The Equanimist

Dropping Money from Helicopters and Other Hard Choices (Update 1)

Posted in Economics, Economy, Political Economy, Political Philosophy, Public Policy, Socioeconomy by equanimist on December 18, 2008

 

i.

Hardly conservative, over-consolidation of wealth at the expense of the US middle class is a reckless game. High productivity and rapidly cycling currency fuel high living standards and rapid growth. Therefore, no long-term solution to the financial crisis is likely to exist apart from (1) upward wage pressure on the bottom 95% of US Americans (2) re-regulation to include incentivization of productivity and innovation and (3) re-inculcation of some sense of civic duty. Near term recapitalization of the US middle class should be the single most effective measure to stave off the ugly prospect of a deflationary spiral.

Much of what is being written, like this short ‘glossary’ entry at the Guardian, explains that “quantitative easing” is akin to dropping money out of helicopters. But, that does not rightly describe recent actions by the Fed. What the Fed has done is to make borrowing very cheap.

Potential borrowers aren’t any more credit worthy now than they were last week (or last year). Moreover, in the event that there are well capitalized bankers who can be persuaded to make risky loans, additional credit now will only kick the can down the road. We all know the one about the guy who borrowed money from Peter to pay Paul.

The current crisis is in some ways not unlike a balloon that, having developed a tiny pin prick, gets a big hole in it. It deflates and cannot be re-inflated until it’s patched. The balloon need not deflate entirely if something can interrupt the process. Might we not either (a) stop up the hole until it can be permanently patched or (b) balance loss with gain?

Unlike an ordinary balloon, a hot air balloon is at once inflated and constantly hemorrhaging air. In fact, there is a current of air flowing through the balloon. This is kind of what the current economy is like. Right now there is a shortage of air flow (liquidity) and a big hole (a lack of confidence). So to avoid a nasty tumble, supply air (real money) until the hole can be patched.

ii.

For some time now nothing has been worth more than some smaller fraction of the price at which it sold because of shrinking real relative middle-class profit shares. Only over-confidence made possible too-easy credit, which, in turn, made the relatively high US lifestyle possible in the face of excessive wealth consolidation.

As is well documented, real profit shares distributed to the bottom 95% of the US population peaked decades ago and income inequality has since risen sharply. A graph of top decile income shares makes this pretty clear (from Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States, 1913-1998,” The Quarterly Journal of Economics, Vol. CXVIII, Feb 2003, issue 1).


At the outset of the Great Depression of the 20th C. income inequality was very high. In years that led up to US involvement in the Second World War, income inequality plummeted, and, it remained relatively low and constant for decades. Disparity in income ramped up throughout the 1970s and exploded in the 1980s (and again in the 2000s; see the International Labor Organization press release cited below) not because productivity and profits began a long decline but because the uppermost decile (later the uppermost 5% and, still later, some smaller fraction thereof) accorded itself increasingly large pieces of the pie (for specific data to augment the above see, for example, Productivity change in the nonfarm business sector, 1947-2006 at the US Dept. of Labor, and Historical Income Tables, Table H-2 and No. HS-26. Share of Aggregate Income Received by Each Fifth and Top 5 Percent of Families: 1947 to 2001 at the US Census Bureau). This graph, unfortunately, stops at 1998. The International Labor Organization estimated that “in the United States in 2007, the chief executive officers (CEOs) of the 15 largest companies earned 520 times more than the average worker.

Now fully 80% of US Americans make a real relative pittance unprecedented in the post-war era. That they don’t think they’re poor doesn’t mean they’re not – only that authority figures from the lowliest parent to the Commander-in-Chief have successfully convinced US Americans to compare down and trade down the socioeconomic ladder (to a more or less indentured servitude as debt ballooned).  See, for detailed analysis, the Trade Union Advisory Committee to the OECD summary of “Growing Unequal?” (to which I have linked here).

