Nuclear Power

You just knew that in a matter of time we would find out that the Japanese earthquake and the tsunami were only the efficient and proximate causes of the catastrophic meltdown at Fukushima Daiichi power generations station northeast of Tokyo-Yokohama. One of the first signs that the Japanese were living in a dream world of imaginary safety and magical thinking was the news that the dangerous work was being done by the Japanese equivalent of braceros (crop-pickers), unskilled and uneducated laborers, who were deliberately put in harm's way so as to avoid putting educated Japanese there. You can see how having subscribed to this expediency, part of the burden of eternal vigilance was shaken off and the attitude, we see in a later news story, deteriorated further, exacerbated by unique, quaint, and utterly counter-productive Japanese traditions.

The news item, in case you missed it preparing for the royal wedding and rehearsing your newly acquired knowledge of the Windsor family tree and prospects, was in the New York Times a couple days ago, reporting the complicity of the Japanese Nuclear and Industrial Safety Agency with the feckless, profit-hoarding upper management of the Toyko Electric Power Company. The news article is damning and reason enough to call for international action against the Japanese government for their part in this disaster. When you have major structural problems within a nuclear power plant your obligation to the planet as a whole is unescapable, yet these morons in Japan decided that their luck would hold. There is a very vivid lesson in all of this for France and the rest of us who have significant parts of our power grids dependent on nuclear reactors.

The most vivid case in point is the not in the least honorable machinations of the owners of Vermont Yankee nuclear power facility on the Connecticut River in southern Vermont. Apparently the owners believe that if they cannot bribe the locals, they can manage special treatment from the U.S. federal authorities charged with regulation of nuclear power. If there is any industry in the United States that needs vigilant and honest and thorough-going regulation, it is the nuclear power industry, but the Vermont Yankee posturing suggests that they know otherwise. Vermont Yankee melting down would destroy a huge swath of New England, rendering it uninhabitable for what amounts to forever.

No one wants clean energy more than we do. The problem is that fusion is at least a century away, by some accounts, or never happening by others. Fission of uranic elements to produce heat to make steam to turn electrical turbines is not clean. There are too many moving parts to trust it. And the least trustable parts are the human beings charged with maintenance and operation of the plants. As the Fukushima Daiichi story tells you, the natural course of social evolution surrounding nuclear power is for management to cut its losses, improve its profits, and maintain as close a relationship as possible with the regulators. That, friends, is a recipe for disaster. Not just a three news cycles disaster, but a virtually infinite catastrophe.



Nuclear Insanity

With Japan's Fukushima Daiichi nuclear energy reactors continuing to melt down and their spent fuel holding tanks catching fire periodically, all spewing harmful radiation into the planet's atmosphere and into the same Pacific Ocean we have in California, Oregon, Washington, Alaska, and Hawai'i, not to omit mention of the many other nations like China, the Philippines, New Zealand, Australia, Chile, Peru, Ecuador, Colombia and seven of the eight Central American countries, the industrial, financial, and governmental gamblers of the United States of Corporatist America continue their schemes to proliferate these insanely dangerous power plants.

What is insane about them is that they are fatally dangerous not just to individuals, but to whole populations, perhaps even our species. That is the operational risk, the danger from producing electricity using the raw heat produced by a reactor to produce steam to make an electrical generator turn. The second risk is in the aftermath of using dangerous materials, the remaining radioactive "spent" nuclear fuel remains an outrageously deadly contaminant for at least ten THOUSAND years after use, so much for the euphemism "spent." Fifty years later we still have not found a place to put it for that time, roughly twice the age of the Egyptian and Chinese civilizations.

Disposing of nuclear waste is well beyond an annoying question in 2011; it is a moral disaster building inexorably every year. The editors of the Boston Globe (a newspaper owned by the New York Times) write to this unfolding disaster today, decrying the feckless political maneuvering and selling our safety short by President Obama and the long line back to Dwight Eisenhower. Read this editorial and tell yourself if they mention the "other" problems with the Yucca Mountain repository issue.

Ten thousand years is about half or one third of the time human beings have been civilized enough to commit their energies to agriculture. It is a long time! But it is not a geological long time. It is, however, a span during which tectonic activities will threaten virtually every place on the the planet, some more often than others, but you get the point. It only takes one large earthquake to ruin a nuclear waste repository and everything around it. Repositories are not "kitchen middens" that will rot away or that will cushion the fall of out-of-favor courtiers being defenestrated for insulting the king. Repositories are hell-holes for virtually evermore.

The other main thing about Yucca Mountain is that it is remote from places where people live, except the million plus people of Las Vegas. But, and the editors of the Globe miss this point, no one wants to be on the route from a nuclear energy plant to any "Yucca Mountain repository," particularly with terrorists possible at every milepost along the way. In fact, this problem is also the undoing of the "refabricating" solution alluded to in the editorial, for how do you get "refabricated" nuclear waste somewhere where it can be used?

The insanity is endless. And perhaps the worst of it was revealed in an article in the New York Times Sunday about the Japanese workers that are doing the heavy lifting at Fukushima Daiichi. This is perhaps one of the most morally repugnant things I have read since the election last year. The Japanese nuclear energy corporation is using casual, uneducated, work-starved men to do the dangerous work around the nuclear sites, knowing full well that the majority will develop ghastly and usually fatal cancers! In other words, nuclear power, when you strip away the aura of science and high tech shininess is just another exploitation of people who are apparently morally worthless to the mainstream civilization. You have to wonder what the decision-makers actually think of mainstream folks, too.

I wish there were a way to harness nuclear energy safely on our planet's surface to supply needed electricity. Fusion of hydrogen atoms for virtually limitless energy "too cheap to meter," is an illusion of words. No real progress is being made to contain the energy, and believe me without containment we are back in the same stew, only worse. No real progress is being made on "refabricating" and, in any case, the logic of that quickly runs afoul of the social impacts of dangerous materials cruising our highways and rail lines.

Obama needs to see that the strategy of putting off the decision to get out of nuclear energy production has to be changed. It is already too late in the sense we have megatons of the waste material to deal with. But, it is not too late to stop planning for more.



Temperate Outrage

Yes, April First, spring struggling through the impermafrost of another long winter. Here in Tucson the temps will hit mid-nineties already, soon to relapse, though, into balmy high seventies and early eighties. Golf weather, although we play year 'round here. And, nothing to do with Santa Claus today at all, except that I have a vision of an eight-year old tip-toeing through the month of December deliberately not listening to the talk around his peer group, not wanting to know.

There is something about homo sapiens that is not very sapient, not very wise, not very reflective, although out of self-image preservation, most of us retain a strong dose of the illusion of wisdom and ability to self-appraise. That "something" in us may stem from defects of workmanship in our physical bodies, mental deficiencies like dyslexia or ADHD syndromes. Or, it may stem from abuse or malnutrition in our infancy or youth. Or, it may come from disabilities acquired by accident, disease, or random misfortune. Taken all together the chances of being handicapped in some way are pretty good, and so we begin to think of ourselves as participating in the "human condition." We see that we are imperfect, but misjudge all too often where that "fate" of being human molds us and when we are just being uncritical and unwise.

In the politics of every civilization there is an open question about what do to about the negative side of our human condition. With respect to criminals—those who transgress society's rules for their own selfish reasons—civil authority takes the cautious way toward a solution, namely, incarcertion, separation from the general society, but sometimes extinguishment when the crime is egregious. With respect to disability societies tend to be blind. They turn away from the misfortune and, if the person shows signs of heroic effort to overcome disability, societies pride themselves (literally) on being of assistance, but it is one of those things that is not well managed and basically is part of the deliberate blindness we see in people and groups. The other negative side of humanity that gets short shrift is in work and labor.

Long ago we discovered that providing for ourselves and our families requires work. You just cannot sit around and expect the world to provide food, shelter, and sex. You have to go out and get it, build it, or pursue it. The history of the division of labor is abundant, but the consequences of the division are usually glossed over for the same reasons that others of our negatives are. We are averse to dealing with the negative differences among us, and moreover, we are extremely reticent to deal with the causes of negative differences.

Part of the problem is us. We just do not like the notion that Johnny cannot read and yet we know what the consequences will be. John will be consigned to work that is menial and low-paid, unless he becomes a rock star, which is literally a one in 10 million chance. We know that some people are better workers than others, and we know that many people are in the wrong kind of work for their native talents, and we know that leaders among workers are not necessarily good people, yet we turn a blind eye to the frictions, trouble, and perpetuation of invidious distinctions among workers of all kinds. We particularly turn a blind eye to the completely expectable excesses of those who choose themselves to be leaders.

Karl Marx wrote about political economy joining well known (from observation) notions about governance with equally well-known ideas about labor and synthesized a theory of human history from it. Marx's "labor theory of value" lies at the heart of his philosophy, but it is probably a mistake to think that Marx had solved the problem of human misery and malfeasance and bad government from that almost simplistic theory. It is a huge step forward, however, and most capitalists and socialists understand it in their bones.

Well, the rest of Marx is about discontent. Sigmund Freud was not the only person interested in Civilization and Its Discontents in the 19th century. People know deep down below their threshold for open eyes that "things" are amiss. They just do not know what to do about it, because they feel isolated and powerless. If anything the internet has done well, it is to make possible the spread of discontent by example. The ability to show others like you or even less well off in their own private discontents has been hugely powerful throughout the Mohammedan nations. (I have learned this week that there is a difference between Muslim and Mohammedan, that being the former is about militancy and the latter about Belief.)

The other problem about coming to Consciousness about one's place in the "class struggle" is the ego problem we have when evidence points to the fact that we are in a lesser category of humanity than we think we are .. or deserve. So it is all important that essays like that published in Common Dreams, Thursday, be read widely. "A Primer on Class Struggle" is exactly the sort of thinking that disabuses us of our private psychology of willful blindness.

Class Struggle may have been popularized by Karl Marx, but the concept ante-dates him by centuries. The history of social uprisings in "western civilization" goes back millennia. In African civilizations the organization has remained tribal, so that class distinctions are hidden by the trappings of patriarchy. In India and the Far East the situations are equally replete with insurrections and the long arduous struggle of menial labor against feckless leadership.

The Arab Spring of 2011 is a trumpet to all people, not just those trapped in tribalist dictatorships. The time has come for some peoples of our planet to assert the best notions of themselves to define what it will be like for their children. Will we continue to ignore the weak and oppress them for our personal benefit, or will we understand ourselves as imperfect, but well-meant citizens, fully capable of abstract thought about law, reason, and economy? I think we can rise up and change it all. It is a study in temperate outrage.



Gas Prices!

Mankind's pursuit of energy to heat his dwellings, to feed his livestock and propel his drayage has denuded vast areas of the planet. We did not learn from our European ancestors what the real cost of fuel was in the big picture. The pressure that population put on energy resources moved us to coal and then to petroleum. And here we are again in a pickle.

The Dutch are famous for harnessing the wind for their mills and pumps and their experience is a lesson not very well learned either, although it is a bit more subtle. When you pump out the sea and reclaim land you extend your weal out beyond the capacity of normal means to protect it. When pumps fail floods ensue ... or as we now see, the reactors begin to melt down into a puddle of impossibly intractable radioactivity, which would be just fine if the China Syndrome actually removed the mess from the surface to the core of our planet. Technology has its own ecology, both physical and social, and it is often very, very difficult to see the big picture.

The Washington Post today ran a piece about the mythologies about gasoline prices that will be sure to upset many of us, since they remove more or less tangible causes of our current (but perennial) distress. The answer, of course, is to stop using gasoline so much ... or at all. It is poisoning our atmosphere. The denuding of Europe (and elsewhere) for its fuel timber will be a pale horror next to the climate change we are already beginning to experience.

As a thought experiment I have been toying with the notion that people who live within, say, 50 miles of where they were born tend to drive around more than people who leave the home territory and live elsewhere. There is, I am theorizing, a travel budget in the human psyche that must be appeased. But, if I am correct, then cruising the neighborhood or someone else's neighborhood might be drastically curtailed in times when cruising fuel is rapidly approaching $5 a gallon. Would this curtailment also have a ripple effect on the stability of our society? Sure.

My example is more than just slightly facetious. But, it is meant to deal with the human willingness to find simple answers to extremely complex situations, thus ignoring the possibility, if not the outright probability, of chaotic effects downstream. Today's gas prices will change the shape of automobiles and the mix of cars you will encounter on the roads, that is for sure. How long it will last is up to us .. unless we are actually devoid of freewill and programmed to wander around aimlessly squandering the riches of our planet.



The Military Solution

As the United States begins to recede into the background of the world intervention in the Libyan civil war, as Cheney's "war for oil and Saddam's scalp" recedes from the headlines and morphs into the on-going civil discord endemic to that ancient place, as the "war against harboring terrorists" continues without success or clear objectives in Afghanistan, as the TeaParty Republicans carry out their war against "the Beast", their notion of big government as the worst enemy of unfettered individual freedom ... except the military, which is the flywheel of the American economy, the everyday American citizen is becoming increasingly aware that the fundamental problems of our country are so deep-seated that almost nothing in the normal political cycle can be brought to bear to mend our national ways.

James Carroll, of the Boston Globe writes today an essay of almost unimaginable importance, a column about the very essence of the American way—the military solution to every problem foreign or domestic. Carroll's essay is balanced on a comparison of diplomatic versus brute strength military solutions, and he shows nicely that had we put as much effort into strong diplomacy we might have easily diverted some situations into peaceful evolutions.

I think Carroll mistakes the level of effort by the U.S. Department of State as inferior to the similar efforts of other nations. We put a corps of diplomats into the world at a level about the same, but much more richly endowed, than any other nation you can think of. Carroll's point, though, is that this sort of parity is ineffective, partly because the military solution is always available and we have invested so much in it, and partly because the level of diplomacy in inadequate to the tasks at hand.

When I was visiting Sydney, Australia years ago, I happened to be at the Consul General's home when he (the deputy Consul acting in the absence of the actual Consul General) was called out because some American movie star was threatening suicide at a downtown hotel. I mention this to give you an idea of the way diplomat's time is spent and to note that the organization of the Department of State is so archaic that the right tool for the job at hand is defined by a system that I would call ego-centric and patriarchal. State never gets things exactly right because most of what it deals with is human mistakes and disorderliness and obscure foreign politics. They just do not have the person or the brain power to deal with the historical situations on the ground. Carroll notes that the German recognition of Slovenian and Croatian independence set off a series of events that led to "ethnic cleansing" attempts by others of the Balkanized peoples of the region, the decaying invention we called Yugoslavia. Carroll thinks that if the U.S. State Department had had more and brighter people in Bonn or Berlin the Germans might have been persuaded to move more slowly.

