Thursday, October 28, 2010

Tuesday, October 26, 2010

Class Warfare

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

Warren Buffett, 2006

Free traders say 'we need to make the middle class bigger by making it smaller'... does that make any sense to you??

Matt Taibbi's Financial Meltdown reporting

worth the read.

Bill Black for President

There are precious few people on the main stage speaking the truth - this guy is one of them.

Thursday, October 21, 2010

What Needs to be Done, working paper

Here are a few of the inevitably many things that need to happen -
1) roll back the concentrations in banking and media that the government (FCC, et al) has allowed.  In general, we need a more robust interpretation and enforcement of AntiTrust laws.
Here's a typical story about the media roll-up from 2003. (and how has it worked out for the local newspapers??)
The 'Financial Reform Bill' crystallized the existing structure and reinforced the market positions of the Too Big To Fail Banks.  They are now even Bigger, with less competition. A rather perverse outcome.  Oh, by the way - TARP almost breaking even is a rather meager outcome when the big banks are paying $144 Billion in bonuses this year.
(And TARP is only breaking even because of the other incredibly expense TRANSFER OF WEALTH PROGRAMS BENEFITTING THE BIG BANKS AT THE EXPENSE OF PENSION FUNDS and other savers)
1b)  Prepare to take over the system of payments and provide a capital backstop in the event (only a matter of time) before the Banks fail again (they are still insolvent and only existing because of the massive transfers of wealth to them discussed above.  A true accounting, including marking their commercial real estate to fair value, would show the entire system to still be worth less than zero.  Prices need to be allowed to reset lower from their credit bubbles high.  Our present official monetary and fiscal policy is to prevent this at all costs.

So - break up the large firms, reinstate Glass Steagall (separating Commercial Banking from Investment Banking). Allow prices to reset to a reality based level.

2) raise interest rates immediately.  Whats happening in the economy is not a monetary policy problem.  Cut income taxes on the first 50k of income to 0% for the next few years at least.   Raise income taxes on >250k income for the next few years at least.  (I'm against high taxes in general, but need to clawback some of the government deficit from the last 10 years from the bush taxc cuts and the fact that the gains from the Structure of International Trade and Wall Street has gone exclusively to this income bracket).

3)Campaign Finance Reform - public funding, a mandate for free airtime to all candidates who can get some threshold of signatures.  Dedicated campaign/political/government channels airing interviews with the candidates, presentations of platforms,. etc.   Reverse the recent Supreme Court decision about unlimited and anonymous political spending.

4) Nothing called News can have intentional factual inaccuracies (it is currently the law of the land that "News" does not have to be true, and can be intentionally false.  So things even as seemingly small as Fox News splicing footage of a small crowd into some liberal conference/speech or a big crowd onto Glenn Beck's rally, et al. )

5) Tear up the Trade Agreements.  These are the most Anti-Democratic Laws ever passed, negotiated in secret usually by large business interests, and have  been devestating to 99% of the people on earth.  Trade needs to be based on a Fair Trade standard.  So at a minimum, as a for example of what you could do - if you want to import to the United States, the product needs to be produced according to our existing set of laws governing the production here.  So Compliance with our environmental laws, workplace protections laws, product safety laws and possibly even something in the dimension of wages - minimum wage laws perhaps.  This is tougher to do and needs more thought.  But why should Free Trade be based on arbitraging away the Environmental Protections and Standard of Living that American workers fought for at great cost over 200 years?  When has Big Business been in favor of any "progressive reform" that turned out to be a huge boon to them?  For instance, the Food and Drug Administration - please read the Jungle by Upton Sinclair!  Or the unionization of workers and a rise in wages vs. profits - Big Businesses hired the Pinkertons to kill people!  This is history!  But these things were necessary to create the stable society and robust middle class that in turn were huge boons to big business!!

6) end the empire building - this has killed every once great nation.  Get out of Iraq, Afghanistan.  Roll back the military presence around the world.

9) The Federal Gov't needs to invest in basic science research, and make cheap higher education loans available to everyone - people here aren't educated enough to make real contributions to the economy.  The sense of entitlement has to go, these people need to do their share.

10)End the homeland security department - Ridge admitted they put out fake terror alerts for political purposes.  What more do you need to show how the national security apparatus is anti democratic and can (and is ) being used against the interests of the people?

11) Something on health care.  In principle I am in favor of universal coverage, but not through the existing insurance/pharmaceutical racket.  Also, we need a health based tax system if we are going down this road,  I am deeply opposed to paying for some 300lb 10 coca-colas a day drinking Diabetic's medicines.  (Eg, lifestyle related disease healthcare costs, when the lifestyle/behavioral choices can/has been identified need to be self funded - eg, a tax on coca cola, etc.)
12) Prosecute the War Crimes - a fish rots from the head. Bush, Cheney, Wolfowitz, Perle, Yoo, Gonzalez, Addington and the rest. You have Myers out there now saying those guys lied to start the war - the former head of the joint chiefs of staff!!!
  How can we hold ourselves up to the rest of the world as a moral example without this?  How can we be serious as a NATION OF LAWS without this??

13) so much more

Wednesday, October 20, 2010

New Physics

imagine if we had sent our physics PhDs to SuperColliders instead of Wall Street Credit Derivative Desks...

Stagflation is happening right now

Stagflation is happening right now, hiding in plain sight.  The Fed's official policy is to prevent "prices" from adjusting downward.  But this gets into what "deflation" and "inflation" are.  Is any price change inflation or deflation??  No, of course not.  Prices change in a very Microeconomics 101 way - where demand meets supply.  We had a collapse in aggregate demand, and productive capacity (supply) got built around 2006 levels of demand.  So, supply curve shifts right, demand curve shifts left... what do you get?  LOWER PRICES.  Pretty basic.  And makes sense.   Since we have had massive degree of leverage, allowing prices to adjust downward (even a little bit! you've got to love 80-1 leverage ratios...) renders the entire system insolvent (still!).    The economy needs to reset prices lower in order to heal, and the Fed is creating inflation to offset this natural deflation - ironically preventing economic growth, since people DO NOT HAVE THE MONEY TO PAY THE INFLATED PRICES.
Its surreal the Fed sees the way out as attempting to continue to distort the return on capital signal by effectively 'mopping up' the extra supply capacity.  How this results in a more efficient return on capital (capital flowing into productive enterprise capable of expanding the economy, adding jobs, etc) is beyond me.  Also, the historical contexts are important for what 'inflation' will be able to do.  In the other inflationary peiods, there was a stronger relationship between wages and prices (eg, wage price spiral).  The whole point of the global structure now is there is NO pricing power of labor.  So workers in the U.S. saying they need more money to keep up with inflation will just exacerbate the flight of jobs to fascist police states with truly proletarian labor forces (you don't like working for a dollar a day in a 19th century style factory?  GO STARVE IN THE FIELDS YOU STUPID FUCKING PROLE!)

Please infer the circularity in this system - the economy is dependent on the U.S./Western consumer having disposable income.  ALL the dynamics are against this.  The official policy responses to address this actually make it worse, in a direct way.  Rougher seas ahead.


This blog is dedicated to Mitchell Feigenbaum and Joseph Schumpeter, personal heroes of mine.