I reiterate what I have previously written: to attribute the current crisis to a lack of liquidity is to miss the point entirely. The balance of US stewards now promulgate economic visions and institute policies without even a foothold in reality. On the one hand, average US Americans are sold an outsized bill of goods while, on the other, the elite who profit on sales hoard and lobby for deregulation to further consolidate means. When convenient, the US consumer is ‘resilient’ and can be depended upon. S/he won’t ‘let the terrorists win’. S/he’ll ‘go out and spend’. And, ‘The free market will sort itself out.’ When convenient, consumerism is decried and the same beleaguered people are told that it is some fault of the US consumer that s/he cannot manage money and, moreover, that s/he does not need (or deserve) and should not get a bailout!

Credit cannot and will not now change the fact that many among the bottom 95% can no longer afford to pay debts they’ve been encouraged to amass, and, will (if furnished) only run the average US household further into debt (compound the problem per se).

But, the point is moot. Bankers should not be so foolish as to make loans that they know borrowers cannot repay. Potential borrowers, then, should not contract loans. Therefore, home prices should continue to plummet until they are priced so cheaply that these poor citizens can afford them. Likewise, goods and services should be sold ever more cheaply or sit on store shelves because the unreal equity (over-confidence) that fueled US consumerism is vanishing. Businesses, then, should be unable to meet their obligations and, unable to recoup even costs, they should fail putting more people out of work.

Mounting job losses, then, should force more homeowners into foreclosure or disadvantageous home sales… More importantly, US productivity and means of production along with the service sector should contract sharply as the supply of goods and services races to catch up with rapidly contracting markets. But, in the event that this is the new economy of extraordinary income inequality, the world furnishes way too many material goods and services – that is, precisely, in a new low-income world too many people are currently employed.

iii.

Congress must act now

The housing market cannot be expected to resolve itself any time soon. As clearly illustrated in the following graph (excerpted from, “‘Pay option’ mortgages could swell foreclosures,” MSNBC.com) foreclosures should be expected to accelerate through the first half of 2009 and only briefly stabilize in the second half before the bottom likely falls out on the housing market in 2010.


In the meantime, socioeconomic stability and quality of life, in addition to productivity and innovation, should continue to deteriorate. Poor, hungry, homeless, shiftless people are not conducive to democracy and should be expected to undermine national security and public safety. [Even wayward adolescents know what Libertarians and Republicans reject – that poor, hungry, homeless, shiftless people are easily “turned”. (Why do we feel allegiance? To whom and to what institutions do we feel it?)]

Still, these are only risks (however probable).

The fastest, surest way to avert these risks is to revalue goods and services by proxy relative to the bottom 95%. The more dollars there are chasing some constant goods-and-services the more expensive they will be. If hoarders cannot be persuaded to recapitalize the US middle class (i.e., furnish dollars to prop up their own way of life) then it falls to legislative bodies and appointees to make the hard choice. Give real money to those who will spend it and more to those who are more likely to spend it than to those who won’t. (Heaven forbid, right? Redistribution is only “right” when money moves up the socioeconomic ladder.)

Still, no long-term solution should be complete that does not effect upward wage pressure. That is, if the US middle class does not have continued support when government programs wind down, all else being equal, things will just revert. So, for example, though enough money might stabilize property values over the short- to medium-term, property values will again fall right away as government money is withdrawn. Bring income inequality back down to more optimal levels (approximately what it was throughout the 1950s, for example).

Short of legislation of pay scales, radical upward wage pressure will only be effected by either increasing the number of jobs out of all proportion to the worker pool or decreasing the number of workers to fill those positions that exist. To that end, I reiterate, it seems most reasonable to impose controls over outsourcing and insourcing as same controls are in the interest of national security.

Giving banks money does nothing to any of the aforementioned ends. Stop doing it. As ought be clear, this cannot and will not jumpstart the US economy and, it would be achieved just as well if the US middle class were recapitalized – dropping money from helicopters.