Well, it is an hypothetical that we will never be able to prove one way or the other, but his point is well taken that in the hurly-burly of asserting ethnic identities in the region, military power came into its own quickly and surely, as if it were a natural human response ... and it is.

Carroll is not arguing elimination of our military, and neither am I. What he is arguing, though, is that the reflexive response to trouble is military, and that the vaingloriousness of this response obscures the failures of a weak diplomatic corps, or it draws the conclusion that State cannot manage any situation, so why bother!

There is a lot going on here. We could talk endlessly about the vigilantist streak in American culture or the rough and ready gun-toting ethos so ballyhooed as the Cold War thawed and then disappeared. We could talk about human nature in general, or about the sorry state of human civil evolution on this planet. But, we should talk about the integration of militarism into the general society and the economy, and that is what Iron Mountain is all about. The fact is that Carroll is spitting against the wind until our civilization finds a different kind of flywheel for our national economy(ies). It seems that from the time of the Pharaohs, Babylonians, the Hittites, Greeks and Romans, the progress of national civilizations has been toward militarism and then demise.

It is fairly clear that the U.S. is already musclebound and unable to assert itself successfully with its military. The simplest IED, a pipe, a cell phone, and some explosives will throw our military into a dither, meanwhile maiming both our military personnel and obliterating our national purpose. Carroll is right: the military is fundamentally ineffective as an instrument of national policy, and just marginally effective at persuading other nations and groups to behave ... even if we do not.

I was an officer in the U.S. Navy. I know the military to be what it is: an imperfect, but hugely expensive, organization of might against anyone who might transgress against our national policy, if we have one. The TeaParty in its zeal to reduce the footprint of national government in our lives, needs to understand that their efforts will come to naught, until they see the Department of Defense as the number One target of their aspirations. They have to learn this now!



Austerity or Rampant Corporatism?

Every morning when I read the economic news, the ranting about fiscal austerity from the right and the mime of perplexity from the left, I wonder. I wonder if anyone has ever heard of the definition of insanity. You know the one: doing the same thing over and over and expecting a different result. In fact I try to apply that same logic to my own work, and I end with a sad admiration for the likes of Paul Krugman who writes again and again about the irrationality and illogic of austerity programs.

While reading that column today I was struck with the notion that Dr. Krugman knows that he is repeating himself with little hope of a different result, but I noticed that he does what few other writers do. He recalls the recent past and demonstrates that if A then B, if C then D. He shows us historical examples, and still the politicians remain committed to their campaigns for fiscal austerity, when it never works, not here in the United States and not anywhere, except in homes across the nations where economics is a sliver of pie and where, importantly, families cannot mint their own money. In other words, I think, the appeal of austerity programs is based on an analogy with family budgeting which is comparing apples to celery.

But, the appeal of austerity programs to those who promote them is not about family finance or even about curing an ailing economy. It is about curtailing government down to the level where the strong can extort, bribe, and finagle special dispensations with the authority of law from a government that increasingly becomes beholding to special interests and special interest groups. In the same issue of the New York Times as Krugman's column was this absolutely exasperating revelation about the policy of General Electric Corporation regarding taxes ... or in other words, the wherewithall of the federal government. You should read this slowly and savor the feeling that GE has for our country.

You will note in the process of metabolizing this news that corporations no longer pay roughly a third of the federal income, but now less than a fifteenth, yet they complain that they are at a disadvantage competing in world markets. Well of course they are when you subtract outrageous salaries and bonuses to the the dudes who run these outfits.

And there is the rub. Corporations have separate identities from the real people who run them. GE was run by a dictator for years, a man who was admired throughout the corporate world as Neutron Jack, the guy who detonated without damaging the structure of things, but decimating the personnel. N.Jack was ruthless and in corporate terms successful. GE is now our largest corporation. I stumbled writing that sentence because GE does 60% of its business abroad and leaves the profits there, too.

It is just a matter of time before corporations generally will not pay taxes. Their ability to deceive Congress, to bribe Congressmen and Congresswomen, to lie about their intentions under the guise of corporate competitiveness, and then stick it to the taxpaying human citizens of the country will only increase. America (and much of Europe and Japan) are corporatist states, with the veneer of citizen democracy wearing extremely thin.



Boondoggles? Much Worse Than That!

If you were around in 1944 you might remember the sales pitch of the Ford Motor Company: "There's a Ford in Your Future!" Personal automobiles were not produced for three years during WWII. Doubtless there were cars produced for official purposes, of course. So, Ford thought it would be good to stimulate the market that was looming over the horizon of the war and that was their slogan. Today, of course, Ford is struggling along and seems to have been better managed and engineered than its old domestic competitors, which may not be saying much.

But there is another Ford word in the lexicon, the thirty-eighth president of the United States, the guy who took over when Richard M. Nixon resigned in disgrace, the Ford guy who pardoned Nixon before he was formally charged with anything, the Ford guy who is being remembered by the Department of Defense with a new aircraft carrier class. Yes, the Ford class of super-carriers, and man-oh-man are they expensive!

The Ford-Class aircraft carrier is not the only boondoggle in progress over at the Pentagon. John Arquilla and a design firm named Fogelson-Lubliner have put together an interesting map of the military-industrial complex, or at least a peek into the maw of that voracious beast that pulls the modern American economy along its destructive path. You have to wonder what kind of mentality and accounting system permits a 20% cost over-run let alone one exceeding 300%! You have to wonder about Congress and the Executive that bald-facedly present these things to the public as if there were the slightest shred of evidence that the costs can be contained.

And, you have to wonder what we could accomplish with our national infrastructure if we were not utterly wasting such huge sums of taxpayers' money on these toys for the generals and admirals. As Bob Herbert, in the New York Times put it a couple days ago, we have not much time left to get our national infrastructure revitalized, or ... we end up permanently behind the eightball, dealing with expensive and debilitating consequences of our inattention and lack of resolve to maintain what we have created.

You know, a bullet train from Tampa to Orlando is not high on my priority list, while a bullet train from San Francisco to Los Angeles makes everything but seismic sense. But new, sexy infrastructure is not what we are talking about. We are dealing with 310 million citizens with an infrastructure budget for 200 million and an imagination for fewer still. The electricity grid must be improved. Roads and bridges are, as we well know, pot-holed and falling down. We invent ways around the unsexy process of renewing infrastructure and convince ourselves we have done something good. Even the extremely far-sighted New York City water project is beginning to crumble with precious little attention given to it.

Living in a military-industrial complex means that we are addicted to wasting the best productive efforts of our society on propelling a flywheel that is supposed to even out the peaks and valleys of the "business cycle." The book The Report from Iron Mountain, which forms the ironic centerpiece of this website, explains this focus on waste as a necessary flywheel for our pretended free-market capitalist economy. We know we cannot long endure the effects of a really free-market economy as the Great Depressions of the 1930s and the decade beginning with the debacle of 2007 are proving. So, we have devised through the chicanes of national and local politics, earmarks, and massive public boondoggles, a "mixed economy" where the public is fed a continuous skein of lies about the righteous freedom of free-markets while massive corporations milk the public treasury endlessly ... for the ostensible purpose of "national defense" (the number one "motherhood" issue in America).

We see in Libya that the Commander-in-Chief feels the impinging reality that force of arms is not easy, brings consequences, and has a politics all its own. Yet, we persist on feeding the illusion that force of arms is the ultimate solution to world problems (like Moammar Qaddafi). I think we need to test that hypothesis, by the way.

But, the military-industrial complex is, in fact, really not about defense or force of arms, it is about private wealth concentrated in the hands of powerful and extremely greedy corporatists who see that sharing a small piece of the federal contract pie to workers is quite profitable for themselves, and well worth a century of lies and deceit.

Bob Herbert is right. If we are going to inch our way out of this military-industrial complex, we need to spend our money on infrastructure. A productive use of our budget spins more flywheels than a destructive one does. It is time we learned that.



Labor Markets Amount to Wage Slavery

Ever since Adam Smith pulled up that mossy old rock and looked beneath to see why the Dutch were so adept so early at the mercantile system and brought his Enlightenment experience into the "scientific" analysis of political economy, we have been trained to think about labor as a service-commodity in the broad workscape of the economic markets, as if ... a thousand years of ethics to the contrary were but a figment of our civilization's imagination. One thing that the Arab uprisings have taught the western nations that so long ago outstripped the sclerotic pace of civil progress in "arabia" is that the way people organize themselves for protection and food and shelter very much determines how good they are going to get at providing that protection from armed bands of desperados, huns, vandals, and motorcycle gangs and how good they are going to get a providing food for a growing population and housing and education. Apparently the easily mimicked tribal elder patriarchy model taken from family organization does not work very well, whether you call them Kings, Fuehrers, dictators, fearless-leader, or whatever. The whole history of civilizations is the history of a failure to organize appropriately. And you have to wonder why we as a species keep repeating the same mistakes over the millennia.

When you are young your parents either directly or indirectly give you ideas and models about what you are going to be or do in your life. Carpenters son's often become carpenters, sea captain's sons go to sea as well, actresses daughters become actresses, sheep shearers give rise to more sheep shearers, and so on. And, the method of family governance, typically a patriarchy with women bearing children and teaching the children about security and responsibility and then often and soberingly dying in childbirth, leads to expansion of the idea beyond the family to the clan and then to the broader community, tribe and nation.

You think you would like to be a fireman or astronaut or doctor or singer or novelist or any of a million things that people do in your environment. You begin to understand the difference between BEING a fireman and DOING the work of a fireman. Being is in your head and your children's heads, but Doing is something that happens among other people. You put yourself out there as a candidate for fireman and someone says that you seem to be healthy and strong enough for the work, so they accept you into the group as a volunteer. You do it for free because you are happy doing it. It fulfills some deep urge you have to protect your community. Meanwhile, your parents who have been growing food that you eat and providing your shelter and all the while getting old and want you to provide these things for yourself. So, you decided to become a professional fireman and offer your services to the community for food and shelter, which they do because you are good at firefighting, and they pay you in money rather than in food and shelter. The money gives you some additional flexibility about how much food you need as compared to how much shelter and what you also have within your shelter to make things more comfortable and interesting, like a computer and television and horseless carriage and crockery, clothing, furniture, golf cart, etc.

A bard comes to your town and tells stories about the way things are in other towns. The mere mention of other towns, of course, is exciting and you had not thought much about what it is that makes a town a town, but you learn that people are pretty much the same wherever you go, although there are interesting differences, too. You think about those differences and wonder why some people praise their god on Friday and some on Saturday and some on Sunday and some not at all. You get the idea that gods are different and that your need is to find the best god for you and your wife and children, one that will protect you from ravages of weather and marauding bands of uncivilized people. Eventually, you notice that all the world is made up of people doing and believing different things as if there were no real rhyme or reason other than some people are better at one thing than at another. You also notice that some activities are more highly prized and therefore more highly paid than others. You did not know about this before.

So you talk to the other firemen and women in your community and ask them what they think is a fair remuneration for putting their lives at risk in blazing infernos of warehouses and homes and restaurants. You are amazed that all the firepeople are thinking and feeling that they are underpaid. You all decide to form a firepersons guild and later you decide, after hearing about similar groups in other towns, you call it a union, because it is a union of people around a central idea, namely, the idea that they are not paid enough for the work they do, given that some people have decided not to work at all, and some people are focused on making money regardless of the pain they cause others.

Soon you learn that other professions have unions and that large numbers of people, millions and millions think they are not getting their fair share of the money in circulation. You approach the tribal elders with this revelation and they say, son, you we think of you and your group as essential, but there are many such groups, many essential, many interesting, many entertaining, some doing work that no one else wants to do, but there is only this one pie and we have to be very careful about how we serve it. The pie has to last all year!

Later you realize that your request was consigned to a person who, having been an auctioneer in another town, but married to a girl in this town you are glad is now married, thinks of your group as a customer and of groups of customers as buyer groups or "markets," on an analogy with customers for wheat, swine, and coal. You go home and talk to your wife about this, thoroughly depressed by the notion that your desire to better yourself and your family has been reduced to chattering and terminology about buying and selling swine and other goods. You wonder if the auctioneers have a union and if they get paid much for all their funny and not-so-funny talk.

Paul Krugman, a writer in the newspaper you buy on weekends and read daily online, says that unions, especially public employee unions, need to be made stronger. And you find yourself agreeing with him, but also wondering if there were not a point glossed over, namely, the idea that workers compete against one another for jobs meted out by employers in a free-for-all market governed only by the notion that profit is the highest good that can be realized by Homo sapiens sapiens.

Isn't there an ethic that says that everyone has the right to work, that the "market value" of a person's work is a marginal difference, not the essential difference, and certainly not the do or die difference among people. After all we believe that all people are equal before the law, so how can law be created that deliberately discriminates among them based on the "whims" of an impersonal construct of the 18th century imagination, the market? Wouldn't people work just as hard and productively if they knew that their society appreciates them by rewarding them with essentially the same wage, rather than virtually enslaving some so that the marginal market value of others is grossly overpaid?

What would it take to reach an accommodation like that? Would we have to rewrite laws about business and go back to a system where the dignity of labor is recognized above its remuneration? Would some jackass call it communism because he was trapped in a mercantilist mentality where labor is a commodity? Would you opt for a civilization where the productive efforts of all were given to the benefit of all?



Shams and Blatant Dishonesty

The states are in trouble. Some are in deeper dogpiles than others, but since states cannot regulate monetary policy like the feds can, they are in dire jeopardy of bankruptcy. No one really knows what a state or commonwealth bankruptcy would accomplish or what effect it would have on the laws of that state, but let's agree for the time being that chaos would engulf a state like New York or California or Texas. A state like Nevada, which is the worst off of all fifty states, might skinny through a bankruptcy as the butt of jokes for five years or so. Most people, I think, would just hold on to whatever bonds that Nevada has sold (or might sell to bail themselves out) on the presumption that there will always be people to spend personal money in a place like Las Vegas or Reno. Moreover, with the federal government owning most of Nevada, the idea that traffic laws or marriage laws or tax laws in Nevada would be null and void, just does not comport with an American sense of continuity and ultimate redemption. If the state were Pennsylvania or Ohio, however, the belt of rust hanging around the necks of the good people of that Commonwealth and that State might give us pause. My point is that Americans can see a variety of futures for our states, some of which are more problematic than others.

So, this week in Wisconsin the legislature is trying to come to grips with Wisconsin's budget woes. They are broke and some—the GOP, notably—see the public employees as having had their way with the taxpayers of Wisconsin, thus being the source of much that is wrong with the income and outgo in that state. I don't know whether the GOP understands that public employees trade off high salaries for solid pension and health care programs. That is "the deal" they get. They forgo living up-scale like their brothers and sisters in the private sector where pensions and health care benefits are iffy, but when the time comes for the state to pay for their part of the bargain, states tend to forget the underlying reasoning in the bargain. And, yes, it is dishonest of states to say that previous legislatures were spend-thrifts. It just isn't so.

