal hundreds or thousands of dollars, the real criminals steal billions. There is no comparison. No-one in Congress is interested in talking about this fraud because they directly benefit from it. I am, of course, talking about military contractors, and most of the trillionaire-company tech industry. Those who steal billions are delighted when their loyal minions foreground people like Shirley. Their minions hope to lap up a few crumbs that spill from the high-powered schemes perpetrated by those who already have so much. ]]> https://www.earthli.com/news/view_article.php?id=6017 2026-01-31T21:29:11+01:00 https://earthli.com/users/marco

writes that, "In response to criticism of the surplus from the major economic powers, particularly the European Union, which has complained that it is being flooded with cheap Chinese imports, the Chinese government sought to turn the tables. "The" ... ]]>

writes that, "In response to criticism of the surplus from the major economic powers, particularly the European Union, which has complained that it is being flooded with cheap Chinese imports, the Chinese government sought to turn the tables. "The vice minister of the General Administration of Customs of China, Wang Jun, said the export controls of China’s partners were preventing China from importing more. "And then directing remarks at the US, without directly naming it, he continued: “It should be pointed out that some countries politicise economic and trade issues, issuing various pretexts to restrict exports of high-tech products to China; otherwise, we would import more. There is vast room for import growth.” "But such calls for the freeing up of trade and the lifting of export controls will not bring about a lessening of restrictions. Rather, they are likely to be intensified. Foreshadowing moves by the EU, French President Emmanual Marcon has called the flood of goods coming out of China “unbearable.”" This whole sordid and tedious chain of events lays bare the lie that western nations believe in competition and fair play, to say nothing of anything like the common good. They made up a bunch of rules for running the economy, rules that benefitted themselves and sounded good to those who weren't immediately benefitted. They sounded good to those who were subjugated because those poor suckers thought that, if they were to follow the rules, they would get to benefit as much as those who'd set up the system. [Flip the table]That was always a lie. China has exposed it by absolutely dominating the game. Now we watch as the empire and its vassals flip the table in a tantrum, take their ball and go home. Yes, China has its own problems of unsustainable growth, of oligarchs within pushing the country in a direction that benefits them. This is always going to happen. But that doesn't change the fact that their success in a game rigged against them has exposed the economic lies told by the empire. ]]> https://www.earthli.com/news/view_article.php?id=5968 2026-01-20T22:01:08+01:00 https://earthli.com/users/marco

writes, [image] "To spell this out clearly, the reason RAM has quadrupled in price is that a huge quantity of RAM that hasn't been produced yet has been bought with money that doesn't exist to populate GPUs that also haven't been produced to go in datacenters" ... ]]>

writes, [image] "To spell this out clearly, the reason RAM has quadrupled in price is that a huge quantity of RAM that hasn't been produced yet has been bought with money that doesn't exist to populate GPUs that also haven't been produced to go in datacenters that haven't been built powered by infrastructure that may never exist to meet a demand that doesn't exist at all to make profit margins that mathematically can't exist while economists talk about this thing they call the "rational markets hypothesis"." Invest now! Before the bubble bursts! -------------------------------------------------------------------------------- The post "4Chan, 2013" writes, [image] "There will be no "collapse" the way some of these people think of it. It's not going to be like the movie "Dawn of the Dead" or whatever where one day suddenly shit hits the fan and prices skyrocket and everyone begins to riot and the SS comes marching down the street to kill everyone. There will be no "happening." It's far more insidious than that. Read the poem ""The Hollow Men"" by TS Eliot and you'll understand. "You'll just notice that every day simple things will become a little more expensive. Everyone's homes and apartments will start to get smaller. Your work hours will get longer, but your pay will decrease. You'll see family and friends less, and find that in time you care less about them. Every day you'll find yourself lowering your standards for everything: work, food, relationships, etc. Job security will no longer exist as a concept. You'll notice houses and apartments shrinking. People will start hanging on to clothing longer and longer. Less [sic] people will get married, even less will have children. People will engross themselves in technological distractions and fantasy while never truly experiencing the real world. "Whatever dream people used to have about what their lives were going to be will become for them a distant memory. The only thing left for them will be the reality of their debt and their poverty. And every minute of every day they will be told, "You are stupid, ugly, and weak, but together we are free, prosperous, and safe." "That is the collapse. The reduction of the American man into a feudal serf, incapable of feeling love or hate, incapable of seeing the pitiful nature of his situation for what it is or recognizing his own self worth." From the poem ""The Hollow Men"" by TS Eliot, "Our dried voices, when We whisper together Are quiet and meaningless As wind in dry grass Or rats’ feet over broken glass In our dry cellar "[...] "We grope together And avoid speech Gathered on this beach of the tumid river "Sightless, unless The eyes reappear As the perpetual star Multifoliate rose Of death’s twilight kingdom The hope only Of empty men." -------------------------------------------------------------------------------- Finally, the post "Capitalism's Contradictory Priorities" writes, "Under capitalism, people aren't entitled to clean water, but data centers are..." [image] Thomas Sankara was assassinated at 37 years of age, surprising no-one. ]]> https://www.earthli.com/news/view_article.php?id=5970 2026-01-20T21:40:00+01:00 https://earthli.com/users/marco

was a fantastic interview. Highly, highly recommended. The summary from the show writes, "[...] discuss the deep decay—“the rot”—within America’s ruling class. Henwood argues today’s" ... ]]>

was a fantastic interview. Highly, highly recommended. The summary from the show writes, "[...] discuss the deep decay—“the rot”—within America’s ruling class. Henwood argues today’s political and economic elites are short-sighted, unimaginative, and corrupted by money. While Trump is an obvious symptom, Henwood stresses that the Democratic establishment, Ivy League elite, and corporate leaders are equally hollow and ineffective. "Scheer pushes back by noting that the decline didn’t begin with Trump. He points to the Clinton era—especially figures like Lawrence Summers—as central architects of the neoliberal turn that dismantled New Deal regulations, empowered Wall Street, destroyed welfare protections, and fueled decades of inequality. Summers in particular is criticized as cynical, ethically compromised, and deeply connected to financial deregulation and predatory finance. "Henwood agrees: Clinton-era Democrats were not passive—they aggressively advanced neoliberal policies pioneered by Reagan and Thatcher, transforming the Democratic Party into a pro-market, pro-finance machine. This shift was mirrored globally among center-left parties. The result: collapsing wages, financial crises, and widespread political alienation. "Scheer emphasizes that inequality today—especially tech monopolies and billionaire dominance—directly traces back to Clinton’s dismantling of antitrust enforcement and financial rules." [image]Doug actually has his own podcast: "Behind the News" by Doug Henwood . The following two shows were particularly good. "December 11, 2025" This show featured "Anatol Lieven analyz[ing] the Trump national security strategy" and a really knockout interview with "Susannah Glickman on the transformation of the US government into a private equity firm." See also another interview: "Runaway Short-Termism" by Susannah Glickman and Nic Johnson ("How has the Trump administration broken from the past century of American political economy?") "December 18, 2025" This show featured excellent, informative, and eye-opening interviews with "Thea Riofrancos, author of "Extraction: The Frontiers of Green Capitalism" , on the complications of using lithium batteries to green our future and Alyssa Battistoni, author of "Free Gifts" , on the weird relationship between capitalism and Nature." ]]> https://www.earthli.com/news/view_article.php?id=5976 2026-01-20T21:17:30+01:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=6000 2026-01-13T22:56:37+01:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=5691 2025-09-14T11:17:14+02:00 https://earthli.com/users/marco

discusses a topic that has also been well-covered by Freddie deBoer in his book The Cult of Smart, namely that: modern, western society privileges intelligence above nearly everything else. I posit that our societies tend to privilege plunder and... ]]>

discusses a topic that has also been well-covered by Freddie deBoer in his book The Cult of Smart, namely that: modern, western society privileges intelligence above nearly everything else. I posit that our societies tend to privilege plunder and those who can do it without a twinge of conscience. Sociopaths, in other words. "[Marxist analytic philosopher G. A.] Cohen calls his view “luck-egalitarianism.” He thinks inequalities are objectionable when they’re outside of the control of whoever gets the short end of the stick. The ideal society would eliminate inequalities that you can’t do anything to change." "A society where the only way to achieve a middle-class lifestyle was to win a place in a warrior caste through trial by combat would be unfair to people who are physically smaller or weaker through no fault of their own. Similarly, it’s unjust if the few escape routes out of the working class tend to be tied to unevenly distributed academic aptitudes." Or, perhaps even more perverse, if the only escape routes are tied neither to physical nor academic ability but to an ability to screw over other people, to be an asshole, to not only disregard principle but, if possible, to not ever have any in the first place. [image]We live in a society where, if you don't already enjoy privilege, your only escape route is to provide some value to the already-wealthy and other elites, usually by providing them means by which they can increase their own personal wealth and power or by massaging their egos with sucking up, or otherwise validating their lifestyles and personal worldview as perfectly entitled masters of the universe. In this society, you either make do with much less -- perhaps much less than you deserve relative to your societal value -- or you burrow your nose in some elite ass to climb that ladder until you not only wouldn't even recognize yourself anymore, you would no longer even be capable of even thinking that any such introspection would be necessary or useful. Instead, the ultimate goal is to become one of them, preening and plundering, encouraging your own entourage of acolytes to burrow their noses in your own privileged ass in a glorious cycle. "Any time we accept inequalities that the worse-off can do nothing about, we’ve therefore accepted a degree of injustice." ]]> https://www.earthli.com/news/view_article.php?id=5539 2025-05-31T16:28:30+02:00 https://earthli.com/users/marco

(just a half a year ago). [media] At about 28:00, "Um so could AI in the near future sort of massively bring down prices in certain sectors and could that have an overall deflationary effect? It could do if the hype around it is true. "[image]But the thing about ... I'm old. The thing about being old is, you know, you've seen it before. I remember when this was called big data That was 15 years ago. "There was a book produced in 2010 -- by a couple of guys at Harvard Business School I think it was, or the Kennedy School -- the race against the machine. It said 60% of all jobs are going to be automated by 2016/2020. Uh, then there was an Oxford business-school-side business-school study said "No lad, you got that wrong it's only 40%." Then the OECD went down to 20%. And we got to 2020 and none of it happened. "So you know I've seen hype bubbles before. I'm still waiting for the blockchain revolution. I've noted many times that every time we've had a major technological shift, labor markets have transformed and gotten bigger not smaller. Because it all rests upon a ""lump of labor" fallacy" . There's a certain amount of work to be done and if the robots do it, we don't do it. So just color me skeptic on that entire thing. "I think what's happening -- here's an interesting one -- if you want to ever think about this: Why is it the Trump administration's going after the universities, right? Well, you know, antisemitism, etc. No. Why do they want to punish us? Because we're the liberal elite. All right, here's another one: How about all the tech barons are massively overinvested in AI and going to make huge losses because they can't even define the short-term end use for it. And they're never going to find 20% extra electricity to run these things So, it's a bit of a bust. Wouldn't it be nice if you could get half a trillion a year in guaranteed funding that used to go to the top research universities to cover your losses? Just saying." At about 31:00, "Fastest growing job in the United States by volume for the past 15 years is elder care nurse. It dwarfs software engineers and everything to do with that industry by a factor of 12 We're all getting older. There's no robot for lifting you in and out of bed and it's not an AI problem to solve. "[...] "There's nothing at risk in a lift button There's a risk in your prostate diagnosis. And if the machine gets it wrong, who do you blame? [question of liability is huge] I'm simply saying that there are frictions in the real world that make the easy technology-adoption and instant transformation ... particularly when you don't have a good business case for most of the stuff that they've got, beyond cheating in academic essays." ]]> https://www.earthli.com/news/view_article.php?id=5434 2025-03-16T00:14:50+01:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=5427 2025-03-15T16:00:10+01:00 https://earthli.com/users/marco

of "POGO" (Project on Government Oversight) about corruption, waste, and fraud. Whereas you may deem anything the government spends money on that you don't like or approve of as "waste", "fraud" has a legal... ]]>

of "POGO" (Project on Government Oversight) about corruption, waste, and fraud. Whereas you may deem anything the government spends money on that you don't like or approve of as "waste", "fraud" has a legal definition. Somewhere in the middle is "corruption", which is when you're paying far too much for services that you actually want or need. The major sources of corruption are the Pentagon budget and Medicare Advantage. [media] So far, she says, DOGE hasn't found any fraud. What they have done is carry out a scattershot demolition of government programs and offices that are the best fraud-fighting ones, so their efforts will have the opposite effect -- it will lead to more fraud and corruption, likely funneling money to oligarchs like Musk himself. This is utterly unsurprising. I really like this lady because she sticks to the horrific facts of the situation without wasting any time discussing the characters involved. They don't matter and aren't relevant for an examination of why DOGE purported mission is just that -- purported. She says that some of the things that DOGE says are true and there are honestly more than enough problems to tackle, but that they're not tackling those problems. Right idea; wrong solution. It's more likely that DOGE is just a deliberate scam, in which they steal more money for themselves while telling everyone that they're saving money. Instead, what they're doing is to redirect money from Congressionally sanctioned and legalized programs to bullshit like SpaceX. She says, "Waste is one of the places where there has always been an alignment between the parties. But, as you've pointed out, one person's waste is not the same another's. I did take it as a great opportunity for us to be able to testify before Marjorie Taylor Greene's committee and say, yes, these are the places we want to look at them. And we have not at all been encouraged by what Doge has done yet. We did submit suggestions of places where they should be looking, and we're not hearing back from them, but we'll sit down with anyone and say, 'this is what you should be doing.' And I hope, maybe, at some point soon, they learn their lesson that the way they're going about things is likely illegal and, so far, kind of incompetent. And we have a road map that could help them be successful if they wanted to." The "POGO" (Project on Government Oversight) is well-established and seems like something that should be getting a lot more attention than DOGE. ]]> https://www.earthli.com/news/view_article.php?id=5397 2025-02-16T23:03:55+01:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=5382 2025-02-15T22:53:15+01:00 https://earthli.com/users/marco

describes how, once again, the treasury secretary comes from the financial sector. Like so many other Democrat-adjacent sources these days, the... ]]>

describes how, once again, the treasury secretary comes from the financial sector. Like so many other Democrat-adjacent sources these days, the article's tone suggests that this is somehow more horrible because the "giant orange baby" nominated him, and Orange Man Bad. "[image]What did Bessent do previously to qualify for this powerful position? He ran a hedge fund, Key Square Capital Management LLC, with 25 employees. But, more important to the transactional world of Donald Trump, Bessent gave $1.25 million to PACs supporting Trump and tens of thousands of dollars to state and national Republican parties and candidates." Look, this isn't great. It's not great that a hedge-fund manager is Treasury Secretary. But ... honestly? Who did you expect to get the role? My entire life has been filled with utterly appalling and much more powerful treasury secretaries. Here's a counterfactual: maybe we should be happy that Trump nominated some stumblebum who'd only run a hedge fund with 25 employees to be in charge of Treasury. Maybe he won't be able to get out of his own way [1]. Be honest with yourself: did you even know who the last few decades of treasury secretaries were or what they did? I did. I've been watching them very carefully for almost two decades now. Will Bessent really be worse than Biden's Janet Yellen, who never saw a war she didn't want to finance the shit right out of? Or Larry Summers, that Jabba-the-fucking-Hut sonofabitch who's so elitist that he makes most other elitists look like sons of the soil? Let's see, who else we got? Hank Paulson? Tim Geitner? Robert Rubin? Steve Mnuchin? All craven creatures of Wall Street. Bessent is almost certainly not going to be any worse than any of those buffoons, who worked as hard as they could to funnel money upward, toward themselves and their ilk. Bessent will do the same but our best hope is that he will be more incompetent at it. -------------------------------------------------------------------------------- [1] Like Trump in his first administration; it feels a bit less so in his second. ]]> https://www.earthli.com/news/view_article.php?id=5383 2025-02-15T22:36:20+01:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=5381 2025-02-14T18:34:31+01:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=5300 2024-12-23T12:38:39+01:00 https://earthli.com/users/marco

that -- and I'm paraphrasing here -- 42% of all stocks and bonds belong to the top 1%. The top 10% own 84% of the market. The top 20% own 93% of the market. The remaining 80% divide up the remaining 7% for themselves. I can only imagine that the bottom three quintiles have pretty much no participation in -- and, hence, benefit from -- the market and its current spectacular gyrations. ]]> https://www.earthli.com/news/view_article.php?id=5232 2024-11-10T08:42:32+01:00 https://earthli.com/users/marco

, which will be published when I get around to copy-editing it. ]]> https://www.earthli.com/news/view_article.php?id=5019 2024-08-19T00:21:00+02:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=5010 2024-08-14T04:45:53+02:00 https://earthli.com/users/marco

is from April but discusses several structural issues with the economy that persist today and many of which have become even more severe, despite simultaneously being desperately papered over by the song-and-dance of the markets and an administration... ]]>

is from April but discusses several structural issues with the economy that persist today and many of which have become even more severe, despite simultaneously being desperately papered over by the song-and-dance of the markets and an administration interested in the economy sinking only after November 5th. [Wages rising; hours sinking] "Today’s typical American working household has several earners, sometimes in multiple jobs. If one earner loses a job while the others keep theirs, she may leave the workforce for a time; there is the option of making do with less, and for some there is early retirement. She will not, in that case, count as unemployed—however difficult her life. A low jobless rate can mask a great deal of stress in such households. The employment-to-population ratio is still a bit below where it was in 2020, and far below where it was in 2000; average weekly hours are still falling." The first interesting fact is that the perceived increase in many other economic diagnostics can be traced to a reduction in working hours for many people. For example, an increase in wages seems like it would be positive but if the number of hours worked at that wage drops, then the gross payout is still less or, at least, less relative to the increase in costs engendered by an inflation driven by many factors but one that many, in no way unjustly, attribute to elite greed squeezing the last few drops of blood from the corpse of the underclass. "[...] what matters to consumers is prices in relation to household incomes over several years. In 1980 Ronald Reagan famously asked, “Are you better off than you were four years ago?” Today, millions of American households are worse off than they were in 2020. Basic living costs, such as gasoline, utilities, food, and housing, have risen more than their incomes have. Real median household income peaked in 2019 and fell at least through 2022. "Yes, but didn’t real wages go up sharply in 2023? According to the Biden-friendly Center for American Progress, real wages (for those continuously employed) have indeed now recovered roughly to where they would have been had no pandemic occurred. But there is a great distinction between steady progress and a sawtooth down-and-up. The former breeds confidence; the latter does not." It is also salient to consider real, felt costs rather to rely overmuch on indicators like CPI, the official inflation rate, or the official unemployment rate (as only the most optimistic and and unrealistic number is generally reported). People have long since lost confidence in any of these numbers, as they continue to be cheerily reported by elite media for whom the numbers mean literally nothing for their day-to-day experience or future. The media live in an economy completely divorced from the one in which the people to whom they're reporting live. And it's really people's confidence that things will continue to be OK that is utterly lacking. People sense how the focus is laser-like on short-term gains for the ultra-rich. They know that, even if they've gotten a little tide to life their boats as well, that this isn't the focus of the economy. If you know that you basically just got lucky to not be regressing financially, then you're not going to be very confident in the economy. You're basically just waiting for the rug to be pulled out from under you, too. "(By 2021 Covid tax credits and relief payments brought child poverty down to a record low of 5.2 percent.) Most Americans were prudent with the support, but they often used it, not unwisely, to achieve a touch of independence from dreary jobs. With that support gone, the cushions erode, savings decline, debt rises–and families feel the pressure to go back to work on whatever terms that employers offer. They don’t like that very much." Yeah, so they think the economy sucks -- because it does suck. For them. For the lords of industry, whom economists like Paul Krugman exclusively represent, the economy's doing great. He's got binders full of figures proving that since his portfolio is increasing in value, everyone else must be doing great. Of course he does. He needs to believe this, so that he can simultaneously get richer and be a very moral person who cares about his fellow, though benighted, citizen. "As people return to work, how secure are their jobs? In the golden years during which today’s older generation of economists learned their textbook tools, a worker’s job was often a lifetime affair. Autoworkers (and their associates in rubber and glass) might suffer periodic layoffs, but they could expect to be called back; their skills and experience remained useful. That was all over by the 1980s." While it is still possible to find employment where skills and experience are not only useful, but rewarded, this is absolutely not encouraged by general economic policy. Companies that continue to work like this have damned well better have an advantage in the market and good margins. Otherwise, they'll be hammered out of existence by companies that don't give a flying blue f*&k about their employees. "The growth of GDP, another once-reliable icon of prosperity, has also lost much of its meaning. The concentration of gains in the small, ultra-rich sectors of finance and technology is one reason. Another has to do with the nature of government-supported investments in chips, in renewable energy and in military hardware, all of which have been contributing to growth and to massive corporate profits. Such investments do create jobs. But they add nothing visible to living standards." This is a very astute observation. Improvements are concentrated at the very top. The numbers look great. The averages and indexes are all booming -- because of about seven companies, without whose progress the rest of the index is in free-fall. Those companies are booming because of a huge bubble in "AI" that is bound to fall to Earth quite soon. The first signs are already here that it's too expensive and unreliable and that the current state of the technology cannot be scaled to address either of those problems. There are no products; It's a command-line prompt with no UI guidance. "Although there were good things in it, even Biden’s infrastructure bill was largely a conventional roads program, notoriously likely to foster suburban sprawl and to enrich developers, rather than to visibly repair the decaying core of most American cities and towns." People see that these bills are very much about funneling money to the usual suspects and very little about actually improving their living conditions. Knowing how the fraud of the last several decades have worked out for them, they are naturally suspicious that this next scheme will also be a fraud that benefits only the already-wealthy and the budding fraudsters in their midst. That is, it is only the unprincipled that see hope in anything because it is they who are most likely to benefit. Still, anecdotal evidence -- speaking to Americans -- suggests that even those for whom the economy is working reasonably well don't really see much hope. They don't expect it their good luck to last. "[...] what are Biden’s priorities these days? They are to get money for Ukraine, Israel, and Taiwan—that is, for (respectively) distant, dishonorable, and prospective wars. The belligerence with which he opened his State of the Union address was astonishing. Yet looming failure in Ukraine and mass murders committed with American bombs in Gaza add to the war-weariness that many Americans feel, after 23 years of brutal and fruitless fighting. The notion that the United States could fight and win a war against China over Taiwan—150 miles from the mainland but more than 5,000 from Hawaii—is too ludicrous for words. When foreign policy is delusional, it’s not unreasonable to lose confidence in economic policy as well." I'm not so sure about that. Again, it's only anecdotal evidence, but people aren't really aware of America's wars. They think that China is the aggressor. They think that Russia is the aggressor. They are basically no better informed or morally equipped than Israelis in that regard. Some people might worry about an economy build on lies, war, murder, and genocide, but that's nearly none of them. [Profits are up; how shocking] The article "Profits Are Still Rising, Why Is the Fed Worried About Wage Growth?" by Dean Baker has a different take on it. Unlike Galbraith, Baker thinks that the numbers are OK. But I think he needs to think that they're OK because he desperately wants Trump to lose. If the economy is not doing well, that will almost certainly happen. So that's kind of the background to Baker's piece. He writes, "I was more than a bit surprised to see the profit data this morning. I really did believe that the profit surge during the pandemic was a one-off, associated with supply-chain issues. "We can argue about how much of this increase was a predictable story, where profits rise due to shortages, and how much was about companies exploiting market power to jack up prices, but the fact that profit shares increased is not disputable. In any case, it was reasonable to expect that profits would return to their pre-pandemic shares after supply chains returned to normal." Was it really reasonable to expect that to happen, Dean? In what world? This one? Fat chance. What was reasonable to expect to happen is that the fat piggies running society would try to stuff as much as they can into their maws -- even if they're not hungry anymore. This is the rich: [image] Sometimes I worry about Dean. Sometimes he's so spot-on with his appraisal of both economics and politics and sometimes I wonder if he's got his head stuck up his ass. Or is he just covering his ass for having talked about how great the Biden economy is for the last two months? I know he just looks at numbers -- like a good economist does -- without really lending any weight or credence to the economy as she is experienced by her subjects but he can't have completely missed the looting and pillaging for the last year, can he? Well, here he is saying that he's "a bit surprised" that profits are up -- and persistently so. Yeah, why wouldn't those durned corporations be willing to share their overflowing profits as increased wages with the employees whose surplus value generated those profit? Because it's a plunder-based, rent-based economy that barely manages to produce enough stuff of value as a side-effect of the profits it generates for the handful of people that run it. How can Dean claim to be "surprised"? He ends his short article with "If profit shares are rising, there is no reason for it to be trying to slow wage growth." Yeah, Dean there's absolutely no economic reason why that would be. But you know as well as I do that the goal of the economy is to funnel money upwards. This will continue until there is a violent revolution. No-one in charge has shown the slightest tendency of being satisfied with the level of plunder -- not while a single grubby 99.9% hand holds a single grubby penny will they be happy. Think of the Grinch swiping the last crumb of Christmas cookie and you have a good picture of the upper class. [image] [Student loans] Another strong effect on the economy is the drag of student loans on an entire generation or two. The following video provides a pretty good overview. [media] This is a pretty good summary of the student-loan crisis. $1.7T of debt, most of which is owed by people who aren't making much money, who owe less than $25,000, who are paying back primarily interest, and who will never pay back the principal. It's just not feasible. They can't declare bankruptcy to get rid of the debt. They are caught in a scam that the U.S. government lured them into, to the benefit of large banks that get to keep their interest -- and large universities that hiked their rates into the stratosphere as soon as they saw how much free government money there was to hoover up. It's a drag on the economy and it was a mistake to do it. The only real beneficiaries are the usual suspects -- the people who already had most of the money in the first place. The student-loan system is there to squeeze blood from a stone. I can concede the point that forgiving this pile of federal loans is only a band-aid, because there's just another generation of loans coming. Nothing will have been done to address the fact that the job market requires college degrees for jobs that don't need them, and that college prices have outpaced inflation and cost-of-living increases by a tremendous amount (two orders of magnitude?). The real solution is to force the universities to return the money they stole from the government to build up dozens of billions of dollars in endowments. [Food-delivery apps] Another part of the economy that has been destroyed is restaurants and food. This is a very, very visible change to most people. The following video is a good introduction of the current situation. [media] Food-delivery apps predate the local restaurants. No-one makes money, though. The customer actually gets delivery more cheaply than the service actually costs. The delivery companies are hemorrhaging money and don't have a path to a viable business model. Local restaurants are being dragged into delivery service against their will. Customers are required to tip or the delivery workers remain woefully underpaid. This is a giant clusterfuck of a business to which a bunch of people have become addicted. Meals on wheels is something that's absolutely necessary for many people, but not nearly the number of people who use these services. ]]> https://www.earthli.com/news/view_article.php?id=4951 2024-02-27T21:25:49+01:00 https://earthli.com/users/marco

writes, "The evidence shows that most Americans are richer than ever, and richer than most people in the rich world – that they consume more, live in larger homes, and so on. They are objectively some of the luckiest people in world" ... ]]>

writes, "The evidence shows that most Americans are richer than ever, and richer than most people in the rich world – that they consume more, live in larger homes, and so on. They are objectively some of the luckiest people in world history. On the one hand all this narcissistic whining about imaginary poverty is mildly annoying for the rest of the world to have to listen to. On the other hand, it reflects shared delusions about individual entitlements and America’s economic decline that are driving a toxic ‘doom politics’ of cynicism and resentment, while also neglecting the needs of actually poor Americans." OK, sure. Probably the wrong people are also complaining, but I think the author might be misunderstanding the message. There seem to be two problems for the author. First of all, people who the author thinks have no right to complain about the economy are complaining about the economy. This probably includes the kind of people that the New York Times interviews about how it's impossible to live in NYC on less than $300k per year. Second of all, those who would be justified in complaining about the economy are apparently not articulating their feeling of insecurity to the author's satisfaction. When these people are asked whether the economy is bad, they say "yes", which is technically wrong, but what they mean is that the system sucks. What they mean is that they might have enough money but they don't feel secure. The economy is just one facet of society, which has an obligation to provide some basics to its people. One of those basics is some sort of plan to allow people to relax and breathe a little, knowing that everything they have won't simply disappear overnight. It's not just about money. It's not even mostly about money. It's about living somewhere nice, near people that you like. It's about not worrying whether you'll have that roof over your head or whether you'll have enough to eat. We've been trained to translate that desire into a desire for money, but that's not where it comes from. You could say that the system perverts that completely human, understandable, and reasonable desire into a desire for money. Once you desire something fungible instead of concrete things, then you also lose track of how much you actually need. Whereas a desire for a home and security is bounded, a desire for money becomes, for many, pathologically unbounded. They system also promotes it because we're in an unlimited-growth, highly consumerist economy. "(Although some, like the extreme cost of health-care compared to other rich countries are attributable to America specific causes, such as peculiarly dysfunctional institutional arrangements.)" Why does the author not realize that they've obviated their own line of reasoning by parenthetically hand-waving away the cost that causes most bankruptcies in the U.S.? Instead of lambasting people for whining, try to figure out if they're whining about the wrong thing. Maybe, when they complain about poverty, they mean, rather than not having enough money, that they feel a sense of precarity, a lack of security, a foreboding that it could all end on a whim. [image]They're not poor now, but maybe they're expressing the real worry that they might be if they ever. Stop. Hustling. Thirty-year-olds can look forward to having six to ten more jobs for different employers before they can even think of retiring. Each job will be increasingly difficult to get, unless you're gifted or work at something that can't be automated away or made obsolete. An influencer might be technically middle-class right now, but has no future. Work lives are decades long, while jobs and careers are 2-5 years long. Insecurity? Fear? You betcha. People are aware that they will have to do unprincipled, soul-crushing things to retain their position -- and even that might not work. They feel temporarily not poor because that's the best their society is willing to offer. Whereas Steinbeck's quote that "[...] the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires" might have once been true, it's probably more accurate to say now that "the middle-class see themselves not as safe and sound, but as the temporarily fortuitous indigent." "Americans live in smaller households in larger homes and drive bigger better cars than they used to. It may be that many Americans can’t afford the lifestyle which they feel they deserve (and maybe they do deserve more!), but the lifestyle they can afford is nevertheless much better than that of previous generations." The author is evaluating "better" purely in monetary terms and not in psychic or security terms. That's all we can say: f&@k you for saying the economy sucks or the system sucks -- if you can even express such a thought -- you have more stuff than ever! What are you whining about? "A bigger problem is the division between the majority who enjoy housing wealth and the minority without it (especially younger people)." Again, the author tosses this in as an aside, when it's pretty salient. An entire generation has no idea what's going to happen over the next 50 years, but the current generation has their nut, so they should be happy about it. Can't you think that the economy sucks even if you personally benefit from it? Are you not allowed to evaluate the economy as "shitty" because it's not scaleable? There's also the laser-like focus on measuring wealth in term of an illiquid asset that is a large proportion of most households' wealth (their home). You can borrow against it, but that doesn't feel secure, especially if you're aware of the regularity of popped bubbles that deflate this fictitious wealth. People don't believe in the numbers anymore -- or in the fairy tale told by their society. They figure it wouldn't take much to lose all control and end up dependent on help or end up on the street. This feeling is promoted by all levels to keep wages low. The system uses fear to keep the rabble in line, demonizes poverty and welfare, then wonders why people are terrified of poverty. "(Real research institutions that care about getting their methodology and facts right, like the Fed, come to very different numbers.) Nevertheless, even obvious nonsense will be believed if it is endlessly repeated and left unchallenged." Which rumors and numbers, though? There are good economists -- like Dean Baker -- telling these stories as well, about how something like forty percent (I can't remember exactly) of American households would not be able to handle a surprise bill of five hundred bucks without borrowing money. Are those economists deluded as well? Maybe people just don't buy the bullshit low, low numbers of inflation and unemployment because they've been massaged nearly beyond all meaning. ]]> https://www.earthli.com/news/view_article.php?id=4952 2024-02-12T22:39:13+01:00 https://earthli.com/users/marco

start off with this sentence, "Argentina's libertarian President Javier Milei praised the virtues of free markets and warned political leaders about the dangers of collectivism in a speech at the World Economic Forum on" ... ]]>