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Response to Global Trends 2025, Part II: Clean Is Good (Formerly "Green Is Good")

Posted in Corrections, National Security, Political Economy, Public Policy, Socioeconomy by equanimist on December 18, 2008

Global climate change hasn’t gone on holiday because the US is staring down the barrel of a financial gun. There remains no doubt that the world is warming, and, there is vanishingly little room to speculate that human activity is not to blame (at least in some part). According to the Intergovernmental Panel on Climate Change (IPCC) Climate Change 2007: Synthesis Report:

Global atmospheric concentrations of CO2, CH4 and N2O have increased markedly as a result of human activities since 1750 and… in 2005 [concentrations of CO2 and CH4] exceeded by far the natural range over the last 650,000 years. Global increases in CO2 concentrations are due primarily to fossil fuel use, with land-use change providing another significant but smaller contribution… There is very high confidence [equal to or greater than 9 in 10 chance] that the global average net effect of human activities since 1750 has been one of warming…

The report continues, relatively small changes are already baked into the system. But don’t let small numeric values fool you. We can be quite confident that these same small changes (less than 1 or 2 degrees Celsius) will put tens or hundreds of millions under “increased water stress”, while negatively impacting food production, increasing risk and damage of flooding, and adversely affecting human health (pps. 50-52). Again, the consequences of changes that cannot be avoided do not bode well for the future. The effects of continued unmitigated global climate change could be catastrophic.

If for no better reason than we are playing a far riskier game than Russian roulette, clean is good.

“But,” you say, “It [R&D] is a huge economic burden. I don’t live in Africa. What do I care if Africans die of thirst? And, I can afford healthcare. Besides, this global warming might be good for US farmers, for a while anyway.” Right you are. But, here’s why you should care anyway.

(1) Addiction to oil is bloody expensive. According to T. Boone Pickens’s Pickens Plan the US currently imports nearly 70% of the oil it uses at a cost of about $700,000,000,000US per annum and will spend about $10,000,000,000,000US (ten trillion USD) on foreign oil over the next ten years. These numbers aren’t strictly accurate since the bottom fell out from under the oil market. At $49 a barrel, it’s about $263,000,000,000 per annum. But, barring total worldwide economic collapse, $49 per bbl. may not last. [Saudi Oil Minister Ali al-Naimi recently indicated that oil has a “fair” price of about $75 per bbl., so, OPEC may move to cut production. (Am I missing something? Isn’t $49 the fair price, the market price? $75 is the price after market manipulation!) And $75 per bbl. is down from June when $100 per bbl. seemed reasonable to the Kuwaiti finance minister.] So barring disaster, with no further interruption and at relatively “flat” reserve estimates over the mid-term, oil ought be expected to fluctuate between $49 and $150 per bbl.

In perspective, US GDP is presently valued at approximately $14.4 trillion. So, at $263 billion, the US annually spends about 1.8% of GDP on foreign oil; at $100 per bbl., that figure rises to about 3.7%; and, at $150 per bbl., that’s nearly 5.6% of GDP! Even if oil settles back down into the twenty dollar range, at $25 per bbl., the US will continue to pay nearly 1% of GDP (about $130,000,000,000 per annum) on foreign oil, a foreign tax on US productivity paid not by big US corporations alone but individual US citizens.

(2) And do not be deceived, the Saudis do not and will not show the US any special treatment. Sure, their king likes to hold hands with ours but, they’re not partners. Case in point, according to Gulf News, “Saudi Arabia’s King Abdullah Bin Abdul Aziz [recently] stressed that Saudi Arabia and other Gulf states did not and will not give any amount of money to the US for that purpose [i.e., the financial crisis].” Translation, The US is dependent upon disinterested foreign oil producers for continued national security.

Why do we stand for it? Why do we continue to lay prostrate at the feet of despots like Abdullah Bin Abdul Aziz? Well, as T. Boone points out, we only import 14,700,000 bbl. of oil every day. The other 6,300,000 bbl. come from US fossil-fuel magnates who collect another nearly 0.8% of GDP at a rate of only $49/bbl. and as much as 2.4% of GDP at $150/bbl.!