Well there are lots of things that are no so, but get a lot of attention in the states' and nation's scrambles for solvency. Paul Krugman, in the New York Times addresses the wanton baloney that is being passed off as legislative zeal these days. The GOP freshmen in the House of Representatives know full well that they are not going to get their way, "killing the beast," but on they rant about cutting the federal government down to what they think are its essentials. It is pure bullcrap! Moreover, it is not about deficits; it is about rolling back a century of progressive legislation that has given millions of people deliberately placed behind the eight-ball by corporate greed and racial discrimination a fighting chance to succeed as human beings in this culture.

There is nothing to the TeaPartyish GOP threats to shut down the government but their self-induced rage over someone else getting money earned in their state. Krugman misses the point that these people are nothing more nor less than emotional children spoiled by a toxic brew of false ideas about how nations actually operate. They are going to very surprised when in two years their attempts to pull the rugs out from under millions of their constituents is going to put them themselves into unemployment lines!

The GOP in Wisconsin has a sordid history anyway, something they inherited from the old world and something they ginned up to heat up the melting pot in their state. Wisconsin is not the only state to have fielded a Joe McCarthy, but the upper midwest seems to be full of itself these days and headed for real trouble. If they succeed in trimming the trade union rights of Wisconsin's public employees, they are going to reap the whirlwind, for no one is going to keep a company or an educational system going in that kind of environment. It is just bad business planning and insanely stupid educational policy. Not to mention the opportunities for police and fire protection to decay and lapse.

I am not sure President Obama is being heard in the legislative chambers in Madison, but they would do well to listen to the rationale Obama has enunciated. All of them would do well to listen to Krugman's despair over budget slashing when so many people are still out of work.



Happy Valentines Day ... (sort of)

Today's celebration of love is good. It is about romantic love, which is for the great majority of us a relatively modern luxury ... probably not much more than 500 years old, the exceptions taking place among the wealthy and well-born. I could write quite a long disquisition on this subject, injecting liberal and progressive comments from time to time, but ... the truth is that I sprained my left hand on Saturday scrambling around on a mountain hillside, and it is therefore excruciating to type the letters "q,a,z" and to use the left Shift key. So, ... I will be back writing soon, I hope.



Food, Weather, Climate

It never ceases to amaze and annoy me that so many people have such egocentric attention spans and world views. They think the latest snow storm is evidence that Al Gore is an idiot and the 97% of the worlds climate and weather scientists are deliberately trying to attach a socialist agenda to every part of the world's economies. Myopia is not the problem. These people are ignorant and unable to think beyond their own noes. Worse, they are vocal and creating a din about their misgivings and misunderstandings that begins to drown out the possibilities for the necessary steps we must take as a species (let alone nations or communities) to save our own asses.

The fact is that the severe melt during the summer months has permitted the various "seas" along the north slope of Alaska and Canada and Siberia to warm up significantly. These are uncontestable facts. The next step in the meteorological process is that the air above the seas is affected. In the current time period a significant new low pressure area has formed over the Barents Sea (off Siberia) which is pumping extremely cold polar air down into Europe. This affects the conditions over northern North America and promotes a similar flow of winter arctic air down the plains and into our imaginations. These are not necessarily permanent effects. We just do not know what will take place five years from now.

One of the more important components of human civilization is the ability to predict the time and place to plant crops. The ancients were interested in the apparent movement of celestial objects like the sun and the moon and the precession of equinoxes mainly for the reason that it gave them a heads up on when to organize their fellow man toward cultivation and planting. That need has not changed in the succeeding millennia. We are extremel dependent on stable climates for our various crops and animal husbandry. What we are now seeing and feeling in our winter bones is the break down of that kind of certainty that our civilization has been predicated upon for upwards of 20,000 years!

Paul Krugman, in the New York Times wrote a few days ago about the effect that bad weather and bad decisions, both based on climate change or denial of it, have already had on world food production. We are already at crisis in many parts of the world. You should not be surprised to learn that the Tunisian, Egyptian, and other uprisings over the past year are directly related to the cost of food, which is determined as you "free market enthusiasts" know by supply and demand. The supply is down and the demand is up. The elasticity of demand is limited, and the elasticity of supply is being challenged by climate change ... and bad decision-making.



Our Corruption and Sacred Cows

The United States is a military-industrial complex. Since the announcement by Secretary Gates about "drastic" cuts in the Department of Defense budget, there has been a lot written about where cuts could be make that do not hurt. The answer is that virtually every part of our society has for about three generations been addicted to what is euphemistically called "defense spending." News media hop onto stories about defense contracts and defense cuts as if there were no countervailing arguments about whether any of it is worth while for our national aspirations.

What are our national aspirations, anyway? We speak in almost any context about helping other societies discover the benefits of democracy, as if we were all that good at it ourselves. The plain ugly facts about our democracy are that it is thoroughly corrupted by special interest money—money that has bought legislation and executive rule-making and judicial injustice on any subject you can mention. The corruption is so prevalent in politics as to rival what we see in other countries as despicable cultures of endemic corruption, such as in Egypt where baksheesh and bribery are "a way of life."

Well, folks, the way of life in America is that we turn away from the ugly sight of our elected "representatives" when they blatantly seek out campaign funding from corporations and PACs that we know are inimical to our own private interests. We are as guilty of corruption of the spirit of our democracy as the man on the street in Cairo who pays off the police to protect his cart of goods for sale. But, we do precious little to demand honesty and clear and critical thinking among our representatives.

We call politics a dirty business, but we rarely wash up ourselves. And, when it comes to the defense establishment, we are exactly what Pogo said some fifty or sixty years ago. We are the enemy! We tolerate extravagant waste by understanding it as "our share" of the national pork eating contest. We build useless machines that kill and wonder why the part of the world where we test them out on real people hates our guts.

Professor Andrew Bacevich of Boston University writes in TomDispatch a couple days ago about the M-I complex and the outrageous cant and lying that sustains it. You should read this before you go down to the store to by your federal tax preparation software.



Competitiveness as a Trope

In today's New York Times Paul Krugman, with whom I disagree rarely, sets off on a semantic trip against the idea of competitiveness as a theme (or even THE theme) of President Obama's State of the Union message. Frankly, I think he is missing the point and has fallen into what some might call an "elitist trap" of his own making. To Krugman "competitiveness" has business connotations that work against progress toward a saner economy, and he mentions one of them outright ... and I do not disagree with his judgment about that one example. Moreover, Krugman admits that as metaphor for rejuvenation of our economy and way of life, "competitiveness" might well be a good political move.

Why then, having admitted that the term is useful does he rankle so much about it being used? I think Krugman sees it as too simplistic and perhaps a ticket on a train moving the wrong direction philosophically as regards needed regulations, there being abroad in the land the foolish myth that regulations are inherently anti-competitive.

I would prefer to see the term "competitiveness" as a trope for building a esprit that incorporates the idea of regulations as necessary bulwarks for a competitive economy. The expression is already in the Constitution "a well-regulated militia being necessary ...," which says that militias to be effective in providing for the common defense require discipline and regulations. Is this different for businesses? Certainly not!

Deep in the thinking of Paul Krugman is the fear that root metaphors sometimes have pernicious effects and are taken too literally. I agree that root metaphors are important in a culture, but I sincerely doubt that Barack Obama's use of the term is going to reinvent the term as a mantra for the corporatists in our society.



A Symbolic Act That is a Lie

My colleague has written about the House of Representatives, now under the sway of the GOP and the TeaParty, voting to repeal last year's Health Care Act. Everyone has heard about this "symbolic" act. But, what is it symbolic of? What was the real point, and does that reason point in a direction for the next two years of GOP frothing at the mouth in Congress? You betcha!

The GOP is playing a game with the American people which goes well beyond disingenuous and dishonest and mendacious and deceptive. It is playing what it believes is its trump card about big government, hoping that the long-standing battle cry "Kill the Beast" will eventually get the tax people off their gold-plated backs, hoping that the process will go slowly enough that they can milk the "starving beast" for all it is worth for their own districts, hoping that the American people will not notice that they are building a plutocracy and governing by corporatism in front of our very eyes.

The game is a lie. The GOP knows full well that all the major players in the Health Care Question want the 2010 Health Care Act. Dr. Aaron Carroll tells you why. [Read it now, please.]

Virtually no sector of the economy is worried about the Act ... or for that matter the deficit, which is the reddest of herrings floating around out there. The GOP needed to placate the TeaParty, to shut them up, to give them a Senate and White House to mouth off about on the Health Care issue.

Yes, this "repeal" game was predictable, but what is not obvious, because of GOP and TeaParty and media propaganda, is that the Health Care Act is a solid piece of work, yes, full of errors that can be and must be fixed, but functional and of great importance to THIRTY MILLION Americans (that's one person in every third dwelling in America). It is time that those thirty and the rest of us got a grip on this thing and demand that the Act be IMPROVED not repealed.



Texas Is Broke and Broken

The main problem as Texans see it, at least those within a half-day's drive of the Capitol Building in Austin, is the drought. There was a drought there when I decamped from central Texas and dropped anchor in Arizona (more or less on my way back to California). I like Texans and some of the folks that move there to become in four or five generations Texans theyselves. And, yeah, they are a bit hubristic about their Lone Star Republic and all the good football they generate under those fabled Friday night lights, but them Texans are a sturdy, if not completely educated lot. Anyway, I spoke with my former housemate and she said drought, even though I had forwarded to her the latest essay from Paul Krugman in the New York Times.

Paul never did live in Texas far as I can see, but he likes it pretty much as conditionally as I do. His prognosis is a different kind of drought, a bankrupt state, and underneath the obvious problems that Governor Whatshisname is gonna have trying to make Texas look good to Texans, is the other drought down there—the honesty drought. The Governor, vying for leadership on the GOP Rightwingnut side, told Texans and any other fools who would listen that Texas was a blamed miracle right before their eyes. They bought it hook, line, and chaw plug, but now theys in for a rude awakenin'.

The GOP has no problem with lies. They tell 'em often enough so that the begin to sound like the truth to the folks who listen ... and to the folks that tell 'em, too. The GOP risks it credulity, of course, but their quick answer is ..."well, son, that there was politics. You gotta unnerstand politics, son. It ain't always pretty." And truly, it ain't!

For me, Texas with no state income tax, but ruinous property taxes that favor the farm against the homeowner, they can all rot in the hell hole of insects, humidity, vipers, they have made down there, 'ceptin' my friends, of course. They're gonna need federal help to get out of this one, and so look for NASA to be doing some of the heavy lifting, and for the many Army camps and bases, look for consolidations under Secretary Gates (former president of them Aggies) that leans toward the Lone Star. And look for more lies. They'll be blaming Oklahoma for sure, and always California!



The Demise of Representative Democracy—The Republic

James Carroll, writing his Monday column in the Boston Globe echoes my sentiments about the real state of the union. The union is anything but "unum" these days, as Carroll quickly explains the newest disparity between the rich and the poor, the causes of which seem to elude the voters, who being trained in "values politics," rather than reasoning from evidence to conclusion, vote away their own standards of living. Carroll is a little short on the attitude side, but he understands fully what the implications of the latest spread are.

The fact is that the super wealthy, who by the way control corporate America, act reflexively to preserve the way of life they have become accustomed to. They also act collusively through corporate board rooms and PACs and lobbying firms to influence legislation. In fact it has gone way beyond mere plumping for a valence on legislation. They actually write the legislation and hand it to the "overworked" and "underprepared" members of Congress. The result is class rule with the interests of corporations—the real Base—brought to the top of the national legislative agenda. It is corporatism, but it is, as Carroll says outright, fascism.

As it happens I read the Paul Krugman essay today before reading Carroll. If you wait to read these references until after reading my brief comments, then read Krugman first. If you do, you might have the Krugman forecast still circulating among your synapses as the bottom line is being laid down by Carroll. Your brain is going to ask you why the country is taking the wrong road to recovery. The answer is twofold.

First, the contemporary "public" has been trained since the days of Reagan to distrust big government, unless it is a big government project in their city, of course. The corollary to this fear of big government is the fear of being outvoted by interests that are not congruent with one's own. How ironic then, that voters have been trained to vote on "values issues" where they do have congruent views with many people of different stations of life, but completely irrelevant to their lives and livelihoods! Voting the so-called "values" issues, including all the smarmy rugged individualist and I-ain't-gonna-take-any-more-of-this-shit confabulations from Palin and the TeaParty, brings in the people who can afford to train you to vote this way (often over long periods of time ... money has a way of insulating rich folks from the exigencies of daily life) and who have real political motives and economic agendas that are exactly antithetical to your own. That's how it happens, except for the second item.

Second, We the People have never been very good at argument, logic, evidence appraisal and testing, or drawing timely conclusions from what we know. In fact, the state of education in civics in this country has got to be near the bottom of all the avowed democracies in the world. We are pathetic citizens and as the saying goes, sunshine patriots, who lose interest in virtually anything that forces us to think about contesting wills with contesting facts (real facts that seem to contradict each other) and long-term outcomes that we might not enjoy. We are living proof of the skeptics of democracy. But, and I am sincere in this statement, Liberals believe that ordinary citizens if presented with political choices based on verifiable and tested evidence can rise above their normal lethargy and self-imposed ignorance to cast reasonable votes that represent BOTH their own private economic and social interests and the long-term interests of the nation (that gives them the right to vote).

Millions of people vote rationally. Millions vote irrationally. As Alan Grayson said as he strode out of the Capitol, giving up his seat to a "bizarre fundamentalist," the problem is not statistical. Democrats do not become better by moving toward the so-called Center. They become better by being Democrats committed to the welfare of the bulk of the population. In this sense, Obama and Clinton are/were wrong. The Bayhs are/were wrong. For slightly different reasons, but based on statistical inferences that ignore the truth of liberal democracy, Rahm Emanuel is/was wrong.

It is, as Krugman says, going to be another tough year. The GOP and TeaParty may finally decide who is in charge in the House, but in the meantime nothing productive for the 85% of the population is going to get done. That is another clue that our representative democracy has been taken over by fascistic corporatists.



China's State Capitalism Is Nothing New

A book review in the 12/13/10 edition of The New Yorker magazine reveals some startling news for libertarians and other addicts of free-market enterprise Kool-Ade©. Protectionism in contemporary China is not a new model of state capitalism at all. The practice of government "interference" in commerce and industry began with the Dutch mercantilists of the early 18th century and was quickly perfected by Great Britain, adopted by Alexander Hamilton for the new United States, and has been used by many nations since. This book review is much more detailed and rich with facts than the abstract suggests. Get a copy of this issue and read this article, if nothing else. (If something else, then read Joyce Carol Oates on her husband's death.)