start off with this sentence, "Argentina's libertarian President Javier Milei praised the virtues of free markets and warned political leaders about the dangers of collectivism in a speech at the World Economic Forum on Wednesday." Talk about red meat for Reason magazine. I've been following this magazine for a while and I appreciate some of their content, but man they just can't resist this bullshit. This obvious mental incompetent is spouting off about collectivism and they love it. He says that the only way to improve everything that capitalism has broken is because we haven't been doing it hard enough. That's why Argentina's president is suddenly at the WEF -- after years and years in the wilderness under Kirchner et. al. Despite its name, the World Economic Forum is just a bunch of billionaires and lobbyists fellating each other about what a great job neoliberalism is doing enriching them while ruining everyone else's lives. ""The West is in danger, it is in danger because those who are supposed to defend Western values find themselves co-opted by a worldview that—inexorably—leads to socialism, consequently to poverty," Milei said in the opening of his keynote speech in Davos, Switzerland, during his first overseas trip as president." OMG. Tell me more, you unheralded genius. It literally doesn't matter how undereducated his background, if he spouts the right thing, then he's in the club. Listen to this slobbering idiot of an author just rehashing the same tired, old tropes. "Milei argued that collectivism punishes business owners and stifles innovation by destroying any incentives "to produce better goods and better services at a better price." Countries embracing greater economic freedom are eight times wealthier than their repressed counterparts, Milei asserted." OMG, yes, everything that isn't exclusively awesome for business is bad for business and must be eliminated. The goal of every society obviously has nothing to do with people, and must be built for the thriving of business. Those businesses will then bring bounty to people, right? To recap: The prime purpose of society is to build businesses and earn rent for their owners, from which a potential side-effect is well-being for the people. Business first, people second. If the side-effect doesn't appear, then too-bad-we-tried. And we aren't going to try super-hard. That's been the story for decades. Give all of your shit to those that already have everything, they'll do something magical with it, and return the favor manyfold. Except they don't. They never do. They just keep what you give them and demand more. It's nothing more than a scam and fools like this author have no pity, no empathy, and no bullshit detectors. They just sploosh all over literally anyone who tells them the bedtime story they've been programmed -- or programmed themselves -- to believe. They can afford to because they never, ever get under the wheels of the mindless, voracious, society-killer that they constantly demand we need more of, nor do they really know or associate with anyone who does. If they happen to hear about it, they reassure themselves that anyone who can't flourish in this glorious neoliberal paradise isn't trying hard enough and deserves what they get. Which is nothing. I mean, look at this guy. This is the picture the author published. I feel like they're taking the piss. She can't possible revere this guy. He looks like he just got up out of one of those Austin Powers time capsules from the 70s. [image] The author "splooshes" on, "Despite internal challenges, Milei's radical agenda has garnered support from external observers, including Kristalina Georgieva, head of the International Monetary Fund (IMF). "The Argentine economy is in such bad shape that it has to be shaken up. President Milei and his team are doing exactly that," she said during an interview in Davos. Argentina is currently the IMF's largest debtor, with an outstanding debt of $46 billion." Oh, yeah, not just Reason magazine, but the IMF is absolutely ready to slob his knob. The IMF has never seen an economy it didn't think it couldn't bleed dry. It loves this shit: bleed the people dry to pay back the IMF -- that's the way! And the IMF has an especial axe to grind with Argentina, which has defaulted a few times in the last couple of decades. Look, this stuff is not new, despite what you might have read. The article "Global 1% Own 43% of Financial Assets" by Ben Norton writes, "The world’s richest 1% own 43% of global financial assets, and the wealth of the top five billionaires has doubled since 2020, while 60% of humanity – nearly 5 billion people – collectively got poorer, according to a report by Oxfam, a leading international humanitarian organization." "A staggering 69.3% of the world’s wealth is located in the Global North, which has just 20.6% of the planet’s population." Despite the Reason author's fears, the world doesn't need Milei to tell it to plunder. The plunder party is already going extremely well. Only a racist would say that this is how things should be. Why would that make you a racist? Because the only way you could support the existing system is to believe that northern-hemisphere people deserve to have most of the world's wealth -- which is largely built on resources extracted from the part of the world they don't live in. It's odd how, in a capitalist economy, the people who live on top of the most valuable resources are the poorest, while those with the least scruples and the biggest guns are the richest. These obvious facts on the ground speak to a global organizational structure that has very little to do with any of its own espoused ideologies -- those are just fairy tales to keep the ignorant masses quiet while their pockets are picked, again and again and again. Right on cue, the article "The World Could Soon Have Its First Trillionaire. Good!" by J.D. Tuccille decides to laud having a trillionaire because that would be an unalloyed good, a tremendous achievement. King of the world. He argues that even a trillion dollars isn't that much because, "A trillion dollars (Oxfam is UK-based, but the report is framed in U.S. dollars) is impressive. But it doesn't represent a fixed measure of wealth, since governments constantly succumb to the temptation to devalue money." You see? The same person who can bemoan the government spending millions on food stamps can argue that a person with a trillion dollars barely has any money at all. Tada! I don't have cite any more about his further arguments that it's the nigh-altruistic beneficence of billionaire's gracing us with their genius and acumen that have dragged so many benighted souls out of poverty. It sure as hell wasn't socialist China, right? No, all of those poor, simple folk wouldn't have been able to help themselves, but the rich and savvy employers saw fit to grant them jobs so that they could no longer be poor. The author might as well just cite Ayn Rand as a source on all of his essays. Almost no-one at Reason ever spares a thought for how much of a drag on the economy billionaires are, about how we've managed to conquer some poverty despite them, not because of them. That, if we'd have a more humane system, we'd have even fewer poor people -- and fewer billionaires as well, which would lead to a river of tears from nearly all of the writers at Reason magazine. I just finished watching Midnight Mass -- which features a vampire, but not how you think. Vampires have their servants called familiars. They just suck up to the vampires for no clear reason other than a child-like adulation, a desire to bask in the reflected light of their idols. That's how I think of people who love billionaires. In related news, the article "Long COVID specialist tells US Senate that “the best way to prevent Long COVID is to prevent COVID in the first place!”" by Benjamin Mateus writes, "As Dr. Ziyad Al-Aly, a physician-scientist at Washington University in St. Louis who is a leading expert on Long COVID, with numerous high-impact publications on the devastation wrought by COVID-19 infections, stated bluntly during his testimony, “The best way to prevent Long COVID is to prevent COVID in the first place. This requires a multilayers/multipronged approach. We must develop sustainable solutions to prevent repeated infections with SARS-CoV-2 and Long COVID that would be embraced by the public. This requires acceleration of development of oral and intranasal vaccines that induce strong mucosal immunity to block infections with the virus. Ventilation and air filtration systems can also play a major role in reducing the risk of infection with airborne pathogens. We did an amazing job proofing our buildings against earthquakes that happen once every few decades or few centuries. Why don’t we proof our buildings against the hazards of airborne pathogens?”" Because there's no money in it, you goddamned hippie. The profits margins on making buildings safe for people sound pretty shitty, buddy, not gonna lie. Hey, though, if you think of some way of making the rich richer while you're stopping COVID, then you'll have a winner. Yup. Get back to us when you do, OK? Thanks, bye. "As he noted in his testimony, “At least 20 million Americans are affected by Long COVID. It affects people across the lifespan—from children to older adults. It affects people across race, ethnicity and sex. The burden of disease and disability in Long COVID is on par with heart disease and cancer. Long COVID has wide and deep ramifications on the labor market and the economy—some estimates suggest that the toll of Long COVID in the US economy is $3.7 trillion—on par with the 2008 recession.”" It's adorable that he tries to tie it the pocketbook because he knows that all of these societies that break their arms patting themselves on the back for being civilized and enlightened really only care about money. It's really a nice try, but so naive. You see: the people who matter made a f#@king killing in 2008. They all got richer. All of the losses were borne by others, people that they don't know and will never meet. You're not making an argument that will convince the rich. So the U.S. economy loses $3.7 trillion -- all they hear is that someone's gotta be picking up that money. It's usually them, so they see Long COVID as a f&#king windfall, another absolute tsunami of free money from the government flowing into their coffers via subsidies for health care and experimental medications that won't even have to go through all of the procedures and testing because we need them so bad. They realized that the way to sell quickly in the traditionally moribund and highly regulated health-care market is to manufacture crises by not handling them before they happen. Sure, it would be great for people if we would plan for epidemics and prevent disease rather than healing it, but that's not where the money is, unfortunately, so there's no mechanism whatsoever for making it happen. "The pandemic, as a trigger event, has accelerated the rot at the core of bourgeois democracy that is unable to address any of the maladies that have been created out of capitalist production. The Senate hearing on Long COVID is an exercise in futility for those who continue to harbor illusions in reform." Yes. Yes, it was. ]]> https://www.earthli.com/news/view_article.php?id=4932 2024-02-04T21:56:03+01:00 https://earthli.com/users/marco

does some decent analysis on the efficacy of the market mechanism for distributing societal benefits versus that of charity. "[...] it doesn’t seem obvious that Instacart “causes” jobs. Suppose Instacart had never been founded. Then people would spend" ... ]]>

does some decent analysis on the efficacy of the market mechanism for distributing societal benefits versus that of charity. "[...] it doesn’t seem obvious that Instacart “causes” jobs. Suppose Instacart had never been founded. Then people would spend whatever money they now spend on Instacart on something else (let’s say booze and porn), which would also create jobs (for brewers, bartenders, and porn stars). There’s no particular reason to think spending the money on Instacart creates more jobs than spending it on those other things would. So how many jobs does Instacart create over replacement? I’m not sure but I think it must be much less than the official number of employees." "Instacart pays its employees, who then go on to stimulate the economy somewhere else. And it saves its customers time, which they can spend on productive economic activity. On the other hand, saving people’s lives allows them to engage in productive activity too. Fewer diseases mean families can spend more money on things other than medical care, and fewer childhood infections potentially means higher IQ and potential as an adult. I don’t think Instacart trivially wins this one either." "There are some charities that send economists (or other professionals) to developing countries and advise them on how to do more capitalism. This kind of development aid has been roundly criticized and did especially badly in Russia." Because it's poorly concealed plunder FFS. Stop talking about Russia like it went wrong despite our best intentions. What happened in Russia was exactly according to plan. Extract, extract, extract. Plunder, plunder, plunder. Weaken, weaken, weaken. The only thing that "went wrong" is that Yeltsin couldn't be replaced with an equally pliant successor when Yeltsin's obviously plastered and exceedingly corrupt ass could no longer viably continue. Putin sticks in the deep state's craw -- much like Castro, although their ethics and politics are quite different -- because he got in the way of their final plunder. The goal is, and has always been, to weaken Russia so much that it explodes into its constituent oblasts, which could then be ruled by U.S.-appointed viceroys. "[...] I’m concerned that even though rich countries got rich because of capitalism, it’s no longer that easy for poor countries to get rich with the same type of capitalism - existing rich countries will outcompete them - and we’re not entirely sure how to help poor countries get rich now, although probably good institutions are always better than bad institutions)" We know how the currently rich countries got rich, but we choose instead to kick away the ladder, to facilitate plundering them, because that's how Empire got rich and how Empire stays rich. The Empire is the Mafia. It is not unable to figure out how to help poor countries become rich; it is uninterested in doing so, as that largely interferes with its own success. Scott suggesting otherwise is a fairy tale that Empire tells about itself that he chooses to believe. "Finally, you could invest in developing-world projects and companies that seem unusually likely to make an overall economic difference there. I’m nervous about this because of China’s Belt and Road initiative, which did this at huge scale for infrastructure, but doesn’t seem to have done much good (and might have done some bad)." Maybe you should find out what people in those countries have to say about BRI rather than what the NYT has to say about it. Your sources are most likely quite biased against it because Empire demands it. I'm sure it's not all good, but I've seen a handful of interviews with leaders of countries in Africa who sing a completely different tune. "[...] if there’s a company that can’t raise enough money to build a dam in Kenya and needs your charity dollar to make the budget work, why hasn’t Wall Street come through for them?" Crazy right? It's almost like financial success isn't at all contingent on doing useful things for society. ]]> https://www.earthli.com/news/view_article.php?id=4831 2023-12-30T17:52:21+01:00 https://earthli.com/users/marco

writes, "And, for two of our super-billionaires, Elon Musk and Mark Zuckerberg, we have Section 230 protection. This means that their Internet platforms are not subject to the same rules on defamation as print and broadcast outlets. Yeah, this is just the" ... ]]>

writes, "And, for two of our super-billionaires, Elon Musk and Mark Zuckerberg, we have Section 230 protection. This means that their Internet platforms are not subject to the same rules on defamation as print and broadcast outlets. Yeah, this is just the market, telling us to give special privileges to online platforms." I like me some Dean Baker. I disagree with him occasionally. This is one of those times because I wonder whether he's not painting with too broad a brush here. It seems disingenuous to call social media "news organizations". These platforms may disseminate information, but are structured completely differently than print. There are billions of authors, as well as the real risk of censorship. We should probably make a distinction between web sites and large corporate portals, but the moderation burden is much higher in either case. You could argue that the entire "official news" part should be separated from the social-media platform -- but that would be ... impossible. People would still repost "news" on the social-media side, anyway, while the "official" part would atrophy in its regulated silo. You could try to outlaw people contributing to common portals entirely. Enforcing "moderation" -- i.e., making companies legally liable for what is considered illegal content -- will inevitably end up as an equivalent to outlawing certain viewpoints. There will always be something that gets taken too seriously, as we've seen millions of times in the existing social networks. Baker derives no value from these social-media forums, so he almost certainly doesn't care if they either disappear or become so neutered that they might as well not exist. The world no longer has a sense of humor because there is a huge incentive to be performatively offended on a lot of these sites. That's the kind of thing that will eventually decide what gets to be published and what doesn't. I think this is pretty typical of the people pushing for increased moderation, legislation, and regulation. I agree that you shouldn't be able to make money off of it, but I also agree that you shouldn't get to moderate away everything that offends anyone. I think especially that they will start by moderating away people calling other people "dirty jews" and "n-words" and posting swastikas into their comments. But they will inevitably end up by moderating away anything that they deem threatening to the company, its profits, or the ruling class to which it belongs and that allows it to prosper. The problem, as usual, is that a lot of people want to reach as large an audience as possible -- because they're narcissists -- but they want to continue to communicate as if they're just talking to their intimate friends. Hell, that "dirty jews" and swastika person might just be making a terrible joke that would be funny to their little in-group, in the context of other things going on. Who knows? Satire gets weird sometimes. Jonathan Swift wrote about cooking Irish children. Without context, no-one can tell that it's just a harmless idiot, learning how to behave themselves properly. With moderation and completely open channels, everyone has to already know how to behave from the get-go. Pushing the boundaries cannot be tolerated because speech is deemed too dangerous to abide. It's never been illegal to be an asshole, and we've seen how loud they can get in public forums. But we have to be extremely careful about splitting people into groups, depending on the ideas they have -- those with free and open access to millions, if not billions of minds, and those without. [image] As a coda: it's not like this isn't already happening all the time! Check out any of Matt Taibbi's TwitterFiles reporting. The U.S. government has worked its censorious tentacles deep into the orifices of the public Internet and is already deciding what can and cannot be published. ]]> https://www.earthli.com/news/view_article.php?id=4823 2023-12-28T21:01:57+01:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=4809 2023-11-23T22:52:47+01:00 https://earthli.com/users/marco

answers its own question with "yes." I'm not so convinced, as I explain in my responses below. Baker's analysis and my critique of it is several weeks old at this point, but it's still applicable. More recently, Paul Krugman has jumped on... ]]>

answers its own question with "yes." I'm not so convinced, as I explain in my responses below. Baker's analysis and my critique of it is several weeks old at this point, but it's still applicable. More recently, Paul Krugman has jumped on the bandwagon, accusing anyone who thinks that the economy sucks -- only because it seems to suck for themselves personally -- off supporting Putin. Baker doesn't go that far, but he does swerve a lot closer than I thought he would. Baker, like Krugman, can't seem to help seeing the world as valiant Democrats trying to save the economy for everyone despite the Republican's interference. That isn't really the feeling I get when watching the Democrats at work, but let's let Baker explain in his own words. "Here also there were conservative members acting as a brake on virtually everything Biden put on the table. And, he lost even this slim majority in the 2022 election, although an additional Senate seat gave him a small amount of extra wiggle room." This is all true, but it suggests that Joe Biden is not conservative. There is nothing in the shape of the policies that he's enacted that belies his prior fifty years in office. He's proud of his police-state record. He's a corporate whore, a grifter, and a malicious asshole. He "always has been" . Why do so many people suggest the opposite? Baker here seems to be pushing the line of thinking that just because the Republicans are batshit, the Democrats must be some sort of safe harbor to which sane people can flee. [1] This is absolutely how the Democrats get you. They are absolutely just as disinterested in the fates of anyone making less than $400K per year as the Republicans; they are just willing to lie about it more -- or differently. With Democrats as with Republicans, you have to watch what their hands do, not listen to what their mouths say. "The unemployment rate, which stood at 6.3 percent when Biden took office, had fallen to 3.9 percent by the end of 2021, and has not gone over 4.0 percent since. This is the longest period where the unemployment rate has been below 4.0 percent in more than half a century." It's so frustrating to have to constantly think that no-one seems to care what kind of jobs these are or how utterly gamed the statistics are. Dean Baker himself writes article after article about how there are six statistics provided by Bureau of Labor Statistics every month -- and how everyone cites the absolutely most optimistic one available. And then he turns around and cites those same statistics as if there were nothing wrong with them, as if they are prime evidence of a booming economy for all, as if an economy that benefits elite Democrats and ticks all the right boxes were good for everyone. "As a result of the ARP [American Rescue Plan Act of 2021], the United States is the only major economy that is largely back to its pre-pandemic growth path. The U.S. also now has the lowest inflation rate of any of the G-7 economies." Congratulations, the U.S. excels the most at blowing smoke up its own ass. The rise benefits the rich the most. It's really odd to hear Baker paraphrasing Reagan's "rising tide lifts all boats", trickle-down bullshit. "In spite of the inflation of 2021 and 2022, real wages for the average worker are higher than they were before the pandemic. And, there have been larger gains for those at the bottom, reversing roughly a quarter of the rise in wage inequality we saw over the last four decades." So, it's better than it was but still terrible? There's still 3/4 of the wage inequality to make up for, but ... what? When do you celebrate? The gain could be reversed on a whim. There is no trust that it won't be. Many of the programs that led to the gains he's talking about have already expired. I think Baker is trying to talk things up until November 2024 because he's terrified that Trump will become president again in 2024. He's trying to sell the dead horse that is Biden by telling people to ignore the evidence of their eyes and to listen to his statistics. Statistics don't put food on the table or pay the rent, but you just gotta hang on until next November -- then you can admit that things are going back into the shitter. Poor Dean now has to watch Joe Biden double down on supporting Israel while it commits war crime after war crime, which is tanking his chances of reelection, despite the awesome economy he's created. "Tens of millions of people are now working from home, either entirely or partially, saving themselves hundreds of hours a year in commuting time, and thousands of dollars on work-related expenses. These savings in time and money do not show up in our data on real wages." True, but those people are also only twenty percent of the workforce (obviously the most important part of the workforce, ammirite?). Good for them, but I don't see how the other eighty percent should celebrate gains that they have no way of enjoying. They can take solace in having a second job where they bring their newly home-officed lords and masters takeout and Amazon orders. It's a glorious class system made immanent, so what's the problem, right, Dean? "These are all extraordinarily positive developments for large segments of the population. There is no period since the late 1990s that could even come close to the progress made in the first two and a half years of the Biden administration." I'm afraid I really have a hard time believing this statement, even from Dean Baker. What does he mean by "large"? Like, as a percentage? Is this happening despite the Democrats? How long-term viable are these gains? Are they equitable? Why would they be? Did something change in the power balance or basic morality of the U.S. political landscape that I missed? Is Biden such an incredible force that he singlehandedly dragged the U.S. upstream? Is that the argument? "But on the whole, it is pretty hard not to see the overall picture as being overwhelmingly positive, especially considering that Biden had to deal with the disruptions created by multiple waves of Covid, as well as Russia’s invasion of Ukraine." Are you f%#king kidding me? "Overwhelmingly positive!" Lay it on a bit thicker there, Dean. Baker is often absolutely blind politically, but this is a bit much, even for him. Is he aiming for a job at the New York Times? Does he need a gig on CNN? Is he just jumping on the "lesser evil" bandwagon 15 months early? Like, if Trump is super-bad, then Biden must be super-good? I don't even know how to process this. He's portraying poor Biden as having had to deal with a war when, in fact, he could have easily prevented it by not provoking it in the first place? [2] Smoke the NYT's ganja little more, Dean. At least the stock market's up again, so that must be good. Wall Street loves wars. So does Bitcoin, apparently. "[...] notably by modernizing the country’s power grid and setting up a system of charging stations for electric cars." What a f*&king waste of money. Biden could have spent it on trains, but I suppose most American have given up on having anything other than a slightly less-polluting copy of the same terrible system that they already have. Biden is pouring money into this because all of his donors have ensured that he and his supporters will be handsomely rewarded for it. There is no change in the basic system. But, apparently, the country's infrastructure has been modernized. Funny, it didn't feel like it when I was there this summer, but I admit that I was just hanging out in the poorer parts of the nation, where these amazing effects have failed to be felt -- and where they will mostly likely never be felt because no one gives a shit about those places. They've got nothing to offer, so they get nothing from the Democrats. Hey, though, maybe Dean Baker knows better. New York City is flourishing, right? "The second piece of legislation Biden got through Congress was the CHIPS Act , which appropriated $280 billion over the next five years (approximately 1.0 percent of the federal budget) for research and support for manufacturing of advanced semi-conductors in the United States." Yeah, good on Biden for subsidizing high-tech companies in the States. They had hardly and money or profits of their own to invest. What could possibly go wrong? Oh, it could turn out that TSMC isn't going to build a packaging facility -- and that the fab is behind schedule and can't find the employees it needs. Money well spent, on the right people. Always the right people. "It probably makes sense in any world to ensure that key components for the economy will be accessible in the event of a conflict with China, and given that Taiwan is our major supplier, this is a real concern." Again, the fact that it's a real concern is because that conflict is being massively stoked and provoked by Biden, but go Biden, right Dean? How can this man be so politically tone-deaf? He's lauding Biden for making a few hand-waving motions in the direction of fixing problems that he himself is causing -- because Biden's sponsors want more war and want to extend the American empire beyond its expiration date. Biden's spending our money to solve a problem he's causing. Bow before him in thanks. "[...] positive story from an economic standpoint, although we should be asking more about ownership of this research than seems to be the case now." We're asking for literally nothing! The government funds everything! And owns nothing! It's all in private hands. Stop being so naive. You know this, Dean. Do you need to believe that Biden is a good president and, thus, a viable candidate for a two-term president, so you just make shit up about how awesome he is? This, when you normally spend every article picking apart the massive giveaways? I can't tell whether you got an LLM to write this article for you. "[...] we at last seem to be making good progress towards a green transition." No. We absolutely are not doing that. We are making good progress on spending other people's money on our friends' companies that are pretending to care about a green transition. But they don't. They don't care about that at all. They care about making money for themselves. No-one in that country gives a flying blue fuck about a green transition, not if it interferes in any way with easy ways of making money. The environment is nowhere on the list of priorities. "We will be able to raise billions of dollars of tax revenue each year, just by monitoring what companies announce they are spending on buybacks. And, we don’t have to worry they will cheat. What will they do, lie to their shareholders?" That seems spectacularly naive for companies that are international conglomerates. I can't imagine they would have let this law pass if they didn't have a workaround. But, sure, let's believe that the Biden administration -- led by the former Senator from ViSA, remember -- has cracked the code and finally found a tax that will pass Wall Street and Congress and is super-easy to monitor and generates oodles of money. Pardon me for not believing it until I see it. We hear all the time about the U.S. turning a corner on some progressive measure until we realize that we've somehow been fooled again. "[...] the corporate income tax, which currently averages around 13 percent of all profits," Does it really? That's pitifully low but, at the same time, it also seems high, when the big guns are paying much, much less than that. Dean's written about Walmart and Amazon -- the nation's two largest employers -- paying essentially no taxes. "With a growing body of evidence showing that a lack of competition has been important in raising profits at the expense of wages," Did we not already know this without collecting more evidence? Did we really need to use scientific experiments to learn that companies that claim that they couldn't possibly pay higher salaries because they're too busy paying billions in dividends and stock buybacks to all of their shareholders are full of shit? "Biden’s appointees are committed to respecting workers’ rights to have a union, if they want one." If by "respecting", you mean not being allowed to help workers at the expense of employers. How do you ignore how the Biden administration crushed the railroad strike last year, Dean? The Biden administration does not give a shit about workers. Not. One. Bit. They care about ensuring profits for their crony international conglomerates, first and foremost. All you have to do is watch what happens when anyone threatens a strike: the Biden administration steps in to "help" by neutering all demands and using whatever legal means they can to force people to keep working without making any gains for themselves. Companies that shed billions in profits per year claim that they couldn't possibly pay their employees cost-of-living increases -- and the Biden administration nods enthusiastically and steps in to crack some skulls and bust some kneecaps until there's a bloody signature on yet another capitulatory deal where the workers walk away with far too little and their management-heavy union and the company's board of directors walk away grinning like Cheshire Cats. "[...] when we have clear evidence of the much greater efficiency of this sort of tax, we will be able to move quickly down that road. The Republicans, and many Democrats, will do everything they can to prevent corporations from paying more tax, but when we have them defending pure waste, we are fighting them on favorable turf." Again, this is so unbelievably naive. It hasn't worked anything like the way he describes in well over forty years. People don't want companies to pay taxes enough that they'll elect people to enforce it. The opposite happens. He's arguing that we have "favorable turf" because ... why? Because the Democrats and Republicans are afraid of looking like corporate stooges? When has that every stopped them? There are no alternatives. It doesn't matter who gets elected -- companies don't pay even close to enough taxes. Occasionally, someone will pass something that makes it look a bit better, to keep the savages at bay. But then a giant thing like the Trump (or the Clinton, or the Bush, or the Obama) tax cut eats up all of the gained ground anyway. Baker's argument amounts to celebrating a field goal by the losing team when the score was already 721 -- 0. What the hell are we celebrating? Are we turning this thing around? Give me a break. "I would say the same about Biden, but he is doing it in a context where he enjoys a far more tentative majority than Roosevelt faced. And, he clearly is not the same sort of charismatic figure as Roosevelt. But all in all, he is doing a damn good job." Biden: better than Roosevelt. Hard to accept, Dean. Roosevelt apparently had it easy compared to poor Biden. Jesus. That country really has lost the ability to wish for anything but a slightly less bloody beating. Honestly, just bend over and grab your ankles -- and be effusively thankful when you get a drop of vaseline. -------------------------------------------------------------------------------- [1] As I noted above, since I wrote up these notes, Biden has gotten on board with Israel's flattening and ethnic cleansing of Gaza (and probably the West Bank, too). I think even Dean is going to have a hard time selling that decision as "poor Joe has just been saddled with more foreign wars." [1] See also "Balance or both-sidesism" by John Q , where the author writes, "Republicans want to overthrow US democracy, while Democrats stubbornly insist on keeping it." There was some snarky bullshit on both sides of this sentence, but it's already revealing enough that he really believes that the Democrats believe in anything like what we learned might be defined as democracy in civics class. They do not. They will use the surveillance state to ensure that they remain in power. They will take the easiest and fastest routes to quick money for themselves. That is literally all that they care about. Anyone who wants to prove that they are interested in more than that should (A) perhaps not become $25M richer within 2-4 years of being elected to national office and (B) should disassociate themselves from the Democratic party. The Democrats are busy trying to pry open a tiny, perhaps nonexistent loophole in Constitutional law in order to prevent their main opponent from even appearing on the ballot for president, while also suppressing any news and information sources that might provide any narrative that conflicts in any way with the pile of bullshit that they're selling to the public, just to make sure that their corpse of a candidate gets reelected. That is not in any way evincing an interest in democracy, as I would define it. ]]> https://www.earthli.com/news/view_article.php?id=4766 2023-08-13T16:05:49+02:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=4732 2023-05-07T07:21:34+02:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=4668 2023-01-28T13:25:41+01:00 https://earthli.com/users/marco