It should be clear, (3) energy production must go green and whoever holds the means of producing clean energy will be future king, and, it should be self-apparent that (4) real or imagined depletion of limited resources creates real potential for inter-regional and international conflicts. Wind farming, solar cell, fuel cell, hydroelectric and hydrothermal technologies will ensure continued US hegemony and will make “free-”market capitalists big bucks. But, the US procrastinates. Procrastination provides opportunity for technological powerhouses (e.g., Japan, Germany and Korea) and motivated states (e.g., United Arab Emirates and other Europeans) to gain the upper-hand and, further, runs the risk that money and means run dry in the interim.

According to the CIA’s World Factbook US foreign debt currently ranks number one in the world at $12,250,000,000,000 while US current account balance ranks dead last at $ -731,200,000,000. In a crisis of confidence (not unlike the current financial crisis) might there come a time when these extravagant Joneses get a knock at the door from debt collectors? Will the US find a new foreign securitizer? The answer seems a stern, “No.”

Will the US kowtow to some foreign superpower in the way that Europeans now kowtow to Russia? When Abdullah grabs George’s hand is it in friendship, or is he really telling the world, “George is my bitch.” How will these debts be paid?

Still, the US controls extraordinary means of production and a vibrant, albeit decimated, scientific community. There remains the possibility that the US can rally and rise to the occasion, as it has done throughout its history. But, it’s a closing window of opportunity. With jobs rapidly disappearing, manufacturers facing bankruptcy, no plan to tackle staggering imbalances, and rapidly gaining technological rivals, the US will either create jobs, secure manufacturers’ viability and aggressively develop future technologies or be eclipsed by foreign rivals.

For these reasons, it must be “unthinkable” that US policymakers do not reinvest in infrastructure now. A clean revolution offers fundamental solutions to all of these problems. And, if it costs even a trillion dollars in investment capital this small sacrifice will pay for itself in less than ten years at one tenth the estimated cost of foreign oil over the same period.

Response to Global Trends 2025, Part I: Country at a Crossroads

Posted in *HIGHLIGHTS, National Security, Politics, Public Policy, Socioeconomy by equanimist on November 26, 2008

US technological and strategic advantages are not insuperable and, the US has lost luster (if not real ground). To retain (or regain) global standing, US “elites” must voluntarily or US stewards must demand that they take aggressive proactive roles developing innovations that will assure continued great power status or be willing to (1) leave successive generations a weaker and increasingly less relevant US, (2) experience real declines in domestic standards of living and (3) leave the US and its allies prone to a hostile multi-polar world wherein destruction might be mutually assured and success might be mutually precluded. Will the US rise to the challenges of 21st century leadership?

First on a long to-do list is an overdue green revolution. The world wants power to fuel rising standards of living. Fossil fuels will be insufficient to supply demand (esp. within a context of global climate change). Whoever develops cost-effective low-impact energy solutions to meet ever increasing energy needs will wield extraordinary power in a new middle-class world. Alternatively, it seems only reasonable to assume that emerging-power energy requirements will significantly raise the possibility of international conflict.

Second, significant overtures ought be made to bring China and Russia into the Western fold. Western powers ought not appease these rising Eastern powers and, there is no sense in antagonism. (Does Poland need missile defense, for example? Should not a meaningful US umbrella suffice?) Western civilization is not a cult of democracy but a democratic solution to the problem of good governance. Is there no room in the West for liberalization on different tracks? Is there no possibility that we might learn something new? We are not so young or so unstable that we cannot stand a little competition. Parallel development of effective governance strategies ought not be viewed with fear but with healthy skepticism. China, in particular, does seem to be following a liberalization strategy and, as such, may be seen to approach Western-style socialized democracy vis-a-vis democratized socialism.

Third, while excessive nationalism is generally insupportable and counterproductive, the US is clearly spread too thin. More care must be taken that globalization is not a race to the bottom. Global Trends warns against some vague “protectionism” that might be better described as isolationism (and xenophobia?) That the US cannot recoil from the world does not admit that the US can afford the consequences of too liberal foreign policies. A balance must be found between the national and global interest.