There is another point to be made beyond the context of the economic emergence of the People's Republic of China, however. The question of the relationship between government and commerce is ever present and it is all too easily forgotten how very "intrusive" government really is in the creation and sustenance of a national economy. First, and obviously, let us not forget that government is the architect of how economic entities measure their success ... they print the money and maintain a monetary policy that rewards national industries in the main. Second, government creates the legal infrastructure within which "private" enterprise is organized and conducts business. Corporate law, interstate commerce concerns, intrastate commerce regulations, zoning ordinances, and much much more are all the undisputed province of government.

The use of subsidies for certain industries and agriculture are a form of support that used to—and still quietly do—be accomplished by restrictive tariffs. Taxes rates are discounted and tax breaks and benefits are government largesse for "private" enterprise.

The modern method of supporting national industries ... (or even foreign industries as a matter of international agreements that improve the lot of poorer nations) ... is for governments to buy substantial amounts of industrial and commercial goods and services. Government contractrs are the essence of the military-industrial-congressional complex. They are very much out of control at the moment, of course, having taken on the trappings of patriotism and national security as a virtual economic ideology that engineers and provokes the use of military hardware (to ultimately be replaced under future contracts) in needless and deliberately wasteful wars and other forms of military activity ... including garrisoning the entire planet with hundreds of bases of operation.

When you hear the TeaParty folk ranting about free-enterprise over the next few years, please understand that they have no clue about the reality of national economies, of the nature of industry, agriculture, or commerce. They have only the slogan that government is bad, repeated endlessly by demagogues and charlatans on Fox network.



No Tax Cuts for the Rich

Today, Dr. Paul Krugman presents a compelling, if lopsided, case for what appears to be an inevitable tax increase. Krugman just flat leaves out the pain and damage a tax increase will produce, and/but he does point out that the damage will be less with the lapse of the Bush tax cuts than with the massive cuts in the federal budget that will be necessary if the cuts are extended. You will recall that the GOP mantra a few years ago was "kill the beast," meaning pare the federal budget down to absolute essentials and let "federalism" work. Ha! Since when do Louisiana and Texas and Ohio work, much less Michigan and the rest of the rust belt states!!! Give me a break!

Read Krugman for encouragement that we are on the right path if we resist the tainted "deal" the Senate Republicans are offering. Smear the GOP with their own merde is the order of the day. The public will soon enough understand that they are being screwn for the benefit of people who are immune to recessions and unemployment and everything but death.



The Galling Lack of Options

On Sunday, Dr. Paul Krugman wrote his report card on President Barack Obama, entitled "The World as He Finds It". It is a scathing indictment of Obama's fatal underestimation of his role and powers in this crisis. It reveals a side of Obama that the pundits have been circling around (like vultures) for months and months. It is disconcerting to those of us who have had a glimpse of the severity of our economic problems and a glimpse of the incredible flaw in our President. He just does not understand the true nature of the political situation, and (I am afraid) it stems from a certain hubris about his election. He truly believes that he is President of all the People in our country, but that is politically incorrect.

My colleague, Dr. John Searle, has written a philosophical treatise on how social institutions are created by human beings. The review of his new book is in the New York Review of Books this week, and the reviewer did a terrible job of it, misunderstanding an entire generation of structural linguistics and padding his essay with sophomoric debating ploys. But, Searle's ideas shine through anyway.

We create government by verbal consent of the governed and the act of consent is either linguistic declaration thereof ... including repetition of the Pledge of Allegiance through endless days of schooling ... or by symbolic behaviors for which there are ample linguistic descriptions, such as a curtsey or any other symbolic obeisance to authority. Clearly voting is an intentional act (unmistakably stipulating a choice) that qualifies as both acceptance of the system and of its meaning and boundaries. Obama misunderstands the nature of the vote. Over forty-six percent voted against Obama. These people accept the system that puts Obama in charge, but they are not behind him or looking to him for leadership. He is foolish to try to enlist them to his retinue, especially when doing so disregards the group that elected him.

But such is the hubris of politics.

The report card on Obama raises several very large questions. First question the reporter. Is Krugman qualified to make these assertions? My answer is that he certainly is qualified to review the activities of the president in the area of his own expertise and to call him up short for a series of miscalculations that Obama and his advisors clearly made. But, you should note that Krugman has his own irons in the fire, if not a horse in this race other than Obama himself. Krugman believes that governments should act as the parachute and structure bracing for national economies when they (inevitably) self-destruct. Others do not believe that this is a function of government, but rather of the market-place, ignoring (of course) the horrible damage to humans and the environment when markets remain paralyzed from inconsistencies in their internal logic.

So, for instance, we read in the New York Times on Tuesday (today) that small European nations are having trouble financing their role as backstops for their national economies. Is this a refutation of Krugman's ideas or is it a situation of oranges being compared to watermelons? Clearly Iceland, Portugal, Ireland, and the others are not nations like the United States, nor do they or can they be expected to have the resources that rich and large nations have. Austerity that Germany and the United Kingdom are promoting may be the only way for their small fellow nations in the European Union, but austerity is a final measure (as you will read) when the parachute fails to open.

So, Krugman's criticism of Obama actually goes to to Obama's failure to distinguish between the necessary roles of the federal government, on the one hand, and the plight of small nations and minority politicians domestically on the other. Moreover, his failure is very much a failure of leadership, a really cold and galling technocratic response to the emotions of despair surrounding him.

With this in mind, what are our options? Will Howard Dean see the opportunity or will he toe the line to avoid further embarrassment to Obama? Will someone else emerge? Is there time to bring forth a new candidate (or revive old ones) and would an improvement of the economy under Obama during the next two years pull the rug out from under these alternative leaders? Krugman is saying, and I agree, that Obama has no more than six months to change his spots into stripes. I don't think he has the strength of political acumen and personal character to do it. So I am deliberately and earnestly looking around!



The Super-Rich and the Rest of Us

The lessons of history are difficult to learn when the history books are written by people whose interest it is to disguise their part in that history. So it was during the so-called Gilded Age of steel magnates, bankers, and railroad titans in the half century following the Civil War. In fact, the Civil War itself could be seen (and has been written) as an economic war between the industrial north that could have opted for industrial slavery on the model of Romanov Russia's industrial serfs. They did not, of course, because slavery is messy and there were too many other factors, not the least (or greatest, either) was the moral question of slavery. But, if you were educated in some southern school systems, your take-away ideas about the Civil War and Reconstruction are fashioned on the lathe of a beaten plantation plutocracy trying desperately to disguise the fact that they were, like their Roman models, up to their ears in horrible slavery.

Historians revise their own accounts or the accounts written before them, and so the titans of industry were "outted" by some historians during the Great Depression. But, the message is mixed, and the mixing is deliberate and caste in the terms of a battle to the death with godless communism and creeping socialism. By the time I was in public schools in the 2nd half of the 20th century the emphasis in the textbooks was on the idea of industrial Progress and jobs that industries created ... not on the abuses of the environment, the low wages in those jobs, the union-busting ideology, the accumulation of riches so great that no one in government could stand up to the temptations of political campaign support and sometimes of graft and corruption.

Big money does not care anything about the niceties of government. It cares about perpetuation of their own position and wealth, as if it really were important that they add another billion to a reserve fortune that they cannot possibly use productively within the economy. Frank Rich, by no means a person of great wealth despite his name, has a good deal to say about the relationship between wealth and government and the distinct feeling we now have that government at the granularity level of "the next election" has succumbed to the temptations of unimaginable wealth and its power.

Notice in his essay, by the way, how the expression "class warfare" now has a vibe to it that suggests excess and red menace. The fact of it is that we are in a system in which economic classes are deliberately pitted against one another with the rules of the game distinctly favoring the super-rich. Let me tell you that this will change, even if it does not Change in terms of the current President. The lessons of history are that people are pushed beyond their tolerances and then spring back with vengeance. Vengeance is not productive energy, but with the super-rich believing they can insulate themselves from it, they continue their strategy of buying our government out from under us.

Look at the last election and try to tell me this is not so. But, having done that, look at your own interests and see which party and leaders are representing your basic needs. I do not think any family earning less than $200,000 a year can say that the super-rich are on their side. Quite the reverse and, you know, it is time to do something serious and permanent about it!



Austerity Means Trouble

Austerity is the watchword across the planet. Germany, the United Kingdom, and others have voted democratically to employ fiscal stringency as a way of promoting recovery. Their tooth-fairy theory is that when entrepreneurs and big corporations see that government is smaller then they will try to get bigger ... and then we will all be happy. The chain of causation within the "austerity" movement is murky and more than slightly illogical, but ... it does have the weight of public opinion on its side right now. Public opinion, by the way, is notoriously bereft of understanding of national and international economies, but does understand personal micro-economics enough to stay out of debtors prison and buy a few toys.

This week in Seoul, South Korea, Obama ran into a threshing machine of austerity-minded countries, including those two allies mentioned above. Obama's hope for a united front to stimulate growth was shredded, baled, and tossed to the side. It was not a pretty sight. We know that stimulation economics has little chance in the Congress now that the GOP holds a rictus grip on the House. We know that TeaParty demogogues are ranting about "big government" and that stimulus planning reeks of "big government." We know that certain countries are trying to isolate the U.S. to take advantage and maybe even wrest "world reserve currency" from the U.S. dollar, which would be a disaster all around, given that China is too immature (even after 5,000 years of trying) to manage a monetary system for our little blue planet.

But, I think that the domestic situation in the U.S. counts for more than air-fairy theories or even the common sense of stimulus economics. First, the whole world knows that the Democrats lost 60 seats in the election last week. What the House will do to Obama's plans is speculated about everywhere in one form or another. The election, as predicted has created an international instability that will be very dangerous, if Obama and the other leaders play their cards poorly.

But, even more than the domestic politics, there is the sense abroad that the U.S. democracy does not (yet) contain that necessary discipline to take good-times revenue and apply it properly to past-times debt. Time and again the U.S. during bull markets and phenomenal industrial growth has squandered the excess revenue on the military and military adventures. The old PNAC typified the attitude that a strong U.S. economy does not have to look backward and repave its pot-holed streets, retire its debt, and educate its citizens in effective micro-economics for the household. Instead, ... and this is what Europe and India and China are afraid of ... the U.S. cannot be depended to not stick the rest of the world with the costs of maintaining an excessively high standard of living for, say, 5% of the U.S. population. And, they are damned sick of it.

Preferring austerity is a losing game, of course, because the German, U.K., and other economies will inevitably follow something like the "lost decade" path of Japan in the 1990s. Their economies will not spring to life and pay off the stimulus infusions. They will languish and, sure as hell, politics will pendulum back toward stimulus economics in a few years, but it will be too late.

Obama must hold on to the stimulus economics as tightly as anything he believes in. The only way out of this fragile economy is for confidence to be renewed at every level. Trickling it down will never jump start consumer spending. Only stimulus economics will work. But, the world wants austerity, and so lost decades are there for us. Gird your loins, folks, it is gonna be a long slow and dangerous road ahead.



Ice Cream and Our Liberal Democracy

The veterans have this day for themselves, and they well deserve this special day, but it is worth noting that the reason we fought--and we did fight and die and suffer greatly!--is for the intelligence that is innate in a liberal democracy, a people who can govern themselves not with fear and horror, but with clear thinking about the way to prosper and to contribute to the commonweal, the common good, the common wealth.

Here is a story you will not soon forget, about a new ice cream shop in Santa Cruz, California and the people who made it possible and good.


Lieutenant, USN, ret.


Germs and Economists

There are lots of products out there now that advertise their ability to rid your hands of germs. Handsoaps are the main product type among these, and I have to admit that I have purchased some. I also purchased handi-wipes that clean kitchen surfaces. The active ingredient in these products is the key to whether I or you should buy them. Mostly these products are effective against 85-95% of bugs and leave 5-15% right where they are, a little dazed perhaps, but busy procreating and sending new generations off into the future, generations that are impervious to these "active ingredients." There is one product that works, of course. Bleach. Use it. The mechanism is oxidation of the cell membranes of the germs, and they cannot build a "resistance" to it or transmit defenses into future generations of mutant ninja germs. Bleach is like a baseball bat to the head.

In Soviet and still in modern Russia prisoners in the penal system were given a course of anti-tuberculosis meds. They were given the meds whether or not their incarceration would last as long as the course of injections. As a result thousands of prisoners were released to the general public in Russia with only a half a course of anti-tuberculosis treatment, and guess what! Some of these ex-cons came down with a variant on tuberculosis that is literally resistant to the widely used innoculents. So, tuberculosis is back and the threat is dire because the strain of germs has evolved with our help and misapplication of medical science is virile and deadly.

The point of telling you this is that there are reasons to avoid half measures and incomplete cures. The principles involved in keeping a sanitary kitchen and bathroom or in trying to eradicate persistent tuberculosis are the same with some social phenomena, and Dr. Paul Krugman has a case in point. He sees The Fed as pursuing a half measures on our prostrate economy and suggests that both economically and politically the consequences of this weak-kneed approach to a country divided by shrill advocates of nonsensical theories will be severe.

Already the Fed has "used up" its ability to regulate markets by using the rediscount rate for keeping commercial banks in line. You cannot charge less than zero interest, which is about what they would have to do now. The warnings were given years ago about playing with that tool, and now they have essentially broken it. The current situation is a lesson in scale and granularity. The rediscount rate makes a difference in modern banking when profits are tied to slender margins in the overnight borrowings, but it is ineffective against stock-market crashes and lending malpractice.

It is time, folks, not to disband the Fed for its very predictable political and economic cowardice, but to teach it the lessons germs have provided us. Who would have ever predicted that!



The Great Inflation, I

The New York Times is running a series of articles about the economics that Japan, as the 2nd largest economy in the world (up until last month), experienced and why. The model of Japan is not one we want to emulate, but there seems to be a remarkable parallelism in our economic track records over the past few years. This is decidedly a bad thing and one which Republicans are by virtue of their assumptions and gnarly attitudes currently about government are likely not going to avoid.

You need to read this article by Marvin Fackler and Steve Lohr and consider the parallels of our situations and the differences. One of the differences not mentioned by the authors is the fact that the U.S. dollar is the reserve currency of the world, a position that benefits the U.S. economy tremendously, induces domestic governmental behaviors that are not necessarily what Japanese economists would have had to worry about, and makes the U.S. simultaneously a hostage to certain monetary policies that would not otherwise obtain. It is a bit like owning the only lawn mower on the block. It is easy to rent out, but difficult to maintain. The bailout of Wall Street was exactly for this purpose ... to make sure that the U.S. kept the mower, the wherewithal to manage a global currencies system. Without Wall Street we could not.