, which... ]]>

, which deals with a practice he says is called Drip Pricing. I suppose it's what the inventors deem to be a clever way of describing a process whereby, instead of being presented with a single price, the customer sees a small price that entices the original purchase, but that grows as more fees and surcharges "drip" into it until the customer has to pay a completely different -- and invariably much higher -- price than originally imagined. [Manipulative Naming] In the author's case, it was a 20% "Fair Wage and Wellness Fee". [image]Which, of course that's what they're going to call it, right? They're not going to call it the "Selling Children into Sex Slavery Fee" because no-one would even consider paying it. But if you call it something that guilts people into thinking that employees are going to go without adequate pay if you don't pony up, then you might slip it by without complaint. And it has to be something, something feel-good like that because no-one would pay a 12.5% fee like "Electricity, Heating, and Water", would they? And how high can they make the surcharge? In one place I've seen, it was 3%; in the linked article, it's 20%. Could it be 50%? 100%? 200%? Where does it end? Could they just advertise free food and then charge you fees and surcharges before you're allowed to leave the establishment? What happens if you don't pay these arbitrary fees? Do they call the police? And why is everything a percentage? Why doesn't it cap out at a fixed fee? If you spend a lot on a meal, say $200, then the staff gets $40 on top of that? Is there no limit to scaling up the salary? Literally everyone else has a cap on their hourly wage, but tipped labor fluctuates not only on the downside, but also on the upside. What an absolutely ridiculous way to run things. What about people who can’t afford the meal with the surcharge? They would have walked away from a restaurant that’s too expensive for them if the restaurant had been honest about the prices. Instead, the restaurant lured in customers with a “bait” and then “switched” the prices on them. The purely psychological nature of what the fee is called and how high it's allowed to be makes it very suspect. It doesn't matter what you want to call it, though, because we already have a word for this kind of practice: it's called "Bait and Switch". This practice is illegal in many, many commercial endeavors because it wastes everyone's time. The customer invests time in a transaction, trusting that the parameters of the transaction will not magically change before it's completed. The prices are supposed to let you choose whether you want to exchange that amount of value for the advertised product. If the advertised price is no longer the one that you're charged, then this deal is broken. [Tipping 2.0] But the system is already broken -- at least in the U.S. -- because this is already how tipping works, right? Restaurants get away with advertising lower prices because they externalize part of their labor costs into a magical fee that is applied afterwards. The only reason this works at all is the guilt induced by knowing that the waitstaff will simply be vastly underpaid if people don't include a generous tip. But what the hell is that all about? Why am I, as a customer, involved in the minutiae of a restaurant's bookkeeping? This isn't the case in many, many other places. Can you imagine if, as the owner of a software-consulting company, I would offer my customers a lower fee, but tell them that they can volunteer to pay 20% more or my employees won't be able to pay their rent or feed their children? This concept feels so outrageously inappropriate in every other context that it's only familiarity that lets otherwise-sane-and-reasonable people argue in favor of it. In the U.S., they don't even include tax in their advertised prices -- even though there is no way to avoid paying them. How is it legal to advertise prices that don't include mandatory fees in a country that is so congenitally arithmetically challenged that making them figure out 8.25% of $6.59 amounts to torture? [It's not like that everywhere] All of these tacked-on fees, taxes, and surcharges are, of course, bullshit. As you can well imagine, none of this nonsense happens in Switzerland. The price is the price. If you want to buy something on a menu that's CHF20.-, then you drop a pretty little pink note with a "20" on it on the table and you walk away. Sure, sometimes you round up if it's CHF19.-, but you don't have to and no-one expects you too. It made more sense in the old days of cash, when you didn't want to watch the waitstaff grub around in their giant wallet to find a 50-cent piece for your change, so you generously told them to "keep it". It was kind of embarrassing because waiting to get 50 cents back felt like you were being cheap -- but it also felt kind of weird giving an otherwise gainfully employed person 50 cents and then having them thank you for it. With cards, you just wave your card in the direction of the pay terminal and get on with your day. You ordered some food, they brought it, you both said hi, said have a nice day, and you all got on with it. It works because it wasn't a transaction between a noble and a servant. They are paid to find out which product you want, bring it to you, and collect the fees for it. When you get back from your lunch break, your job will be to use a power-wrench to tighten bolts or to enter data into an Excel spreadsheet. They're all just jobs that need to be done. There doesn't need to be a more complicated system than wages for that. People are trying like hell to more firmly establish the ludicrous practice of tipping, though -- even in Switzerland. The reason is almost certainly something like: people are gullible morons easily guilted into making their own lives worse if doing so might make complete strangers think that they're slightly more decent human beings. It's largely how confidence games work -- and society tends toward being a confidence game if we're not vigilant. [What are wages?] Could we get away from a wage-based system? Absolutely! But let's not pretend that's what we're doing with these fees and tips and surcharges. All of these complications of an otherwise simple system are proposed and promulgated by those who want to move costs away from themselves -- externalizing them. In the end, our society needs people to do things in order for it to function. When you work on anything other than providing your basic needs, then you're trusting that society will value this labor enough that it provides your basic needs for you -- or compensates you for having not taken care of your basic needs by providing you with something that you can trade to those who can provide you with your basic needs. That is, if I don't spend my time growing food for myself, then I have to trust that what I do spend my time doing will be compensated in some chain of purchasing with food or I will starve to death. I absolutely understand that there are many other facets that are of interest to society in this relationship -- things that end up complicating the simple formula outlined above. I want to emphasize that the system outlined above is the reason we started doing this in the first place. We want, as a society to benefit from productivity that isn't directly associated with the production of basic needs, so we agree to take care of the basic needs for some so that they provide us with value at a higher level than basic. We just can't forget that this is the reason we're doing this because, otherwise, we can be fooled into believing that secondary or tertiary knock-on goals are actually the primary goals, in which case we continue to believe in a system that is no longer providing the basic needs for everyone. Which is kind of what we have, right? Almost no-one reading this article is involved in production that satisfies basic needs, and almost all of us are aware that at least some -- if not many -- of those who do provide those basic needs are not making ends meet -- but we manage to ignore that we've broken the original deal because doing so is personally beneficial to us. God help us when we start to believe that, for example, keeping the labor force insecure and scared is actually beneficial for society. It's not beneficial for society, it's beneficial for an elite segment of society. If you happen to be in that segment and have no ethics, then you'll support a system that exploits those who can't defend themselves for your benefit. Consider the article "In Confidential Memo, Treasury Secretary Janet Yellen Celebrated Unemployment As A “Worker-Discipline Device”" by Jon Schwartz , where she's, "[...] making the case for, as she writes, the positive “impact of heightened job insecurity.” A rise in worker insecurity in the mid-1990s meant everyone was too scared to ask for raises, which meant businesses wouldn’t need to hike prices, which meant even with the falling unemployment at the time, the Fed didn’t need to raise interest rates to slow the economy and throw people out of work." Once you get to that level of twisted justification, you really need to get back to basics and think about why we're doing what we're doing. Otherwise you end up in a place where 99% of your system is built to benefit an elite, while keeping the 99% of everyone else just simmering enough to continue to play along, but not angry enough to actually do something about it. Which takes me back to my original topic sentence above [1], "The United States is the absolute king of searching for ways in which you can suck just enough of the enjoyment out of doing something that it creates the most profit without alienating people to the degree that they stop paying for it." Society started off with a decent idea and then forgot about it. Instead, we let what was originally a sound system be buried under layers of parasitic bullshit that funnels value away from those who've actually earned it. [Do you have to pay it?] I think you're justified in refusing to pay the surcharge and letting the restaurant know what you think by having a conversation with the manager publicly. People, we've already addressed this problem. There are laws against it. Just enforce them. Or rise up and refuse to pay. Resistance has to begin somewhere; maybe here? -------------------------------------------------------------------------------- [1] Did I just quote myself from the same article? You're damned right I did. ]]> https://www.earthli.com/news/view_article.php?id=4666 2023-01-23T20:43:50+01:00 https://earthli.com/users/marco

lays out all of its information, then comes to the wrong conclusion. Once again, people, revenue != profits. A corporation only very grudgingly declares profits. It must pay taxes on profits. Therefore, it looks for... ]]>

lays out all of its information, then comes to the wrong conclusion. Once again, people, revenue != profits. A corporation only very grudgingly declares profits. It must pay taxes on profits. Therefore, it looks for every single possible way to squirrel away profits into different parts of the ledger. The article is about an over 100% increase in the price of eggs from January to December of 2022. My anecdotal source says that it's more like over 300% in central NY, where people barely have two nickels to rub together in the first place. Where Robert Reich blames corporate greed, the author says that the explanation is simpler: the avian flu. It's very clever and good to remember events that are directly related to the production of eggs. Since so many hens had to be killed, there are, necessarily, fewer eggs around. A decrease in supply leads to an increase in price, right? Well, yes, of course, but that's also corporate greed. It can be both unfettered market forces and corporate greed. Reich points out that the largest egg-producer in the U.S. declared a 65% year-on-year increase in profits. That profit comes after they've set back money to account for their lost hens, and for building up their business again in the coming year. Lancaster acts as if the company would be paying taxes on its profits and then it would reserve money out of those profits in order to make sure that it stays in business, despite having lost a lot of its hens. That's not how this works, I'm quite sure. They raised their prices to gouge their customers, who could hardly choose not to buy a staple food. That's why their profits grew so much. If they'd not gouged their customers, they'd have had about the same profit as in other years. Instead, they took advantage of their monopoly position and the absolute windfall of a devastating avian flu that would have put a smaller company out of business. Reich's explanation fits the facts better. ]]> https://www.earthli.com/news/view_article.php?id=4604 2022-11-21T22:08:31+01:00 https://earthli.com/users/marco

"The abrupt change in fortune for FTX and its sister trading firm Alameda Research marks a spectacular fall for Bankman-Fried, a 30-year-old trader and entrepreneur who is one of the industry’s most prominent figures. Bankman-Fried was one of the world’s richest people just months ago, but large swaths of his $24 billion fortune will evaporate if FTX and Alameda Research go bust." What a nonsensical paragraph. It's an interesting philosophical conundrum: If it could fall apart so quickly, then did it ever really exist? It did not. Sam Bankman-Fried was the king of the Golgafrinchans for a little while, with his little tracksuit stuffed full of leaves. I've read that, as little as a couple of months ago, his empire was valued at $32B. Ludicrous. Our economy is run by fatuous idiots, serial fabulists. I have seen nothing but reverential treatment of Bankman-Fried, as if everyone has to cover their egos for ever having thought he was the real deal. FTX's rival Binance, after 48 hours of due diligence, gave up examining FTX's records and called off their potential buyout because there was way too much shady shit and way too little there there. Also, "The US Securities and Exchange Commission has expanded an investigation into FTX, which includes examining the platform’s cryptocurrency lending products and the management of customer funds, according to a person familiar with the matter." [image]This one might hit crypto in general pretty hard again (harder than it already has, as Bitcoin and Ethereum already slid 20% over the last couple of days). "“Given the size and interlinkages of both FTX and Alameda Research with other entities of the crypto ecosystem… it looks likely that a new cascade of margin calls, deleveraging and crypto company [and] platform failures is starting similar to what we saw last May [and] June following the collapse of Terra,” JPMorgan analysts wrote." ]]> https://www.earthli.com/news/view_article.php?id=4355 2021-11-07T09:19:04+01:00 https://earthli.com/users/marco

shows a top-hatted capitalist explaining our economy to two, much-taller, blue aliens with tentacles for arms and two extra tentacles extending from their ribcages. Their physiognomy isn't relevant to the story, but that's what they look like. [image] "Alien:" ... ]]>

shows a top-hatted capitalist explaining our economy to two, much-taller, blue aliens with tentacles for arms and two extra tentacles extending from their ribcages. Their physiognomy isn't relevant to the story, but that's what they look like. [image] "Alien: "Explain to us: how do you decide how to allocate resources, and who does what work, on Earth?" "Human: "So you see, on Earth we have a free market, so resources are efficiently allocated to meet the needs of the people, based on market principles like supply and demand. " "Human: "Entrepreneurs own the factories, and workers sell their labor to them." Alien: "How can you “own” a factory?" Human: "That's easy, you just have a piece of paper saying that you do, and the State enforces it with police." "Alien: "But what I don't understand is why do the workers obey the people with the pieces of paper that say they own everything?" "Human: "No, they aren't obeying them, they are entering into a free contract in order to earn the money they need to survive. " "Alien: "That sounds a lot like how we kept beasts of burden as slaves in our primitive societies. " Human: "No, you aren't getting it, it is freedom." "Alien: "I don't understand, why don't the workers, being the larger class, simply destroy and eat the smaller class who commands them?" "Human: [looking annoyed] "Human: "Let me show you some of the charts again..."" The final, hover-over text reads, "Alien: "I don't understand, if ever increasing-consumption is leading to the destruction of your own planet, why don't you just reduce consumption?" ""Because then the investors would lose money. It's like you aren't even reading the charts."" ]]> https://www.earthli.com/news/view_article.php?id=4214 2021-03-27T13:09:03+01:00 https://earthli.com/users/marco

, which included the following infuriating citation. "Yet, as economist Steve Horowitz recently wrote to me on Facebook, "The reality is that we can never achieve" a zero-risk society, and "the costs of trying to are enormous, in" ... ]]>

, which included the following infuriating citation. "Yet, as economist Steve Horowitz recently wrote to me on Facebook, "The reality is that we can never achieve" a zero-risk society, and "the costs of trying to are enormous, in terms of both material resources and human freedom."" Honestly, just fucking knock it off. Nobody wants a zero-risk society. We just want to maybe not have a high-risk society because all the fucking filthy lucre is being funneled into five pockets. That's all. The point isn't to eliminate risk, but not to die or get sick or suffer just for the sake of making a few people rich. It's not that the money isn't fucking around for every other dipshit thing like war or military hardware or cops or giant fucking boondoggles like the stock market and tech companies. Stop blowing smoke up our asses, Veronica. Maybe you call everyone out for wasting money -- I don't know, I don't really follow your oeuvre. But it doesn't matter because no-one who matters does. They start fucking whining about the deficit and the debt -- just like you do in your article -- as soon as the 99% would benefit rather than the 1%. On the other hand, a title like " Billionaire Wealth Gains Could Pay for Two-Thirds of Covid Relief Bill" by Rebekah is also supremely unhelpful. I haven't read the article, but the clickbait lede compares two large numbers with no real relation. The money the government is spending actually exists -- or, at least, it can create it -- while the increased value of billionaires' assets is a phantom temporarily buoyed and wafted about by the hot air of the market. It cannot be transformed into anything useful. It came from nothing and there shall it return, probably sometime soon. It's not liquid. It's useless other than to let them wield power based on its magic might. That works well enough because everybody believes in the fantasy of asset-based wealth, regardless of the underlying asset. ]]> https://www.earthli.com/news/view_article.php?id=4213 2021-03-27T13:04:32+01:00 https://earthli.com/users/marco

describes the main reason the U.S. -- and the world -- economy doesn't seem to have noticed any downside in the last year and a half, despite the most devastating pandemic in living memory. "It seems that whatever the state of the economy, the" ... ]]>

describes the main reason the U.S. -- and the world -- economy doesn't seem to have noticed any downside in the last year and a half, despite the most devastating pandemic in living memory. "It seems that whatever the state of the economy, the response of central banks is the same: pour more money into the financial system, so that investors and speculators can continue to make vast profits on the basis of ultra-low interest rates. "When the economy is down, more money is needed to stimulate it. If it starts to grow, more money must be supplied to stop interest rates going up and damaging the recovery." "The ECB statement said “preserving favourable financing conditions” was essential, and noted that “market interest rates have increased since the start of the year, which poses a risk to wider financing conditions.”" What is the end goal here? Once an interest rate has gone down, it can never go back up? Or will we ever have the patience to wait out investors? The way they're talking, this is the new normal. No interest rates for anyone else, but money pumped into the financial markets. At the first sign of a change, pump it up again. There is no plan to get back to interest rates that benefit anyone but the already wealthy. The economy would have to somehow magically become "healthy" on its own, creating conditions under which it would be acceptable for interest rates to rise -- because businesses were investing enough already. As it is, they don't invest because no-one's buying anything because people have no jobs and no money and can't go out anyway (and stores are restaurants are closed). Pumping into this economy just pours the money straight into the .01%'s coffers. "Banks used the risk-free rate on bonds as the baseline for setting rates, and “sizable and persistent increases in these market rates,” if left unchecked, “could translate into premature tightening of financial conditions for all sectors of the economy,” it said." To translate for Lagarde, this means that "unchecked", zombie companies would die and take down the zombie economy with it. Instead of letting any adjustment happen, they preserve the status quo. Somehow, this means that the companies don't just survive but flourish, making millions, if not billions, in profits. Instead of having a bad year, many of the most highly subsidized business had their best years ever. When policy turns a bankruptcy into lottery winnings for key players, that's all you need to know about how the world works. "The inflow of money into financial markets from central banks, starting in the wake of the global financial crisis of 2008, and then accelerated in response to the pandemic, has created a mountain of fictitious capital, such that a rapid increase in market rates has the potential to set off a financial crisis." Although they pay lip service to maintaining a steady 2% inflation (for the ostensible purpose of keeping as close to full employment as possible), the ECB, just like the Fed, has other goals in mind. To whit, "[...] if inflation were to reach the ECB’s stated target, it would completely ignore that, in line with its real objective of continuing to shovel money into the hands of the financial oligarchs, which, together with other central banks, it serves." ]]> https://www.earthli.com/news/view_article.php?id=4163 2021-01-30T23:46:34+01:00 https://earthli.com/users/marco

, which I read in 2015), but also about how Europe's and China's problems -- dithering/incompetence and fear of state confiscation, respectively -- make the U.S. dollar as short- and medium-term reserve currency a much more viable option than you'd at first think. He finishes up by talking about (mostly deficient) political responses to COVID-19 and the resulting crisis of confidence. "Mark: Let's think about the model that constrain us here. And I don't mean sort of the fancy, formal ones. I mean the informal ones in our heads. Most people do not understand that governments are not like households. Most people do not spend their time thinking about the difference between money and high-powered money and bank reserves and all of the rest of the stuff that makes government's ability to finance itself qualitatively different from households. "We love that household analogy: we've gotta tighten our belts, don't spend too much, all that sort of stuff. If you put through BIden's proposals and add it to the CARES package, the United States, in 2020 and 21 will spend more money than it spent in the entire New Deal period, inflation-adjusted. And that's without then saying 'everybody gets a paycheck until all this is over.' "Now, I happen to think, as the dominant reserve currency, and the Euros will never miss an opportunity to miss an opportunity, and you'd be mad to put your money in China because you might get arrested and never get it back, we actually have quite a lot of room to do this. I really think that it could be done. "But you've got to deal with the folk models in people's heads. And the vast majority of Americans do not think that running up an extra $15T in debt, just because there's a virus that's taking out 1 in a hundred people is a good idea. And if you do that, in the midterms, you're going to pay an awful electoral price, even if it is the right thing to do. "Interviewer: The epidemiologists, some of them in Biden's administration, they're essentially saying two months... "Mark: They don't know. They don't know. Hold on. They don't know. The thing about this pandemic is it shows you ...my favorite line about science is from Dara Ó Briain: 'Science doesn't know everything, because if it did, it would stop.' "And it's a very profound insight. And when you're dealing with something new and novel like a Corona pandemic, which throws up a new variant, is it deadlier? you're just constantly walking through a fog and you're changing your mind because you got new information. "Which, then, if you're a politician, you get slammed on because you're called inconsistent. Again, you can't win. So the notion of 'we know it's going to be two months': this is the stupidest, deadliest thing to say, because it might be six, in which case you now look like an eejit and what you promised you need to do for two months, you now need to do for six months, so now your credibility is shot. "And what you see right across the world, irrespective of ... this is happening in Denmark for Christ's sake. They have a group of rioters called the "Men in Black". This is the best welfare state and best-governed country in the world. And you've got people like 'I am done with this lockdown bullshit.' "So you're losing public trust all over the world. And we're operating at this level of 'and the answer is you should run up $15T in debt.' And I'm not even sure that's the right answer. I'm not sure that's even the problem that we face. I think we face a chronic problem of public confidence. And a chronic problem of the inability to do what it says on the tin. Which isn't just a money problem." I've transcribed a good portion of it, but just listen to the end of the discussion from there. It's stays quite interesting, with good points all around. ]]> https://www.earthli.com/news/view_article.php?id=3989 2020-06-01T21:11:58+02:00 https://earthli.com/users/marco

points out that it is absolutely not difficult to fix the so-called problem with remdesivir. It's a short article, so I'll just cite it in full, highlighting the most salient bits for those who need a tl;dr for a four-paragraph article. ... ]]>

points out that it is absolutely not difficult to fix the so-called problem with remdesivir. It's a short article, so I'll just cite it in full, highlighting the most salient bits for those who need a tl;dr for a four-paragraph article. "The Washington Post had an excellent piece documenting how the government put up most of the money for developing remdesivir, a drug that now offers the hope of being the first effective treatment for the coronavirus. As the piece explains, in spite of the substantial contribution of public funds, Gilead Sciences holds a patent monopoly on remdesivir, which will allow it to charge whatever it wants without facing competition from other manufacturers. "There is a simple and obvious solution to this problem. The government should simply take possession of the patent, putting it in the public domain so that anyone can manufacture the drug and also conduct further research, subject to the requirement that any subsequent developments are also in the public domain. "To ensure that Gilead is fairly compensated, we can pay the company an amount that is 10 percent above any research costs it incurred that exceeded the government payments for development. Gilead would just have to submit its records, with the payment coming after they are fully audited. "See, it’s simple, fun, and easy. We get the drug. Gilead gets a respectable profit, and remdesivir is cheap. Is everybody happy? (Emphasis added.)" The problem seems to be that people cannot even conceive of the government revoking a patent -- which it absolutely has the power to do. The government giveth and the government taketh away. How is it even currently a thing that the government spends all the money on research, then privatizes the profits from that research? Answer: corruption, graft, and the same people coming out on top, of course. If you don't accept that certain companies get absolutely free handouts from the government, life gets a lot better for a lot of people in a hurry. ]]> https://www.earthli.com/news/view_article.php?id=3965 2020-05-02T23:42:15+02:00 https://earthli.com/users/marco

is an article that shows just how much money the 400 richest Americans (the .0001%) have -- and what could be done with a relatively small fraction of it (e.g. use 6% to "refund all taxes for households earning under $80,000"). "Pro tip: Show the" ... ]]>

is an article that shows just how much money the 400 richest Americans (the .0001%) have -- and what could be done with a relatively small fraction of it (e.g. use 6% to "refund all taxes for households earning under $80,000"). "Pro tip: Show the source of the page to read it without all of the scrolling." You scroll horizontally along a nearly endlessly long page that discusses excessive wealth and the good it could do were it to be distributed. The final bit of text appears at about $120 billion (about 4%). If you want to scroll for the remaining 96%, you can. It's a good, quasi-visceral way of feeling just how damned much money/assets/value/wealth those 400 people have. The article addresses not just the recent crisis in the West (Covid-19), but also the one that's been killing people in the developing world in droves for decades: malaria. He doesn't mention AIDS, but that's also a global pandemic that kills its targets much more slowly -- and that's also largely under control in the West and therefore not really a problem. "Around 800 children will die of malaria today. A small group of super rich people could stop it for a sum of money so small that they would likely never even notice its absence. But they choose not to." The author is American, so he focuses on the excess American wealth -- which is truly staggering -- and what it could do for Americans. Instead of accepting that the debt burden shoots even further into the stratosphere, what if we just used all of that excess cash that a handful of Americans have and will never be able to use to pay it all back now? [1] "The recent coronavirus stimulus was the largest ever passed by congress. It was financed entirely through deficit spending, which will be repaid by taxpayers for generations. The burden of repaying this debt could be erased in an instant with a tax on the super rich so small that they would not even feel it." Because of the massive and utterly useless private cash reserves in the US, Americans are faced with more of a false choice than in other nations: "As Americans debate how and when to open the economy after coronavirus, we are frequently presented with a seemingly impossible choice between risking millions of lives and sliding into a great depression through a continued lock down. This is a repugnant lie. "The money to weather this storm while maintaining quarantine exists, it's just a matter of finding the political will to take it." In fairness, though, there is no political will short of a revolution that will take this money. It is so ideologically inconceivable for Americans to seize money like this that the shock should it happen would reverberate so hard as to wipe out the wealth it was trying to seize. This is not an argument against trying it. Instead, I'm counseling caution and planning to make sure that it works in the best way possible. The author goes on to mention all sorts of amazing things we could do with the nearly $3 trillion of wealth owned by the top 400 in America. At an 85% wealth tax on the .0001%, we get everything we could dream of. "These programs combined would completely transform our world. By redistributing this wealth, millions of lives would be saved. Billions would be rescued from poverty and disease. By inconveniencing just 400 people, the entire human race could advance to a new, unprecedented level of development." However. Here's where I have to play party-pooper. The wealth he proposes to confiscate is asset-based. It's not cash that can be used to pay for programs like $10,000 for every household in America. It's possible that confiscating this much money would destabilize the rest of the economy to such a degree that a large percentage of the wealth being confiscated disappears as it is being confiscated (or soon after). It's fictitious cash and cannot be made "real" just by taking it. I agree wholeheartedly that 400 families/people should be able to live on "just" $500 billion left over after the 85% was confiscated. But we have to have a plan for how to turn the confiscated value into redistributable capital without endangering it. Since it's mostly in the form of assets, those assets would have to be confiscated or nationalized and would have to continue to be managed. Or, the assets would remain in the hands of those currently managing them, but 85% of their value would be transferred to sovereign funds, which would use them as collateral to obtain the liquidity to fund the programs mentioned in the article. Future gains and profits would also be split along the 85/15 line. This could work -- with a different population that has been indoctrinated with a different ideology. The population would have to consider solidarity a public good that is worth attaining, instead of focusing laser-like on personal gain and senseless accumulation. It's clear that they have far more money than they know what to do with (by orders of magnitude). The ideology in America that everyone is just -- as John Steinbeck put it -- "temporarily embarrassed millionaires" runs deep and strong. Remember, we're not talking about an 85% income tax; we're talking about seizing 85% of some people's wealth. People with no money at all will consider their as-yet unrealized -- and likely never-to-be-realized -- fortunes to be in just as much danger as the actual fortunes of their overlords -- and will paradoxically do everything they can to protect their master's fortunes. This oft-observed behavior is a well-worn strategy and has protected the elites thus far -- and they've gotten nearly incomprehensibly far. We would be fools to think that anything short of a revolution would shake the shit out of a society like that. -------------------------------------------------------------------------------- [1] Debt-to-GDP ratio has not historically been a problem in the US. However, with a drastically sinking output and a skyrocketing deficit and therefore debt, it might soon be. Since other countries are weathering the economic storm better than the US, they can expect their debt-to-GDP ratio to increase much less. Not that GDP is a proper measure of economic output, but as a gross indicator, it's almost all we've got. ]]> https://www.earthli.com/news/view_article.php?id=3931 2020-04-18T18:27:06+02:00 https://earthli.com/users/marco

"him" "often" and can recommend his book: "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer by Dean Baker (2016) (read in 2017)" . Mark Blyth He's a professor at Brown University, an excellent economist and a former stand-up comedian. He also has a German wife, speaks German and has a good grasp of European affairs. I've written about him in "Discussion between Mark Blyth and Wendy Schiller on Nov. 9, 2016" , "Mark Blyth on Global Trumpism" , "Mark Blyth on the Jimmy Dore show" , and, of course, a review of his groundbreaking shredding of austerity in "Austerity: The History of a Dangerous Idea by Mark Blyth (read in 2015)" . Richard Wolff He's a Marxist/Socialist economist and one of the driving forces behind the Democracy at Work organization. I wrote about him in "Bernie Blindness and the U.S. hatred of Socialism" under the sub-head "Richard Wolff is a National Treasure". Yanis Varoufakis He's the former finance minister of Greece and current founder of DIEM25, there's very little I don't like about this guy. I've written about him several times: "A brace of videos from Oxford (Varoufakis, Piketty & Žižek)" , "Adults in the Room: My Battle with the European and American Deep Establishment by Yanis Varoufakis (2017) (read in 2018)" (a book that is long, but highly recommended). Thomas Piketty I have a few draft article in the making on his latest work Capital and Ideology, which seems to encompass and eclipse his previous groundbreaking work in Capital in the 21st Century. I wrote about him in "A brace of videos from Oxford (Varoufakis, Piketty & Žižek)" . I mean, I like J.K. Galbraith, Jeffrey Sachs, James Tobin, and Joseph Stiglitz [1], too -- but the ones above are my top five. -------------------------------------------------------------------------------- [1] Yes, I noticed. All men. The only woman I can think of, off the top of my head, is Ann Pettifor. ]]> https://www.earthli.com/news/view_article.php?id=3919 2020-03-22T23:08:31+01:00 https://earthli.com/users/marco

discusses what kind of people are needed once society collapses or changes significantly, based on experience in Afghanistan. "You make yourself useful in a failed state exactly the opposite of how you do in ours. In the United States in 2020, it pays to have" ... ]]>

discusses what kind of people are needed once society collapses or changes significantly, based on experience in Afghanistan. "You make yourself useful in a failed state exactly the opposite of how you do in ours. In the United States in 2020, it pays to have excellent skills in one or two areas, to be the best at what you do in your specialty. Not in Afghanistan in 2000. Dangerous places work best for people who are renaissance men and women, those with a wide variety of skills. Learn to do a lot of things fairly well. Shoot a gun, drive a car, cook, sew. Translate a foreign language, ride a motorcycle, fish, hunt. You can sell those skills to people who don’t have them." The article "Things Have Changed" by James Howard Kunstler offers advice in the same direction, by the author of the Long Emergency, a non-fiction book about the end of capitalism and World Made by Hand, a novelization of the same. "There will be economic roles and social roles for all those willing to step up to some responsibility. Young people may see tremendous opportunity replacing the wounded economic dinosaurs wobbling across the landscape. It’ll be all about going local and regional and making yourself useful in exchange for a livelihood and the esteem of others around you — aka, your community. Government has been working tirelessly to make itself superfluous, if not completely ineffectual, impotent, and rather loathsome in the face of this crisis that has been slowly-but-visibly building for half a century. Something old and played-out is limping offstage, and something new is stepping on." ]]> https://www.earthli.com/news/view_article.php?id=3859 2019-11-30T17:00:28+01:00 https://earthli.com/users/marco

takes issue with the media's love affair with plumbing the depths of billionaires' minds. [1] "It is bizarre that so many people look to the country’s billionaires to tell us how the world should be constructed or think that these people have any great" ... ]]>

takes issue with the media's love affair with plumbing the depths of billionaires' minds. [1] "It is bizarre that so many people look to the country’s billionaires to tell us how the world should be constructed or think that these people have any great insight into such matters. Being a billionaire means that you were successful at getting very rich. There is no reason to believe that billionaires have any more insight into major policy issues than anyone else. "[...] why would anyone think that Zuckerberg would know or care about how Facebook should be run in a way that protects democracy? Zuckerberg runs Facebook to make to make money (lots of it), not to promote democracy. The way to fix the problems of Facebook is not to convince Zuckerberg of its harms, the way to fix Facebook is to change the law. (Emphasis added.)" He makes the excellent point that, while the billionaires -- and society in general, implicitly doing their bidding -- do their damnedest to convince us that they are in charge just because they have all the money, they are not in charge. We are still, at least nominally, in charge of them. It doesn't feel like this is the case (again, mostly because of the flood of propaganda working to convince us otherwise) but we could change how things work, if we were so inclined. Baker likes to remind us that situations that seem horribly unfair are built that way. There are few natural laws that determine our economy. Instead, there are thousands of man-made laws funneling money upward -- most of these laws built by those with money to ensure that the situation remains unchanged. We should not waste any time worrying about these peoples' feelings -- they certainly don't return the favor. In the specific case of Facebook, Baker advises that, "[t]he best way to address the immediate issue of concern with Facebook, that it will run political ads with lies, is simply to remove Facebook’s exemption from libel law. In the early days of the Internet, Congress passed the Communications Decency Act, which established rules for Internet. The law included a provision, Section 230, which exempted intermediaries like Facebook from libel. This provision means that Facebook, unlike the New York Times or CNN, cannot be sued if it transmits false and damaging claims about individuals, companies, or other entities. (Emphasis added.)" This disparity is striking and a tremendous economic boon to Facebook. Like Uber (not acknowledging employees), AirBNB (not paying hotel taxes) or Amazon (not paying sales taxes), its business model is based on an artificial and wholly unfair advantage over competitors that it exploited to become a monopoly. "Zuckerberg might argue that Facebook’s operations are highly automated, people can buy ads on Facebook without any human intervention. This means that it doesn’t have staff available to review all the ads that it runs. That is undoubtedly true, but that is Mark Zuckerberg’s problem. Just as the New York Times and CNN pay people to review the ads they run, Facebook can pay to review the ads it runs. That will cost lots of money and reduce Facebook’s profits, but so what? (Emphasis added.)" Baker goes on to argue that "[i]t is hard to see an argument as to why we should not be at least as concerned about protecting democracy as protecting copyright holders’ ability to make money from their copyrights". While this is an excellent point, it's not likely to convince people who wonder to what degree cracking down on libel on the Internet would actually protect democracy. I think that the line of reasoning that appeals universally is asking why is one business model preferred over the other? Why are the rules different for Facebook and so-called classic media? This argument should hit home for anyone interested in fairness, regardless of other political leanings. Baker finishes strongly with exactly this argument, "if Facebook wants to compete with print and broadcast outlets for advertising dollars, it should be held to the same rules as these outlets." That this situation is unlikely to change has nothing to do with the power of the argument against Facebook's exemption under the CDA and everything to do with the dysfunction of the American government. -------------------------------------------------------------------------------- [1] In this article, Baker focuses on Zuckerberg, but in the article "Yet Another New York Times Column Gets the Story on Automation and Inequality Completely Wrong" by Dean Baker , he makes the same argument about Bill Gates. "No, technology does not generate inequality. Our policy on technology generates inequality. We have rules (patent and copyright monopolies) that allow people to own technology. "Bill Gates is incredibly rich because the government will arrest anyone who mass produces copies of Microsoft software without his permission. If anyone could freely reproduce Windows and other software, without even sending a thank you note, Bill Gates would still be working for a living." ]]> https://www.earthli.com/news/view_article.php?id=3843 2019-11-13T22:37:47+01:00 https://earthli.com/users/marco

spends a few useless paragraphs discussing America's growing predilection for "milk alternatives" before finishing with the following paragraph: "That's not the only problem Dean Foods has faced. Walmart (WMT), which was one of Dean" ... ]]>

spends a few useless paragraphs discussing America's growing predilection for "milk alternatives" before finishing with the following paragraph: "That's not the only problem Dean Foods has faced. Walmart (WMT), which was one of Dean Food's biggest customers, dropped them last year after building its own dairy plant." So, oat-milk sales being up is the lede and the world's largest company having dropped Dean as a vendor is just an incidental footnote? The one time I open a link to a CNN article, I'm rewarded with my expectations being met. My expectations of CNN: * Include an auto-starting, non-muted video that follows you around the screen * Push agenda that a given trend is driven by the lifestyle choices of its mid-to-upper-class readers/viewers * Bitch about my ad-blocker Check, check and check. ]]> https://www.earthli.com/news/view_article.php?id=3732 2019-04-16T21:14:55+02:00 https://earthli.com/users/marco

: "In a statement, French Prime Minister Emmanuel Macron vowed to the rebuild the cathedral, beginning with a national donation program to raise funds for the effort." Did Macron just suggest using... ]]>

: "In a statement, French Prime Minister Emmanuel Macron vowed to the rebuild the cathedral, beginning with a national donation program to raise funds for the effort." Did Macron just suggest using GoFundMe to fund the rebuilding of Notre Dame? Is France not collecting taxes anymore? ]]> https://www.earthli.com/news/view_article.php?id=3676 2019-01-21T20:57:14+01:00 https://earthli.com/users/marco

(sub-titled: Crypto is the Mother of All Scams and (Now Busted) Bubbles While... ]]>