Fourth, the US must reinvest in infrastructure (to include human capital). Among themes that recur in Global Trends, the US despite extraordinary natural, intellectual, cultural and technological resources is losing ground. The implication is US infrastructure is failing for lack of maintenance. The Ayn Rand model of Greenspan’s “free-”market capitalism is failing. Too liberal market policies have resulted in nearly four decades of radical redistribution of wealth on the one hand and decelerating pace of US innovation on the other. For as long as US stewards continue to indulge libertarian market fantasies and refuse to make hard choices, US infrastructure will deteriorate because self-interested individuals cannot be counted upon to make consistently wise strategic decisions. Isn’t that why we adopt governance over anarchy in the first place? Complacency and profit taking (profiteering?) have left the US vulnerable and pose real danger to US standing.

The Myth of the Pay Incentive (a follow-up note on innovation)

Posted in *HIGHLIGHTS, Philosophy, Political Economy, Public Policy by equanimist on November 16, 2008

Previously, I wrote a little note (“A Note on Innovation”) in which I argue that US-style “free-”market capitalism is collaboration inhospitable; that so-called “performance-based pay is profit-driven; and, as such, innovation-irrespective “performance-based” pay packages favor cheap, outmoded and proprietary goods and services (what some might call “crap”).

To fill the gaps left in this short note, I submit that “free-”market capitalism is just a feature on the US-economic landscape – a landscape strewn and dotted with (1) legislation (2) efficacy-driven market-share competition (3) strong perceived need and (4) pay promises that are only valuable on innovation, all of which do spur innovation.

Take, for example, the so-called “Big Three” (viz., GM, Ford and Chrysler).

Big Three executives command exorbitant pay packages relative to foreign peers. If innovation were a function of high pay (or vice versa) then Big Three executives should have radically advanced the industry in recent years. Have they? Have US automakers radically advanced the auto industry? The answer seems a resounding, “No.

Focus in on just one decades-old concern, fuel efficiency. Aside from a few so-called “econoboxes”, the Big Three have failed to produce even fuel-efficient vehicles, let alone the most fuel-efficient cars in any class. Legislation, such as CAFE standards that US car makers fight tooth and nail, has advanced fuel efficiency. So, despite Big Three executive pay packages (often multiples of foreign counterparts’ executive pay packages), the Big Three are not generally “innovative” and, the Big Three have consistently fought innovation. As a result, the Big Three have consistently lost market share to foreign rivals who have innovated.

Even in this soft economy, foreign car makers continue to grow market share. Why? When oil prices exploded, “patriotism” (decidedly anti-free market force) and advertising lost out to real efficacy-driven market-share competition and, foreign car companies were ready with many fuel-efficient cars. They were ready not because German and Japanese auto execs command extraordinarily high salaries that spur innovation but because foreign car makers have long competed for market share where gas is costly. That is, efficacy-driven market-share competition – competition, for example, to save consumers real dollars when real dollars really add up – is a powerful economic force.

Still, while efficacy-driven market-share competition may be sufficient to spur innovation, innovation is often product of something altogether other than market forces: strong perceived need (often subsidized by government and government entities). “Necessity,” as they say, “is the mother of invention.”

Since ancient times, battlefields have been rife with innovation. Likewise, at all times, implacable scientific minds and engineers have made manifold innovations (often in so-called “free time”). Some of history’s greatest innovators (often members of the leisure class – often subsidized) have toiled because they “needed” to know – they “had to” – had to satisfy themselves!

Strong perceived need is vital to innovation and much would not proceed if it were not for the very anti-free market force of subsidies that furnish resources and opportunity. Ergo, to this day so-called “free-”market governments fund agencies, academic institutions, departments and scientists within same in addition to private contractors. Why? Because “free-”market forces and “performance-based” pay are insufficient to spur myriad innovations that keep countries like the US one step ahead of the competition.