The Times series is about DEFLATION. It is the opposite of inflation with which we are all very familiar. We reason that debt incurred today will be paid off with revenue purposefully inflated and thus be easier to manage, since each dollar is worth marginally less than the dollars borrowed. Well, it is the opposite with deflation. It means that the dollars spend retiring debt are more valuable than the debt dollars borrowed. You can see how that creates an up-hill battle to get out of debt. Republicans are not thinking about deflation when they say that we should not incur more debt, in fact their program would cut the necessary stimulus to growth that the Japanese also failed to produce and thus lead exactly to slow or no growth and deflation.



Dinosaurs of the Human Imagination

Rebecca Solnit is a liberal, a Californian, and is often quoted in liberal circles. She has a knack with images. Her essay today is built on the imagery of dinosaurs, although she is quick to point out that she really means corporations. She despairs over the power of these behemoths and the motivations that move them. She is satisfied that her metaphor carries with it sufficient associations that you will get the point ... that corporations are, in terms of human civil liberties, in terms of democracy, in terms of our caretakership of this planet, obsolete. They are constructs of our imagination, and they must be ... will be ... brought under permanent control before they ruin us all.

I need to point out that corporations do fit into my mantra about life, especially political life, being 50% competition and 50% cooperation. Conservatives and libertarians believe that corporations are the embodiment of cooperation. Read Solnit and see if you think so.

But, of course, the sort of cooperation that is embodied in corporations is not real human cooperation on a daily basis. It is, rather, a sterile process of investment in which pooled resources (not necessarily or even usually "cooperating resources") are put in the hands of people who survive a highly competitive game of organizational ladder climbing (or are handed passes to skip the lower rungs of the ladder by virtue of their chance of birth). Where the thinking and planning and work goes on in corporate dinosaurs it is 100% competitive with legal restrictions about having other motivations and goals.

In other words, corporations are to extend Solnit's metaphor an evolutionary step in the progress of cooperation that is the hallmark of civilization. But, corporations are but a first step in that evolution and like most such things they are faulty ... but extremely powerful.

So, think about that while you are reading this amazing article by Fareed Zakaria from Time magazine. The point of view here is completely different, far more pragmatic, less critically aware of the evolutionary process, as if we had not much to say about what our organizational constructs have become. Zakaria is optimistic, and it is a relief to read his ideas in these "sour times."

Both of these authors are right, both are talking about the way things are in the planetary political economy, but one sees the forest and the other the trees, yet even that hackneyed notion does not fit. Read both these essays and feel the gestalt shift between them, and know that all the while you are reading about your own life as well.



Willfully Ignorant

The news from Europe is not good. When the news from Europe is not good it is not good for us in North America, either. They do not call the Atlantic Ocean "The Pond" just because of jet aircraft and the reduction of three month Mayflower trips to five hour hops to Gatwick. The fact is that the European economy and the North American economy are closely intertwined. Some of your favorite stores (Target, Trader Joe's, to name a couple of mine) are European. Some of your favorite products are European. You have the picture: what happens in Europe does not stay in Europe ... it affects us quickly and surely.

So. The bad news is the willful ignoring of John Maynard Keynes, possibly the best-known economist ever, and his prescription for economic stagnation and slow (or medium fast) rot of the industrial and financial prowess of an economy. That would be (boiled down into one phrase) "Keep consumer demand no less than level." Of course, in a market economy consumers do basically what they individually want and the microeconomics of that is separate from and should not be a metaphor for the macroeconomics of what governments must do in troubled economies like ours and Europe's and Japan's and everybody else's.

The lesson of The Great Depression was that government must prime the pump and provide the opportunity for consumers to express their demand for goods and services. They won't when they have no jobs and few, if any, prospects for getting one (or a bunch of part-time jobs). So, government must insure that people are put to work ... and must be the employer of last resort, if the private sector goes catatonic as it has in the past two years ... here and in Europe.

But, this answer is being willfully ignored all across Europe. The main reasons for this tragic mistake are two: politicians do not understand large numbers. We see this when times are prosperous. Polticians run up huge bills for stuff, completely oblivious to the overall expenditure. Armed forces are a major part of this spend-freely attitude. But, when times are bad, like now, politicians forget the flip side of good-times spending, namely, that most government expenditures create jobs and taxes that more than pay for the expenditures.

The second cause of the current willful ignorance is that the people, including those in government and in corporate offices, are frightened by the colossal losses of 2007 and 2008, the hair-breath's encounter with a world-wide melt down. In their ensuing paranoia they transfer what they feel at the microeconomic level to the macro with these two utterly meaningless, misleading, and wrong-headed metaphors.

One, they are afraid that foreign parties will tell them what to do on a false analogy with foreclosure processes. Yes, China (and others) own a lot of U.S. and European debt, but China (in particular) is trapped by that ownership and cannot afford to be stupid about devaluing the assets it holds abroad.

Two, there is a sense that large sovereign debts are "morally" indefensible. Well, yes, there are such things as macroeconomic "morals," but debt is not one of them. The problem is that the microeconomic moral is that individuals should not owe more than they can pay back. At the macrolevel, however, there are many ways of paying back, but almost all of them depend on a thriving economy. So, you see, AUSTERITY—the new watch word in Europe, and soon in North America if the election turns out the way the corporate press is reporting it— is precisely the wrong thing to do.

We are in for some very bad years, probably decades of miserable economic performance, and we could have done something to avoid it, but we (and the Europeans) didn't. In fact, as the Europeans plunge into one austerity program after another, and as their economies grind down to mere shadows of their real potential, the North American economies will be directly and tragically affected. Yes, these ideas are too big for most politicians to understand, and the tragedy for democracy lies in that horrible truth.



George Soros on China and Her Money

You probably did not know there IS an international currency crisis! Well, the U.S. lost 95,000 jobs in September and the official unemployment rate was stated at 9.6%. Of course this is a fabrication. The real unemployment rate is about 15%, counting those who have fallen off the far end of the treadmill and are no longer "looking for work." The importance of these statistics is that they reflect the sad state of U.S. industry, and that sad state is due in no small measure to trade imbalances, that is, fewer nations are buying U.S. goods than three years ago.

There are many other reasons why our economy is languishing in the weeds, but George Soros knows that a good part of it is caused ... deliberately ... by Chinese monetary policy. Below the "fold" (next page) is a copy of the emailed essay that Mr. Soros sends out to subscribers. I think you will find it illuminating ... and that you will reconsider your purchases from now on. Just sayin' ... Chinese goods are good for China and not for us.

China must fix the global currency crisis

George Soros

Financial Times October 8, 2010

I share the growing concern about the misalignment of currencies. Brazil 's finance minister speaks of a latent currency war, and he is not far off the mark. It is in the currency markets where different economic policies and different economic and political systems interact and clash.

The prevailing exchange rate system is lopsided. China has essentially pegged its currency to the dollar while most other currencies fluctuate more or less freely. China has a two-tier system in which the capital account is strictly controlled; most other currencies don't distinguish between current and capital accounts. This makes the Chinese currency chronically undervalued and assures China of a persistent large trade surplus.

Most importantly, this arrangement allows the Chinese government to skim off a significant slice from the value of Chinese exports without interfering with the incentives that make people work so hard and make their labor so productive. It has the same effect as taxation but it works much better.

This has been the secret of China 's success. It gives China the upper hand in its dealings with other countries because the government has discretion over the use of the surplus. And it protected China from the financial crisis, which shook the developed world to its core. For China the crisis was an extraneous event that was experienced mainly as a temporary decline in exports.

It is no exaggeration to say that since the financial crisis, China has been in the driver's seat. Its currency moves have had a decisive influence on exchange rates. Earlier this year when the euro got into trouble, China adopted a wait-and-see policy. Its absence as a buyer contributed to the euro's decline. When the euro hit 120 against the dollar China stepped in to preserve the euro as an international currency. Chinese buying reversed the euro's decline.

More recently, when Congressional legislation against Chinese currency manipulation emerged as a real threat, China allowed its currency to appreciate against the dollar by a couple of percentage points. Yet the rise in the euro, yen and other currencies compensated for the fall in the dollar, preserving China 's advantage.

China's dominant position is now endangered by both external and internal factors. The impending global slowdown has intensified protectionist pressures. Countries such as Japan , Korea and Brazil are intervening unilaterally in currency markets.

If they started imitating China by imposing restrictions on capital transfers, China would lose some of its current advantages. Moreover, global currency markets would be disrupted and the global economy would deteriorate.

Internally, consumption as a percentage of GDP has fallen from an already low 46 per cent in 2000 to 35.6 per cent in 2009, as China expert Michael Pettis has shown. Additional investments in capital goods offer very low returns. From now on, consumption must grow much faster than GDP.

Thus both internal and external considerations cry out for allowing the renminbi to appreciate. But currency adjustments must be part of an internationally coordinated plan to reduce global imbalances.

The imbalances in the US are the mirror image of China . China is threatened by inflation, the US by deflation. At nearly 70 per cent of GDP, consumption in the US is too high. The US needs fiscal stimulus enhancing competitiveness rather than quantitative easing that puts upward pressure on all currencies other than the renminbi.

The US also needs the renminbi to rise in order to reduce the trade deficit and alleviate the burden of accumulated debt. China , in turn, could accept a higher renminbi and a lower overall growth rate as long as the share of consumption is rising and the improvement in living standards continues.

The public in China would be satisfied, only exporters would suffer and the currency surplus accruing to the Chinese government would diminish. A large rise would be disastrous, as Premier Wen says, but 10 percent a year should be tolerable.

Since the Chinese government is the direct beneficiary of the currency surplus, it would need to have remarkable foresight to accept this diminution in its power and recognize the advantages of coordinating its economic policies with the rest of the world. It needs to recognize that China cannot continue rising without paying more attention to the interests of its trading partners.

Only China is in a position to initiate a process of international cooperation because it can offer the enticement of renminbi appreciation. China has already developed an elaborate mechanism for consensus building at home. Now it must go a step further and engage in consensus building internationally. This would be rewarded by the rest of the world accepting the rise of China .

Whether it realises it or not, China has emerged as a leader of the world. If it fails to live up to the responsibilities of leadership, the global currency system is liable to break down and take the global economy with it. Either way, the Chinese trade surplus is bound to shrink but it would be much better for China if that happened as a result of rising living standards rather than a global economic decline.

The chances of a positive outcome are not good, yet we must strive for it because in the absence of international cooperation the world is heading for a period of great turbulence and disruptions.

The writer is chairman of Soros Fund Management LLC



Part II: Krugman/Wells on Slogging Out of Our Slump

A couple weeks ago (9/25/10) I wrote a quick article about Paul Krugman's and Robin Wells Krugman's (his wife and amanuensis and [it is said] his "courage") first essay on getting out of the awful slump we are in (see the Economics tab). As promised the Krugmans have concluded their two-part series of book reviews in the New York Review of Books and, unhappily, they have not provided us with a cure-all. We should not have expected one.

Paul Krugman continues to argue strongly and clearly and logically that deficit spending by sovereign powers, including our own federal government, is the way out of the prolonged slump. We have considerable uncertainty abroad in the land caused by the inability of major players to see a safe passage anywhere on the horizon, so they are not spending ... or borrowing. The economy is "awash" in capital ready to build the next new world, but as capitalism is usually its own worst enemy ... a characteristic downplayed by entrepreneurs (even the ones on today's sidelines biding their time) and financiers (almost all of them unable to take a risk today that would have not registered in their adrenal glands in 2007), here we sit in a paralysis of risk aversion and literal hopelessness.

Krugman believes, as do I, that hope springs eternal in the breast of man, but that in the free market "visionaries" must be able to see, literally, the path forward. Today in the U.S. they do not see it for neither the federal adminstration nor its opposition have a clue what will work politically. We have the feeling that Obama and Summers and Geithner know what Krugman is saying is true, but they are afraid that the psychos on the other side will call them names ... communist, for one, which is utterly laughable ... and their paralyzing fear lamentable.

The basic truth is that relatively small amounts (compared to the size of the U.S. economy) are sufficient to carry off the stimulus function. They are huge numbers to civilians who make less than a half a million a year, but they are chicken feed. The chicken eats, the chicken lays beautiful taxable eggs and when everyone is happy with the result, the chicken is retired with the huge profits that the chickenfeed produced. It is elementary arithmetic, but the other side paralyzed as usual by political fears refuses to acknowledge it.

Yes, they can see it, but no, they do not believe it will work for them as designed. They fear that their efforts will not be rewarded sufficiently for the risk to be taken ... EVEN THOUGH a scant two-three years ago they would have taken the same risk. You have to look at this point because I have made it twice now. What is holding back the "titan" of industry is a combination of abject fear ... the consequence of their own over zealous risk taking and their fear-born need for soft landings until they can remount their steed and charge of into the future with some degree of optimism. If you have learned anything about human beings at this website is has to be that FEAR is the number one problem of mankind.

Krugman and Well leave us on a sour and despairing note. The politics is not right for the correct response to the massive and growing unemployment we have. Obama cannot transfer the blame to the Republicans even if, as well they might, take over Congress next January. Obama and his advisors have no more courage than the captains of industry have these days. They too are paralyzed by fear. It's a pretty pathetic situation when you consider that the solution is staring us in the face!



Causes and Effects in Economics

There is rarely any one reason for a disaster. Sometimes there is, but usually there are several reasons with one or two being proximate causes, the fuse to the bomb, so to speak. Because there are usually several reasons the history of disasters and the politics of them becomes complex, too complex for most, so people tend to rely on programmed thinking, systems, and (as I mentioned in the last essay) their minds become "captive" of those ideas, which may be right in some small measure, but miss the point that things are complex.

About the most complex thing going these days is the American economy, which is more or less STUCK in the doldrums. The doldrums are areas where the wind does not blow, suggesting that we are in a period when capital does not flow. There are many reasons for that, but Paul Krugman and Robin Wells think it is a massive loss of nerve among the finance capitalists, a pendulum swing back from those "heady" days when they were the lords of creation and any bet was worth billions of dollars.

You should take some time out of your weekend to read their account of the past decade and the past two years particularly. Go to "The Way Out of the Slump" and compare it to the daily news. Journalists are not historians. Notice also how the authors treat their intellectual adversaries with more than the usual amount of respect you hear in the mass media, almost all of which has adopted "the frenzy" as a way of life. In other words, this article should recalibrate your bullcrap meter for the 38 days that remain before the election.



Addicted to Cool-Aid?

There is a video coursing around the internet again these days about a woman from TX or OK or one of them states where the people have discernible "acsayents." The woman is on a game show pitted against some children ... you know the show ... and she is just terrible, horrible, unbelievably stupid and yet headstrong. She is probably (hopefully) not the average American, but she is typical in one way, I think. Americans have a perverse pride about what they don't know, so deep is the anti-intellectualism of a society that refers to successful thinkers as "brainiacs," that is to say they are not quite human (probably partly robotic and therefore incapable of or inept at human relations).