(sub-titled: Crypto is the Mother of All Scams and (Now Busted) Bubbles While Blockchain Is The Most Over-Hyped Technology Ever, No Better than a Spreadsheet/Database). He had good foresight in 2007, but I'm surprised to see how confident he is about the current system in that paper ... maybe he's just emphasizing more as compared to E-Currencies (and also he's addressing Congress, who are a bunch of noobs anyway). He gives an inordinate amount of trust to the current system where he seems to be able to see all of the holes in the E-Currency world. Why does he do that? He's right that it fucks up less than E-Currencies are likely to, but I still think his view is too high-level and doesn't take into account how rotten it all is, at the core. And likely to fail. He cites numbers from sources that are known to be corrupt, but doesn't acknowledge this. Is there any reason to believe LIBOR at this point? [Citations] On the utopian vision vs. the dystopic reality. "So the utopian crypto future will be one of libertarian decentralization of all economic activity, transactions and human interactions. Everything will end up on a public decentralized distributed permissionless trustless ledger; or better millions of ledgers on computers that are now already consuming more energy than Canada to verify and confirm transactions without the use of evil centralized institutions." On the degree of centralization in crypto vs. the purported advantage of decentralization. He makes an excellent point, in that the alternative to shady banks is even shadier crypto -- which doesn't mean that we should continue to trust in shady banks, though. "First, miners are massively centralized as the top four among them control three quarters of mining and behave like any oligopolist: jacking up transaction costs to increase their fat profit margins. And when it comes to security most of these miners are in non-transparent and authoritarian countries such as Russia and China. So we are supposed not to trust central banks or banks when it comes to financial transactions but rather a bunch of shady anonymous concentrated oligopolists in jurisdictions where there is little rule of law? (Emphasis added.)" In this next point, though, he seems to be arguing against centralization specifically when it's not in the U.S. That is, Chinese and Russian control is nefarious, but centralization would seemingly be OK if it were under American aegis. "Everything that this study argues about the nefarious impact of China on Bitcoin can be said and applied to any other crypto-currency and to the role of Russia in the crypto eco-system." Another good point is that crypto is yet another section of life that is non-democratic. Say whatever you want about the current system -- it is, at least, run by ostensibly democratic countries. It's corrupt as hell, but at least there's some hope that we could influence it. "[...] developers are police, prosecutors and judges: when something goes wrong in one of their buggy “smart” pseudo-contracts6 and massive hacking occurs, they simply change the code and “fork” a failing coin into another one by arbitrary fiat, revealing the entire “trustless” enterprise to have been untrustworthy from the start. (Emphasis added.)" The massive centralization in the crypto world leads to massive inequality. "Fourth, wealth in crypto-land is more concentrated than in North Korea where the inequality Gini coefficient is 0.86 (it is 0.41 in the quite unequal US): the Gini coefficient for Bitcoin is an astonishing 0.88." "So decentralization is just a total myth invented by a bunch of whales whose wealth is fake; now that the retail suckers who bought at the peak have literally lost their shirts these crypto “whales” are fake billionaires as liquefying their wealth would crash the price of the “asset” to zero." He makes another interesting point about people who compare the initila Internet boom with the supposed boom of crypto. "The WWW went live in 1991 and by 2000 – nine years later - it already had 738 million users; and by 2015 the number of users was 3.5 billion. [...] And the number of crypto transactions has collapsed by at least 75% between 2017 and 2018." I was more surprised to learn that half of all humans do not use the Internet at all. Our decisions affect them. In the end, there is absolutely nothing to distinguish crypto from any other scam that the financial world has come up with. "That is precisely where the ICO charlatans would effectively take us [...] where all transactions occur through the barter of different tokens or goods. It is time to recognize their utopian rhetoric for what it is: self-serving nonsense meant to separate credulous investors from their hard-earned savings. (Emphasis added.)" In the next citation, I feel that Roubini is too generous to our current system. "While price manipulation does occur in a variety of financial markets, there are strict laws against it and it is subject to draconian criminal prosecution; thus, it is the exception rather than the rule." ...unless you count the multi-trillion dollar and decade-long LIBOR scam. Any prosecutions there? No? I thought so. At any rate, crypto is collapsing so fast that it's hard to imagine that anyone is still supporting it -- other than the people that had already bought it. "In 2018 cryptocurrency values fell by 90% on average from their December peak. They would have collapsed much more had a vast scheme to prop up their price via outright manipulation not been rapidly implemented. But, like in the case of the sub-prime bubble, most US regulators are still asleep at the wheel while having started investigations months ago. (Emphasis added.)" "Without such outright criminal manipulation the price of Bitcoin would now be about 80% lower than its current value, ie about $1200 rather than the current $6500." ]]> https://www.earthli.com/news/view_article.php?id=3643 2018-12-31T23:23:32+01:00 https://earthli.com/users/marco

. He's a national treasure. Once more, though, from the... ]]>

. He's a national treasure. Once more, though, from the top. His brief post "Thomas Friedman Shows Us Why Democracy is Facing Huge Problems" by Dean Baker makes the following points (all emphases added). [1] [Patents] "Bill Gates is not incredibly rich because of rapid accelerations in technology and globalization, he is incredibly rich because the government gives Microsoft patent and copyright monopolies on Windows and other software. It will arrest people who make copies without his permission. In fact, it negotiates trade deals (wrong called "free trade" deals) that require other countries to arrest people too." [The Finance Industry] "The reason there are very rich people in finance, who can bid up property prices in major cities to make them unaffordable to the middle class, is that we coddle the financial industry." [Unequal job-protection] "And the reason globalization puts downward pressure on the pay of factory workers, but not doctors and dentists, is that we have protection for doctors and dentists." [The Market] "[...] the point is that we have screwed middle-class workers by deliberate policy; it was not just something that happened." The market does not work in mysterious ways. It works in very predictable ways -- as long as you don't deliberately ignore which levers are actually being pulled. It's not like the incentives are hidden. The elites are screwing everyone else in broad daylight. So stop pretending that we can't figure out how to fix problems. We know how to fix them. We just don't give enough of a damn. The elites would rather keep everything for themselves and pay people like Thomas Friedman to try to convince people that it's their own fault they can't succeed. It's a level playing field, after all, no? -------------------------------------------------------------------------------- [1] The article "Liberals Used to Feel Your Pain. Now They Inflict It" by Ted Rall makes a similar point about elites, but with ACA (Obamacare) as an example. He used to live in Ohio, where there was one plan available. It cost $1,400 per month and still had a $10,000 deductible. [2] His colleagues living in large cities (e.g. Manhattan) thought the ACA was great -- because they had choices. The ACA prefers the urban professional because it's a market-based solution. That it prefers urban elites is a matter of policy. A single-payer healthcare system would be the same for everyone. Rall compares this lack of empathy -- what I call the I got mine Jack response -- to the way the Western media tries to charge the Gilets Jaunes in France with not caring about the environment because they don't want another gas tax. They'll pay the gas tax -- but not if the elites don't pay their taxes. It's about fairness. It's about people buying somewhat less bullshit. It's about pulling back the curtain and seeing the scam. Ignoring this will get Trump re-elected. [1] Jesus, I thought Switzerland was expensive. That's almost 4 times what I pay, with a deductible that's almost 7x higher. ]]> https://www.earthli.com/news/view_article.php?id=3390 2017-03-04T20:41:31+01:00 https://earthli.com/users/marco

. I recently saw another interview with him on the Jimmy Dore show that I can recommend watching. If you've watched Blythe before, he doesn't cover a lot of new ground, but he does have a wonderful way... ]]>

. I recently saw another interview with him on the Jimmy Dore show that I can recommend watching. If you've watched Blythe before, he doesn't cover a lot of new ground, but he does have a wonderful way with words and for getting right to the point. Often he can shut down an entire line of reasoning with a single, giant point that makes other arguments pale into insignificance. The interview is split into two parts: [media] [media] I didn't extract any transcript this time around, but the videos aren't that long. If you like Blyth -- and you should because he's brilliant and funny and (almost [1]) always right -- I can highly recommend the podcast interview with "The Dig: Mark Blyth on How Austerity Brought Us Donald Trump" (1h:30m). "Interview" is a bit of stretch. He's like Slavoj Žižek: they ask him a question and he's off and running for 20 minutes. It's heady and interesting stuff and over far too soon. -------------------------------------------------------------------------------- [1] No-one is right all the time. In my experience, though, Blyth comes close. ]]> https://www.earthli.com/news/view_article.php?id=3361 2017-01-23T22:49:58+01:00 https://earthli.com/users/marco

isn't very long or filled with detail, but it looks like the TPP is dead. Trump made good on the one promise of his that I actually approved of. The TPP was a deal negotiated in secret, encompassed over 2000 pages and was written (and probably... ]]>

isn't very long or filled with detail, but it looks like the TPP is dead. Trump made good on the one promise of his that I actually approved of. The TPP was a deal negotiated in secret, encompassed over 2000 pages and was written (and probably read) almost exclusively by lobbyists for giant multinationals and patent/copyright holders. The former were hoping to be able to extract rent from signers that passed laws that could be shown to infringe on their potential profits. Infringement was to be determined by a completely new panel of judges chosen by the industry itself and having jurisdiction over any nation-state judiciaries. The latter were hoping to extend their 75-years-after-the-death-of-the-creator (i.e. the Mickey Mouse rule) copyright rules to signatories (which would have included China). The world will be a better place with nations controlled by their admittedly faulty democratic leaders rather than multinationals. Hopefully, we can stop hearing that this international trade treaty was about "free trade", which it absolutely was not. That Trump struck it down after having promised to do so goes a long way toward explaining why the ruling elites hate him so much -- as evidenced by their utter lack of support for him -- despite his agenda not being radically different from that of Obama. Except for not loving the TPP. The multinationals worked long and hard on this scheme to legalize rent-extraction and are almost certainly not pleased to see it so quickly smashed to the wayside. It remains to be seen whether they actually accept the defeat. ]]> https://www.earthli.com/news/view_article.php?id=3342 2017-01-02T10:33:44+01:00 https://earthli.com/users/marco

. The article is quite accurate and well-written in the material that it addresses. The reaction at "Reddit" was more uninformed than usual. My notes below. * Taxes: Federal and even cantonal ... ]]>

. The article is quite accurate and well-written in the material that it addresses. The reaction at "Reddit" was more uninformed than usual. My notes below. * Taxes: Federal and even cantonal (state) taxes are lower in Switzerland. As she mentioned, this is partially due to there being no "capital-gains loophole" (dividends are taxed at a high rate) but also because there are fewer loopholes for corporations. When corporations pay their fair share of taxes instead of sloughing off profits, taxes for everyone else go down. * Cars: Her point about owning a car is a good one. I want to add that there's no pressure for a young people to own cards just get places, which keeps them out of debt longer. Naturally, some get cars (and debt) anyway, but it's not the norm. Of course, that means that they all ride the trains with you...Cost of Living: The commentaters at Reddit noted that the average salary of 90k per year in Switzerland is eaten up by the cost of living. Well, of course it is. Switzerland doesn't offer more bang for your tax dollar, more maternity leave, better unemployment insurance and retraining, low-cost or nearly free higher education, better commuting, better work/life balance, more vacation and 2-3 times as much disposable income, you greedy, ungrateful fuck. That said, you only eat through 90k per year (especially by yourself!) if you eat all of your meals at restaurants and are constantly on the go in clubs, bars, etc. -- especially if you live in a big, expensive city (e.g. Zürich or Geneva). At "Encodo" , we eat in the office three times per week, dining out for lunch only twice per week. We (almost) never eat at our desks, though, preferring a communal eating area inside or on an outdoor terrace, weather permitting. People here generally eat at restaurants a lot less. It's a cooking culture. The salary covers even a lifestyle that isn't trying to save, but you can save a lot if you adjust your lifestyle a bit. People bitching about having used up every cent of their salaries would do so no matter how much they were paid. * McDonalds: There were also complaints of how expensive McDonalds is in Switzerland. Everything is locally sourced, including the non-hormone, non-antibiotic, grass-fed beef, the cheese (McRaclette!) and even the potatoes. It still looks the same, but presumably kills you less quickly. Hell, they even bring your food to your table. You have to compare apples to apples. There are cheaper alternatives here, if you're looking for low-price takeaway meals. For example, the umpteen Döner stands or the many options in Co-op or Migros. * Water Just as an example: if you buy bottled water, then you can buy it on the train (CHF5.60) or a Kiosk (CHF3.90) or Migros (CHF0.90) or just take tap water -- best in the world -- from home (CHF0.00). You pay for convenience, but if you plan even just a little bit, you can save a lot of money. * Rest of Europe: Some commentators said that it's even better in other European countries. That is true, on some levels. Swiss health insurance is the third-highest in the world (behind the UK and the stratospheric US). There is no public option, though we've gotten to vote on it a couple of times. CEO salaries are still higher than they should be [1] but we also voted on limiting that recently and only narrowly lost. Switzerland lags in a few areas behind countries like Austria and Germany, but excels in others. The main advantage (in my mind) is that Switzerland is not part of the EU and might be less affected by what are sure to be further shockwaves in that conglomerate. * Salaries: It was a bit sad to see how many comments at Reddit focused laser-like on the absolute amount of take-home cash. Work/life benefits and a better life don't enter into this very simple equation. When a populace can focus only on one thing, then everything else will be taken away. -------------------------------------------------------------------------------- [1] Not at "Encodo" , of course; there the ratio is more like 1:1 ]]> https://www.earthli.com/news/view_article.php?id=3322 2016-12-22T07:37:37+01:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=3133 2015-05-17T21:21:35+02:00 https://earthli.com/users/marco

for a workable proposal that would cost peanuts for each taxpayer. While we're at it, could we also ensure that everyone in the world has access to clean drinking water or to sufficient food? No, of course not. That would cost billions. Who has that kind of money? Governments are busy buying planes that don't fly with that money and corporations are busy...sitting on it, waiting for a good investment opportunity. Our civilization is absolutely not geared toward providing services. It is geared toward providing rent. ]]> https://www.earthli.com/news/view_article.php?id=3121 2015-03-01T23:13:44+01:00 https://earthli.com/users/marco

points out that Germany's obsession with low inflation and low interest rates handcuffs Greece, preventing it -- and other nations in trouble, like Italy, Spain and Ireland -- from either alleviating their own pain or paying back their debts. "The same story applies to private debt. if interest rates were to rise and companies were troubled by the amount of debt they had outstanding they could just issue new bonds and buy up the existing debt at large discounts, thereby reducing their debt burden." This is just what most countries do when they can control their own currency: they raise interest rates, accept a modest amount of inflation and reduce the overall value of their debt vis à vis their creditors's currencies. Greece cannot do this and Germany keeps both the inflation and interest rates so low that there is no room to breathe. [Germany != Private Banks] What if Greece were to default on its debts? Germany wouldn't get all of the money back that it had invested in Greece, right? Is that what we're really talking about? Or are we talking instead about getting the EU populace to support policies that bail out private investors first? The article "Debt Forgiveness in Greece: It's Easier Than the NYT Leads Readers to Believe" by Dean Baker points out that, "[...] over 80 percent of Greece's debt is held by the I.M.F., European Central Bank, and other official institutions. Concessions made by these entities could hugely reduce Greece's debt burden while leaving private debt holders unaffected. These concessions need not cost taxpayers a euro, since the European Central Bank knows how to print euros, which it can and is doing." Both the aid packages for Greece as well as the strong-arm austerity tactics exercised by Europe are in the interests of "incompetent bankers who made bad loans to Greece" who were "effectively bailed out" by Europe. The cruel measures serve no-one except them -- getting them their money back more quickly. Europe, on the other hand, has no benefit. Far better to take its boot off of Greece's neck -- and let Greece return to at-least-partial financial health. Then they'll be better able to contribute to the EU economy. [Austerity won't help] The article "Greek Austerity Does Not Protect Europe's Taxpayers" by Dean Baker points out another hypocrisy in the standard story of Greece vs. EU. "Most of the debt is owed to official lenders who have no need to make demands on Germany's taxpayers to get funding. (The European Central Bank prints its money.) "Furthermore, more rapid growth in the euro zone will both allow Greece to repay a larger portion of its debt and also improve Germany's budget situation as well. For this reason, it is hard to see how German taxpayers will derive any benefit from austerity in Greece." And Dean's not alone: the article "Ending the Creditor’s Paradise" by Mark Blyth backs him up by pointing out that the people of Europe, their economy, their well-being, their democratically expressed desires -- they're all beside the point to the unelected financial elite that runs things. "What we have done over the past thirty years is to build a creditor’s paradise of positive real interest rates, low inflation, open markets, beaten-down unions, and a retreating state — all policed by unelected economic officials in central banks and other unelected institutions that have only one target: to keep such a creditor’s paradise going." As it stands, Greece has reduced its budgets massively and there is no more they could be reasonably asked to do. It's a testament to the power of this financial elite that they can get the German government to work so much against its own best interests. It's a dangerous game to play and is all-too-likely to be a game of short-term gains for very few before it all blows up for everyone else. ]]> https://www.earthli.com/news/view_article.php?id=3112 2015-03-01T12:42:50+01:00 https://earthli.com/users/marco

corrects the New York Times on their chronic mischaracterization of the Argentine default situation that drags on long after the default actually occurred (in 2001). The NYT likes to make us think that the... ]]>

corrects the New York Times on their chronic mischaracterization of the Argentine default situation that drags on long after the default actually occurred (in 2001). The NYT likes to make us think that the battle is between a noble group of American investors which generously invested in Argentina, only to be robbed a country with no work ethic and a casual willingness to declare default rather than pay back their creditors. What actually happened is that the original investors had already taken their losses, having sold their debt to the current holders "at a small fraction of its face value". The original investors understood that their investment had turned sour and took their losses. The new investors? They bought debt at a very low price in the hope of getting a much higher payout on it: just another investment, in other words. Why are they more confident in this investment than the group from which they bought the debt? "Their hope was that they could use their political connections and their legal expertise to force the Argentine government to pay substantially more on its debt than it offered to other creditors." The NYT characterization of this second group as "holdouts" is therefore completely misleading. One commentator asked why the timing of the purchase (pre- or post-default) should affect our opinion or the involved parties, to which Baker responded, "[T]he default amounts to a psuedo-bankruptcy. It's only pseudo, since we don't have international bankruptcy rules for governments. Someone how [sic] held the bonds prior to the default would have had a greater expectation that they would paid in full than someone who had bought them after the default when it was almost certain they would not be paid in full." The difference in attitude toward the parties can be easily explained: Baker evaluates the situation objectively because he doesn't have a dog in the hunt. The New York Times -- despite all protestations by both themselves and their enemies -- is biased toward big-business and especially finance. They are only a liberal newspaper as the term "liberal economics" is used in the rest of the world, where it means "laissez faire" rather than left-leaning. The slant is obvious if you know how to look for it. ]]> https://www.earthli.com/news/view_article.php?id=3026 2014-08-11T22:58:17+02:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=2998 2014-06-09T22:18:05+02:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=2936 2014-01-27T22:57:05+01:00 https://earthli.com/users/marco

put it, "[t]he irrelevance of Davos is, arguably, good news: it’s a sign that the economic crisis is over, at least if you’re a member of the 0.01%." Mr. Koroda of Japan had the closing remarks, "Mr. Koroda (Japan): I think we can be cautiously optimistic about the global economic outlook. First, the US economy is likely to grow by 3% plus this year and next year. Europe is finally recovering, growing and Japan also is making significant progress and emerging economies like India as well as China, Indonesia and others, their economic growth rate is likely to be maintained at a high level or likely to accelerate. So I think we have to be of course cautious, we have to be always mindful of downside risk, but I think we can be cautiously optimistic about the global economic outlook. "Martin Wolf I think that you have given the summary that I would otherwise have given (looks through notes) and that's relevant to the sort of market gyrations we're seeing. The strong view on the panel is that maybe this is a little overdone, we're going to have a lot of volatility, but basically the world economy is recovering at last and not looking too bad, despite all the local difficulties. As I always remark in these conclusions -- and for the last couple of years, we've had this sort of situation -- that it's as optimism grows that risk grows and I think that one has to always remember that. But my reading of this panel is they're not optimistic enough to be really dangerous, so I'm going to go with the conclusion of the panel, which was I think an immensely thorough review of all the issues." At the remark about "dangerous", Koroda laughed out loud. Of course he can. Even if they're wrong about the danger that the policies they discussed and recommended, they won't be personally affected. The billions who are affected by the grand scheming of such committees may have much less to laugh about but no one in Davos really listens to them, nor were they the topic of discussion. The people on stage will be just fine, no matter what happens. For them, the economic crisis is not only over, it arguably never even existed, considering how well that echelon came out of the financial crisis in the last five years. In an interview after the panel on SRF, though, the interviewer claimed that "all of these arguments about income inequality are in the center of the debate", to which Philip Jennings, the General Secretary of UNI Global Union replied (in part): "You have Barack Obama just a few weeks ago who said that this is the challenge of our times. The lack of social mobility. We have the leader of the British business community, the CBI, saying that workers need a pay-rise. You have Angela Merkel and the new coalition talking about minimum wages. Because the problem is stark and real. People here talk about the economic recovery: is it sustainable? For the majority of the working population, for practically everybody, it's meant nothing. Because in terms of their income, wages are stable, they're not moving. In the USA, some research was done by Barkley University and they showed that the benefits of the economic recovery in America went to the 1% alone. Not fair. Not sustainable. And not good for business." When asked about the biggest global risks for the world economy being this wide income inequality, he responded, "When you have unfair distribution of income, there are clear economic consequences of this. We talk about a lack of demand in our economies. The European economy growing 1% .... the US economy is growing faster, but there's a lack of economic demand. We have not reached the level of output ... of pre-crisis levels...it's still 10% below. So, if you haven't got income, when economies are based on 70% consumption and wages aren't rising, what do you do? You borrow, you get another job, you take risks and, at the end of the day, the economy doesn't move." He continued to explain that he's couching his argument in economic terms only because he knows that waving a red flag and making the power salute will get him pigeonholed by the people who should instead listen. So he makes the argument that not only are people drowning in an economic system without a moral rudder but this a bad thing because it's also bad for business. They continued their discussion, but focused on Europe, discussing how the Euro kills countries (e.g. Greece) that cannot control their own devaluation in order to stimulate local growth. They next covered the topic of Bangladesh, focusing on how global multinationals are taking advantage of the poor and have the worst level of trust ever measured. See the "Uni Global Union" home page for more details and news about this quite interesting organization and its president, who bring some much-needed balance, reason and consideration for the vast majority of the population to this very one-sided conference. The next panel discussion was a love-in for Shimon Peres, former prime minister of Israel, who was allowed to spout off at length about how dangerous Arabs and Iranians are. I lost interest relatively quickly -- because life is too short. ]]> https://www.earthli.com/news/view_article.php?id=2895 2013-12-06T22:40:45+01:00 https://earthli.com/users/marco

sums up the season as follows, "Have people become so immune to fellow feeling that they are prepared to spend £46 on a jar for dog treats or £6.50 a bang on personalised crackers, rather than give the money to a better cause?(7) Or is this the Western world’s" ... ]]>

sums up the season as follows, "Have people become so immune to fellow feeling that they are prepared to spend £46 on a jar for dog treats or £6.50 a bang on personalised crackers, rather than give the money to a better cause?(7) Or is this the Western world’s potlatch, spending ridiculous sums on conspicuously useless gifts to enhance our social status? [...] "To service this peculiar form of mental illness, we must wear down the knap of the Earth, ream the surface of the planet with great holes, fleetingly handle the products of that destruction[,] then dump the materials into another hole. (Emphasis added.)" ]]> https://www.earthli.com/news/view_article.php?id=2888 2013-11-02T22:00:47+01:00 https://earthli.com/users/marco

, it turns out that some of the highly touted, so-called disruptive business models of some Silicon Valley darlings only work at all because they take advantage of such hidden subsidies. Citing from the article, "Their business model relies on marketizing formerly non-economic spheres of life, like giving a friend a ride in your car, and they have aggressively externalized costs like gas, insurance, payroll, etc. so that profits are maximized and expenses are as close as possible to nonexistent. [...] Taxis have been strictly regulated to ensure that the industry’s companies and contractor-drivers pay revenue into the city for the infrastructure they use [...] "In San Francisco taxis generate over ten million dollars each year in revenue for the city to spend on maintaining transport infrastructure. [...] It’s this public transportation infrastructure, a big part of which is comprised of taxis, that is being disrupted by the ridesharing companies who have inserted themselves as for-profit brokers in the transportation commons." A company that takes advantage of a hidden subsidy like this is a parasite with an almost deliberately short-term business model. That is, it is expected to generate profit for its owners and backers in the very short term and will quickly fall apart once the subsidizers notice what is going on. It will most definitely fall apart when no one is paying for infrastructure in a few years after the taxi industry has been replaced with something that pays no taxes and has no actual employees. It seems so simple on the surface: people are driving places anyway, so why not pay them to take other people along with them? And why shouldn't these companies collect a fee for brokering the transaction? Well, because they're taking advantage of an existing infrastructure that they don't plan to pay to maintain (else there would be no viable business model). What seems like a great idea starts to sound less viable once all real-world factors are considered. We are, of course, encouraged to ignore these factors in favor of promoting innovation. Those that point out such unavoidable conclusions are chastised for being against progress and anti-business. Also affected are other factors like making sure that "environmental standard[s]" are maintained and improved (something none of these companies could possibly be interested in, since they're unregulated) as well as ensuring that drivers don't "discriminate among passengers [and] serve all parts of the city, among other things that might not be maximally profitable." [Amazon.com] Uber and Lyft are not the only ones that benefit from an unwitting public largesse (well, the public is mostly unwitting -- there are almost certainly public officials who are well-aware of the ramifications but who are well-paid to look the other way). As has been pointed out (way back in "The Success of Amazon: Welfare As We Should Know It" by Dean Baker and again in "The Smart Boys: Larry Summers and Jeff Bezos" by Dean Baker ), Amazon benefits from the subsidy of not having to pay sales tax in most states. "In the vast majority of states Amazon has an advantage [...] because it does not have to collect sales tax. [...] In many states, including California and New York, sales taxes are in the range of 7-8 percent. "[...] Last year Amazon.com’s sales in North America were $34 billion. [...] if we assume an average uncollected tax rate of 5 percent, Amazon and Bezos effectively got a subsidy from taxpayers of more than $1.7 billion last year. [...] if we go back through Amazon’s history, the size of the implicit subsidy through Amazon’s sales tax exemption vastly exceeds the company’s cumulative profits. This raises the question of whether Amazon would even exist today without the generosity of taxpayers in being willing to subsidize Amazon’s business [...]" [Alarm-system companies] Another good example comes from David Cay Johnston in his book Free Lunch, which details the massive subsidy from which alarm companies benefit by externalizing the cost of responding to calls onto the taxpayer. The interview ""Free Lunch": David Cay Johnston on hidden government subsidies for the very, very rich" . "[...] local taxpayers pay over $2 billion a year providing those companies with free labor. That free labor provides 100% of the profits of that industry. Here’s how it works. You buy a burglar alarm. [...] the alarm goes off. [...] The police are on their way. That’s the subsidy! [...] The police spend about $50 every time they check out the burglar alarm. All the burglar alarm company does is install an electronic device that calls them if the burglar alarm is tripped. 99% of burglar alarms are false. " Taxpayers pay for the police, who respond to calls for the alarm company, which has to pay almost nothing in continuing services. Since only about 20% of homes have an alarm, the other 80% heavily subsidize the alarm systems of the 20%. [Airlines] And, last but not least, there are America's airlines. These are not only engaged in a customer-hostile race to the bottom, but they've been feeding on the public largesse for as long as it has existed. The article "Skyway Robbery: 6 Ways the Out-of-Control Airline Industry Is Ripping Off America" by Lynn Stuart Parramore explains that "up until the 1970s, taxpayers, through the federal government, provided more than $155 billion in direct support for the aviation industry". Not only that, but "[a]fter September 11, the industry received approximately $8 billion in federal assistance that continued even after most airlines returned to profitability." It's fine for these companies to detect a need in the market -- and an accompanying opportunity for profit -- but we're fools for lauding them to the heavens for their business acumen even while our tax dollars are the primary reason for the primary profit margins. We should stand up and take back what we've already paid for and demand proper, inexpensive service from industries that are all-but-indistinguishable from public services. They're privatized the profit and socialized the costs. All the while convincing us of their business acumen and gouging us all the way. The first step is recognizing that this is happening and revoking our respect and adulation for these con artists. The next is to demand the control we've paid for -- or else just stop paying for a service that doesn't serve our interests. Parramore's airline article sums up what we have to do quite nicely, "[...] we have to decide once again that corporate America exists not just to make short-term profits that enrich executives, but for the benefit of the taxpayers, workers, and citizens that allow it to exist." ]]> https://www.earthli.com/news/view_article.php?id=2887 2013-11-02T11:39:47+01:00 https://earthli.com/users/marco

states the case with pharmaceutical patents very clearly, succinctly explaining how purported libertarian and small-government conservatives sometimes argue for government regulation. This case is a perfect example... ]]>

states the case with pharmaceutical patents very clearly, succinctly explaining how purported libertarian and small-government conservatives sometimes argue for government regulation. This case is a perfect example of why it's OK to ignore the opinions of people like Douthat: they have shown time and again that they are either (A) corrupt, in it for themselves and their friends or (B) ignorant and possibly stupid and therefore incapable of engaging in productive debate. Here's Baker's analysis of Douthat's stance on health care: "The story is that without government guaranteed patent monopolies, drug companies and medical device companies would not do all the wonderful research they are now doing into developing better drugs and devices." This is the classic claim. Without private industry, a return to the Dark Ages of medicine is imminent. It ignores not only the enormous amount of public money that funded -- and still funds -- medical research, but also a hidden subsidy, as Baker explains below. "[...] granting these companies monopolies is a form of big government. That doesn't get changed just because people like Douthat like the beneficiaries or think the purpose is good. "If the government allows drug companies to pull in an extra $300 billion a year (@1.8 percent of GDP), by threatening to arrest anyone who competes with them, it is pretty much the same thing as if the government were to raise taxes by $300 billion and hand it to the drug companies." Economically, there is no difference. Patents are a very status-quo--friendly way of passing on the subsidy; as Baker says, in "the latter case there would be more public control over what happened to their tax dollars." Both are government subsidies but the former is actually is a less responsible form of state government. The patent system essentially defers collection of the subsidy to the private sector. History has shown that such sectors tend toward monopoly and self-selection and self-preservation. Do advocates like Douthat plead the case of the pharmaceutical companies because of personal kickbacks? Unlikely. More likely is that he -- and others like him -- are just too indoctrinated in maintaining the status quo that they can't even see the basic hypocrisy of their views. What is highly suspicious is that their breaks from libertarian principles occur only when the beneficiaries are large corporations. Or, as Baker puts it in an addendum, "the professed advocates of free markets and free trade are harsh opponents of freedom when it might hurt the income of their friends. [...] We must recognize that the only ideology these people support is [...] the ideology that the wealthy should have more money." ]]> https://www.earthli.com/news/view_article.php?id=2878 2013-09-23T18:45:02+02:00 https://earthli.com/users/marco

sums it up very nicely. [image] ]]>

sums it up very nicely. [image] ]]> https://www.earthli.com/news/view_article.php?id=2812 2013-03-11T22:55:38+01:00 https://earthli.com/users/marco

. Rather than try to reformulate the result in a hyperbolic way, I'll perform the... ]]>