These government and academic scientists and engineers do not generally receive “performance-based” pay but graded pay (an extreme whereat there is no remunerative reward for innovation). The pay is so bad that many flee the very projects they most cherish to make money in the “private” sector (a sector not known for paying scientists and engineers sums to rival executive pay packages). That is, low pay packages may actually stifle US innovation by driving scientists and engineers away from basic science to more lucrative careers in business, sales and pharmaceuticals (where they have devised a way to make medicine pay: cure nothing, treat everything).

So, legislative (and litigious) processes spur innovation. Efficacy-driven market-share competition spurs innovation. Strong perceived need inspires innovation. Subsidies often make innovation possible. But, in no case does pay per se spur innovation (though, as indicated, too low pay may hamper innovation).

How can remuneration spur innovation? Well, that guy in the garage building a better mousetrap – if he isn’t some wonk like me who simply must satisfy himself – is probably sick to death of slaving away while executives make fortunes off the sweat of his brow. He becomes the so-called “entrepreneur”. That is, the promise of future pay that will only materialize as the result of innovation is a powerful incentive.

Thus, innovation is spurred by (1) reasonable mandates, (2) efficacy-driven market-share competition, (3) perceived need and curiosity and (4) the promise of pay for innovation. Innovation is not a function of regular or so-called “performance-based” pay (i.e., pay packages linked to short-term value of profit shares).

Until and unless (1) government mandates innovation; (2) competition fuels innovation; (3) innovation is cheaper than existing technologies or subsidized; (4) necessity demands innovation; and (5) pay packages are restructured to drive innovation per se, innovation will progress at a sub-maximal rate because “performance-based” pay is both irrespective of and insufficient to spur innovation.

Profligate Banks Use "Emergency" Loans to Dodge Accountability

Posted in Economics, Economy, Political Economy, Public Policy by equanimist on November 11, 2008

By August, 2007, it had become clear to some (namely, me, and I wrote about it here) that (among developing crises) US middle-class profit shares might be insufficient to continue to drive the US economy – that US middle-class profit shares were too small to continue to effect general prosperity.

The so-called “credit crisis” unfolded throughout 2008. Rates of default rose. Home prices plummeted. Banks failed. Credit froze. Markets tanked. One million jobs were lost. And so on.

Ad hoc bailouts came and went but no comprehensive plan of action was proposed until September, 2008, when it appeared that the economy might be on the verge of total collapse and Bush lackey, Henry “Hank” Paulson, swept in with “the Paulson Plan”.

A bloated modified version of the Paulson Plan (a.k.a. “Emergency Economic Stabilization Act of 2008” including the “Troubled Asset Relief Program” or TARP) was approved after “sweeteners” were added to bribe individual members of Congress.

In short order, Hank found a way to use money allocated by the TARP to purchase troubled assets in a manner at once consistent with the broad purview granted him by Congress and inconsistent with explicit intentions to buy mortgage backed securities in reverse auctions.

As of this writing, no TARP money has gone to buy mortgage backed securities or keep homeowners in their homes. And, no further stimulus has gone to the US middle class. But, Bloomberg reports that the Federal Reserve has loaned nearly $2,000,000,000,000US (that’s two trillion US dollars) to unnamed institutions for unspecified collateral (about $6,500 for every legal US citizen). Earlier bailouts coming to about $3,000 per person, that brings the running total cost of bailouts to about $9,500 per person.

If home prices continue to fall and jobs continue to disappear and middle-class wages continue to shrink and credit remains tight, where will these troubled institutions get money to make payments? And what will their collateral be worth?

These loan recipients are beneath contempt and the Fed is acting foolishly. US equity affords the possibility of public oversight and control over pay packages (including salaries, bonuses, perks and etcetera). Federal Reserve loans, on the other hand, shield these so-called “fat cats” – these prodigal bums who bled the US dry – from public scrutiny and sanction. When even bailout recipients continue to engage in profligate excesses despite mounting pressure to reform, it must be inferred that loan recipients intend to continue bad business practices behind doors marked “Private”.