All of that is by way of introduction to the news of the day that Wall Street and other power sectors of these You-knighted States are satisfied that the paltry 67,000 new jobs created last month indicates that we are not headed into a double-dip recession. Even the New York Times is flogging this canard in its headlines today. ("Canard" is French for "goose," birds that seem to be flying backwards with most of their body and their long necks stretched out in front of the wing, the opposite of pheasants, you know. In other words, a canard is an assertion that is fundamentally backwards from the facts.)

Today's headline is the crime. The story is that the "relief" shown by Wall Street was based on much more dire forecasts made by most of the people who make forecasts about how many jobs will be created, based (we are guessing) on such things as the data collected by government on sales, savings, borrowing, etc., which are all aggregated data, notoriously inaccurate, and this time leading the forecasters to underestimate the creation of jobs.

But the total number of jobs actually decreased! You will find this out down in the meat of the article, while your head is still spinning from the "good news" that Wall Street is relieved that the forecasters were wrong. In practice, it takes nearly four times the number of jobs created in August to pull us out of a slump as deep and trenchant as the Great Recession. So, (you read further), the percentage of unemployed actually increased! This is good news?

Well, Paul Krugman was clear enough about it two days ago in his column in the Times. He has stationed himself in the pessimists group ... a likely and comfortable place for any competent economist ... and believes that the political winds, whipped up by the GOP for their own short-term gain at the polls this November, supported by the likes of the Koch brothers and others of the fantastically rich and greedy, will play out in such a way that the double-dip will become inevitable, that America's economy will lose a decade or more—an entire generation plus those "elders" in their 30's and 40's who were laid off in the past two years!

Government has been hiding the truth of the damage done to Wall Street to protect our international standing as owner of the reserve currency of the world. They have been deceitful, because they honestly thought it was necessary to hide the damage from the Japanese, Germans, Chinese, Russians, Brazilians, Indians, and so forth, all of whom depend grudgingly on the value of American dollars, (based on the #1 economy in the world), both being managed properly and honestly, and the government being IN on the idea that international finance and monetary policies are the crucial elements of a global economy. I think Obama's economic team could have been a bit more forthcoming about this, especially as it would have provided them with copious material with which to beat up the GOP and the Libertarians who caused all this mess.

But, you see, the problem is not ultimately with the call that Obama and Geithner made, it is with the American public who chugs the Cool-Aid of deception with alacrity and, in fact, has become addicted to pleasant fibs and untruths, lest the bitter truth of harrowing disaster ruin their day. It is a pathetic situation, and if I were a doom-sayer, I would surely prognosticate that the End is near. But, I am not, and anyway some smartie would be happy that my forecast was wrong in detail, and everyone would party for a week on the fictitious news that all is well.

It is not.



Stagnation to Fascism

Occasionally I run across an academic essay that makes public sense, that is not wrapped in abstruse vocabulary or in-crowd allusions and references. Here is one by Walden Bello: "The Political Consequences of Stagnation."

Like all authors confined to a thousand words and confronting a welter of facts and opinions, Bello dishes out a sloppy dismissal of Paul Krugman, I think. It is not just that politics is especial toxic these days, or that common sense or Nobel Prize sense is easily dismissed. It is that the press has enormous power to silence a voice or a mob or an ideology. Politicians have enormous power to ignore common and Nobel sense. But these things are both non-cumulative and hyper-cumulative, depending on the context. I agree with Bello that November could put a straight-jacket on Obama for his last two years ... or it could empower him to use his office strongly. We do not know.

Nothing is foreordained, not Fascism, not Democracy, not anything. If you want something to happen, you have to get out and work for it. If the facts are in the way, do what the GOP does, lie about it, continuously. Eventually, with the right mix of discontent, people will leave their moorings in common sense and go for an easy promise. The great irony of our day is that the right fears the thing they are most likely to bring about ... Fascism.



More Krugman on Bernanke

This Friday morning Fed Chair Ben Bernanke said that despite "softness" in the economy, despite the fact that growth of the GDP is about 1.6%—better than the 1.4% that leading economists had predicted (... they say ...)—the Fed will do nothing until there are signs that the economy is actually going negative again, the so-called double dip recession we have all been fearing. What you have here is a man with a fist-length handle on a household hammer, confronted with railroad spikes sticking up all over the place. If he were to try to pound one of those annoying spikes down, he would rap his knuckles raw in no time at all. He just does not have ... or believe he has ... the right tool for the job. Raw knuckles or too little courage, it matters little, since the result is the same.

Paul Krugman, on the other hand, thinks that Bernanke and Co., Inc. are so afraid of raw knuckles that they have convinced themselves that the Fed must reserve its energies for "real" crises. But this IS a real crisis, he says, particularly when you look at the trends. People in general are not spending on credit like they used to. Having "learned" the lesson of living high off credit in the waning decades of the 20th century, people are now buying fewer durable goods, record lows in new and resale houses, just cars and just enough to keep Detroit solvent for a while more.

Krugman is slightly disingenuous about all of this. There is truth to the observation that Bernanke and the Fed have very little maneuvering room down here where rediscount rates cannot be adjusted further downward into negative numbers. But, as he says, Bernanke does have some options and it is a matter of courage to use them now to stoke the furnaces and get things rolling fast enough to begin peeling back the unemployment figures.

People in general know someone without a job. You cannot have 15 million people without jobs or significantly curtailed in their jobs without everyone knowing someone in that situation. Americans are UNLIKELY to have really learned the antidote to the philosophy that you can spend beyond your means because the economy will reward you over time. It would be nice to think so, and many observers have taken the past twelve months as proof of a new epoch in American household economics. But I seriously doubt it.

I think the reason the people are holding back is because they do not trust that the economy is actually recovering ... based on evidence (as I have alluded to) in their own neighborhoods and cities. It becomes a self-fulfilling prophecy, however, so Krugman is correct that Obama and the Fed ... BOTH ... must put themselves into the bully pulpits they have and incite the populace to personal economic courage.

But, Krugman is wrong, too. If things start to plummet again, a Fed system that has used its last erg of energy and cut its last rate and bought up lots of securities to shore up some system will not be able to actually respond. AND Krugman is dreaming if he thinks that a "blockaded" Congress is going to hand Obama new and better tools with which to solve the problem. All evidence is that the GOP will choose to re-inherit the mess they know they created, rather than let Obama and the Democrats play at fixing it.

I come away from this with the idea that Obama's West Wing is playing a foolish game of "division of labor," allowing Treasury and the Fed to take all the initiatives, but reserving their own voice and muscle for some ill-defined future contingency, a policy that the press has torn apart completely, labeling Obama a technocratic but ineffective president.



Krugman on Bernanke

For me Paul Krugman is required reading. His column in Saturday's New York Times is no exception, but what I take from it each time is tempered by my own (and others') reviews of the facts of economic and political life. Yes, Dr. Krugman is a partisan in much of this, and as I wrote on Friday, I respect his judgment on economics and even on the politics of economics.

In this latest column Krugman takes Fed Chair Ben Bernanke to task, labeling him a deliberate avoider of controversy and, basically, a shirker of his lawful duties. Wow! This is strong stuff from Krugman, who must have an embroidered version of the charter of the Federal Reserve Bank System. The Fed has very few tools with which to work, but like an early 20th century cat's whisker radio dial that was hard to tune exactly on station, the Fed's "tuner" when operable has very fine adjustments allowing the Board to more or less control the economy so long as bankers and lenders behave "normally."

Krugman has often noted that currently the Fed's tuner is so close to the low end of the dial that effectively there are no "stations left to tune in" the rediscount rate is practically zero now and you cannot go below zero in this game. So, it is surprising that Krugman finds Bernanke wanting at this juncture. Bernanke inherited the low end tuning of the economy and is trapped by it. Put another way, the Fed works only in the contiuum of normal practice and cannot work at the extremes.

But, we are in extremis right now, Krugman wails. We need someone to step up and swing some elbows. I do not disagree with the prescription, but I doubted until I read one crucial passage of the column that the Fed has any real latitude. That crucial Krugman statement is this:

I prefer to believe that he’s being political, unwilling to engage in open confrontation with other Fed officials — especially those regional Fed presidents who fear inflation, even with deflation the clear and present danger, and are evidently unmoved by the plight of the unemployed.

As with all things we come down to the Inflation v. Deflation cool-aid test. Apparently the Fed officials out in the "hustings" are being plied with the moronic idea that fiscal stringency is the cure for questionable assets. Yes, one falls off an apple tree and the other grows from a rhizome under the ground. Apples and rutabagas! It is GOP cool-aid, the cart before the horse, a preposterous (literally) idea that you take the carrot away from the donkey immediately when it begins to face the right direction. Carrots are for pulling and hauling, not facing!

Krugman's column brings up the background failure in the White House. To use Frank Rich's theory, Obama and his brain trust do not believe that Americans can understand the nature and elements of this crisis, so they have deliberately foregone the task of explaining it. Their reasoning is that the international situation requires that American interests internationally be preserved, even if it means a longer trek domestically. (This is a correct, but distasteful analysis, by the way.) Into this deliberate vacuum has jumped the TeaParty crackpots who out of pure ideological enthusiasms, fantasies, and fundamental foolheartiness would eliminate not only the Fed, Social Security, but virtually all the function of government that control the economy. Fair and Equal treatment of the TeaParty concept of "government" in the mass media gives their nihilistic credo credit it does not deserve and so the cool-aid becomes the mantra a frightened centrists and natural conservatives.

Here and there you will see an article that concludes the American people understand the TeaParty for what it is—a bitter frustration with government and necessity to maintain eternal vigilance over it—that they know we have a long way to go to right the economy and drive out the ideas that ran it aground. I am buoyed up by these, but I am certain it is not enough. We must get the White House out of its meritbadge mentality and into the streets selling the truth!



Double Dip is Going to be Very Bad

Look. Dr. Paul Krugman is not a crank, an alarmist, a daredevil, a flim-flam man who likes to play with others' money. He is a sober, reflective, intelligent, informed, and totally accurate analyst of contemporary economics. He may or may not be a genius. His mom thinks so; so do I, but then misery loves company! LOL

The double dip is upon us. The New York Times reports this morning (and the Washington Post does not) that we are heading into what may be turn out to be a couple of lost decades, thanks to the ideological gridlock and intellectual inadequacies in Congress. World stock markets are down yesterday significantly, boding very badly for confidence in the economies that buoy up the world ... ours and Europe's primarily.

Krugman warned about letting gridlock set in. He, and quite a few others, have been saying all along that the Crash of 2008 must be dealt with by massive sovereign replacement of assets on a temporary basis, followed by a deliberate retirement of that very debt. The key, and it is as obvious as the wart on the end of Rupert Murdock's nose, that rejuvenated economies bailed out by national governments pay themselves back by vastly increased revenues from the recovery. It makes no damned sense at all to stint the recovery by pulling back bail-out funds before they can be safely pulled back. But that's what the geniuses in the GOP ... and in conservative Germany frightened to death of a Weimar inflation ... have done.

They have done exactly the opposite of a "fireside chat." They have expressed doubt and caution and ignorance in the face of a situation that required and still requires very deft and intelligent management. Obama's team had done the hard work of keeping silent on the true extent of the damage done by the Wall Street baracudas, but they failed in the last analysis to trust Americans with the bad news ... primarily because they were unsure of how long they could ask Congress to hold its breath. They were cautious when they should have laid it on the line to Congress that nothing less than a complete bailout would suffice. Half measures fail and waste trillions of dollars.

You need to talk to your neighbors about this. If the situation is allowed to deteriorate further, all the billions that have already been spent will go down the drain with the lost assets of 2008. It is a simple arithmetic, and citizens need to demand that we not let this happen to us. The alternative? One or two lost decades in which every sector of society will suffer, but none more than the young who never get a decent chance to begin.



NYRB Articles You Must Read

The August 19th edition of The New York Review of Books is a gem. Two articles stand out as both milestones and bell weathers of the current situation on our small blue planet. The first is an article by New York Times columnist Frank Rich.

"Why Has He Fallen Short", ostensibly a review of Jonathan Alter's new book, is also pure Frank Rich. I consider it mandatory reading for Progressives and other Liberals who are chafing at the bit stuck between our jaws in Gore v. Bush. The psychological fact is that G.W.Bush was re-elected and that speaks volumes about the location of the American head (such as it is) in this epoch. Rich does not avoid criticism, and his generalization that Obama is fundamentally a meritocrat is perhaps understated. The approach to Larry Summers could have repercussions, however, and Rich is to be applauded for seeing and telling how this arrogant man has a) been behind the only process that would save us another depression, but b) has so alienated the field of liberal economists as to foreclose cooperation both here and in Europe.

The other article is by George Soros, whose clear thinking and writing are a blessing. It is not for nothing that the GOP and Tea Party folker hate his guts and are vivid in their demonstrations of hatred against him. Soros concentrates on the role of Germany in the European recovery, noting that Merkel's Germany is taking the wrong path, a crucial error that Obama was unable (partly for reasons just discussed above) to help them avoid. The Euro, according to Soros, is something of a miracle of social engineering, but flawed, perhaps fatally, by the asymmetric structures between sovereign (national) treasuries and international (EU) banking structures and practices. But, key to the whole thing is the German Weimar-born angst about inflation, a problem that is echoed in contemporary American politics, despite the bi-partisan agreement that fighting the Great Recession requires a sequence of spending and then debt retirement. Soros has the words, but Germany does not seem to have the ears. We can only hope that American voters begin to understand the Euro situation as a lesson for our own.



Listening Carefully to Geithner

In the New York Times this Tuesday morning Tim Geithner describes the outlines of the Obama strategy for contending with the "Great Recession." We are in the era of Orwellian Newspeak, of course, so what you read literally must be sifted and coaxed for its real meaning. Think about it: if you had to address 300,000,000 citizens of the United States ... as varied as they are, as obtuse and belligerent as some are, as self-centered, individualistic, and skeptical as most of us are ... and try to promote the necessary idea that economic recovery is partly (51%) confidence in the mass, how would you address the issues?

First you start with the name of our epoch and call it something a little less threatening, say, "Great Recession," even though the huge numbers of people (not percentages to compare with 1930's America, which was just over half urban) are out of work, perhaps permanently. Then you muffle the idea of permanence by not mentioning that millions of people in the country are obsolete educationally and their skills more appropriate to a world long since gone. We don't build Chevies the way we used to, or toothpaste, or even houses. Technologies appear and make more efficient and accurate the tasks they are dedicated to. The people either retrain or get tossed by the wayside.