. Rather than try to reformulate the result in a hyperbolic way, I'll perform the service of just translating the relatively clear amendment to the Swiss constitution. [The letter of the law] See the link above for the full text; I include the original German for the parts I think are most relevant to the discussion: "3. Zum Schutz der Volkswirtschaft, des Privateigentums und der Aktionärinnen und Aktionäre sowie im Sinne einer nachhaltigen Unternehmensführung regelt das Gesetz die im In- oder Ausland kotierten Schweizer Aktiengesellschaften nach folgenden Grundsätzen: "a. Die Generalversammlung stimmt jährlich über die Gesamtsumme aller Vergütungen (Geld und Wert der Sachleistungen) des Verwaltungsrates, der Geschäftsleitung und des Beirates ab. [...] "b. Die Organmitglieder erhalten keine Abgangs- oder andere Entschädigung, keine Vergütung im Voraus, keine Prämie für Firmenkäufe und -verkäufe und keinen zusätzlichen Berater- oder Arbeitsvertrag von einer anderen Gesellschaft der Gruppe. [...] "c. Die Statuten regeln die Höhe der Kredite, Darlehen und Renten an die Organmitglieder, deren Erfolgs- und Beteiligungspläne und deren Anzahl Mandate ausserhalb des Konzerns sowie die Dauer der Arbeitsverträge der Geschäftsleitungsmitglieder. "d. Widerhandlung gegen die Bestimmungen nach den Buchstaben a-c wird mit Freiheitsstrafe bis zu drei Jahren und Geldstrafe bis zu sechs Jahresvergütungen bestraft." And, quickly -- and mostly directly -- translated to English: "3. In order to protect the national economy, private property and shareholders as well as encouraging sustainable business management, the law for companies that are held publicly -- Swiss or foreign -- will be changed in the following ways: "a. The general assembly will, on a yearly basis, determine the sum total of all remuneration (cash as well as in-kind transfers) for the board of directors, management and advisory board. [...] "b. The board members will receive no compensation for either joining or leaving, no payments in advance, no bonus for acquiring or selling companies and will have no additional consulting or work agreements with other companies in the group. [...] "c. The company rules will determine the size of any loans or other value-transfers to board members, the ways in which profit can be distributed and the total number of other board memberships allowed as well as the maximum service duration for board members. "d. Contravention of the conclusions of a-c will be punished with up to 3 years in jail and up to six times the involved party's yearly board-member salary." [How will it play out?] [image]In other words: no more golden parachutes or absurd signing fees to attract "talent", either for board members or management. And, if they don't stick to the new rules, there's a possible jail sentence and hefty fine for all parties involved. The article "The Swiss (!) lead the revolution against elites" by Darrell Delamaide summed it up as follows, "The measure gives shareholders a veto — a real veto, not a pretend one — over executive pay and bans signing bonuses, golden handshakes and golden parachutes. It applies to all of the country’s public companies, and violations are punishable by prison." This is a pretty good summary, although it applies to all companies that are incorporated in Switzerland. This would include companies like TransOcean -- so recently famous for having done its share to ruin the Gulf of Mexico a few years back -- which will have to play by these rules as well. As with all Swiss initiatives, the people have spoken, however it is now up to the parliament to integrate this into existing Swiss law. This sometimes proves to be anything other than simple, especially if it conflicts with other existing laws or treaties. Still, 68% of 49% of Switzerland agreed to go ahead with the restrictions. In canton Zürich -- home to many businesses -- 70% agreed. See the "full results for a canton-by-canton breakdown" . [What about Europe?] Europe is hoping that the Swiss initiative triggers a wave. From the article cited above, "In France, the liberal daily Libération had this front-page headline: “Cap on bosses’ salaries: Let us do like the Swiss.” [...] Rainer Brüderle, who is heading the election campaign for the Free Democrats, the junior partner in the current coalition, said Germany should emulate the Swiss pay curb and “set an example” for Europe." After Italy's recent elections, it's likely that people there would be quite receptive to such measures, to say nothing of even more depressed countries like Portugal, Spain and Greece. According to "Swiss Curb Executive Greed; Will Anyone Follow?" by William Pfaff "The [European Union’s ] Commission has ruled that all bankers and banking institutions anywhere within the EU, and also—here comes the knockout punch—all those executives working for EU-based banks worldwide, must have the bonuses they pay or receive capped at no more than existing annual salaries. This limit can be waived only if the bank’s shareholders agree, and then only to the level of double the executive’s current salary." Further, it seems that this draft law will be "approved by finance ministers and the European Parliament", a move which is likely to tip Britain's hand on its continued membership in the EU. Will it stick with the Continent or would it rather continue to be a hyper-capitalist colony of the U.S.? The European Union, however, does not have the same direct-democracy referendum & initiative system as Switzerland so citizens there will have to keep up the pressure on their politicians instead. Despite the promising conclusions of the Commission cited above, considering the utter lack of success Europeans have had in dissuading their politicians from ruinous austerity policies, I would say: Good luck with capping executive pay. The same goes double (or triple) for any Americans gazing hopefully across the wide waters and dreaming of a more equitable future. [Possible fallout is minimal] Speaking of the typically American reaction, like clockwork, "the Swiss business confederation warned that approval of the referendum would hurt the country’s investor-friendly reputation." Of course it said that. It's a lobbying firm; that's its job. This organization also said that all the rich people would abandon canton Zürich when tailored flat-rate taxes -- previously available to "big fish" seeking domicile -- were outlawed. A handful went, of course, but most stayed. Switzerland's preferred status has taken a tremendous beating of late anyway, with its kowtowing to the U.S. Treasury department in the UBS affair(s) and its recent signing of FATCA. At this point, sitting -- as they are -- on top of a reasonably functioning economy, the Swiss seem to be more concerned with chopping some of the bigger miscreants down to size than making themselves even more attractive to outside investors. Those are flocking to Switzerland's relatively safe harbor as it is; if there was ever a time to claw back some concessions on the equitable-pay front, it's now. [So, where to next?] With that in mind, the article "1:12 - Gemeinsam für gerechte Löhne" discusses a possible next step: the young socialist party of Switzerland is working on an initiative for "1:12 -- working together for fair salaries". The crux of that amendment is straightforward: "Der höchste von einem Unternehmen bezahlte Lohn darf nicht höher sein als das Zwölffache des tiefsten vom gleichen Unternehmen bezahlten Lohnes" "The highest salary paid by a company cannot be higher than twelve times the lowest salary in that same company." This would bring executive salaries in line with those in Japan, where the ratio was 1:16 in 2010. [1] Given the enormous support for the recent initiative "against ripoffs", chances are certainly quite good that this next initiative goes through as well. -------------------------------------------------------------------------------- [1] See "Average Japanese CEO Earns One-Sixth As Much As American CEOs" by Zaid Jilani for more information ]]> https://www.earthli.com/news/view_article.php?id=2800 2013-03-03T19:22:52+01:00 https://earthli.com/users/marco

hits the nail on the head. Pew put together a report a few years ago on the wealth of various age groups in the U.S. This report has since been misused by many journalists to show that the wealthy elderly are exacting inter-generational... ]]>

hits the nail on the head. Pew put together a report a few years ago on the wealth of various age groups in the U.S. This report has since been misused by many journalists to show that the wealthy elderly are exacting inter-generational warfare on the young. The report stated that "the median household over the age of 65 had $170,500 in net worth [while] households under age 35 had [a] median net worth [of] just $3,700". Though I'm going to pull out the highlights I found interesting, it's well worth your while to read Baker's full article (it's not that long). "The bulk of people who are now turning age 65 do not have a defined benefit pension. [...] This means that the only income they have is their Social Security check, which averages a bit over $1,200 a month. Right off the bat, $100 a month is subtracted to pay for their Medicare Part B premium. This means that our high living seniors have an income of $1,100 a month, plus their $170,500 in net worth. "Is this rich? My guess is that 90 percent of the reporters who have covered this Pew study have no clue what net worth means. [...] Do the reporters covering this story really think this is a picture of affluence? Will they be happy if they have a retirement where their entire income is their Social Security check?" The $170,500 in net worth is at that point most likely tied up in illiquid assets like cars or -- most likely -- a home. As Baker also points out, "the median house price is roughly $180,000", which means that most people over the age of 65 also have most of their net worth bound up in an asset that they would have to sell in order to use it to buy food. But then they'd have to start paying rent, and so on and so forth. Still not looking very rosy, by any means. Baker goes on to summarize the situation: "When David Rosnick and I did our projections we took this as evidence that most seniors and those soon to be retired (the situation looks worse for those near retirement) were likely to be struggling to make ends meet in their old age. Remarkably Pew has managed to convince the country's top reporters that $170,500 in assets can make a person rich, even when it takes $400,000 in annual income to make a person rich when we are talking about raising taxes. This is truly incredible. (Emphasis added.)" The truly rich are not acknowledged as such -- to the point where the New York Times writes articles sympathizing with families that are barely scraping by on a quarter of a million dollars per year combined income -- while the nearly income-less elderly are reviled for gouging the young out of their futures. ]]> https://www.earthli.com/news/view_article.php?id=2627 2012-04-01T22:34:16+02:00 https://earthli.com/users/marco

. The original infographic is hosted at a site called "Accounting Degree Online" , for some strange... ]]>

. The original infographic is hosted at a site called "Accounting Degree Online" , for some strange reason. At any rate, the findings are kind of interesting. The URL to the graphic includes the text "Rich people are unethical" but it could more accurately be called "Rich people are unethical (so are the poor, but to a lesser degree)" or "Some people are unethical, but the rich are disproportionately so" or "Rich people are not as nice as poor people, even though they more easily could be". Some of the results are that the poor give a higher percentage of their income to charity, or that the rich were more likely to take candy that was clearly marked as being for children. They cheat on their wives more, default on mortgages more often and cheat to win more often. Given the dominant form of capitalism today, where cheating is encouraged and actively rewarded, it's hardly surprising that the winners of the game are also those who are willing to cheat more. It would have been strange had the results shown the contrary. The reason the study is interesting is that, though it provides support for the rational hypothesis -- in a system that rewards cheating, those who cheat more will win -- and belies the oft-promulgated maxim that the poor are no-good scoundrels trying to suck the system dry. In fact, the poor are poor because they're worse at cheating; the study shows that this is not from a dearth of ability (the likely next defense that would result) but from a surfeit of morality. [image] ]]> https://www.earthli.com/news/view_article.php?id=2620 2012-03-06T23:17:57+01:00 https://earthli.com/users/marco

and "Understanding Greece’s default" by Felix Salmon provide many of the answers. Broadly -- and most of this post is dealing with quite broad explanations -- existing Greek bonds will be replaced with bonds in two categories, which will be redistributed to current investors who choose to partake in the restructuring -- and beyond a certain percentage of those investors, all investors will have to partake or end up holding worthless old bonds. Bonds in the first category will be worth about $0.10 on the dollar and bonds in the second about $0.15, leaving about the 75% haircut that is being bandied about these days. The gory details are below (as provided by Mr Salmon): "But then there’s the CDS holders. In the best-case scenario for Greece and Europe and bondholders, every €1,000 of old Greek bonds will get converted to new bonds with a face value of just €315. Those bonds will probably trade at about 30% of face value, which means the new-Greek-bond component of the exchange will be worth about 10 cents for every dollar in face value of old Greek bonds that you might currently hold. Add in another 15 cents of EFSF bonds, and the total value of the exchange will be about 25 cents on the dollar, which is why people are talking about a 75% “present value haircut”." To add a twist, the bonds held by the ECB (European Central Bank) are exempt from the haircut, because it's the ECB that's been funding the soft landing in the first place, so it's assumed that they've absorbed enough losses at this point and the remaining losses can be absorbed by private investors. "[...] the two events together have effectively cleaved the stock of Greek bonds into two parts, with one part (the bonds owned by the ECB) being effectively senior to the other part (the bonds owned by everybody else). This is known as Subordination, and Subordination is a credit event under ISDA rules." On the other hand, it's not all investors who will carry the extra burden: the EIB (European Investment Bank) will also be proud owners of full-value bonds. This includes the UK, which hasn't pumped any money in Greece's direction, so will garner protection from losses that it hasn't in any way actually paid for. If a 75%-haircut doesn't signify a default event, it's hard to imagine what could. But whether the world will consider this a default is still being debated as significant parties think it would be too horrible to allow a European nation to do something as gauche as default and others don't want to risk showing the CDS market to be utter hogwash. As it is, the CDS market is being treated very badly and it's hard to see how anyone who purchased CDS before Greece started to slide significantly -- when the imminent default was not priced in -- could think this is in any way a proper way for the market to behave. Those investors are in possession of liquidity vehicles that they viewed as a pure investment but which are now threatening to actually be used as promised. And the scary thing for those investors is that the ostensible guarantee provided by a CDS is turning out not to be much of a guarantee at all under real-world conditions. Come to think of it, it's certainly not the first of many fanciful financial ideas that have shattered into a million worthless pieces upon introduction to reality (see: the end of 2008). Obligations are being shuffled around to suit the most powerful and the needs of nations and investors with what they thought were clear terms and conditions on their investments are finding that they may, in actuality, never be paid. This is no longer unpredictability, which is bad enough for investment, but an almost certainty of a bad investment, which means the CDS market may dry up (at least in the case of sovereign nation debts). It's hard to explain in short, but "How Greece’s default could kill the sovereign CDS market" by Felix Salmon does a good job. "The way that CDS auctions are meant to work is that once a borrower defaults on its debt, that defaulted debt continues to be traded in the market, and its value then determines the amount that credit default swaps need to pay out. But in this case, Greece’s defaulted debt might well not continue to be traded in the market. In which case, when traders need to find a cheapest-to-deliver bond to bid on in the CDS auction, they’re going to have to use one of the new bonds, rather than one of the old ones. "And now you can see why the nominal price of the new Greek bonds is so important. Right now, it seems that they’ll be trading at a nominal price of about 30 cents on the dollar, which is close (ish) to the current market price of the old Greek debt. But there’s no particular reason why that should be the case. If Greece had gone for an 85% nominal haircut rather than a 68.5% nominal haircut, then the nominal price of the new Greek bonds would be 67 cents on the dollar — and anybody who wrote credit protection on Greece would only have to pay out 33 cents on the dollar rather than 70 cents on the dollar. "In other words, Greece’s CDS really aren’t protecting holders of Greek bonds at all — or if they do, it’s more a matter of luck than of law. When they get paid out on their CDS holdings, people owning protection against a Greek default won’t get paid according to how much money they lost on their old bonds. Instead, they’ll get paid according to the nominal price of the new bonds. (Emphasis added.)" A CDS on existing Greek debt will be worth whatever the technocrats who build the conditions of the structured default decide it will be worth. This is not a pleasant position to be in, as an investor (unless one has undue influence over said technocrats and can shield the original debt from any haircut at all, as in the case of the EIB). "How all CDS are at risk of not paying out" by Felix Salmon follows up on the topic of CDS: whereas the article above makes clear that the payout on a CDS on sovereign debt for which the event has triggered is subject to manipulation, it turns out that all CDS are subject to manipulation. "If you own protection on a credit, then, you’re very much in a world of caveat emptor. You can trade in and out of CDS and make a good living; these things are, first and foremost, trading vehicles. That’s why they’re more liquid than bonds. But if you have a strategy which involves actually getting paid out on your CDS in the event of default, then you should definitely worry that the payout might not happen, even if the event of default is clear and declared. What’s more, there’s really no good way to hedge that risk." There are some who will rejoice that the CDS market may be hearing its death-knell (though rumors of its death are likely exaggerated) but there is nothing a priori wrong with CDS: it's that the market for these derivatives was completely unregulated and ballooned into a significant part of the world economy, to a size that would tear down a much larger part of said economy were a significant default ever to occur. This is not in any way going to be easy for Greece, but it will be survivable and then other countries with similar debt-to-GDP loads will start to seriously consider it. "if the Greek bond exchange goes really smoothly, and the sun rises in the morning and Italian bond yields stay below 5%, then maybe that’s the most worrying outcome of all. Because at that point Greece will have managed to wipe out, at a stroke, debt amounting to some 54% of GDP. You can see how Portugal and Ireland might be a little jealous." ]]> https://www.earthli.com/news/view_article.php?id=2551 2011-09-03T22:03:01+02:00 https://earthli.com/users/marco

, proposes an elegant solution to one of the main drags on the economy today: the millions of people (over 80% of mortgage-holders) who continue to make exorbitant payments on their now-nearly-equityless homes. They are moral heroes for continuing to pour money into... ]]>

, proposes an elegant solution to one of the main drags on the economy today: the millions of people (over 80% of mortgage-holders) who continue to make exorbitant payments on their now-nearly-equityless homes. They are moral heroes for continuing to pour money into what amounts to a black hole, an investment that will never pan out. They are also paying a huge amount of interest -- especially compared to today's rates -- because they're trapped and unable to refinance their mortgages. According to Cringely: "Rates are down, sure, but qualifying rules are stricter and there are at least 30 million U.S. homeowners who are literally trapped in their old mortgages. A few walk away, but most don’t because they worry about ruining their credit. And this means that while new 30 year mortgage rates are in the 3-4 percent range, the average rate paid by these trapped homeowners on their old mortgages is twice that. And since their loan initiation overhead was amortized years ago, their actual yield is even higher. "Are you making seven percent on your money?" No? The banks are. And they're pleased as punch with the situation, which is why they're giving people such a huge runaround when they try to qualify for refinancing via government programs for which they qualify. "This is all you need to know to understand the stalled U.S. housing market: it is stalled because a class of investors has found a way for their investments to not only live on after the housing bubble popped, they are actually making more — in some cases a lot more — than they were on that money when the loans were originated. They are doing so well, in fact, that they can’t imagine a circumstance under which they would ever allow the ghost mortgages to go away, no matter the cost to the economy or the nation." Why should they, you may argue? They have legal documents -- well, most of them don't because they didn't bother securing valid documentation for their mortgages -- and they can continue to squeeze their customers. The problem is that their squeezing is preventing the economy from recovering for anyone other than those doing the squeezing. That's not a problem in their eyes, or in the eyes of strict libertarians, who would be only too happy to let a large part of their fellow countrymen starve in the streets because they allowed themselves to be hoodwinked. But those of with any morals or ethics whatsoever, or with any interest in using the tremendous wealth of the U.S. to provide a viable civilization that doesn't resemble Tina Turner's Thunderdome, are more than a little concerned. We would actually appreciate it if the U.S. were run by the representatives we elected instead of by an oligarchy over which we have no control whatsoever (oh, yeah, you can boycott their products; let me know how that works for you) and whose benevolence toward anyone outside of their class is nonexistent. So, the obvious-in-hindsight solution is to let people with mortgages held by government organizations refinance at current interest rates. Immediately and without delay and without paperwork. They will continue to pay their mortgages -- as they have been -- but they will no longer be required to torpedo themselves financially by paying usurious interest rates on top of it. They may even be able to stay afloat enough to keep their jobs and actually contribute to their local economies, which is pretty much the part that's been missing from any of the stellar economic planning we've seen of late. "The way to do this is for Fannie Mae and Freddie Mac and the Federal Housing Administration and the Veterans Administration and any other government-sponsored mortgage programs you can name to waive the appraisal requirement on non cash-out refinance applications for owner-occupied homes under these programs." It's a stimulus that costs essentially nothing and which can be enacted immediately without an act or Congress or even an Executive Signing Order. And it applies to the people who are in the most trouble and whose participation is needed to prevent another recession or even a depression. Poor Cringely ends his post with "Run with it, Barry. Be a hero", but I don't think that's a football Obama's willing to carry. He hasn't shown the will to do anything even remotely social or for the general public, so it's hard to imagine he's going to start now. Maybe he's do it for the purely Machiavellian reason that it might lift his poll numbers...but considering the Republican field of candidates, he doesn't really have much to worry about there either. Interested to see what happens, though. I bet we see a tax cut for the rich instead -- one that costs the government dozens of times as much in revenue as this plan would. ]]> https://www.earthli.com/news/view_article.php?id=2533 2011-06-16T22:48:50+02:00 https://earthli.com/users/marco

sums it up quite well. Greece, Spain, Portugal and Ireland are in trouble, but Greece is hit the hardest because it was the government that "borrow[ed] at rates only slightly higher"... ]]>

sums it up quite well. Greece, Spain, Portugal and Ireland are in trouble, but Greece is hit the hardest because it was the government that "borrow[ed] at rates only slightly higher than those facing Germany [and] took on far too much debt." In Ireland and Spain, the government didn't borrow too much, but both those countries' banks did and, at least in Ireland's case, the government agreed to take on the banks' debt for them. (For more on Ireland, see the article, "When Irish Eyes Are Crying" by Michael Lewis . [1]) Portugal was "somewhere in between". So Greece had a lot of money to pay back and needed to come up with the money somehow. As Krugman notes, though, instead of requiring that Greece crack down on its notoriously lax and corrupt tax system, "European leaders offered emergency loans [...] but only in exchange for promises to impose savage austerity programs, mainly consisting of huge spending cuts." These spending cuts are the austerity programs you hear the general populace protesting as their salaries are cut mercilessly while the tax-cheats -- who could contribute a lot more -- are left untouched. That the ECB (European Central Bank) could impose such conditions is not only cruel but bad policy; Krugman again: "Objections that these programs would be self-defeating — not only would they impose large direct pain, but they also would, by worsening the economic slump, reduce revenues — were waved away. Austerity would actually be expansionary, it was claimed, because it would improve confidence." More than a year later and things have gone from bad to worse. The dire "slump" predicted above came to fruition, revenues are down, more austerity measures are being applied, the screws are being turned and the Greeks, desperate, are back in the streets, protesting for their livelihoods. "It’s now clear that Greece, Ireland and Portugal can’t and won’t repay their debts in full, although Spain might manage to tough it out. "[...] "Realistically, then, Europe needs to prepare for some kind of debt reduction, involving a combination of aid from stronger economies and “haircuts” imposed on private creditors, who will have to accept less than full repayment. [2] Realism, however, appears to be in short supply." So what happens when Greece can't pay back its debts? Krugman thinks that "[i]f Greek banks collapse, that might well force Greece out of the euro area". In that case, Greece would have to reëstablish a currency, though they would be hard-pressed to attract investment capital. Such a move "could start financial dominoes falling across much of Europe." It's hard to see why the ECB is on such a suicidal course other than blind devotion to a principle. That's what Krugman thinks anyway -- his "guess is that [the ECB] is just not willing to face up to the failure of its fantasies." -- but it could be that the same private investors who call so many other tunes, who head up so many institutions that are "too big to fail", are also calling the shots on ECB policy, manipulating prevailing ideologies about so-called free-market principles to squeeze short-term gain from a dying market...and to hell with everybody else. -------------------------------------------------------------------------------- [1] The "whole article" is long, but the main parts that describe what happened are as follows: "In the general panic, absent government intervention, the other banks would have gone down, too. [Irish Prime Minister] Lenihan faced a choice: Should he believe the people immediately around him or the financial markets? Should he trust the family or the experts? He stuck with the family. Ireland gave its promise. And the promise sank Ireland. "[...] if the Irish wanted to save their banks, why not guarantee just the deposits? There’s a big difference between depositors and bondholders: depositors can flee. The immediate danger to the banks was that savers who had put money into them would take their money out, and the banks would be without funds. The investors who owned the roughly 80 billion euros of Irish bank bonds, on the other hand, were stuck. They couldn’t take their money out of the bank. And their 80 billion euros very nearly exactly covered the eventual losses inside the Irish banks. These private bondholders didn’t have any right to be made whole by the Irish government. "A handful of Irish bankers incurred debts they could never repay, of something like 100 billion euros. They may have had no idea what they were doing, but they did it all the same. Their debts were private—owed by them to investors around the world—and still the Irish people have undertaken to repay them as if they were obligations of the state." [1] Based on recent history, this is unlikely to happen. See the footnote on Ireland above where private investors were mysteriously paid back at 100 cents on the Euro for the bad investments, exactly as Goldman Sachs was mysteriously paid back 100 cents on the dollar for its losses in AIG. If one allows for corruption, things become far less mysterious. ]]> https://www.earthli.com/news/view_article.php?id=2402 2010-06-19T22:11:49+02:00 https://earthli.com/users/marco

. Even if you're no longer a U.S. citizen, the U.S. reserves the right to require you to pay U.S. taxes if... ]]>

. Even if you're no longer a U.S. citizen, the U.S. reserves the right to require you to pay U.S. taxes if you're either (A) in non-compliance with filing rules or (B) you're rich (in which case, you probably won't be paying anything significant, like other rich Americans). I'm not sure how this is enforced -- it would be hard imagine countries allowing the Treasury department S.W.A.T. team to storm a domicile on foreign soil, but far stranger things have happened. Many countries have an agreement with the U.S. so that ex-pats and/or dual citizens need only actually pay taxes once. That is, ex-pats get a hefty deductible and only have to pay U.S. taxes if they really start making money. Despite the seeming generosity of this, the U.S. is one of the few countries in the world that makes its citizens file tax forms while living abroad. The U.S. tax forms are also incredibly complex and confusing; take the example below, just one example among many. "Individuals: Enter the amount from Form 1040, line 41 (minus any amount on Form 8914, line 6). If you are a nonresident alien, enter the amount from Form 1040NR, line 38 (minus any amount on Form 8914, line 6). Estates and trusts: Enter your taxable income without the deduction for your exemption" Even for people that can read above a 10th-grade level and whose mother tongue is English, this is a doozy. Recent reports on Obama's recent address to the nation on the oil crisis estimated that the speech was at the 10th-grade reading level; many newspapers deemed this comprehension level to be over the heads of "most Americans". So how are they going to fill out their tax forms? The answer is that they will not. Unless other countries (like Switzerland), the U.S. government does not provide free software to help fill out taxes or transfer data from one year to the next. Americans are forced to pay for software or pay accountants to fill out their forms for them and voila! A cottage industry is born! It's easy to imagine H&R Block lobbying furiously against any legislation that simplifies the tax code. ]]> https://www.earthli.com/news/view_article.php?id=2399 2010-06-10T22:03:07+02:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=2385 2010-05-09T21:00:13+02:00 https://earthli.com/users/marco

, which reminds us that TARP was not a straight-out loan because it acted as a subsidy because of the extremely low interest rate at which the money was loaned: "[...] the government stepped in and providing banks with huge amounts of money (we don't know exactly who got how much because the Fed refuses to tell us what it did with our money), at a cost far below what they would have been forced to pay in private markets. The banks could lend this money at enormous premiums or use it to just buy government bonds and pocket the difference in interest rates. (Emphasis added.)" While on the subject of massive bailouts and financial institutions that are at least partially owned by the government now is a quick article, "Are Freddie's Losses on Loans Purchased Since September 2008?" , which asks for more detail on recent reports that Freddie Mac is getting an "additional $10.6 billion from the government to cover its losses". Baker asks the obvious and very pertinent question of whether "these losses are due to loans purchased before Freddie Mac was taken over by the government in September of 2008 or losses on loans purchased after this date." If the former, then the government is simply still paying for the"bad business decisions" made by Freddie Mac before it was purchased by the government; if the latter, then the government is "effectively subsidizing banks by paying too much money" for loans made by Freddie Mac to banks after the purchase. The most important question for taxpayers is never answered, to whit: are "Fannie and Freddie are b[e]ing used to subsidize banks by overpaying for their loans?" And, if so, doesn't this make the trope that the banks are paying back all of their TARP loans all the more mendacious? Or the outcry that BP might be "forced" to actually pay for the oil spill that it caused. "In the "Free Market" BP Pays for Every Cent of the Damage It Caused" "BP caused damage to hundreds of thousands of people, possibly millions, living in the gulf states. Under free market principles, they are supposed to compensate people for the damage that they have caused by their irresponsible conduct. "However, the "socialists" in Congress passed legilsation that limited BP's damages to $75 million. This means that they ignored market principles and had the government step in and seize property from individuals and hand it to BP." When the President says that BP will pay for everything, he means up to and including $75 million, which is likely to be only a sliver of the true final cost of the cleanup effort. That has nothing to do with the free market and everything to do with "redistribut[ing] wealth income upward". And then there's the myth about retirement incomes, as documented in "How Far Will $5 Billion Go In Covering Retiree Health Care?" , in which the Washington Post fails to help its readers do the basic math in order to help them come to the desired conclusion that Obama is a socialist giving away $5 billion to retirees. Here, Baker helps readers figure out how far that amount actually goes. "Since this $5 billion is the total amount available for the three years from 2011 until 2014, it means that there will be just under $1.7 billion available per year, or less than $900 per retiree per year. Health care costs for people in this age group average well over $10,000 a year, which means that this money will cover on average less than 9 percent of costs. (Emphasis added.)" Ah, well, $5 billion spread across so many people and over three years sounds like far less than it did a minute ago. If you're one of the few in the first world for whom $5 billion still sounds like a lot of money. Next up is good old Thomas Friedman writing for the NY Times and cheerfully generalizing his success -- having married a billionaire heiress -- into an average success for his entire generation. The article, "What's the "We" Jazz, Thomas Friedman?" , has this to say: "Of course those who know anything about the economy know that the vast majority of baby boomers have not fared especially well. [...] wages began to stagnate in the mid-70s, when the oldest baby boomers were in their mid-twenties [...] most saw very little gain in living standards relative to what their parents had. Many had to go heavily into debt to buy and hold a home, to send their kids through college or to cover the cost of a serious illness. [...]" But Baker is also quick to point out that this situation is the expected outcome of directed policy that was -- and still is -- designed to "redistribute income upward". As a result of all these policies, the "vast majority [of Baby Boomers] have next to nothing to support themselves other than their Social Security". These are not things that you will ever hear from even the most reviled liberal rag like the NY Times, which should actually get you thinking about just how liberal the NY times actually is. But it probably won't, because then you'd have to face just how far to the right sources that accuse a right-wing source like the NY Times of being liberal really are. Baby Boomers are in this dire situation not becuase they're all overwhelmingly stupid but because they're naïve and believe what their media tells them. They believe what people like Friedman tell them. "We can blame the average auto worker, shoe salesperson and school teacher for not being smarter about the macroeconomy than Robert Rubin, Alan Greenspan, and other managers of economic policy, but the fact is that they made the mistake of listening to these people. They thought that stock prices and house prices would just keep rising forever. Sure, this was stupid, but Rubin, Greenspan and the rest were supposed to be really smart people, and it was their job to know the economy. Too bad Thomas Friedman was never smart enough to notice either the stock bubble or the housing bubble and to warn his readers." Yet another source considered to be very liberal in the right-wing wasteland that is contemporary American thought, NPR, is next on Baker's shit-list in the article, "NPR Shills for Doctors" , where he notes that NPR cheerfully focused laser-like on the plight of doctors, as if they formed the most-beleagured segment of the American population. Instead, as Baker points out, "It would have been helpful to include the perspective of an economist who could have told listeners that physicians are the most highly paid profession. An economist also could have told listeners that our physicians are paid far more than doctors in countries like Germany and Canada, which is one reason that the U.S. health care system is so uncompetitive. An economist also could have discussed the protectionist measures that keep the pay of U.S. physicians so far above world levels." Following up on his gutting of Thomas Friedman and his like-minded compatriots, wherein Baker puts paid to Friedman's -- and many of his cohorts' -- obsession with deficits is the article, "The Post Makes Stuff Up in the News Section to Push Its Deficit Reduction Agenda" , clears up the heavily promulgated confusion that a "lack of fiscal discipline" was the primary cause of the Euro-zone's current crisis. "The euro's problem stem from the fact that many economies across Europe were driven by a housing bubble. The European Central Bank (ECB), like the Fed, thought that bubbles were fun and opted to ignore the growth of dangerous housing bubbles in many countries. [...] Because Greece and the other troubled countries are stuck in the euro zone, they can neither lower interest rates nor decrease the value of their currency to offset the contractionary impact of deficit reduction. As a result, deficit reduction can lead to a downward spiral in which lower output leads to a higher budget deficit, requiring further cuts, and therefore causing a further drop in output. (Emphasis added.)" Further to U.S. coverage of the fiscal policy of the European Central Bank is the article, "What About the ECB's Reputation as a Competent Central Bank?" , which reminds readers in the U.S. that, contrary to what even their purportedly liberal news sources tell them, "[c]entral banks are supposed to intervene to help economies in this sort of crisis, that is why governments create them" and that, when they do so, they are not "yield[ing] to politics". Such reporting is so deliberately deceptive and is yet another example of the finely tuned self-censoring propaganda that is mass media in the U.S. The misinformation about the EU is flying fast and thick recently, with the article, "The Post Misinforms Readers About the Greek Crisis" , taking the Post to about its completely ideological approach to economics reporting because it continues, against all logic, to hammer on the issue of debt ratios, when the problem in Greece lies elsewhere. "There have been and are many countries with considerably higher ratios of debt to GDP than Greece than manage to borrow in financial markets without major problems. The more obvious problem with Greece is that it is in the euro." A final example comes from the article, "The NYT Doesn't Know About the UK's Housing Bubble" , in which the New York Times again willfully ignores the massive impact that the implosion of the global housing bubble had on all involved economies. "The economic collapse following in the wake of the housing crash is the main source of the country's current fiscal problems, not profligate spending [...] (Emphasis added.)" ...although even the NY Times is only too happy to parrot the standard right-wing line that all possible problems are due to profligate spending and, of course, excessive taxation of business and the wealthy. This is basic economics that even a tyro can learn with a few weeks concentrated reading and yet entire newspapers throughout the world are staffed with writers who either are incapable of understanding basic macroeconomics or are unwilling to do so. Or are perhaps hamstrung by ideological limitations within the organization for which they work. Next up is Baker taking the Post to task for speaking out only the business side of an issue, in the article "Why Should We Care What the Chamber of Commerce Tells Us About China?" "A drop in the dollar relative to the yuan will improve the U.S. trade situation for two reasons. First, it will make U.S. exports cheaper for buyers in China, leading them to buy more. Second, it will make Chinese imports more expensive for people in the United States, leading the U.S. to consume fewer goods from China and more domestically made goods. [...] The U.S. executives in China only care about the former effect. [...] Rather than presenting the views of these executives as the simple truth about U.S. trade with China, the Post should have presented them as the views of a narrow interest group. (Emphasis added.)" As an added bonus, if you run out of cool economics news by Dean Baker, then give Felix Salmon a whirl. He's got his head screwed on pretty tightly as well. As an example, the article, "Deconstructing the crash" by Felix Salmon , addresses the 90-minute "crash" on Wall Street last week. He's not a radical by far, but he quite sensibly suggests that such mini-crashes are only going to get more and more frequent as more and more of the trading system is just a bunch of computer software "algos" constantly watching each other for minute changes in attitude toward different securities and derivatives. To that end, he humbly suggests that the only real brake on such rampant trading is a tax. "There’s a very sensible idea going around that a simple way to deal with nearly all of these problems, at a single stroke, would be to implement a tiny tax on financial transactions. Historically, people have complained that such a tax harms liquidity, which is true. But the fact is that it harms the bad kind of liquidity — the liquidity which dries up to zero just when you need it most. Liquidity, if it’s spread across multiple electronic exchanges and can disappear in a microsecond, does very little actual good, and in fact does harm during tail events like this. Let’s tax it, and raise some money for the public fisc at the same time as slowing down markets and making them think before doing a trade." Where Baker is much easier to follow even if you don't have a degree or a strong interest in economic policy and financial markets jargon, Salmon can get a bit more involved. He's worth adding to the newsfeeds, though. ]]> https://www.earthli.com/news/view_article.php?id=2373 2010-04-28T20:52:37+02:00 https://earthli.com/users/marco