These so-called “emergency” loans must stop. Consolidation of power in the hands of too few has gone on for too long and US democracy is imperiled. The federal government must appropriate money as needed; reinstitute a truly progressive tax code; effect upward middle-class wage pressure and, further, issue progressive “tax credits” to recapitalize the middle class and dilute the outsized profit shares that a tiny sliver of a slice has accorded itself. Until such time credit will remain tight, jobs will continue to vanish and the US middle class and all of its dependents will suffer by every measure.

Heresy!

Posted in Economics, Economy, Public Policy by equanimist on November 3, 2008

Imagine that! Giving money to people/municipalities/states who/that need it (the same who/that are most likely to spend it) and funding projects to improve our failing infrastructure may have the added benefit of increased liquidity. Indeed, as Mr. Nicolaci da Costa of Reuters has it, All stimulus plans are not created equal. Moreover, the affects of making the Bush tax cuts permanent and further corporate tax cuts (many corporations don’t pay taxes, by the way) will be minimal or regressive according to the EPI. So much for Voodoo economics.

Descent into Fascism (Update 1)

Posted in Public Policy by equanimist on October 27, 2008

Intelligence and police agencies regularly violate our civil rights (often with impunity). The Department of Justice selectively enforces the law and continues to seek power to hold detainees indefinitely having recently sought a stay to avoid compliance with Judge Ricardo M. Urbina’s right to summon prisoners and release them following his review in Federal District Court.

Now, the Washington Post and ACLU report that Customs and Border Protection (CBP) is stopping, searching and detaining travelers (some US citizens) without probable cause within 100 miles of a US border. Moreover, seemingly in violation of a decades’ old judicial decision (viz., Heidy v. United States Customs Service), CBP is copying and sharing personal information seized from same.

With the designation of “Constitution Free Zones”, reports suggest that CBP is now using broad authority to harass law-abiding US citizens. If CBP can stop anyone within 100 miles of a US border and demand same to produce papers and detain any persons and seize any personal items without cause and, further, if anyone can be declared an enemy combatant and detained incommunicado at secret prisons then upwards of 197 million US Americans now live in less of a democracy and more of a police state.

I recall myself a child my parents and teachers telling me about how great it is to be an ‘American’ because here (in the US) the Constitution and the Bill of Rights guard us. My grandparents fought and most of my European relatives died in the fight to rid the world of fascism and soviet communism. In fewer than eight short years King Bush and his cronies have turned the US into Soviet Russia. Imagine that: eight short years to topple US democracy. I’d have thought that it would take longer.

Intelligence and police agencies cannot be allowed to trample civil liberties. The DoJ must apply the law equally. CBP powers must be narrowly defined such that we are guarded against unscrupulous search, seizure and detention. Write your congresspeople. Demand action.

Response to suggested capital injections to grease seized credit markets (Update 3)

Posted in Economics, Public Policy by equanimist on October 10, 2008

At rock bottom, the current crises are not the result of bad loans and predatory lending but irrational expectations.

Ambitious people wondered how they might get a little more of so-called “disposable income.” But, there wasn’t any left. To continue to realize growth beyond reasonable expectations [supported by greater real disposable income (higher real middle-class wages) and population growth] credit could be employed. Goods and services were sold on credit: cars, homes, flat screen televisions, mp3-players… People borrowed money to pay for those goods and services because they didn’t have enough money to buy them. They defaulted.

The current crisis began on teevees and in showrooms and open houses all around the world. Banks don’t need direct capital injections. To give banks direct capital injections (a last ditch effort to stave off the ugly prospect of distributing real power) is to attempt to eliminate the middle-class from participation in the economy. I submit to you, all such attempts to “fix” this mess will ultimately fail. The socioeconomy is a product of the whole no portion of which can be circumvented

The solution is simple: People need money to pay the banks. Give them actual cash that will last long enough to effect upward wage pressure. That’s the only way we’ll jump-start this economy. Sorry Mr. Buffet. Sorry Mr. Gates. You will be worth less or worthless. Pick.