Here is the link to Geithner's essay, but I am going to reproduce it below, as well. I am going to bold face each word or phrase that I think is code for the real nature of the so-called "Great Recession." I think you will be able to see for yourself each word and phrase that is designed to set a frame (framework) for instilling confidence.

I hope you notice the unusual attempt in his essay to make bad news into good news. In this case he is using the increase statistic to suggest that activity is better than stasis. It is a smart move and you can bet that the West Wing and Treasury were all over this concept.

So, here it is: (with emphasis added)

Welcome to the Recovery
THE devastation wrought by the great recession is still all too real for millions of Americans who lost their jobs, businesses and homes. The scars of the crisis are fresh, and every new economic report brings another wave of anxiety. That uncertainty is understandable, but a review of recent data on the American economy shows that we are on a path back to growth.

The recession that began in late 2007 was extraordinarily severe, but the actions we took at its height to stimulate the economy helped arrest the freefall, preventing an even deeper collapse and putting the economy on the road to recovery.

From the start, President Obama made clear that recovery from a crisis of this magnitude would not come quickly and that the recovery would not follow a straight line. We saw that this past spring, when the European fiscal crisis posed a serious challenge to the markets and to business confidence, dampening investment and the rate of growth here.

While the economy has a long way to go before reaching its full potential, last week’s data on economic growth show that large parts of the private sector continue to strengthen. Business investment and consumption — the two keys to private demand — are getting stronger, better than last year and better than last quarter. Uncertainty is still inhibiting investment, but business capital spending increased at a solid annual rate of about 17 percent.

Together, private consumption and fixed investment contributed about 3.25 percent to growth. Even the surge in imports, which lowered the rate of increase of G.D.P., actually reflects healthy and growing American demand.

As the economists Ken Rogoff and Carmen Reinhart have written, recoveries that follow financial crises are typically a hard climb. That is reality. The process of repair means economic growth will come slower than we would like. But despite these challenges, there is good news to report:

• Exports are booming because American companies are very competitive and lead the world in many high-tech industries.

• Private job growth has returned — not as fast as we would like, but at an earlier stage of this recovery than in the last two recoveries. Manufacturing has generated 136,000 new jobs in the past six months.

• Businesses have repaired their balance sheets and are now in a strong financial position to reinvest and grow.

• American families are saving more, paying down their debt and borrowing more responsibly. This has been a necessary adjustment because the borrow-and-spend path we were on wasn’t sustainable.

• The auto industry is coming back, and the Big Three — Chrysler, Ford and General Motors — are now leaner, generating profits despite lower annual sales.

• Major banks, forced by the stress tests to raise capital and open their books, are stronger and more competitive. Now, as businesses expand again, our banks are better positioned to finance growth.

• The government’s investment in banks has already earned more than $20 billion in profits for taxpayers, and the TARP program will be out of business earlier than expected — and costing nearly a quarter of a trillion dollars less than projected last year.

We all understand and appreciate that these signs of strength in parts of the economy are cold comfort to those Americans still looking for work and to those industries, like construction, hit hardest by the crisis. But these economic measures, nonetheless, do represent an encouraging turnaround from the frightening future we faced just 18 months ago.

The new data show that this recession was even deeper than previously estimated. The plunge in economic activity started an entire year before President Obama took office and was accelerating at the end of 2008, when G.D.P. fell at an annual rate of roughly 7 percent.

Panicked by the collapse in demand and financing and fearing a prolonged slump, the private sector cut payrolls and investment savagely. The rate of job loss worsened with time: by early last year, 750,000 jobs vanished every month. The economic collapse drove tax revenue down, pushing the annual deficit up to $1.3 trillion by last January.

The economic rescue package that President Obama put in place was essential to turning the economy around. The combined effect of government actions taken over the past two years — the stimulus package, the stress tests and recapitalization of the banks, the restructuring of the American car industry and the many steps taken by the Federal Reserve — were extremely effective in stopping the freefall and restarting the economy.

According to a report released last week by Alan Blinder and Mark Zandi, advisers to President Bill Clinton and Senator John McCain, respectively, the combined actions since the fall of 2007 of the Federal Reserve, the White House and Congress helped save 8.5 million jobs and increased gross domestic product by 6.5 percent relative to what would have happened had we done nothing. The study showed that government action delivered a powerful bang for the buck, and that the bank rescue on its own will turn a profit for taxpayers.

We have a long way to go to address the fiscal trauma and damage across the country, and we will need to monitor the ups and downs in the economy month by month. The share of workers who have been unemployed for six months or more is at its highest level since 1948, when the data was first recorded, and we must do more to ensure that they have the skills they need to re-enter the 21st-century economy. Small businesses are still battling a tough climate. State and local governments are still hurting.

There are urgent tasks to be undertaken to reinforce the recovery, and Congress should move now to help small business, to assist states in keeping teachers in the classroom, to increase investments in public infrastructure, to promote clean energy and to increase exports. And while making smart, targeted investments in our future, we must also cut the deficit over the next few years and make sure that America once again lives within its means.

These are considerable challenges, but we are in a much stronger position to face them today than when President Obama took office. By taking aggressive action to fix the financial system, reduce growth in health care costs and improve education, we have put the American economy on a firmer foundation for future growth.

And as the president said last week, no one should bet against the American worker, American business and American ingenuity.

We suffered a terrible blow, but we are coming back.

See. There was a meltdown, a ThreeMileIsland event in our economy and Obama needed for people to understand that only in outline. Now, as the election comes closer, you will begin to see lots more details emerge, accounting for the "sweetheart deals" that the big banks (essential to the national and international economies) got from Bush and continued under Obama. It is going to feel like looking back on a near fatal automobile crash. You are going to wonder how you got through it, and the adrenalin will surge again. But you can be assured that this administration is telling you the extent now, if not the all the gory details. And, you can be thankful that this administration understood the problem and took the correct evasive action to avoid a fatal crash.

Oh, of course, that is the main point. The insurgents still do not have a clue, and they will put the country and its economy into a fatal skid on the treacherous roadway to recovery.



The Arizona Desert

There is a rule in government and politics: follow the money! What is happening to the U.S. immigration laws is profiting someone immensely. Figure it out. What industries use drugs and cheap labor?



Bernanke At The Crossroads

Amid strident and stern and sensible pleas for more federal assistance to the economy, Fed Chair Ben Bernanke declined on Thursday, described in a piece by Sewell Chan in the New York Times. The reality alluded to (or sometimes not) in the article is that the Federal Reserve Bank is almost out of trumps, cards, chips, and its seat at the table in jeopardy. Well, actually there is nothing to take the place of the nearly exhausted Fed, so I guess Mr. Bernanke will continue to sit, whether he can ante up or not.

The Fed has the following responsibilities under the law, as described in the Wikipedia description:

Conducting the nation's monetary policy by influencing monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.

Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system, and protect the credit rights of consumers.

Maintaining stability of the financial system and containing systemic risk that may arise in financial markets.

Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system.

You will notice that the powers inherent in the fulfilling these responsibilities are limited and revolve around money supply and credit. With respect to money supply the balance against inflation is maintained by keeping the money supply growing proportionately to the population, particularly the productively employed sector of the general population. Notice that both inflation and deflation have their own logic and can with sufficient panic and distrust in the economy get out of the control of the Fed.

With respect to credit the Fed stands at the apex of a system wherein each level of lending institutions is dependent on the rate at which the Fed sets its over-night and other rates. Currently there is about one and half percent of rate structure to play with before the Fed has no handle or grasp or control on lending whatsoever. So, quickly, Bernanke's decision to not intervene further in credit is based fundamentally on the fact that he has very little leverage on the system and must wait for natural growth and demand to occur, whereupon his single handle will magically appear and a healthy control system will rematerialize within the logic of supply and demand.

The Fed has other "powers" such as running the "clearings" of checks and other instruments. There is no real monetary or fiscal control here, unless there is a serious panic. Then the Fed could shut down the system in order that the players can take a deep breath and reconsider their options in the light of panic. Emergency loans to specified institutions are possible, but these are mostly designed to avert bottlenecks that occur because of human or system failures elsewhere and to coordinate with FDIC and its cousins.

Understanding Bernanke's dilemma requires at least a cursory look at the rest of the world. The rest of the world begins in Europe in the EU where, as everyone by now knows that the southern and eastern tiers of countries are in various kinds of fiscal emergency, Greece because of, among other things, pension spending that is not supportable by the taxable (actually taxed) gross domestic product. But the problems in the Baltic states and east central Europe do not suggest strength either. Germany and the U.K. are the stronger members of the EU, but neither is the deep pocket that the rest of the EU needs. They are not deep because the politics of fiscal constraint is winning against the more likely to succeed policy of central stimulation.

In the U.S. the same battle is afoot, but with not nearly the number of active troops on the conservative side ... for now ... but with everyone nervous about piling up debt on debt for a someday-recovered economy to pay off. It is a game of "chicken" where the decision to put on the brakes is crucial, but the two alternatives—stopping too soon or stopping too late—are fatal.

If the federal government chickens out and repeats the errors of FDR and his Congresses of 1936-37 then the economy is almost completely sure to double dip into a great or greater recession, enter a period of deflation, yet fail to recover jobs, productivity, or any semblance of healthy growth. Moreover, and crucially, the zillions of dollars spent in the first wave of federal "bailout" and economic assistance will evaporate from the economy as the deflation deepens and the economy does not recover. In essence the debt we have nervously piled up becomes a dead weight around our necks, with each dollar of debt more difficult to pay off.

The imagery of games of "chicken" sometimes has the loser plunging over a cliff onto the rocks below as the winning car screaches to a stop just before the lip of the cliff. So, in our economics, if we do not curtail spending at just the right time, we risk plunging the entire economy into ruinous debt that exceeds our economy's ability to produce full payments on that debt. It becomes uncontrollable and politics being what it is, as cities and states default on their debt the strong urge is to IN-flate our way out of the situation, leaving huge masses of the population experiencing "sticker shock" on food, transportation, and housing. A Weimar U.S. would be a disaster, too.

So, Bernanke has his wary eye on Berlin and London hoping that the best minds there see the correct time and place to being braking their own programs of stimulating their economies. He also, as the article points out, has an eye on the domestic indicators: unemployment, housing starts, domestic production, etc. He must not be sleeping too well these days, because the numbers are not good, and will not be for some time ... a time during which we will have the up-coming mid-term elections, two year later the presidential election, and two years after that another mid-term. All such elections are decisively affected by the state of the economy.

The big question is, then, what are the alternatives to the exercise of the powers of the Federal Reserve System? The answer throws you back into the maelstrom of domestic politics. Congress is voting on a strictly partisan basis currently to extend unemployment benefits and the administration is doing what it can with the domestic budget to get Main Street-sustaining money out into the place where politics originates—locally. But will it be enough, and will the press and pundits understand that this particular game of chicken is unlikely to have a Disney ending? Someone is going to get "killed" if the administration does not handle this exactly right. If the Congress goes Republican then the last two years of an Obama administration will have one arm tied behind its back. How then to manage the tricky business of saving the economy? Frankly, I don't see how any administration could do it without Congress cooperating.



The Funny Bone of Personal Politics

There is nothing fun or funny about cracking your elbow just wrong and getting a sharp, throbbing, usually short-term, but nevertheless really painful reminder that you have hit your "funny bone." It is not really a bone; it is a nerve line that lies close to the surface of that boney part between the upper and lower arm. It is ironic, by the way, that the elbow is considered one of your best weapons to use in the case of being assaulted on the streets by potential rapists, muggers, bullies or any other sociopathic types. Put that elbow into a solar plexus, an eye, a crotch ... whatever is handy at the moment. It will hurt the assailant and give you a moment to consider your broader options.

My best friend, to digress from elbows for a moment, told me that she thinks the country is headed over a cliff if it is true that in the recent government program to stimulate home buying, prisoners (in prisons for whatever crime) were able access the program and rip off the American taxpayers for upwards of $8,000 a piece. Why, she ranted, can't government see that the person applying for the credit is in prison and, ipso facto, ineligible for the largesse? Why doesn't government work anymore, she concluded in righteous disgust! They're all crooks and liars!

My friend's chagrin has turned to biliousness, and the reason is that her sense of fair play has been offended what appears to be "once too often." She believes that if she hears one story like the prisoners getting government hand-outs, however undocumented, that her separate experience in the hospital observing the indigent "gaming" the health-care system, gives her not only the ability, but the right and responsibility to withdraw support from governments so easily conned.

Two factors missing from her analysis and eventual political catatonia are: quantitative evidence and sound logical principles. She does not know for a fact that there was more than one case of $8000 fraud (fraud only if those in prison were actually prohibited by statute from participating ... which, btw, may have eluded the rule-makers in their rush to get systems primed and working again). Assuming there was more than one case, what was the total damage to the public? Was it 0.000001% of the total spent or 0.0001%? Like the funnybone, the trauma of unfairness and fraud is perceived out of all proportion to the actual damage or injury.

Another misunderstood factor is the logic of government spending that eludes even the most diligent observers, namely, the concept of Statistical Effectiveness in the broadcast method of distribution. Governments spend like homeowners use grass seed. We broadcast seed across the territory to be greened up, rather than taking each seed or dollar individually and planting it in its own little hole. Yes, of course, the homeowner knows that birds will eat some fraction of the seed, that they will poop some of it out in fertile little packages, but on the neighbors' yards. Yes, of course, the government knows that in broadcast method emergency programs there will be waste. They don't advertise their advance expectation for the simple reason that to do so would attract even more birds!

Life is not fair! We come to know this incrementally during our youth as one darned thing after another befalls us. We don't get the attention of the cute, blonde, cheerleader, the pitching position on the school baseball team, any credit for saving money that we could have spent on boutique coffee concoctions, the unfailing love of both parents and spouses, and so on, and endlessly. We learn that the universe really does not care about our little peeves, but we also learn to insulate ourselves from the opportunities for disappointment. We learn to keep our elbows in, but then something major happens and our funny bone achingly stings for what seems like hours.

When there is a major event like the Great Recession of 2008 and its aftermath, we hunker down and prepare for whatever kind of austerity and pain and disillusionment that may come our way. We can hold this pose for a limited time however. Hunkering is hard on the psyche, and so we break posture from time to time to stretch a muscle or listen for good news. When the news is that the birds have eaten "all the grass seed" we are alarmed and outraged, stopping only momentarily to actually notice that the vast majority of the seed remains on the fertile ground.

So, today Paul Krugman in the New York Times has good reason to be critical of the outraged and "tired of hunkering" among us. He knows that outrage and bad news spread faster than confidence and good news, so he is warning us like a bumped elbow that the pain we have now is but a trifle compared to what we will have if we don't stay hunkered down long enough to solve this recession.