: "Sweden’s Bo Lundgren was also on the panel, and he helped explain how the Swedish population has the crucial and decidedly un-Greek ability to unite behind unpopular yet necessary policies once their political leaders have set a certain course. Greece, which" ... ]]>

: "Sweden’s Bo Lundgren was also on the panel, and he helped explain how the Swedish population has the crucial and decidedly un-Greek ability to unite behind unpopular yet necessary policies once their political leaders have set a certain course. Greece, which is already seeing riots at any hint of fiscal austerity, just isn’t the kind of nation which is likely to decide that five years of wage cuts in a painful and deflationary recession is a price worth paying to stay current on the national debt. (Emphasis added.)" I've heard this argument once today already and that time it was also nestled softly in the implication that Greeks are basically unwilling to put up with any reduction of their otherwise cushy and carefree existence just to save their country. This from the same people that were happily chirping just weeks ago about how the Greek government is composed only of corrupt idiots. This from the same people who sneered at Greece's government over the last decade, who watched as Greece struggled to make ends meet, with yo-yoing inflation and unemployment all the while. Greece is largely considered a third-world European country by those living in the first-world ones. That's why everybody wants to vacation there -- it's still cheaper than most other places in Europe. And yet, when the Greek government decides that wages cuts are the very first austerity measure it will employ and the people take to the streets, the Greeks are a bunch of ungrateful crybabies. Perhaps they are unwilling to put up with further austerity, above and beyond that to which they have already been subjected recently and over the last couple of decades. Perhaps they are of the opinion that those crooked idiots in their government should go first when it comes to taking a financial haircut. It's all well and good to talk up how the stolid Swedes know how to get behind their government, but it really should be noted that the Swedes also have generally had the kind of governance that they can get behind. The Greeks, by all accounts, are still waiting on that experience. The article is about Nouriel Roubini, and details his prognostications about Greece at a recent conference. As usual [1], he's not bullish: "Nouriel’s base case, then, is Argentina 2001: after all, Greece has a much higher debt-to-GDP ratio, much higher deficit-to-GDP ratio, and much higher current-account deficit than Argentina had back then. [...] if Greece is worse than Argentina, he says, then Spain is worse than Greece. Its housing bubble and bust has left the banking sector much weaker than Greece’s; its unemployment situation, especially with the under-30 crowd, is much worse than Greece’s; and the cost of any Spain bailout would be so much more enormous than the cost of a Greek bailout as to be almost unthinkable. [...] clearly no one [sees tough fiscal and structural reforms] happening, given Spain’s political history over the past 20 years." So Spain isn't politically viable enough to save itself but, in its case, it's because of its political history (which is quite right and follows the argumentation for Greece above). Greece is, for some mysterious reason, not treated as kindly by Salmon and instead chided for being unable to man up like the Swedes. Roubini sees only the pragmatic solution; that is, "some kind of coercive yet orderly debt restructuring, which keeps the face value of the debt unchanged but which reduces coupons and pushes out maturities". In other words, wait and see if Greece will be able to pay back their debt later. There's a lot of unknown unknowns in this situation, though a recent example of a large entity -- Lehman Brothers -- defaulting on its debt offers clues to possible futures for Greece. However, looking at the two Euro-zone countries in the biggest trouble, it's hard not to notice that "even though Greece’s debts are small in relation to Spain’s, they’re still large in relation to, say, those of Lehman Brothers". Salmon sums up the unknowability of the situation as follows: "[...] the bear case is terrifying, the bull case is very hard to articulate, and everybody is talking about a possible default even when the country has an investment-grade credit rating from two agencies and is only one notch below investment grade at the third" For the layman: If Greece goes tits-up, Europe probably will go with it; the upside is hard to articulate because there effectively is none; and ratings agencies still consider Greece a decent investment, which would be mysterious if anyone had any f*#$ing reason for believing a good god-damned thing a ratings agency had to say anymore. When they're telling you that bagful of dogshit is really a sunshine-and-rainbow machine, make sure to hang on to your best suit and tie when you get cleaned out, so that you look good in your mournful interviews on the "idiot investor" media circuit later this year. -------------------------------------------------------------------------------- [1] Roubini's nickname is "Dr. Doom", but financial pessimists have much more often been right than wrong lately. ]]> https://www.earthli.com/news/view_article.php?id=2355 2010-03-28T22:30:43+02:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=2347 2010-03-19T23:58:52+01:00 https://earthli.com/users/marco

. First off, the author makes sure to use the term IOU right in the title to get people into the right frame of mind. If they get the mistaken impression that the Social Security is... ]]>

. First off, the author makes sure to use the term IOU right in the title to get people into the right frame of mind. If they get the mistaken impression that the Social Security is issuing IOUs, then that's a real shame. Before analyzing any further, a quick recap of how Social Security works is in order. Social Security is individually funded by a special tax (FICA) and, as the article correctly states, "collected more money in payroll taxes than it paid out in benefits" for years. However, there is nothing nefarious about this. Social Security was set up by people who actually understood statistics and actuarial realities like a boatload of Boomers retiring all at once. Because of this spike of retirees, they planned ahead and saved extra cash so that the program would have a surplus from which it could draw when its income fell below its payouts. This is part of the plan and is not some sign of imminent collapse. The $2.5 trillion will be doled out over the decades until they finally run out sometime in 2037. The transition from surplus to deficit for the program came about a year earlier than anticipated because of the near-collapse of the economy -- which put a lot of former FICA-payers out of work, reducing receipts -- but planners from decades ago could hardly have foreseen how royally the stewards of the economy would screw things up. With thirty years until the money runs out, Social Security needs -- at the most -- a tweak or two to keep it running at break-even or perhaps surplus again, should that be needed. Unfortunately, the planners of yesteryear were somehow less of a bunch of stumblebums than the geniuses running our government today, so it's possible that they will put off the tweaks until it's too late. So Social Security is ticking along like a Swiss clock: There is no emergency. But take a look at the ominous wording from the article: "This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more." This doesn't exactly sound like things are going to plan, does it? It sounds like Social Security is bleeding like a stuck pig. The problem, as it turns out, is that the government plundered the Social Security fund for other things. That does not mean that Social Security does not have the money, but that the government has to pay back what it borrowed. This is not in any way the fault of the Social Security program. To the contrary, actually. That program actually works as expected, but the pirates in charge plundered it -- much like CEOs were busy plundering their own company's pension programs. If Social Security is bankrupt, it's because it -- and we -- were robbed. But the author of the article laments that the "timing couldn't be worse" to require the IOUs to be paid back because the economy is so shitty and the government is already in hock up to its eyeballs. Again, this is not Social Security's fault. As mentioned above, the timing was totally god-damned predictable: In a span of decades, the switch from surplus to deficit came a year early. But our fearless leaders ignored this fiscal reality and made no plans whatsoever to provide for funding to replenish the plundered funds. So now, according to the article, "the government will have to borrow even more money, much of it abroad". The point, however, is that the IOUs are in the form of special U.S. government bonds, which are (still) the most secure investment on earth. The only way they don't get paid back or lose value is if the U.S. economy collapses entirely -- taking the global economy with it. In that case, not having Social Security will be least of anyone's problems. However, despite the utter predictability of this situation, the author claims that "experts say it is a warning sign that the program's finances are deteriorating". Those are some shitty experts who don't know anything about Social Security. Listen to this language: "Social Security is projected to drain its trust funds by 2037 unless Congress acts, and there's concern that the looming crisis will lead to reduced benefits." Are you scared yet? Do the words "drain", "trust funds", "looming crisis" and "reduced benefits" send chills down your spine? Are you now suitably terrified of a situation that will possibly affect you in 27 years? Can you think of any other government program that has guaranteed its funding -- by paying for itself -- a quarter of a century in advance? Hell, the military can't even stick to its budget for one year and it gets 3/4 of a billion dollars per year. To that are usually added a couple of "supplemental funding" bills of a $100 billion or so each. But nobody complains about that or predicts the downfall of the nation because it's the military. Hell, the military is hemorrhaging money far worse than even the worst naysayers accuse Social Security of doing, but we don't ever hear about that in the doomsday terms the situation deserves. The DOD lost $19 billion in cash into the sands of Iraq and nobody cared. Rumsfeld admitted that the Pentagon's finances were beyond the capabilities of their accountants; they're not even bothering to keep track of their money or budgets anymore. But Social Security, with its scrupulous laying of money to the side in anticipation of foreseeable expenses, is clearly the problem program. Why? Because it's a social program. ]]> https://www.earthli.com/news/view_article.php?id=2333 2010-02-02T21:06:31+01:00 https://earthli.com/users/marco

includes the following: "Mr. Bernanke has offered no hint that he feels the need to adopt policies that might bring unemployment down faster. Instead, he has responded to suggestions for further Fed action with boilerplate about “the anchoring of inflation expectations.” It’s harsh but true to say that he’s acting as if it’s Mission Accomplished now that the big banks have been rescued. [...] policy decisions at the Fed are made by committee vote. And while Mr. Bernanke seems insufficiently concerned about unemployment and too concerned about inflation, many of his colleagues are worse. Replacing him with someone less established, with less ability to sway the internal discussion, could end up strengthening the hands of the inflation hawks and doing even more damage to job creation." To sum up, Bernanke will continue to give away the country -- lock, stock & barrel -- to private interests, but he's not incompetent. He's a very accomplished enemy of the public interest. ]]> https://www.earthli.com/news/view_article.php?id=2317 2010-01-11T22:36:45+01:00 https://earthli.com/users/marco

, is even more downbeat than usual -- if that's even possible -- but it's difficult... ]]>

, is even more downbeat than usual -- if that's even possible -- but it's difficult to argue that he doesn't have a point. Or that his predictions are complete nonsense. The term "perfect storm" is thrown around entirely too much, but the signs are there: * Effects of the sub-prime mortgage collapse are barely dammed at all, even with the massive influx of bailout money * The job market is worse than it has been in a long time * States and social safety nets have no cash reserves left, can't run deficits and are gearing up for massive cuts -- or declaring what amounts to bankruptcy * Without jobs, people with regular mortgages won't be able to pay and will either bail out on them or be foreclosed upon. * No social services to help any of these people out (states have no money) means way more homeless. * Suburbia closing up shop in many city outskirts with a spiral of failure following foreclosures wherever the population no longer exists to support profligate consumerism * The model of consumerism and debt no longer works in a country where there are fewer jobs, everything costs more and there is no help out there at all * The new, improved bankruptcy bill passed during the Bush administration will keep more and more people in debt slavery until they just give up and check out (see homeless plan above). * More Americans than ever are surviving only on food stamps with no income whatsoever -- exactly the kind of program that will be cut when the states tank and are forced to stop operations. * At some point soon, the creditors on all of those trash assets the Fed bought up over the last year ($11.5 billion worth or thereabouts that's probably worth a tiny percentage of that now) will come calling. * Loan sharks of all stripes -- already quite profilgate -- will have a final heyday before a correction/uprising occurs * On the upside, the abandoned homes and shopping centers will function as some form of utility-free shelter for some families * An additional wave of unemployment is also coming as state programs are shut down and people are sent home. * So, not only are there no services, but there are even more people burdening the already overburdened social safety net, which has been ripped into uselessness over the last couple of decades anyway * Investment in infrastructure -- both industrial (machinery, equipment, etc.) and civic (bridges, highways, etc.) -- is already low and will dwindle even more, killing the motor that might kick-start anything again. * And then there's food: harvests are the worst in years and, with petroleum prices pegged very high, "one also has to wonder how farmers will be able to borrow money to get their crops in this year." Throw in a federal government that continues a decades-long trend by investing primarily in farm, financial and military subsidies -- which only benefit a tiny portion of Americans -- and we're not headed for a cliff; we're off the cliff and are legs are spinning in free space like Wile E. Coyote's. It's hard to imagine that this won't all lead somewhere horrible in the short and medium term. It all depends on how much patience people have for suffering because they think they deserve what has befallen them. The predations of the loan sharks -- both freelance and credit-card -- will likely end in even more people in jail, but in a bizarre resurrection of the debtor's prison from Britain's darkest times. As it is, many live lives of quiet desperation (as the saying goes) and are -- more than ever -- wage slaves: Afraid to leave their jobs for fear of losing their last tenuous hold on a semblance of normalcy or dignity, for fear of losing health insurance, for fear of losing a way to feed themselves. Anyway, that's the pessimist's/realist's view. Things could turn out better, but it's going to be a landing, whether softer or not is the only question. ]]> https://www.earthli.com/news/view_article.php?id=2249 2009-12-01T23:00:35+01:00 https://earthli.com/users/marco

, neatly illustrates the deferential interpretation of the financial robbery it describes. "About the A.I.G. affair: During the bubble years, many financial companies created the illusion of financial soundness by buying credit-default swaps from A.I.G. —" ... ]]>

, neatly illustrates the deferential interpretation of the financial robbery it describes. "About the A.I.G. affair: During the bubble years, many financial companies created the illusion of financial soundness by buying credit-default swaps from A.I.G. — basically, insurance policies in which A.I.G. promised to make up the difference if borrowers defaulted on their debts. It was an illusion because the insurer didn’t have remotely enough money to make good on its promises if things went bad. And sure enough, things went bad. "So why protect bankers from the consequences of their errors? Well, by the time A.I.G.’s hollowness became apparent, the world financial system was on the edge of collapse and officials judged — probably correctly — that letting A.I.G. go bankrupt would push the financial system over that edge." Perhaps Krugman has told this story so many times that he's lost the energy for outrage, but what he describes is patently immoral (for the people involved; a bank is amoral by definition and cannot be immoral) and should be criminal. He's describing extortion and insurance fraud on a grand scale. If it isn't illegal, then that's only because the perpetrators also made their plan legal before putting it into action. That's two crimes instead of just the one, then. Once something like this happens, the system is broken. That the history of the last year is described in terms of "errors" instead of crimes is the only indication we need that the system is irrevocably broken, not just down for the count. That almost no one has been prosecuted or fired or anything is not a sign that no wrong was done; rather, it's a sign that the wrong continues. He goes on to describe how the banks then paid themselves back much of the money they'd lost: "After all, banks would have suffered huge losses if A.I.G. had been allowed to fail. So it seemed only fair for them to bear part of the cost of the bailout, which they could have done by accepting a “haircut” on the amounts A.I.G. owed them. Indeed, the government asked them to do just that. But they said no — and that was the end of the story. Taxpayers not only ended up honoring foolish promises made by other people, they ended up doing so at 100 cents on the dollar." Again, Krugman describes the situation as if it was just a big avalanche over which no one had any control. Just let the tidal wave wash over the city, then start building again to make it exactly like it was before: just as close to the shore and everything. Forget Russia and all of the other favorite punching bags of the Western media: The government of the United States is a textbook example of a kleptocracy. As a result of this highway robbery, the administration has far fewer options because Americans in general now know that they're being robbed blind. However, since the bailout package went entirely to banks and the portions of the stimulus that have been doled out have been hoovered up by private industry that was doing just fine without it, the economy is mysteriously still extremely weak and, for (almost) all intents and purposes, in the shitter. The main intent seems to be to bleed it as dry as possible before, well, what? Moving to another planet? What, exactly, do the powers-that-be plan to do once the corpse of the most powerful country to ever grace this planet has stopped twitching? The stimulus is based almost entirely on trickle-down economics, which doesn't work for anyone but the kleptocrats. The people seem perfectly willing to put up with this indefinitely, but even their willingness will, at some point, be eclipsed by a physical inability to do so. So, with two huge piles of money allocated and mostly wasted, it's time the government buckled down and put together an even bigger one that will really work this time. "For the economy is still in deep trouble and needs much more government help. Unemployment is in double-digits; we desperately need more government spending on job creation. Banks are still weak, and credit is still tight; we desperately need more government aid to the financial sector. But try to talk to an ordinary voter about this, and the response you’re likely to get is: “No way. All they’ll do is hand out more money to Wall Street.”" And that is completely justifiable because the ordinary voter's ass is still mighty sore from the reaming it's gotten over the last year. At some point, you just stop loaning your stoner roommate money. But Krugman laments not that the U.S. has been hijacked by criminals nor that its leadership is so politically stagnant that it can't effect any change whatsoever, but that the American people aren't stupid enough to fall for the same trick a third time. Krugman, on the other hand, knows that the economy cannot recover without a huge cash injection, so he's willing to believe the patently unbelievable. Can you imagine Krugman confronting his wife about a potential infidelity? "Who was that man and what were you doing?" "Well ... it's a funny story, actually ... I was just walking along, minding my own business when I tripped over a rug, all of my clothes flew off and I landed naked in his lap. In my struggles to extricate myself, I may have accidently made love to him a few times. Anyway, the next thing I know, you're standing there in the doorway, all glaring and accusatory and embarrassing me in front of my new friend." "Oh, all right then. So I imagine you haven't had time to cook; we'll be ordering out, then?" Krugman is undoubtedly right that the economy will never recover without more stimulus. But what does "recover" mean in this context? To what should America -- and, indeed, the global economy -- recover? A hyper-consumerist economy with enormous debt-loads and inflated value built on a phantasmagorical house of cards of fraudulent financial instruments? To ex-ex-exurbs, strip malls and driving everywhere? To food that travels an average of 1700 miles? The American lifestyle was only maintainable with a thick layer of fraud at its base and it has collapsed. There is no turning back because it was never real. As horrific as it sounds -- because letting the current global system collapse will cause untold suffering -- it is preferable to simply propping things back up the way they were with the same people in charge, as is being attempted now. There have been no lessons learned, no people punished and no changes made. Regulation is still non-existent and the majority still kowtows to a minority that has its power simply because it assumed it, not because it earned it. Is it any better to pour money back into a system that is, even now, sucking us dry for its own petty gain? Is it better to superficially prevent the collapse but still have most of the suffering? To end up even more in thrall to our lords and masters? It is their exhortations we hear that the system not be allowed to collapse; it has always been them, whispering that they work for our well-being while they strip of us most of what we have, leaving us only enough to survive another day, to produce just a little bit more value for their endlessly champing maws. ]]> https://www.earthli.com/news/view_article.php?id=2153 2009-04-14T21:52:41+02:00 https://earthli.com/users/marco

, imagines a conversation between Barack Obama and Larry Summers. It covers all the major themes, heavily sprinkled with extremely salty language. It is, at any rate, accurate in its information, from the recent details about Fitch's finding that almost all mortgages they examined involved some fraud to the history of Summers himself having thwarted Brooksley Born's attempts to regulate exactly the derivatives that ended up sinking the global economy. As said, the language is very salty; here's Obama wrapping things up in a neat little bow: "What the hell is financial engineering, Larry? It's one skeevy scheme after another, betting on this and that, casino capitalism, inventing derivatives, and then it all blows up, and my beautiful fucking agenda is fucked in the ass to the consistency of chocolate mousse by the banks who're too chicken to admit they're insolvent, they're not men, they're sissies bawling for bailouts, and how can I be a transformative president like Reagan and build a more perfect union if I don't get any fucking money to transform fucking anything because we have to give all the money to fucking Wall Street to transform itself into a financializing excrementalization of a crapolatization that fucks the entire world in every asshole on the planet up to and including all future assholes as-yet-unborn to every asshole already-born?" YMMV. ]]> https://www.earthli.com/news/view_article.php?id=2137 2009-03-21T23:27:17+01:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=2126 2009-03-10T20:19:41+01:00 https://earthli.com/users/marco

provides a handy visual mnemonic, starting with a single $100 bill and working up from there all the way to $1 trillion. The graphics are excellent [1], but I find that little descriptions also go a long way: * $10,000 fits in a pocket * $1,000,000 fits in a briefcase * $100,000,000 fits on a pallet * $1,000,000,000 takes up a whole room * $1,000,000,000,000 takes up a whole warehouse -------------------------------------------------------------------------------- [1] The graphic for $1 trillion is attached, with the little speck in the bottom left corner corresponding to you, standing next to 10,000 pallets of cash. ]]> https://www.earthli.com/news/view_article.php?id=2104 2009-02-15T22:22:15+01:00 https://earthli.com/users/marco

is a (somewhat) amusing look at the world through the eyes of "typical" trader on Wall Street. This trader is wondering why Wall Street is wasting its time worrying about what the rest of the non-Wall Street-world thinks. Instead, he feels his... ]]>

is a (somewhat) amusing look at the world through the eyes of "typical" trader on Wall Street. This trader is wondering why Wall Street is wasting its time worrying about what the rest of the non-Wall Street-world thinks. Instead, he feels his fellow traders should stick to the plan and stick it to a government that gave them so much money without bothering to force any conditions first. "Think about this. Some fool comes along and gives you $15 billion, no strings attached. The fool doesn’t own you. You own him. Mack needs to stand up and say, 'We at Morgan Stanley are pleased by your investment. Now, if you ever want to see a dime of it back, go away. We’ll call you if we need you.'" As a high-flying captain of Wall Street, you've already ignored or broken most, if not all, of the rules that are the social glue that prevents complete anarchy from breaking out. Now is not the time to grow a conscience. Or, as Lewis puts it: "The main point is that guilt is financially counterproductive. ... [n]o one really liked you when you were making $45 million a year. How do you think they’ll treat you when you’re poor?" It's funny 'cause it's true. ]]> https://www.earthli.com/news/view_article.php?id=2100 2009-02-11T20:38:27+01:00 https://earthli.com/users/marco

, wasn't exactly about finance, but it did involve this interesting question that the author wanted to ask of the exceedingly smarmy Senator Chuck Schumer. It's about a slated fare increase on NYC transit from the current $2.00 to $3.00 per ride. The... ]]>

, wasn't exactly about finance, but it did involve this interesting question that the author wanted to ask of the exceedingly smarmy Senator Chuck Schumer. It's about a slated fare increase on NYC transit from the current $2.00 to $3.00 per ride. The fare increase is "to raise $1.2 billion claimed by the MTA as its deficit". Naturally, the MTA is not allowed to run a deficit, so it has to make up the difference. Since bailing out a transportation organization that provides service to millions of mostly lower- and middle-class people is completely out of the question [1], the MTA has to come up with cash on its own. So, a fare raise it is. Naturally, this should have no nasty side-effects on the locals, since it's only $40 extra per month. C'mon, who can't come up with that kind of cash? What are you, poor? Anyway, the kicker is why the MTA needs the money. It's to pay down "the interest on the MTA's capital expenditures (NOT operations) -- that is, the building of the 2nd Ave. subway, etc. -- [which amount to] $1.5 billion for this year." So, the fare increase will go directly to the bank to pay the interest on a monstrous loan. That interest bill of $1.5 billion will likely remain the same as the odds that the MTA will be able to actual pay down any of their debt in this economy are slim to none. For those following along at home, that means that, when banks need money to stay afloat, they get billions free from the government. When a state/city agency needs money, it gets bupkis and has to shaft its riders to make ends meet. Witness the majesty of a Democratic government, finally ready to stand up for the little guy. Let's answer the author's question below: "Why haven't the Democrats earmarked the funds they're paying for bailing out the billionaire shareholders to paying off the bank loans, so that no fare increases and no layoffs would be needed?" Because the Democrats [2] like the billionaire shareholders better than the poor because the shareholders give Congress better stuff. Layoffs and fare increases are New York State's -- and New York City's -- problem. What is the difference between a Democrat and Republican? Only fringe issues; they are both equally happy with the basic class divisions as they stand, as long as the legislature stands firmly on the far more opulent side. -------------------------------------------------------------------------------- [1] I mean, what's the point? What's in it for our dear leaders? A warm feeling in the cockles of their hearts? Not bloody likely. The advantage of being heartless is that you never have to consider whether you shouldn't throw the poor a bone in exchange for a warm, snuggly feeling. [1] Again, with certain exceptions, but honestly, Dennis Kucinich, what the hell are you still doing in that party? They all laugh at you and don't listen to a word you say. Just go independent or socialist like good old Bernie Sanders and be done with it. Then, I won't have to write these stupid footnotes anymore. ]]> https://www.earthli.com/news/view_article.php?id=2099 2009-02-11T20:05:52+01:00 https://earthli.com/users/marco

, lists the actual votes for the spending bill recently passed by the Congress and the Senate. "The Obama bipartisan proposal receives 0 Republican votes in the House, and 0 Republican votes in the Senate. An extremely" ... ]]>

, lists the actual votes for the spending bill recently passed by the Congress and the Senate. "The Obama bipartisan proposal receives 0 Republican votes in the House, and 0 Republican votes in the Senate. An extremely small group of posturing senators makes the plan materially worse -- reducing its likely efficacy as an employment boost by roughly 600,000 or so -- and it looks as though the final passage bill will get roughly 240 Democrats and 0 Republicans in the House, and 58 Democrats and 3 Republicans in the Senate." Of just over 300 'yeah' votes for the bill, 3 are going to be Republican. That's 1%. Let's get the definition of "bipartisan" : "Of, consisting of, or supported by members of two parties, especially two major political parties: a bipartisan resolution." Though 1% technically satisfies the definition, it is certainly not in the spirit of it. Ergo, stop calling it a bipartisan bill. Just because the Democrats let the Republicans eviscerate it of a good portion of its job-creating power doesn't make it bipartisan. In fact, let's stop talking about the Democrats and the Republicans as if they are two separate parties. They all, once again, have put together a bill that consists of $400 billion of tax breaks -- most of them probably going to you-know-who -- and which does very little for 99% of the population. The banks have already gotten theirs, now it's Halliburton's turn -- what other company is more experienced in large infrastructure projects? Just make it no-bid and cost-plus and everyone who matters will be smiling. In a half a year, when this extra trillion down the toilet has mysteriously failed to halt the looming depression [1], the Congress and the Senate (a few can be excused for good behavior [2]) should be the first ones up against the wall when the revolution comes. -------------------------------------------------------------------------------- [1] Yes, yes, some of the best economic minds in the business -- from various sides of the ideological spectrum -- say that we should spend out way out of this crisis. They also wield a kind of inexorable logic and make it look viable on paper. But remember, it has to be executed correctly and skillfully. So forget about that. Whatever this group of idiots in charge employs will benefit only them and their friends in the short term, and tank the country further for the 99% of who don't matter. [1] Bernie, Dennis? You're free to go. Everybody else? Get in the f$%king truck. ]]> https://www.earthli.com/news/view_article.php?id=2093 2009-02-09T21:16:16+01:00 https://earthli.com/users/marco

, refers us to a five-minute video of a portion of the investigation of how the SEC managed to avoid shutting down Bernie Madoff ten years ago. The video is linked below. [media] I've taken the liberty of providing a rush transcript of the best bits below.... ]]>

, refers us to a five-minute video of a portion of the investigation of how the SEC managed to avoid shutting down Bernie Madoff ten years ago. The video is linked below. [media] I've taken the liberty of providing a rush transcript of the best bits below. In all cases, "you" refers to the SEC. "Your mission you said was to, 'protect investors and detect fraud quickly'. How'd that work out? What went wrong? [...] One guy with a few friends and helpers discovered this thing nearly a decade ago, led you to this pile of dung that is Bernie Madoff and stuck your nose in it and you couldn't figure it out. You couldn't find your backside with two hands if the lights were on. [...] You have single-handedly defused the American public of any sense of confidence in American markets if you're the watchdog. You have totally and thoroughly failed in your mission." America needs more of this. America needs a Congress that is this harsh with itself, with corporate leaders that show up with their hats in hand, with lobbyists and with functionaries from all of the other potentially-useful-but-in-reality-useless agencies and branches that make up our gargantuan government. But, knowing that that's not likely to happen, just enjoy this five-minute clip as Rep. Ackerman lights into a table full of functionaries from the SEC, who clearly don't understand the meaning of "taking responsibility". Linda Thomsen, the SEC enforcement director who also speaks in the video is the living definition of "functionary". She can't even just apologize for her colossal screw-up; instead, she uses that most abhorrent of constructions, "I'm sorry (you feel that way)". What sounds like an apology is in fact an expression of commiseration for the anger of another for which the person purportedly apologizing is in no way directly responsible. It makes you wish there was a trap door under her. The transcript continues: "How are [Americans] supposed to have confidence that if somebody goes to you with a complaint, gives it to you on a silver platter, with all of the investigation, with all of the data, with all of the number and how he knows that, and after a period of a half-dozen or eight years, you still don't know anything. [...] This is huge. How do you miss that? And we know that there's a million Madoffs out there; you missed all of those too." Just because the SEC has been historically useless doesn't mean that it's a bad idea to have one. It just means that we've had poor regulation, not that we need no regulation. Sure, the lobbyists and Congress itself have had a lot to do with defanging the SEC, but the people working there don't have to compromise their principles as well. So, dump the current crop of career bureaucrats at the SEC -- and other similarly useless agencies -- and hire some people willing to work for the American people instead of for their careers. ]]> https://www.earthli.com/news/view_article.php?id=2004 2009-02-03T21:34:25+01:00 https://earthli.com/users/marco