In unrelated news, check out these articles at Salon.com: The Palins’ un-American activities and Meet Sarah Palin’s radical right-wing pals. I’m not entirely sure if they’re true, because I haven’t had time to research them, but, i’m finding confirmation elsewhere. Frightful confirmation of my worst fears.

You cannot have your cake and eat it too.

Posted in Economy, Political Economy, Public Policy by equanimist on October 4, 2008

Easy credit had a more insidious affect than falling home prices and high personal debt.

Now it seems crystal clear that easy credit within a context of open US border policies (including but not limited to insourcing talent, outsourcing work and hiring illegal immigrants for menial tasks – all  of which depress wages over a broad spectrum) and general US avarice (it seems absurd to talk about entitlement and fail to note that the top four percent have demanded an increasingly bigger piece of the pie for decades prompting the overwhelming question, “How many yachts can you water ski behind?”) must artificially depress wages.

The short of the long of it:

“The other half” (i.e., ninety-six percent or approximately
290 000 000 US Americans) sees how “the rich” live and the former must be wont to compare themselves to the latter – it is human nature or US culture. Advertising (which, more than letting consumers know about products, is designed and intended to persuade people to want/buy goods that they might not have wanted/bought) cannot be discounted. Further, it must be assumed that people would sooner avoid conflict (if it isn’t self-evident from the fact that we’re not big cats). Compliance is generally voluntary.

Organization and protest are hard. Credit, that’s easy. Did US citizens get credit instead of organizing and protesting falling wages?

Now that wages are artificially (extremely) depressed, credit is drying up, home prices are falling and human nature is what it is, what ought we to expect? What do people do when their livelihoods are threatened?

The passage of a bill funding Treasury in its reverse-bids to buy illiquid debt off of banks is all well and good for whomever gets to buy the debt back up on the cheap, but bad for the banks on fire-sale and probably irrelevant to the current crisis, especially when certain provisions make the fire-sale even less appealing (making so-called “price discovery” even less likely while simultaneously doing nothing to increase the likelihood that we will sooner-rather-than-later separate the wheat from the chaff). It’s no wonder that the market closed lower today. It’s a wonder it was up at all.

If President Bush has been right about anything, it is that this is a dire crisis. I reiterate: It didn’t start with easy credit or falling home values and resetting interest rates but began instead with falling wages and downward wage pressure – with which it got worse. It won’t be fixed until we find a new place on the socioeconomic continuum or find a way to effect a fast redistribution of wealth on an historical par.

безопасная победа!

Posted in Public Policy by equanimist on September 21, 2008

Legislative Proposal for Treasury Authority To Purchase Mortgage-Related Assets” (the “Paulson Plan”) is a thinly veiled power-grab by the outgoing Bush Administration to establish precedent for a Money Czar who, like the President, will operate outside US law to effect Executive policy now and in future. No one will prosecute because the AG will casually submit to you that we don’t prosecute every crime. Who do we prosecute?

Taxpayer cost of the Paulson Plan, no less than $2333 for every legal US citizen. Running tally of bailouts to effect a timeout wherein the ultra-rich and uber-shrewd can effectively reposition themselves in time for an Executive sponsored usurpation of US citizen rights, $3283 for every man woman and child.

Free Market Capitalism, Deregulation, and so-called Freedom are now synonymous with survival of the fittest and, as such, neither patriotic nor prudent: the fittest tend to conquer – here, to strip every protection that the public will allow. The US middle-class has been repeatedly decimated. Given time, a conquered “working-class” marshals its resources. What do the Revolutionary War, the Boxer Rebellion, the October Revolution and WWII all have in common?

We began at a high height here, in the US, so such a crisis plays out over decades or generations. Consider that it began in 1969. When will the whole house of cards come tumbling down?

Write your Congressmen. Feel free to copy this text (or don’t because here in Communist Russia they’ll probably put you on a watch list or abduct you in the night and fly you down to Guantanamo Bay where they’ll torture you ‘til you confess that you love your country and you can’t let things go down like this). Don’t let any such legislation be passed.