, wherein the authors examine a mortgage-backed bond rated by Standard & Poor's: "The financial institution that owns the bond calculates the value at 97 cents on the dollar, or a mere 3 percent loss. But S.& P. estimates it is worth 87 cents, based on the current loan-default rate, and could be worth 53 cents under a bleaker situation that contemplates a doubling of defaults. But even that might be optimistic, because the bond traded recently for just 38 cents on the dollar, reflecting the even gloomier outlook of investors." [image]The government is going to spend $850 billion on bonds very similar to those described above. That means that the government will be willing to pay at least 87 cents on the dollar for an asset that no one else on the planet is willing to even look at for more than 38 cents on the dollar. It gets even better: "The bond is backed by 9,000 second mortgages used by borrowers who put down little or no money to buy homes. Nearly a quarter of the loans are delinquent, and losses on defaulted mortgages are averaging 40 percent. The security once had a top rating, triple-A." The rating agency deemed this kind of bond "triple-A"! And, that isn't considered fraud! If this kind of bond -- one that has lost at least 10% already and is falling like a stone -- is considered AAA, what exactly does the bottom of the barrel look like? For it to have gotten such a rating, it must be what is called in the parlance a "senior tranche", which means that its risks are at least partially hedged by even more appalling tranches of sliced-and-diced securities below it. But that won't help it when all of those tranches go belly-up, as they have been increasingly doing of late and as the fraudsters who put together this entire house of cards promised could never happen. We believed them, and let them run our system into the ground while they scampered off to their villas with billions. Wait, wait, wait. Back up a second. What the hell is a tranche? It's a "slice" (from the French) of a pile of securities. What does a "pile of securities" mean? Securities are financial instruments that come in a variety of flavors. There are stocks, which represent ownership, and bonds, which represent debt. Everyone pretty much understands the intrinsic value of those and how one can trade them. There are also derivatives, which represent the rights of ownership and it gets more exotic from there. Securities are essentially contracts with value that can be traded. Among securities that represent debt are mortgages which, because of the deflating housing bubble, represent much of the bad debt included in these securities. Ok, so say that you're a bank and you've got mortgages in your portfolio, and you'd like to trade with others but, honestly, these mortgages aren't that attractive, so you're not likely to be able to move them out of your portfolio at a decent price. Those mortgages are only one step away from actual people and thus represent a plethora of different risks, a different valuated risk for each mortgage. That's a lot of overhead and is the classic picture for a bank, where the money the bank is owed on mortgages is balanced against the risk that a given mortgage will default. These figures contribute to the overall valuation for the bank. Just spitballing, you can imagine that the value of the bank's portfolio is equal to the base value of the securities plus the expected interest income minus a percentage calculated on the risk that the mortgage will default. Now imagine how pathetic that percentage looks to a real lion of the market. A few percentage points? C'mon, you can do better. So, you start to think about it and you wonder whether you can't make some lemons out of lemonade. Some of your mortgages are probably just wonderful and you could easily sell them to a third party...because it would actually be a good investment for that third party. Others are less attractive and represent the problem. So, you could put together a package with some low-risk mortgages and some high-risk ones and only sell them together. However, any third party with a calculator would be able to easily determine the valuation on such a package, as it's just the sum all the valuations of the securities in that package. Still no takers. It's important at this point to remember why there are no takers for such a package: because it's not worth the risk. You could sell the package at a lower value in order to make it more tempting for buyers, but that would likely involve exactly the sort of low profits that you were trying to escape in the first place. So that's a dead end. The point seems to be that, as long as potential buyers can figure out how much what you're selling is actually worth on the market, you'll get a lower price than you'd like for it. It's a classic market dilemma. Now, if you're neither a criminal nor a fraudster, you're going to restrict yourself to trying to actual increase the value of what you're offering for sale, but by spending less on the added value than the market would be willing to pay for it. If you're willing to think outside of the box, you'll approach the problem from another direction: namely, that the problem to solve is that third parties can still figure out the value of what you're selling on their own. You want to figure out some way of making the actual value of your product so obscure that they'll either have to take your word for it or they'll at the very least have to trust a third party to do it for them -- which is where the ratings agencies come in. Once the authority of valuation is concentrated in a small handful of ratings agencies, it becomes much easier to control ratings with a little well-placed bribery (once you've accepted your fate as a pirate on the high seas of finance, a little bribery is a logical cost of doing business). In the world of physical -- as opposed to virtual -- products, there are laws against doing this: think of the lemon laws governing automobile transactions. In the world of finance, what few laws and regulations there were were neatly excised by the Clinton administration. [1] Any areas still covered by regulation were scrupulously avoided; this wasn't hard to do as, from the analysis above, the classic world of finance (which was still regulated) wasn't going to provide the sought-after profits. So, the trillion dollar question is, how do you make lemonade out of lemons? The answer is, at long last, tranches. We've established that you can't sell your high-risk securities. Mixing high- and low-risk securities is also still too transparent. So, instead of taking n low-risk securities and m high-risk securities, you start slicing up your individual securities. So, you take a mortgage worth $200,000 and slice it into 1,000 $200 bits. Then, you do this with all of your securities, throw it all into a pot and start to ladle financial olio into new derivatives called "mortgage-backed securities". In order to attract all comers, you carefully strain a higher percentage of slices from low-risk mortgages into some of these all the way down until you're scraping the bottom of the pot for the really bad stuff. After all this number-crunching, you've got a pile of computer printouts depicting the valuation of each security as a percentage risk calculated much as you would do for far simpler packages, but with a lot more wiggle room for assigning risk. A human being is no longer really capable of determining the true value of this security -- and neither is a ratings agency. Instead of simply giving these securities a low rating for being so intransparent, the ratings agencies instead simply took the word of the company that created the security for the value of the package. And took a tidy profit for themselves, of course. After a bit of back and forth, it became easy to know just how many slices of low-risk securities had to be in a package in order to acquire a AAA rating. [image]And finally, you've acheived your goal: you're able to sell your securities at a much higher value than they actually have simply because no one can tell anymore how much it's really worth. Add to this that the ratings agencies didn't do their job, the oversight and regulation were non-existent and there was soon a tremendous amount of risk entering the market at a completely fraudulent valuation level. And, with everybody doing it, you had to keep getting more and more inventive to keep your profit margin higher than the competition's. Driven by this engine, a huge bubble ensured that you were able to move even the dregs from your pot, you could always find a buyer for even the most toxic securities in your portfolio. Now that the bubble's burst, the only buyer for any of this stuff is the buyer of last resort, good old Uncle Sam. -------------------------------------------------------------------------------- [1] With the help of Phil Gramm, Larry Summers, Ben Bernanke and all the other usual suspects. The Bush administration gladly took up the reins and let the jolly roger fly for eight more years. ]]> https://www.earthli.com/news/view_article.php?id=2082 2009-01-17T17:53:50+01:00 https://earthli.com/users/marco

ever. He started about eight years ago and has moved on to videos instead. As usual, he manages to capture that which is most important out of the miasma of obfuscation that the mainstream media emits (as Homer Simpson put it: "It's"... ]]>

ever. He started about eight years ago and has moved on to videos instead. As usual, he manages to capture that which is most important out of the miasma of obfuscation that the mainstream media emits (as Homer Simpson put it: "It's funny because he says what we're all thinking." [image] And the money quote, transcribed for posterity. "Oh, enough with all the "broad bipartisan" bullshit! Did Republicans not got [sic] their asses totally kicked in November? Who cares if they like the goddamn stimulus package? Does Obama want to be Mr. Snuggly McFondly, or does he want to start stimulating the shit out of this goddamn economy? Because my wallet doesn't care about bipartisanship -- it cares about having motherfucking MONEY IN IT." ]]> https://www.earthli.com/news/view_article.php?id=2045 2008-12-30T23:35:47+01:00 https://earthli.com/users/marco

and the image originally found on the "Truth" ... ]]>

and the image originally found on the "Truth About Cars" blog. Another full transcript of the cartoon is available at "Recurring themes in Calvin and Hobbes" ; Wikipedia, the original source has since been edited and longer contains it. Such is the way of the Internet. ]]> https://www.earthli.com/news/view_article.php?id=1957 2008-10-15T22:21:53+02:00 https://earthli.com/users/marco

(Matt Taibbi and Byron York Butt Heads Over Whether McCain Deserves Blame for the Wall Street Meltdown) in a live chat and quickly noticed that Mr. York was sticking to his original thesis without regard for new information. Now, that's just par for the course in any discussion, but Taibbi noticed that York thought much of his opinion on what caused the current financial crisis, but seemed not to have any idea what a Credit Default Swap was. York was chirpily blaming poor people defaulting on bad mortgages for the crisis and dismissed the possibility that the glorified OTB of CDS trades had anything to do with it -- because he'd never even heard of them. Here's York's argument: "I think that Fannie Mae and Freddie Mac were also major factors [...] the Democrats' desire to give mortgages to people, particularly minorities, who could not afford them, and the Republicans' desire to achieve an "ownership society," in part by giving mortgages to people who could not afford them." In other words, poor people are -- not solely, but primarily -- to blame. Here's Taibbi expressing amazement: "Oh, come on. Tell me you're not ashamed to put this gigantic international financial Krakatoa at the feet of a bunch of poor black people who missed their mortgage payments. The CDS market, this market for credit default swaps that was created in 2000 by Phil Gramm's Commodities Future Modernization Act, this is now a $62 trillion market [...] That's like five times the size of the holdings in the NYSE. And it's all speculation by Wall Street traders. It's a classic bubble/Ponzi scheme." A Credit Default Swap is basically a bet on whether or not a particular credit will fail or not. Neither the buyer nor the seller has to even own the credit in question, so there is no limit to the number of brokers that can speculate on a single credit. There is, of course, more to it than that, but it's all just window dressing meant to make it look like this $62 trillion market [2] is somehow more sophisticated or useful to real people's lives than a craps table. York completely ignored that line of reasoning, which is when Taibbi smelled blood in the water and went after him -- instead of giving him a pass, as so often happens when a dumb guy is losing an argument. "Do you even know how a CDS works? Can you explain your conception of how these derivatives work? Because I get the feeling you don't understand. Or do you actually think that it was a few tiny homeowner defaults that sank gigantic companies like AIG and Lehman and Bear Stearns? Explain to me how these default swaps work, I'm interested to hear. [...] Tick tick tick. Hilarious sitting here while you frantically search the Internet to learn about the cause of the financial crisis — in the middle of a live chat interview." Of course, it's not nice to make fun of the uninformed, which is why it happens so rarely. But, when one of the uninformed poses as bearer of truth, he or she deserves whatever they get for trying to get us to convince us to join their side. Imagine if Joe Biden had had the cajones to go after Sarah Palin in the same way whenever she started in on one of her canned speeches instead of answering a question. Now that would have been fun. -------------------------------------------------------------------------------- [1] "Clip of Tim Russert - Paul Krugman vs O'reilly" is an excellent example. At eight minutes, it's way too long and highly irritating to watch, but it illustrates the effectiveness of O'Reilly's methods perfectly: note how Tim Russert does almost nothing to control him or refute any of the dozens of falsehoods he spews across the table. [1] With some estimates going much higher, to $300 trillion. It's very difficult to say because the market is completely unregulated and companies are not required to open their books on it. ]]> https://www.earthli.com/news/view_article.php?id=1951 2008-10-14T22:44:35+02:00 https://earthli.com/users/marco

made the following prediction: "As international politics dominates policy debate, it drowns out the creaking of the international monetary system as it sags under the strain. Throw energy market volatity into the mix, as well as the long, slow demise of the dollar and at least two more years of the Bush doctrine, and it’s a true recipe for disaster. The fuse is lit—and we don’t know how long it is or how fast it burns, but we do know that there is a whole helluva lot of explosives on the other end." As Stephen Colbert is fond of saying, "I called it!" [Description of the Problem] [image]Simplified descriptions are a dime a dozen, but accepting a simplification because it's easier is a big part of the reason the powers-that-be were able to keep us supporting their economic habit for so long. To understand something as big and hairy as the global economy, you've got to get down in the trenches. To that end, there's an excellent video called "Money as Debt" by Bob Bossin & Paul Grignon (47min.) that provides a great introduction to the past, present and possible future of our monetary system. It covers advantages, disadvantages and gaping loopholes. [2] The article "The Bailout Round II: Adult Version?" by Dean Baker presents a good summary, doing the heavy lifting for us: "The United States is in a recession and facing the worst financial crisis in almost 80 years because the folks currently in charge were out to lunch. [...] They allowed an $8 trillion housing bubble ($110,000 for every homeowner) to grow unchecked. ... The main cause of the economy's weakness is not insolvent banks and lack of credit; it's the loss of $4 trillion to $5 trillion in housing equity as a result of the bubble's partial deflation. Families used their equity to support their consumption in the years from 2002 to 2007, as the savings rate fell to almost zero... families can no longer sustain their levels of consumption... banks won't lend to these families is that they no longer have home equity to serve as collateral.... And house prices are not going to come back...." As to what can be done -- what is normally done -- the paper "Understanding the Three Ways of Dealing with Financial Crises" by Brad DeLong , though not particularly well-edited, offers an understandable description of the mechanisms available for financial market control. It's accompanied by graphics, which nicely illustrate the effects of the different measures. At the end, he makes what, in light of recent events, can only be considered a reasonable prediction: "I don't believe that after this the price of risk will ever again become a free-market price, just as after the Great Depression the short-term price of liquidity--the short term interest rate--ever became a free-market price. The federal government, in one form or another, is going to be in the business of insuring debt securities against steep declines in value. Securities that are not so insured will simply not be traded. What Fannie Mae did for "conforming" home loans, the Treasury or some other government agency will do for derivative securities. It will offer insurance, charge for that insurance, and supervise and oversee financiers much more strictly." Assuming that there's anything left to oversee, of course. A later interview ended on a more upbeat note; from "The Mercury News Interview" by Brad DeLong offered concrete regulatory measures for a future derivatives markets: "The first step would be to say you can't trade a derivative security without trading it through an organized derivative exchange. That is to centralize the market and make it transparent for finance, to re-regulate it in a bunch of different ways. The second thing is to say if you are a high-end financial professional or you are getting a high income from anybody, that you have to take a great deal of that income in the form of long-term stock in whatever company is paying you [3]. (emphasis added)" So that, in a nutshell, is the problem. The solution? Well, time will tell, but England got the ball rolling over the weekend and the rest of Europe happily fell in line. The U.S. is following -- albeit reluctantly -- in their footsteps as well. The solution was evident from the beginning, but a false dedication to a screwed-up ideology prevented the governments of the world from implementing it until it was nearly too late. Dean Baker outlined the basic details weeks ago: "How do we go about getting the banks in order? Almost every economist I know rejects the Paulson approach and argues instead for directly injecting capital into the banks. The taxpayers give them the money and then we own some, or all, of the bank. (That's what Warren Buffet did with Goldman Sachs.) [...] If Secretary Paulson constructed a package that was centered around buying direct equity stakes in the banks, he could quickly garner large majority support in both houses. Better yet, Congress could just construct its own package centered on buying equity stakes and send it to President Bush. If he balks, we can just threaten him with stories about the Great Depression." Weeks later, it is almost exactly that plan that is swinging into action (and on the back of which the DJIA rocketed up almost 1000 points). [Who's Not to Blame] There's a tremendous amount of information floating around, trying to encapsulate the disaster in a nutshell, to break it down into bite-size chunks or sound-bites. The Republicans, ever fond of facile, easily digested and politically flattering interpretations -- and never ones to shy away from twisting wildly in order to pin the blame on a favorite scapegoat -- are aiming straight at Fannie Mae, Freddie Mac and (here comes the favorite scapegoat) ... poor people. The article, "Subprime Suspects" by Daniel Gross (Subprime Suspects: The right blames the credit crisis on poor minority homeowners. This is not merely offensive, but entirely wrong.), covers this specious theory in more detail (and he's understandably pissed): "Let me get this straight. Investment banks and insurance companies run by centimillionaires blow up, and it's the fault of Jimmy Carter, Bill Clinton, and poor minorities? [...] As Barry Ritholtz notes in this "fine rant" , the CRA didn't force mortgage companies to offer loans for no money down, or to throw underwriting standards out the window, or to encourage mortgage brokers to aggressively seek out new markets. Nor did the CRA force the credit-rating agencies to slap high-grade ratings on packages of subprime debt." There's a wonderful expression in America that goes, "don't piss on my leg and tell me it's raining". Anyone who believes the argument that government supervision of Fannie Mae and Freddie Mac -- and their obligations through the CRA (the Community Reinvestment Act) -- is what brought them down is deluding themselves. Yes, the companies were gutted from the inside out; this video, "Exposing Fannie Mae and Freddie Mac" by Daryl Montgomery is a fascinating look at corporate malfeasance, wherein we learn that these banks were leveraged at a rate of 70 to 1 [4] before being absorbed into the gut of the government. Gross continues with this defense: "Third, lending money to poor people and minorities isn't inherently risky. There's plenty of evidence that in fact it's not that risky at all. That's what we've learned from several decades of microlending programs, at home and abroad, with their very high repayment rates. [...] On the other hand, lending money recklessly to obscenely rich white guys [...] can be really risky. In fact, it's even more risky, since they have a lot more borrowing capacity." The poor generally don't need a lot of money -- they can't even conceive of borrowing the kind of money that's causing our current economic troubles. Only the truly criminally devious would think of borrowing billions, then betting it all on shaky gambles in the hopes of winning the lottery. In the end, the poor might default on their mortgage, but only very rarely and with almost zero deleterious effect on the national economy, to say nothing of the global one. When big-time investors lose at the craps tables, their clients lose, their backers lose, but they themselves don't. They generally still earn big salaries and compensation packages and are back in the morning, bright-eyed and bushy-tailed, ready to hit the tables again. It seems the Republicans either grew tired of blaming Clinton for the economy or finally realized that no one was buying it. But that good, old, Democratic scapegoat, Jimmy Carter, never gets tired of shouldering blame. The CRA was passed on his watch -- and some would say, good for him -- so it's clearly his fault that a high-flying economy thirty years after he left office is crashing and burning. [5] The irresponsible homeowners, who all tried to move to neighborhoods above their station, have also earned their fair share of opprobrium. Are they to blame for the bad mortgages? Or were they perhaps hoodwinked by a whole chain of people eager to generate more and more and more debt to sell further up the food-chain? The hungry maw of the rational free market demanded more, so they provided. "Mortgage Industry Bankrupts Black America" by Kai Wright offers much, much more detail about those "irresponsible homeowners" the affluent like to blame for this debacle. [What is to blame] [media]As usual, an overly simplified world-view is to blame. It's the economic equivalent of "you're either with us or against us", with the economy being either a free market -- with "free" tending to connote "free lunch" for the "new rulers of the world" (as put so nicely by John Pilger in his book of the same name) -- or a socialist wasteland, like Russia had. Do you want what Russia had? Huh? Huh? Huh? Decades of lackluster life followed by a catastrophic crash? [6] No? Then, shut your mouth and get out of the way, while your betters go about the business of making money out of nothing. Better yet, let Ah-nuld explain everything (see video to the right). [Counting the Ways] The article "The Wall Street Model: Unintelligent Design" by Pam Martens offers a very succinct and illuminating analysis of how the system works or rather, doesn't. One of the problems at the core of the model is that it depends, in large part, on getting monkeys (in this case, brokers) to claw their way over each other and beat one another about the head to gain every little advantage. Free marketers claim this mechanism efficiently optimizes financial gain, but, outside of the classroom, people exercise no moral restraint and rip every loophole wide open in their desire to "win". The game is rigged and there is no winning, only more striving and more risk and more stress and sinking to ever-deeper depths. We, the oblivious, may be in The Matrix, but the alpha-monkeys are no happier being strapped to a hamster wheel. [7] Worse still, the system seems to run only for the benefit of the system and the brokers, not the millions of small investors show actually provide the stake for the game. "[...] imagine a business model that bases remuneration to brokers on how much money they make for their Wall Street employer and not one dime for how well their customers’ portfolios perform. A Wall Street broker receives remuneration that rises from approximately 30 to 50 per cent of the gross commission based on their cumulative trading commissions with zero regard to how well the clients’ accounts have done. There is no acknowledged internal mechanism in any of the major Wall Street firms to gauge the overall success of the accounts the broker is managing. [...] Brokers put their clients “safe money” in these unsuitable investments because their Wall Street employer dangled a seductive financial inducement. [...] In other words, the financial incentive has created an artificial demand [for inconceivably bad paper]." The system is designed, as the title says "unintelligently", because it has implicit feedback loops that lead to extremely undesirable, highly unstable and long-term untenable conditions. But, is "unintelligent" the right description? The system works just splendidly for some -- namely, the people that designed it in the first place. The notion that the system is unintelligent is a misnomer because it's based on the wrong precepts: we assume that the economy is there for the benefit of all. This is blinkered, naive thinking. It is there for the benefit of those in control of it. We are unintelligent for supporting it and allowing the investors to proceed by personal fiat. They are winning; they have, indeed, won. The game is over and there is only a mess to clean up. We have lost. They will retire -- having perhaps paid perhaps minimal fines for their "accounting frauds" -- to their villas in whichever balmy clime they choose. We, and ensuing generations, will only see the grindstone as it presses painfully against our noses. We can, at best, hope to have some influence in how the next game is played, which is why we must now pay attention instead of succumbing to anger, retribution, resignation or outright depression. [Forget Blame. What About Punishment?] [image]We've all heard of the sub-prime debt that had been "misclassified" [8] as AAA paper. Oopsie. Well, this is only one case of misclassification; it is standard practice to put lipstick on a pig by simply re-labeling things. Otherwise known as "lying about the content and quality of your securities in order to move them at a higher price than any sane person would otherwise pay". Otherwise known as fraud when a poor person does it. Investment banks cheerfully perpetrated these acts because they "so despised the low-paying Treasuries that they replaced Treasuries with Freddie Mac and Fannie Mae paper in mutual funds bearing the name 'U.S. Government Fund.'" Isn't that cool? They slapped a Mercedes logo on a Yugo and got away with it. As standard practice. This is criminal. If it is not criminal, then it should be. Even a critic like Pam Marten can only muster up enough bile to call the practice "misleading". You know what? So are con-men. And, even when such a practice is not technically illegal [9], it is clearly structured in a way that it will be misused and generate the wrong results -- where "wrong" means beneficial to only the few that generated the results, but deeply harmful to the majority of other people in the society. It's why we even have laws and a civilization and a government -- remember? Murder is illegal not because it's not beneficial to the person murdering (they presumably profit from the act), but because, if everyone did it, society would be unbearable and eventually fail. That also used to be the reason we hated con-men instead of admiring, envying and promoting them. So, we have policies that encourage bad behavior, like the notion that investors have no obligations to the firms in which they've invested. The inevitable consequence of that is that, as Martens puts it: "[t]here is no longer any incentive on Wall Street to bring about initial public offerings of only companies that will stand the test of time and create new jobs and new markets to make America strong and globally competitive. There is only an incentive to collect the underwriting fee and cash out quickly on private equity stakes." There is no avoiding the outcome; the policies and structure of the system make its current shape inevitable, resulting in a culture of firms that don't do anything but profit from fluctuations that generate tremendous amounts of money from thin air. But you can eat neither thin air nor money and neither one amounts to actual, physical value. The fallout/collapse playing out in the last few weeks is an inevitable consequence of a system that has been increasingly gamed over decades. We, as people, just don't really care enough to stop it -- mostly because there is so much wealth to go around, we were able to ignore the egregious thefts perpetrated by our heralded financial con-men. As mentioned above, why are practices that seem so inherently immoral and unethical not also illegal? Or, if they are, why are the crimes not prosecuted? Let's examine first what happens when a normal citizen commits a crime in the normal, public, outside world: they get arrested, their name goes on public record, they get a public trial and they go to public jail. Crimes in the financial world are prosecuted within their own system by "arbitrators" -- a system designed by the financiers themselves and rubber-stamped by an obsequious Congress willing to profit from the crooked model: "...arbitrators do not have to follow the law, or legal precedent, or write a reasoned decision, or pull arbitrators from a large unbiased pool as is done in jury selection. Industry insiders routinely serve over and over again." That's why the article, "America's Own Kleptocracy" by Michael Hudson , can only say that the "heads [of Fannie Mae and Freddie Mac] had been removed for accounting fraud" (emphasis added) and that "Maurice Greenberg already had been removed a few years back for accounting fraud" (emphasis added); financial executives at that level don't actually get prosecuted or punished for their crimes. What do you think you live? Some law-and-order paradise like Pakistan? [10] [Trillions Upon Trillions] The obvious question is: can the financial collapse be stopped at all? Is the pumping of hundreds of billions of dollars into these failing, crooked banks helping the economy in a significant way? Or is it just a stop-gap measure, meant to keep things afloat -- after a fashion -- until after the elections? The recent figures might sound like a lot of money, but the real monster is "Credit Default Swaps (CDS) with over $60 trillion now owed through secret contracts in an unregulated market"; the quality of paper traded there is at best currently unknown and most likely unknowable. The amount of debt is, at best, a ballpark guess. Some have put the figure closer to $300 trillion. Compared to these kinds of numbers, the implosion of the housing market, with its mere trillions, seems like peanuts. It comes as no surprise, however, that the masters of the market and their political lackies would continue to blame all of their woes on that instead of revealing their hugely dishonest -- and, by all rights, illegal -- money-making schemes. The schemes that benefit the brokers and their firms, but leave the actual investors and holders of portfolios (i.e. the people that actually invested the cold, hard cash into that market) holding all the risk. This system has to be dismantled and a saner one put in place. There is currently no difference between the US and Zimbabwe on that account. We just pretend that our system is fancier, but that's only because we all believe the myth of American exceptionalism. Even taking AIG as an example, the housing market was only tangential to its downfall. [11] The reason the housing market is such a convenient scapegoat is that the mortgages in it -- the debt -- comprised a large part of the available capital in the U.S. financial system. With a tremendous amount of wealth flowing in via pension funds and mutual funds, investors were always looking for a better place -- read: more profitable, but still with manageable risk -- to put all that wealth. These mortgages, billed as they were as AAA paper, seemed like the ideal place to safely cash in. Honestly, though? This is not just the case of investors and their companies inadvertently making bad gambles; they knew that there couldn't be that much good paper in the market, but they bought in because they all figured that they would be the ones to cash out first, before the faith in that market collapsed. [12] And, because they all knew that they would get massive commisions (especially compared to investing in boring, old, low-yield T-Bills) regardless of how their investments actually performed. And, because everybody else was doing it [13], you either ran with the big dogs or stayed on the porch. So, back to AIG. They didn't do any of that. Instead, they sold investment insurance to investors doing that, picking up "a teeny tiny commission [...] for a policy promising to pay if, say, the $11 trillion U.S. mortgage market should 'stumble'". The next, logical step was to automate this process, so that requests for such insurance could be granted automatically by computers and the fee for that insurance automatically cashed, dozens of times per second. On the other side, the investors also used machines to automate their strategies, so that they could make commissions of "a thousand million-dollar gambles in the course of a few minutes", all automatically insured by AIG. This automation continued to invest based on razor-thin probabilities, none of which accounted for what any person would have immediately seen: that the quality of the paper -- the mortgages and other debt -- had declined considerably and couldn't possibly be as valuable as indicated. The algorithm has no way of discerning between safe debt and ridiculously unsafe debt marked as safe debt. The machine, like the HAL 9000, doesn't understand lying. But that didn't matter, because the investors got their cut, AIG got theirs and, because, more often than not, faith kept the bubble alive, things worked out. Until they didn't. Which every damned one of the people involved knew would happen someday. But, they did it anyway, because there was no downside, no punishment for losing the savings of millions of Americans via losses in dozens of markets, in which supposedly "safe" money-markets, mutual funds and pensions are invested. It is no different from the person who invests in a pyramid scheme because he knows he's not the last sucker in line -- those schemes work just great for the first handful of people invested in them. [Isn't that a Hedge Fund?] And, just to be clear, these are not wealth-creation schemes in the classic sense: they are basically hedge funds and "[a] hedge fund does not make money by producing goods and services. It does not advance funds to buy real assets or even lend money." One of the massive problems is that investment banks that were investing in more traditional ways saw the ridiculous amounts of being made by hedge funds and moved as quickly as they could to similar business models. However, hedge fund participants must usually sign a paper indicating that they are rich enough to lose everything invested in that fund before they are allowed to participate. The extreme risk is up-front. Investments in much lower-risk instruments do not at all satisfy that requirement, which makes it all the more criminal when that money ends up being managed as a hedge fund anyway. Here is a brief description from Michael Hudson of how hedge funds work: "[A hedge fund] borrows huge sums to leverage its bet with nearly free credit. Its managers are not industrial engineers but mathematicians who program computers to make cross-bets or “straddles” on which way interest rates, currency exchange rates, stock or bond prices may move – or the prices for packaged bank mortgages. The packaged loans may be sound or they may be junk. It doesn’t matter. All that matters is making money in a marketplace where most trades last only a few seconds. What creates the gains is the price fibrillation – volatility. [...] This kind of transaction may make fortunes, but it is not “wealth creation” in the form that most people recognize." One obvious question that comes to mind is: if so much money was made by all involved parties, then where did it go? If someone makes mad cash for five years, then loses a lot, why don't they just use their wealth to cover their debts? Why does the government have to step in to cover their debts? That is where the final step of the plan falls into place: because all of the generated wealth was paid out immediately in the form of "commissions, salaries and annual bonuses" that could be declared as capital gains instead of normal income and was taxed at less than half the rate. Beautiful, isn't it? Generate a tremendous amount of wealth using schemes that you know can't last, laundering the profit to private reserves, then telling the government that it can either let you fail (in which case the money-making machine finally collapses, but all past profits are available as personal savings) or save you to prevent economic collapse (in which case the scheme continues). In either case, you don't become poor. [Save Us. Now.] It works out just great for the gamblers and we, the public, happily swallow the stories our government and media tell us about how they "had to be saved". What, exactly, was saved? Not "industrial capitalism, or even banking as we know it", but the right to continue this scheme into the future. It became such an integral part of our economy that this money -- but not wealth or capital -- making scheme has become our economy (at least, as told to use by our elected officials, who profit handsomely from it). But such talk is tantamount to treason; as the president himself said, "[t]here will be ample opportunity to debate the origins of this problem. Now is the time to solve it." Typical. Never play the blame game when you might get the blame. The article, "The Wall Street Bailout: Why Politicians Can't Be Trusted" by Amy Goodman , includes excerpts from two very good interviews on "Democracy Now!" with Michael Hudson, professor of economics at the University of Missouri, Kansas City, and an economic adviser to Rep. Dennis Kucinich and Nomi Prins, who used to run the European analytics group at Bear Stearns and also worked at Lehman Brothers. Prin described the situation succinctly: "It's about taking on too much leverage and borrowing to take on the risk and borrowing again and borrowing again, 25 to 30 times the amount of capital. ... They had to basically back the borrowing that they were doing. ... There was no transparency to the Fed, to the SEC, to the Treasury, to anyone who would have even bothered to look as to how much of a catastrophe was being created, so that when anything fell, whether it was the subprime mortgage or whether it was a credit complex security, it was all below a pile of immense interlocked, incestuous borrowing, and that's what is bringing down the entire banking system." If it makes economic sense to bail out these investment banks in order to avoid a depression (called a "deep recession" in these sensitive times), then why doesn't it make sense to help out the people who will also suffer massively from the ruination of the economy over the next several years? Whether or not they are to blame for their situation is neither here nor there, their free-fall from the middle class to below the poverty line will have long- and far-reaching consequences. "A better use of the money [...] would be to 'save these 4 million homeowners from defaulting and being kicked out of their houses. Now they're going to be kicked out of the houses. The houses will be vacant. The cities are going to [lose] property taxes, they're going to have to cut back local expenditures, local infrastructure. The economy is being sacrificed to pay the gamblers.' (Michael Hudson)" As to whether we should rescue this system or not, consider this: it is not the case that banks literally can't sell their paper. The article "Let's Stop the Greatest Theft in the History of Humankind" by Otto Spengler notes that there are buyers for the horrible paper that investment banks currently hold: hedge funds. They just aren't willing to pay top dollar for it, typically "25% to 30% below the prices that banks carry these assets on their books". Banks that "hold about $30 of securities for every $1 of capital" can't afford that kind of a write-down without going immediately insolvent. Which is what happened to Lehman Brothers: without a bail-out, they had no choice. "Lehman Brothers classified 14% of its assets as Level III at the end of the first quarter; Goldman Sachs was at 13%. Why is Lehman bankrupt, and Goldman Sachs still in business? If Secretary Paulson, the former head of Goldman Sachs, had not proposed a general bailout last week, we might already have had the answer to that question." So Goldman Sachs is well-networked enough to get themselves a bailout, one in which the government is going 20% above market value for bad paper (otherwise, the bail-out wouldn't work). [One Born Every Minute] [image]The financial system is at once complicated and very simple. It is complicated enough to be confusing to the layman (see preceding article) and simple enough to be compared, as the article "How the financial markets fell for a 400-year-old sucker bet" by Jordan Ellenberg (We're Down $700 Billion. Let's Go Double or Nothing! How the financial markets fell for a 400-year-old sucker bet.) does, to "the martingale". The Martingale is a doubling game, which "...doesn't eliminate risk—it just takes your risk and squeezes it all into one improbable but hideous scenario". Do we really want an economy that acts like the worst game in the casino? Do we really want to save it as it is? Or do we want to build something better, something more stable, something fairer to more people? With many of the dominoes having fallen, now is the time to prevent the same old guard from setting them back up again. -------------------------------------------------------------------------------- [1] You crazy bastard. [1] There's also a version on YouTube, broken into several parts, of course; here's "part one" . [1] The emphasized measure above, in particular, would address the all-out piracy that is rotting capitalism at the core today. That way, you only get a golden parachute if you actually created lasting value; what a concept! As to the fact that "[t]he CEO of Bear Stearns lost 95 percent of his personal portfolio in the forced merger of last March", that's still probably not enough for most people (this author included). Because of that CEOs malfeasance -- and likely criminal fraud -- hundreds of thousands of people will work longer, have less and likely suffer. The 95% sounds like a lot, but it's only slightly higher than the tax rate in the U.S. for the super-rich in the 40's and 50's, the time of greatest economic growth in U.S. history. What was his net worth before he "lost it all"? Was he worth as much as Hank Paulson: $700 million? If so, then he's still worth $35 million. So his gamble didn't pay off and he ended up worth only $35 million instead of $700 million -- that's hardly a punishing lifestyle. Dean Baker knows how close people are to lighting torches and lifting pitchforks: "This isn't about... constructing a bank rescue the way that business people would do it. We have an interest in a well-operating financial system. There is zero public interest in... Wall Street banks and their executives." [1] Here's how I understand this mechanism. Leveraging is just a fancy term for lending. Leveraged money is money that has been loaned or invested; leveraging ratios indicate how often the same money has been lent. A ratio of 70 to 1 means that the bank has 70 dollars of debt for each dollar of debt that they own. The debt is balanced by collateral (like a house), which can be confiscated (repo-ed, foreclosed, etc.) if the amount of the loan cannot be collected. However, if the value of the collateral drops, then the bank cannot cover part of its obligations and has to cover those obligations from elsewhere. In the case of the housing-bubble collapse, the value of the collateral has fallen by 10, 15, 20% so far, leaving banks holding a lot of mortgages without any "safe" investments that they can use to cover their bad ones. Extreme leveraging increases the amount of profit in boom times, but is extremely sensitive to price fluctuations: whereas a leveraging ratio of 10 to 1 could feasibly survive a day-to-day fluctuation of up to 10% in collateral value, a ratio of 70 to 1 can barely survive a fluctuation of 1%. FDIC-Insured banks generally have to keep their leveraging between 8 to 1 and 12 to 1 (from what I've read), but considerably lower than the 30 to 1 and higher enjoyed by Bear Sterns and Lehman Brothers. Goldman Sachs is also at or near this level, but they somehow haven't gone bankrupt yet. Funny that. [1] As Daniel Gross put it: "[...] it's difficult to imagine how Jimmy Carter could be responsible for the supremely poor decision-making seen in the financial system. I await the Krauthammer column in which he points out the specific provision of the Community Reinvestment Act that forced Bear Stearns to run with an absurd leverage ratio of 33 to 1." [1] Speaking of the Russians, they were at least better-prepared for their collapse than we're likely to be. Their downfall may have appeared catastrophic, but it was likely a pillow-soft landing compared to the coming collapse of the American Way of Life(tm). "Closing the 'Collapse Gap': the USSR was better prepared for collapse than the US" by Dmitry Orlov goes into greater detail, noting that the high level of bureaucracy and large number of state-run services softened the landing for many. For example, health care and housing were largely unaffected because it was all state-run in the first place. There were no companies to go out of business, no property on which to foreclose and hospitals provided care as before, without wondering whether failing insurance companies would be able to cover costs. Even the emphasis on public transportation -- and the co-location of housing near it -- left very few people cut off from the bare essentials when the hammer (and sickle) came down. Not so with the U.S., where half of the people would have to become nomadic just to get near reliable food supplies. The U.S. also lacks repairable goods in its throwaway society, which means that it can't survive without a constant influx of new goods and people are also generally incapable of fixing things for themselves. These circumstance could change, but it would require time and would be much worse than it was for the Russians. They had less, so they were used to suffering -- in a way, it prepared them better for their collapse. [1] They're far, far richer than you, but comfort yourself that they're probably not really happier. They can buy and sell you a thousand times over with your own tax money, but they are incapable of deriving true pleasure from it. So there's always that to help you sleep at night. [1] You'll excuse the excessive use of quotes to indicate irony. When so many terms barely retain any of their notional meaning, one has to somehow make a distinction between valid and invalid usage. [1] Thanks, lobbyists! And a corrupt Congress! [1] Referring to the impeachment of President Musharraf, which was the right thing to do, as he had repeatedly violated the Pakistani constitution. The United States, on the other hand, does not impeach presidents for gross violations of the constitution or gross dereliction of duty. [1] The AIG executives who spent hundreds of thousands of dollars on a single weekend honestly can't understand where the problem lies. They received $87 billion and spent a few scraps on a weekend. Where's the problem? What they don't understand is that people don't want to see them lose just 95% of their net worth; they don't want to see them living only dozens of times above the station of a mere mortal. They want to see them down in the dirt with the rest of us, struggling to make a car payment. From their point of view, the public anger is completely overblown: imagine lending someone a thousand dollars to buy food and fix up an apartment; would you get angry if they bought a stick of gum with some of that money? They were given billions to save their business and they went to a retreat to discuss just that. Where's the problem? From their point of view, there is none. [1] If you've ever seen Monty Python's Meaning of Life, you'll remember the "The Crimson Permanent Assurance" segment at the beginning where a company engaged in hostile takeovers is depicted as a marauding pirate ship, plying the waters of financial districts in their building. It is, of course, available on "YouTube" . And it's probably trite to mention that this is the way some people viewed the world of high finance 25 years ago, before it crashed all of our money away in the late 80's, late 90's and, most recently, the late 00's. [1] According to Michael Hudson, "the accounting fictions written down by companies that had entered an unreal world based on false accounting" were not known only to a select few, while the rest clambered over one another toward the brass ring. He says that, realistically, "nearly everyone in the financial sector knew [the accounting] to be fake". ]]> https://www.earthli.com/news/view_article.php?id=1955 2008-10-13T20:59:40+02:00 https://earthli.com/users/marco

(U.S. stock indexes slammed as GM, financials hit: Dow industrials down over 5,500 points, or 39%, from year-ago peak). It's strange, though, because doesn't crash mean that everything stops working? Crash means bread lines and... ]]>

(U.S. stock indexes slammed as GM, financials hit: Dow industrials down over 5,500 points, or 39%, from year-ago peak). It's strange, though, because doesn't crash mean that everything stops working? Crash means bread lines and digging holes and filling them in again to pass the time. At least, that's what happened during the last crash. What does crash mean today? The internet clearly still works. Jets are still flying on time (I can hear one right now). Just how crashed is crashed? "Moment of Truth" by Paul Krugman says we've got the weekend to figure things out. After that, people will no longer have to wonder whether the world is in a recession -- after that, it'll be a depression. What measures are on the table? Nothing useful from Europe or the Americans, but the British -- under Gordon Brown -- have a pragmatic program that has a good chance of working. But they can't just save themselves -- everyone else has to follow suit or they'll just drag Britain down with them, decent program or not. "[...] the British government, showing the kind of clear thinking that has been all too scarce on this side of the pond, announced a plan to provide banks with £50 billion in new capital — the equivalent, relative to the size of the economy, of a $500 billion program here — together with extensive guarantees for financial transactions between banks. [...] The British plan isn’t perfect, but there’s widespread agreement among economists that it offers by far the best available template for a broader rescue effort. And the time to act is now. You may think that things can’t get any worse — but they can, and if nothing is done in the next few days, they will." He never was one to take lightly, but with a newly-minted Nobel Prize in his pocket, Krugman's opinion carries even more weight. But, what does worse mean? 401K accounts and pension funds empty? Really empty? Does the internet start to disappear? Does TV? Do movies, art, music and books become superfluous? Not only no gas, but no food in the stores anyway? Are planes flying? Does the global transportation network continue at some reasonable percentage of capacity? Do we just lose access to cheap Chinese crap or do we also have no food available? And if we stop buying Chinese crap, will they stop buying our crap debt and let the whole house of cards fall even further? When a high-profile newspaper says that "everyone" is affected, to whom are they referring? Americans have saved, on average, nothing over the last several years; not a dime, on average. Are they affected? People who spent every dime that came in -- and many that didn't -- on stuff they didn't need are looking pretty smart right now, as those who squirreled away for retirement watch everything disappear in a puff of smoke. Who's on top? Who's going to suffer more? Will anyone in the first world really suffer? Or will most of us continue to pay marginally more for food or fall deeper into poverty? Will we just see worse returns on our investments or will they disappear entirely? Does the crash affect everyone? Or just the people who invested directly? And what about the lives of the poor around the world -- billions of whom live on less than a dollar a day during the best of times -- are they going to get even worse? Or do their lives continue more-or-less unchanged as the "western" world drops several steps down the economic ladder? Do their lives perhaps get better as the owner of the boot on their neck suddenly has a whole set of troubles of his own to which to attend? So, now it's Monday and Europe appears to have gotten its s%#t together in order to "save" the economy (though they are actually converting the economy to be state-run until it gets back on its feet). And America? Paulson's still in denial and, apparently, all branches of government are willing to wait for him to realize that his bastardized notion of the free market can no longer save itself. They'll probably wait until things have teetered even closer to the brink, putting another notch on the belt of failure for both the Bush administration and the do-nothing Congress. They must be going for a record or something. ]]> https://www.earthli.com/news/view_article.php?id=1938 2008-10-02T23:02:50+02:00 https://earthli.com/users/marco

-- written by no less an eminence than a former World Bank president and Nobel Prize winner in economics -- is highly critical of the assets addressed by the bailout, noting that "[n]o private firm was willing to buy these toxic mortgages at what the seller thought was a reasonable price"; he is also highly suspicious of the cast of characters (gang?) running the show in Washington: "To be frank, the administration has a credibility and trust gap as big as that of Wall Street. If the crisis was as severe as they claim, why didn't they propose a more credible plan? With lack of oversight and transparency the cause of the current problem, how could they make a proposal so short in both? [...] Why not spend as much on [Americans that are losing their homes] as on Wall Street? Do they still believe in trickle-down economics [...]? " The article "Congress Confronts Its Contradictions" by George Monbiot offers the opinion that we should remove surprise and shock from our response to the effrontery of the administration. If you've been paying attention for the last n decades, then you should realize that "[t]he banking subsidies [in the bailout] are as American as apple pie and obesity." In fact, the world economy would never have gotten where it was without private profit and public risk because "corporate welfare is a consistent feature of advanced capitalism." Then there's the article, "Rep. Dennis Kucinich Rejects $700 Billion Bailout" ('Is this the United States Congress or the Board of Directors of Goldman Sachs?' Rep. Dennis Kucinich Rejects $700 Billion Bailout). Kucinich is one of those that thinks the system is broken, but that we should replace it with something else, not just slap a band-aid on it and let it run aground again at a later date. "I reject the underlying premise that we needed this bill. [...] We haven’t looked at any alternatives, [...] We have a bill here, a bill of more than a hundred pages, that we haven’t had a single hearing on the bill, you know—on the concept, yes, on what Paulson and Bernanke asked for initially. But, you know, we need to have hearings on this. There’s 400 economists and three Nobel Prize-winning economists who have said, “Whoa, wait a minute! What are you doing? Why are you rushing this?” You know, this thing doesn’t smell right, frankly." And these days, when something doesn't smell right, it's likely because of a politicization of yet another law-making process. Kucinich went on to note "that we’re putting this up before an adjournment in an election season shows that Congress is being put under extraordinary pressure to bail out Wall Street." The hurry, hurry, hurry attitude is an old con-man's trick to force a bad decision. So, that's Joe Stiglitz wondering aloud why Congress didn't try harder to make a bailout that benefitted everyone and George Monbiot and Dennis Kucinich muttering that it's because they thought they could get away with the same old game of graft they've been working for decades. That's not bad, but what's missing is a little more bombast [2], which the article, "The Rich Are Staging a Coup Right Now" by Michael Moore , fills in nicely. "This bailout's mission is to protect the obscene amount of wealth that has been accumulated in the last eight years. It's to protect the top shareholders who own and control corporate America. It's to make sure their yachts and mansions and "way of life" go uninterrupted while the rest of America suffers and struggles to pay the bills. Let the rich suffer for once. Let them pay for the bailout." Amazingly not too much different from Monbiot and Stiglitz, actually. It's got a bit more of the "f&%k 'em if we're f%@ked anyway" edge to it, but Moore makes essentially the same point. It wouldn't be fair to not cite someone for the defense, so next up is the article, "How Much Will It Cost and Will It Come Soon Enough?" by James K. Galbraith (How Much Will It Cost and Will It Come Soon Enough? - Could the current bailout bill have been better? Yes. But there are still a few fixes Congress should consider.) [3], which explains the exact fiscal obligations one can expect from the bailout for the American taxpayer. "Despite the common use of language, the capital cost of this bill does not involve "taxpayer dollars." It authorizes a financial transaction, exchanging good debt (U.S. Treasury bills and bonds) for bad debt (the "troubled assets"). Many of those troubled assets will continue to earn income for some time, perhaps a long time. The U.S. Treasury commits itself to paying the interest on the debts it issues. The net fiscal cost -- which is also the net fiscal stimulus -- of this bill is the difference between those two revenue streams. Given the very low rate of interest presently prevailing on Treasury bills, this is likely to be somewhere between $20 billion per year and zero from the beginning, even if the Treasury were to issue all $700 billion in new debt at once. It is a mistake, in short, to count the capital cost as a "cost to the taxpayer." This is not the war in Iraq. In the longer run, of course the Treasury will incur capital losses on the assets it acquires. The entire purpose of the bill is to overpay for bad assets, so as to give financial institutions a chance to recapitalize themselves. (emphasis added)" Oh-kay. This is a very good and accurate description of the bailout [4], as it gets to the crux of why it could ever possibly "fix" anything. The emphasized portions tell the story: we (the government) buy "bad debt" (of completely unknown quality) with "good debt" (very stable T-Bills and so on), hoping that the bad debt will turn out to "earn income for some time". We are, in effect, "overpaying [...] for bad assets". The obvious question to ask is: if the bad debt is expected to mostly pay for itself in the long run, why does Wall Street want to get rid of it so badly? Why are they going to go bankrupt if they hang on to it, but the U.S. government won't? Well, it has something to do with the government's ability to grant itself an extra $1 trillion in debt until those hot properties turn themselves around. What has so drastically over-leveraged investment banks and threatens them with bankruptcy could conceivably be absorbed by the U.S. Treasury, which would likely emerged, if not exactly unscathed, then with a "mere" extra $100 billion of debt. However, it would also save investment banks that had made very poor (and greedy) investment decisions, allowing them to stay in business. And allowing them to perhaps do it all over again. -------------------------------------------------------------------------------- [1] In particular, the short speeches, "Let's Play "Wall Street Bailout"" by Representative Marcy Kaptur (D-OH) and "Dennis Kucinich Tells the Truth" by Representative Dennis Kucinish (D-OH) were very good. [1] For more bombast, see the truly excellent speeches linked in the first footnote, above (one of which is Kucinich with the kid gloves off). [1] Though Galbraith supports a bailout of some kind (and wasn't unhappy with the version that was voted down), he's generally a peacenik and can't be said to be truly conservative in outlook. [1] Although the allegory used in the following cartoon was much cleverer (click to enlarge): [image] David Malki's cartoons are often clever, in fact, and you can find more at "Wondermark" . ]]> https://www.earthli.com/news/view_article.php?id=1944 2008-09-24T22:29:41+02:00 https://earthli.com/users/marco

; John Cole is clearly furious: "In other words, folks spent years making billions upon billions of dollars on risky transactions, more money on the stock of companies that was artificially high based on those transactions, more money bundling all those transactions into more transactions, and made a killing, and when it turns out the whole thing is a big pile of shit, you and I get the god damned bill. [3] [...] I do not ever want to hear another damned word about the free market. I don’t want to hear another thing about letting the market regulate itself. I don’t want to hear about the free flow of capital. [...] None of it. From superfunds to super-bailouts, I am tired of other people getting rich being irresponsible and then being told I have to pay to clean it up." [image]He is, of course, referring to the $700 billion plan proposed by Treasury Secretary Hank Paulson. It's infuriating chutzpah. You get a hankering for some tar and feathers just reading the proposal. And Paulson's a f&$%#ing functionary, for Christ's sake; he's an appointee! Where does he get off proposing extra-constitutional powers like that for himself? You see how easy it is to get angry? If you actually see what's happening, you get angry. People are not descending on Washington and Wall Street with pitchforks and torches, ergo, they do not yet truly understand what's going on. Instead, they're still hopeful that they can get everything back with one big, trillion dollar gamble, willing to bet their futures as long as everybody else is too. The article "Let's Stop the Greatest Theft in the History of Humankind" by Otto Spengler posits some very interesting sociological theory as possible driver behind this behavior, to whit: "Americans are so deep in the hole that they might as well keep putting borrowed quarters into the one-armed bandit." And why not? Any gains in other "safe" investments they made -- be it tech stocks, houses or even the S&P 500, which is right back where it was 11 years ago -- haven't worked out any better than pure luck, anyway. [There Oughta be a Law] [image]Even if you managed to keep a cool head so far, you'll lose it when you realize that you haven't heard the words "criminal" or "charges" or "criminal charges" or "good, old-fashioned hanging". Not once. Because whether or not what happened was technically legal, it was most certainly immoral, unethical and wholly counterproductive. It is precisely to prevent such ego-centric idiocy that we have a civilization, a structured society and a government. There is little difference between the global finance system and monkeys clubbing one another over the head. The strongest and/or sleaziest wins. If you're not willing to be sleazier than almost everyone else, you better be good at grabbing your ankles. All you hear is that we must do this for the good of the system, which keeps us all alive. We are being asked to save The Matrix; being asked keep the nutrients coming in and the energy running out. We are co-conspirators in our own demise. -------------------------------------------------------------------------------- [1] This is a most excellent small treatise on the nature of crowds and group mentality, originally written in French in 1895. The translation from the French I referenced is an excellent translation, still available and highly recommended. [1] I know it as an ancient Norse myth of a snake that ate its own tail as it encircled Midgard. It turns out that the name is Greek and that the Norse version is called Jörmungandr, but what the hell, I learned most of my Norse mythology from Marvel comic books, so there were bound to be some transcription errors. [1] I have made a massive effort to keep myself from adding [sic] behind every missing hyphen in that punctuationally frightening sentence. ]]> https://www.earthli.com/news/view_article.php?id=1939 2008-09-22T19:34:28+02:00 https://earthli.com/users/marco

https://www.earthli.com/news/view_article.php?id=1936 2008-09-21T23:24:47+02:00 https://earthli.com/users/marco

, cites Barry Ritholz as saying that "[t]he deregulation movement is now an historical footnote, just another interest group, and once in power they turned into socialists." It is hard to disagree. The socialism of the Democrats & Republicans (and their power base) is, of course, their very own. That they control our entire political process is not new. That they routinely practice massive corporate welfare, while, at the same time, dismantling social welfare, is not new. That they relentlessly support the socialization of risk and the privatization of debt is also not new. If you've been paying attention to what's actually been done in America -- not just what has been said will be done, which is often not nearly the same thing, soaked as it is with platitudes and lies -- over the last century, then the bailouts do not come as a surprise. Knowing that they will do it makes their prancing about in the nude, proclaiming the beauty of their robes no less nauseating. Will all these bailouts work? Will the near-constant prattling from the media that bailouts are just what the doctor ordered and that we can all go back to consuming ourselves silly work? Who knows? Irrational exhuberance is perfectly capable of buoying a rotted economy, as we have seen several times over just the last quarter-century. The economy is mostly belief-driven anyway. The only reason many schemes tend to succeed instead of fail is that people, in general, pay off their debts and work very hard. Were they not to do so (as the neocons nearly constantly accuse of the poor in their holy war against the have-nots), the entire house of cards would have collapsed long before it was able to get into trillions and trillions and trillions and trillions of dollars of increasingly shaky derivatives debt. But that was yesterday; on Friday, bold new plans arrived for handling the economy correctly in the future: by personal fiat of the Treasury secretary, as described in "The Bush Administration’s $700 Billion Rescue Plan" and "Dems on bailout: Include homeowners" . Because of the urgent requirement to save investment banks that have gambled themselves into a deep hole, the secretary will have the power to "buy and sell the toxic mortgage-related assets without any additional involvement by lawmakers". No approval by any elected officials, just an appointee doling out $700 billion as he sees fit, presumably without any consideration for personal gain. The secretary is only required to inform Congress that investments were made within three months, but that's just a formality because the decree also states that: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." Oh, and the debt ceiling kind of got raised to about $11.3 trillion, as well. Oh, and this bill has to be passed as quickly as possible because the crisis is dire. Con-men also use time-pressure to force bad decisions; this is no different. So, there you have it, the treasury secretary is authorized to buy up nearly a trillion dollars of bad debt, at his own discretion and his decisions cannot be retracted or questioned. Hypocritically, free-marketers are behind this proposal, dangling the hope that the government will be able to turn this debt around, even though private financial companies are seemingly unable -- or unwilling -- to do so. Either they're (A) retracting the main plank in their ideology -- that private industry does everything better than the government -- or (B) they are blowing a lot of smoke up America's ass in order to get them to take their crap investments off of their hands. [1] As pointed out in "Why Paulson is wrong" by Luigi Zingales [2], "[t]he Paulson RTC will buy toxic assets at inflated prices thereby creating a charitable institution that provides welfare to the rich—at the taxpayers’ expense." And it will likely work and be passed more-or-less as drafted because "the many (we, the taxpayers) are dispersed, we cannot put up a good fight in Capitol Hill; while the financial industry is well represented at all the levels." It's the same old story and, at this point, we can really only watch it all happen as decisions we don't agree with at all are made for us at hyperspeed. [3] And who stands to benefit the most? Why the worst of the worst, that's who (as if the answer could have been anything else). "Concerns about the Treasury Rescue Plan" by Douglas W. Elmendorf is highly critical [4], pointing out what is immediately obvious to anyone familiar with social welfare plans: that the most grossly negligent end up needing the most help: "[One] problem with buying troubled debt is that it provides the most help to the financial institutions that made [...] the worst investment decisions. Banks that stayed clear of this debt or sold such debt at cut-rate prices earlier this year in an effort to move beyond the crisis would receive no direct gain from such a program, while banks that made the biggest commitments to low-quality mortgages and have delayed dealing with their balance-sheet problems would be the biggest beneficiaries." This is only a proposal, but amendments to it -- like extending its provisions to using some of the $700 billion to keep millions of Americans in their homes instead of exclusively saving the gamblers or, at the very least, capping the amount of "golden parachute" money executives are allowed to suck out of the dessicated corpses of their companies before handing them over to the government to deal with -- are being met with stiff resistance, if not outright derision. While the Congress seems absolutely willing to provide trillions to bail out the financial institutions, they are balking at actually providing any conditions for the bailout, like "prod[ding] investors to be more willing to write down mortgages rather than pursue foreclosures." That condition alone would require the affected financial institutions to actually deal with part of the mess they created by maintaining their mortgages. Instead, they would rather just foreclose and cut their losses, no matter that millions of U.S. citizens would be thrown out of their homes. While it's not illegal to do so, it should in no way be supported by the government. The vast majority of both Republicans and Democrats -- nestled, as they are in the pockets of these wealthy investment banks -- strenuously disagree -- saying that this would adversely affect the smooth and fair workings of the free market (even as they pump public cash into it). So, what could the government do instead? No one across the entire spectrum of political opinion seems to mind that the government is stepping in: even the purported free-marketers are positively clamoring for it to do so. The problem is that the government is not stepping in hard enough, trading truckloads of cash for, well, nothing much at all. A handful of worthless paper for which they might be able to recoup some of their losses. Instead, we should see: "[...] a new central authority to supervise the financial institutions and compel them to support the government's actions to stabilize the system. Government can apply killer leverage to the financial players: Accept our objectives and follow our instructions or you are left on your own -- cut off from government lending spigots and ineligible for any direct assistance." That would be more like it; of course, such action remains firmly in the realm of fantasy. The plot of our movie-of-the-week is developing in a different direction. It is honestly hard to discern the difference between the US and a banana republic, except as one of scale. -------------------------------------------------------------------------------- [1] If, after the last dozen years of free marketers running the show, you still believe that it might be (A) or that there's another explanation, but it most certainly can't be (B), then you're a moron and part of the problem. [1] Zingales is from the Chicago School, famously home of Milton Friedman and his "Chicago Boys", who would rise to fame as the primary architects of the globalized financial markets we have today. Even they can't see their way to approving of what is happening right now. [1] As Texas oilman -- and former gubernatorial candidate -- once said of rape, "[a]s long as it's inevitable, you might as well lie back and enjoy it." [1] The Brookings Institution is a think-tank dedicated to far-right economic methodology, including neoconservatism and mass privatization. Even they can't summon up enough hypocrisy to like this plan (though they've perhaps used up all of their hypocrisy in the last eight years); Congress, on the other hand, seems to be having no difficulty whatsoever. ]]> https://www.earthli.com/news/view_article.php?id=1891 2008-08-04T22:50:29+02:00 https://earthli.com/users/marco

, points out that this is the prevailing attitude that drove the constant growth of the American economy. It was this propaganda that allowed Americans to continue to cling to an increasingly untenable standard of living that crept (was pushed) constantly upward and beyond their means. Now, early in the twentieth century, it's hard to see how even the most faithful will be able to keep up the sham. First, there's the sheer fact that "80 percent of the work force" makes the same or less than they made 30 years ago -- cost-of-living has increased, but wages have not. The "classic" wage-earner -- "a man in his 30s" -- earns "12 percent" less than 30 years ago. There's always a lot of noise about a booming economy, but it all goes to the top 1% or even 0.1% of the population, from where it's supposed to trickle to the rest of us in the form of more jobs, or so our elected officials (and their corporate masters) would have us believe. No job? Foreclosed? No insurance? Can't afford food? Try harder! Don't be so lazy, stop whining and pick yourself up by your bootstraps! The economy's doing wonderfully well -- just look at the stock market! If you can't make it in this economy, then that's just the way the ball bounces. It would be unfair -- to both you and your fellow taxpayers -- to help you too much, or at all, if we're going to be perfectly honest. [1] The problem with that theory is that a comparitively small pool of rich people don't buy nearly as much stuff as a much larger pool of poorer people: only so many cars and large-screen TVs fit into one mansion. The extra money that should trickle back into the economy is far more likely to be invested wherever in the world it is expected to make the highest return. Decades of experimentation have shown us that there are no guarantees that it ends up in the domestic economy -- to the contrary. Americans certainly gave the old college try though. First, they "sen[t] more women into paid work"; the "percentage of American working mothers with school-age children has almost doubled since 1970, to more than 70 percent". When that wasn't enough to maintain the American lifestyle, they didn't question the system, hyper-consumerism or the way they seemed to spend a tremendous amount of money on a government that never did anything for them. No, they buckled down and started working more. Some got second jobs; others just worked many more hours, working more than they did 30 years ago as well (on average) and working "350 more hours a year than the average European", who enjoys much better quality-of-life and a much stronger social safety-net, to boot. When that was also not enough, Americans started to borrow, which brings us up to the present, where credit-card debt per household and number of expected foreclosures and defaulted loans are all at all-time highs. At this stage, with no more hours in the day left to work, no more people in the household to turn into wage-earners and no more collateral with which to borrow more money, it seems that chasing the carrot of the American Dream is finally at an end, stomped into the ground by reality. Where once we shook our heads in amazement, laughing that the Soviets actually believed their own hype (which they, in actuality, did not [2]), we are now the butt of a joke we played on ourselves and are threatened with a fall just as precipitous as the Soviets suffered when reality took notice up and bit them in the ass. Reich offers the obvious solution, but it's difficult to see how to get there from here without a revolution: "Most Americans can no longer maintain their standard of living. The only lasting remedy is to improve their standard of living by widening the circle of prosperity. [...] the long-term answer is for us to invest in the productivity of our working people [...] We must also adopt progressive taxes at the federal, state and local levels. In other words, we must rebuild the American economy from the bottom up. It cannot be rebuilt from the top down." That will not happen in four years, nor will it happen in ten; at best, this complete turnaround will take a generation. He is talking about institutional change wherein the current holders of power will have to let go of some of their wealth in exchange for long-term goals. Good luck with that. -------------------------------------------------------------------------------- [1] Oh, I'm sorry. Are you a major corporation or industry with a large, well-financed lobby and/or a shadowy campaign-contribution structure? Well, that's different then; here, help yourself to some billions until you get back on your feet. No, no, don't worry about paying it back if that would be inconvenient; just having you as an upstanding member of our economy is reward enough. [1] A joke from the cold war days goes like this: "A Soviet diplomat took his American counterpart to one side and told him, 'Soviets and Americans are basically the same except for one big difference: here in America, you actually believe your propaganda.'" ]]> https://www.earthli.com/news/view_article.php?id=1459 2007-01-07T21:13:14+01:00 https://earthli.com/users/marco

(As an Economic System, Capitalism is Going Crazy: Factors in Our Colossal Mess) offers a nigh-panicked critique of the out-of-control hyper-captitalism found in the rarified air of the international financial instruments markets. With a name like that, it's already clear that the intent is to hoodwink and the system does not disappoint. With the... ]]>

(As an Economic System, Capitalism is Going Crazy: Factors in Our Colossal Mess) offers a nigh-panicked critique of the out-of-control hyper-captitalism found in the rarified air of the international financial instruments markets. With a name like that, it's already clear that the intent is to hoodwink and the system does not disappoint. With the introduction of ever faster computing, ever more memory and ever tighter integration of information and communication, traders, who used to be limited in their schemes to invent money out of thin air, are hatching bolder ideas every day. "Ingenious and precarious schemes in the world economy today have great legitimacy and flourish in the sense that the postulates of classical economics postulated are fast becoming irrelevant. It is the era of the fast talker and buccaneer-snake-oil salesmen in suits. Nothing old-fashioned has credibility." With the ability to home precisely in on a perceived profit or price difference in commodity, option, currency, derivative or future -- and combined with techniques like swapping, making forward rate agreements, taking naked positions or hedging by selling short and taking long -- traders can make incredible amounts of money in an incredibly small amount of time. All these fancy names for gambling involve incredible risk, whose consequences are absorbed by the market -- or the enormous groups of investors increasingly partaking of hedge funds, which bet against global-size risks like a bookie bets on horses. Companies are incorporated, merged and discarded in a fraction of the time that a classical economy allowed. Suffice it to say, with this kind of speed and with this kind of money on the line -- tens of billions in hours -- the game doesn't stay honest for very long. "The problem is that capitalism has become more aberrant, improvisatory, and self-destructive than ever. We are in the age of the predator and gamblers, people who want to get very rich very quickly and are wholly oblivious to the larger consequences." These larger consequences are manifold, but mostly stem from the basis of the neoclassical capitalist economic system itself. The constant need to grow in a world of limited resources is a real-world problem not addressed in the ivory towers of economics. On paper, it works like a charm and enough have believed in the translation from paper to the real world to sustain the system so far -- though the unwitting masses provide the raw input of capital (via taxes) and labor. As more institutions realize that the system is eminently exploitable and starting to wobble, the more they pile on, grabbing for the last scraps before everything collapses. These kind of larger consequences are starting to concern the old guard, who heretofore were happy to milk the money-making machine they'd built on the backs of the poor [1]. They are now alarmed to see investors with just as little regard for the old guard's well-being. "'Reconstructing economic theory virtually from scratch' and purging economics of 'neoclassical idiocies,' or that its 'demonstrably false conceptual core is sustained by inertia alone,' is now the subject of very acute articles in none other than the Financial Times" The way things work at the top, the amount of cash available and the amount of risk, well, risked, is simply breathtaking: "In the case of Amaranth Advisors, this outfit lost about $6.5 billion at the end of September on an erroneous weather prediction and went under." They probably bet on a worse hurricane season this year and lost. The moral question of whether anyone should be able to profit from the misery and disaster caused by a hurricane is not addressed. Not only do tens of thousands of people remain homeless in New Orleans, but slick, young sharks in suits made enough money to buy a gold-plated lear jet in a single day -- by betting that George Bush would drop the ball. An interesting side-effect of an amoral economy, to say the least. That's not to say that some of these sharks don't sink: "At least 2,600 hedge funds were founded from the beginning of 2005 to October 2006, but 1,100 went out of business. The new financial instruments -- derivatives, hedge funds, incomprehensible financial inventions of every sort-are growing at a phenomenal rate...[the] head of the European Central Bank ... wrote that he could not comprehend them; that there is scant oversight over them; that many are pure hype; that nothing prevents them from creating immense domino effects on the entire financial system were they to collapse, thereby also dragging the well-regulated parts of the system down." The obvious solution, as suggested by both Kolko and the Financial Times, is to inject some oversight into this system. As these markets are international, global and fleeting -- with trillions flitting across networks from London to Tokyo to New York and back in the span of days -- this necessitates international oversight. That's where the phrase "out of control" comes back to haunt: oversight is impossible. There is no way to implement oversight on a system that evolves so quickly, evading every attempt to squash the fantastical profits concealed within it. As a scant few regulators talk of stopping the Piñata from swaying around so wildly, everyone else crowds around, wildly swinging what they hope is the lucky bat that will explode the candy from inside it. "The chances of developing a common trans-national approach or rules are close to zero, if only because nations of the world are rivals in the bid to attract financial companies and regulation, or lack of it, is a major factor on where to headquarter. When the next financial crisis occurs, and the likelihood of that happening has grown by leaps and bounds, it is more likely than ever to drag the entire global economy with it." This doomsaying comes from those who are the most knowledgable about the global economy. As international politics dominates policy debate, it drowns out the creaking of the international monetary system as it sags under the strain. Throw energy market volatity into the mix, as well as the long, slow demise of the dollar and at least two more years of the Bush doctrine, and it's a true recipe for disaster. The fuse is lit -- and we don't know how long it is or how fast it burns, but we do know that there is a whole helluva lot of explosives on the other end. -------------------------------------------------------------------------------- [1] Though Kolko mentions that Socialism is dead as an economic system, some of the strongest economies in the world -- in the Scandinavian countries, in Switzerland and others -- have strong socialist elements. The socialism typically identified as such by detractors had a tough century to be sure, either from being paired with totalitarianism or suffering all-out assault from competing -- and rapacious -- capitalist/militarist systems. Let's not pretend the social experiments in Angola, the Congo or anywhere in South America were ever given a fighting chance. ]]>