The Paradox of PETSD

Post Economic Trauma Stress Disorder is the topic today. The world leaders in Toronto have decided that reduction of sovereign debt must be addressed, but President Obama's absolutely accurate call for patience and caution was heard. Perhaps Dr. Paul Krugman's point of view is finally being heard, too, but perhaps not. Krugman (and many, many others, by the way,) is quite positive, (and so am I), that we are circling the drain of a very long, protracted, and ultimately catastrophic "lost decade" depression, all for the lack of the necessary rationality to assess our true economic position. We see in the public discourse strident calls for fiscal stringency, but these are panicked and irrational responses, and there is a reason why they appear at this juncture.

James Carroll in the Boston Globe this Monday morning seemed to be saying something very much in parallel to Krugman. He writes of the total effect of long wars and thousands of casualties on the public at large. He is eloquent in describing the narrowing of the public imagination and the search for simple answers.

But, it is not just war and vivid casualties of war that affect our national psyche, our combined mood, our daily sense (or lack of it) of promise for the future. Clearly, the economic debacle of 2008 that now continues to be holding huge, almost incomprehensible numbers of people in the U.S. and even more abroad hostage to hopeless unemployment is just exactly that sort of traumatic experience that gives us the psychological and intellectual blinders that lead us to seek simplistic answers to vital, but complex questions.

There is a paradoxical aspect to what I will call the Obama/Krugman synthesis of ideas. Krugman is writing as a journalist-intellectual and can speak much more forcefully to attract the necessary attention. President Obama on the other hand needs to be more circumspect than anyone on the planet, for in the last analysis, if anything goes wrong, the critics will be all over him. The paradox, however, is that neither of these exponents of the historically proven way out can say publicly what the benchmarks are that will guide them from current, necessary deficit spending to future necessary deficit reduction policies, BECAUSE publishing the benchmarks will lead strong unscrupulous players to simulate those conditions, to take advantage to achieve windfall profits. The situation is very much analagous to the Heisenberg Uncertainty Principle, which says that an observer cannot help but effect the outcome of an observation.

Obama's hope is that, while attempting to help the financial sector and then the industrial/commercial sectors back to their feet and to a reasonable strength of enterprise purpose that will sustain recovery, he can argue, cajole, and squeeze the leaders of other economies around the world into compliance with a system that works. He needs to do this without rubbing in their faces the obvious truth that the American economy is the strongest, leads, and must recover for all other economies to recover. At the same time he must let them know that global interdependence means that sovereign disregard for the agreed-upon way out, will mean the failure of the American recovery and inevitably the collapse of the world economy. He must convince an entire planet, a jumble of uncoordinated and purposely selfish economies, that for the long run recovery they must be rational against all the strong appeals by the traumatized and stunned to surrender to simplistic answers. It is quite a trick, but as Krugman and others correctly point out again and again, week after week, it is the only way ... short of sacrificing a generation or two of our planet's human beings to the gnawing incapacitation of unemployment.



The Greek's Trojan Horse: The Euro

Paul Krugman in the New York Times compares Greece to California to achieve an analogy about feckless economics. I am sure that Calfornians don't care what he says about them. They seem to be impervious to the facts of how bankrupt the California government is. Education and prisons are competing on a playing field probably best described as swiss cheese ... that is, with enormous holes in the logic of things.

Greece on the other hand is caught up in the California dream of 1949, seduced by the sirens of European prosperity, but with very little to suggest that they have the industry or enterprise to sustain that lifestyle for themselves. And, believe me (and Dr. Krugman) they must do it for themselves, because there is no Washington government in Europe to bail them out, just financiers harumphing at their desks, wondering how to make a profit out of the situation.

To be fair, some see the problem for what it is, namely a huge flaw in the EU concept of an economic/currency union without a central government to regulate and monitor. Krugman may be right that Greece will eventually follow its own destiny outside the EU. I think he is being an alarmist, for Merkel and the Germans are not likely to let the crack in Athens turn into a north - south fissure in all of Europe.



Forging a Green Economy

In the Sunday New York Times Magazine Nobelist Paul Krugman spills out on the table a variety of thoughts and facts and a couple scenarios about global warming policy and economics. He is lite on scenarios, and being at the epicenter of one of them he does mention—his example of the the American southwest becoming a permanent dust bowl—I can see and viscerally feel why he avoids the issue. In fairness, Dr. Krugman, the probability of a nine degree increase here in temperatures over the next century is slight compared to a similar but more devastating rise on the humid east coast or the upper plains. But, you would not want to mention those areas for fear of providing the residents with even more reason to dig in their heels and continue their disbelief.

Krugman's long article is worth the time, and I urge you to read it. The Master's is on TV today and provides a perfect backdrop for this important article. Krugman's other significant "scenario" is a less well understood situation in western Atlantic. The possibility of the Gulf Stream dissipating has been talked about for a long time. We just do not know what the increase in sea water temperatures at the surface off the Bahamas and the Antilles will do to the Stream. There is a possibility that it will strengthen the Stream and contribute to warmer temps across the northern Atlantic and on into western Europe and over the top of Scandinavia. The further north such a warming went the faster the process of releasing methane from permafrost would be, accelerating global warming and increasing chaos in relatively contemporary climates and ecosystems. Of course, if the Stream dissipates, then the UK and northwest Europe will become increasingly untenable.

So, the problem that Krugman discusses is how to galvanize politics and "special interests" into a coherent and maximally effective "social" plan to combat our own climate-changing effluents. Krugman says he is most in favor of a "big bang" approach, but I am not sure he has convinced me that that is the best way, or the most plausible politically. On the other hand, I am quite certain that the idea of loving future generations will be a non-starter, that we are about as hyped on the concept of global warming as we will ever be ... short of really chaotic and destructive weather focusing our attention on climate change.

In my generation the problem is almost completely a non-starter. In suburban Tucson new SUVs are a plague, though happily driven by aging citizens whose sense of impending senescence leads them to believe they are safer in these behemoths. Human nature is to take short term actions that protect the self and family over long term actions that protect the neighbors. Human beings of all ages live by the illusion of survival by the "skin of our teeth."

You have seen the House of Representatives pass a "cap and trade" bill that will not go through the Senate. It will not pass the 60 vote test because the GOP is playing a different game, a game of "chicken" founded on the belief that the mid-term elections this fall will significantly reduce the Democratic majorities, perhaps even deliver the Senate into GOP hands. The Tea-Party folks who feel slighted by the Bush-Obama policy to direct recovery efforts down from Wall Street will vote mindlessly for candidates whose understanding of global warming is sketchy at best and predominately disbelieving. As a prediction, then, I feel confident that almost nothing serious will be done by Congress for the next ten years. Of course the green will fade to yellow during this time and our descendants will have a hell of a time recovering from our self-centered behavior.



Starve the Beast

Nobelist economist Paul Krugman devotes his column this rainy (in Arizona) Monday to the Republican strategy for dealing with what they find most obnoxious. Dr. Krugman lingers on the strategy and the inevitable consequences, but you did not hear it first from him ... or me ... several years ago, this so-called strategy has been party of a generation's view of the world, and like the animus that motivated the Wallace group from the deep south, the reason for the GOP strategy is pure Social Darwinist selfishness.

Social Darwinism says that society is like an organism and that individuals within that society are like individual animals in a state of nature, that is, these individuals survive OR NOT depending on whether or not they are fit for the situation into which they are born. That is about as succinct a statement as you will find on this subject, and it is packed with associated meanings. First the idea that societies are organisms dates back at least to Hegel and his dialectic, which (as you will recall) tells us that human progress is the result of antagonistic forces (thesis and antithesis) struggling for survival and emerging as a new synthesis. If you read Hegal deeply you will discover that "antitheses" are not like anti-matter, something that will cause annihilation when one becomes involved with it. Anti-theses are "problems" and mental constructs, the emergence of which into one's life is accomplished by chance, design, devine intervention, and several other ultimate causes. Hegel is murky and so are his "syntheses" which are supposed to be new things or ideas in the world. Suffice it to say, though, that everything in Hegel remains, but gets reshuffled and mixed up together, much like organisms eating their way across a petri dish, a savannah, a city-scape, or a epoch.

Also the GOP idea of Social Darwinism then assumes that the chance of birth is one of the problems of the individual, not of the society. You can deconstruct Social Darwinism along this axis: is responsibility for chance happenings the dialectic problem of society or individuals. They put it on individuals and completely turn their societal back on the unfortunates that come to bat with two strikes on them. Liberals take precisely the opposite point of view.

So, after a lot of philosophizing and word-smithing you come to the idea that "starving the beast" so you can drown it in the bathtub is just a metaphor for drowning the unfortunate and misfortunate in society because they are just too much trouble ... and by the way ... helping them is a burden to folks who were to the manor born or scraped and grappled their way to wherever they think they are above the rest.

Krugman's essay leaves the idea that a socially intolerable situation is going to develop and that's what the GOP wants to happen ... their version of the drowning event. But, think about it. If the people who are closest to the fan finally realize that their butts are the next to be sacrificed, will they protect the fan or their own butts, or will they simply turn off the fan. Will they see government as the problem or not? The fact is that no one really knows, except you and I. We know that the history of revolutions ends with individuals watching all remnants of civilization and security and the good things of life disappear, and so they institute strong government to make things better. This happens always. It means that the social and political revolution the GOP thinks it wants will (if history and human nature are any guide at all) turn out to be more government not less, achieved through bloodshed, needless destruction of the civil infrastructure, and awful excesses directed at minority groups, women, and children.



Slow Motion Implosion

Last week we discussed the problem that Greece is posing to the EU, the probability of a prolonged default on its debt, its inability to square productivity with the benefits the Greeks want, and a subset of that, the disparities and antagonistic aims of the economic sectors within Greece, especially the agricultural sector. Greece is—and has been—a poor country by in large, despite the occasional Onassis. It's middle class is narrow and politically besieged by cultural values that no longer represent the aspirations of most Greeks.

But, the truth is that Greece is broke and a failure of the Greek government to come to grips with its budget has forced Germany of the "deep pockets" to take up the slack ... and perhaps the cudgel ... and certainly the fate of the EU.

One seeks perspective on something like this. Why all of a sudden are Greece, Portugal, Spain, and Italy (the southern tier) all hanging by a thread? The answer is not the climate. Southern Europe does, however, share a cultural value that does not predominate in the north. If you have spent a good deal of time in the Mediterrean area you know that "industriousness" is not the main feature of these cultures. This is not to say that Italians do not make great, fast, and beautiful cars, or the Greeks wonderful vacation experiences, or Spain, or Portugal, but they do not register on the "industry" scale like Sweden, Germany, the UK, the Netherlands, or France. The difference goes way back and is set in a concrete of nostalgia and choices made about what is important in life ... and it is not back-breaking, pencil sharpening, money-grubbing industriousness.

So, the meltdown of the New York financial system had immediate repercussions around the world. Smaller economies depended on the U.S. and others to maintain the momentum and flow of credit. When that ended and froze, the countries that were subsisting on the eddies of the global economy began to drown in their own profligacy, their mismatch between resources and expectations. The White House understood this and has done what it could to put the top back on the house of Finance. But as with Main Street in America, the wobbly condition of the lesser economies threatens the entire structure again. Germany cannot do it alone.

Germany, I can guarantee you, is talking to Washington right now. The disquiet is being masked by deliberate silence. EU wants (and needs) to believe that it is a self-sustaining and organic entity. Maastricht is less than twenty years old, however, and the ties that bind the EU together are threads, not burly cables. EU could fail for lack of confidence as easily as for lack of economic solvency. Both are on Obama's plate ... and you will not hear much about it, but keep it in mind.



Forget Gum

This morning's Sunday New York Times has an article about the distractions we encounter with new technology, like the cell phone, and how dangerous it can be just walking across the street with your cell on your ear listening to a list of grocery items you need to remember to pick up on the way home this evening. Drivers, too, of course. They have much more mass in their hands and their inattentiveness will cause grievous damage when they lose their focus. We used to laugh at people who tripped over their own shadows when chewing gum, but are any of us so different about much bigger things—like the alarms about our prostrate economy.

No. We are not better. Hardly anyone is talking about the continued increase in unemployment. Sixty-five thousand more jobs were lost in December! That amounts to about a quarter million people directly affected in their families. What about this? Should we be worried, angst-ridden, taking to the streets, pulling up the cobblestones and erecting barriers behind which we can stage our revolution? Perhaps not, but we should not be letting Congress and the White House off the hook either. There are things that the federal government can do and is currently not doing to ameliorate the hardship and pain and disaster that visits on the unemployed.

So the latest warning in the news ... also no one talking about it ... is that inflation is not moving up, not moving down, but just sitting there, sort of waiting for something else to happen. Something did ... something negative. Did you read in the news the other day that December retail sales were DOWN? Yep! Down and this is the season when many retailers make or break their year.

Here in the southwest where I am currently living the malls are eerily quiet and many stores are just gone, leaving empty spaces between those hanging on for dear life. Of course this leads to fewer shoppers and the survivors soon enough find they cannot survive. It is like the effect of CO2 in the atmosphere setting of thaws in the permafrost which releases methane with its quadrupling effect on greenhousing our atmosphere. One thing leads to another ... yet we choose to remain oblivious, distracted, in harm's way.



The Corporate Monster

Frank Rich's column this Sunday is a departure. It reads like a NYr movie review, but it is deadly serious about the fatal distortion in American economics, particularly the problem with finance holding the throat of all the rest. Rich is absolutely correct that we must fix this before it kills us. No other issue is half as important. The mid-terms will hang on whether the Democrats in Congress have the courage to tell the lobbyists to go to hell!




Statistics can be deceiving. Statistics can mask truth and disguise falsehoods. Presenting statistics is an art form, for the manner of presentation, down to the color palette used can imply much that the numbers cannot.

Take for instance this "unemployment map" provided by The American Observer. Look at it now; play it through to the end.

Did you notice that 8.5% and 10+% unemployment are represented in the most somber dark purple and black? Did you follow your own county and miss what was happening elsewhere? Did you wonder about the wide open spaces shown out west? Did you remember that we now have an average national unemployment of 10.2%? Do you still think the map was biased or slanted one way or another?

Of course it is biased. Its colors are intended to give you a "worst case" impression of the relentless loss of jobs across America. It is as if darkness falls across the face of the land. But has it? What about the real statistics that indicate pockets and regions of 17% unemployment and 30% unemployment among Black American males? What color is left to show the despair in these precincts? And what do these statistics mean? Do they show a two pound roast chicken on the Thanksgiving table instead of a twenty pound golden brown turkey? Do they show what will happen at Christmas?

The sad fact is that unemployment, however unpleasant it is to conceive and behold, is increasing and Obama's government is doing precious little at the bully pulpit or through Congress to turn this around. Yes, I know the economic stimulus package has brought about new optimism in housing and automobile sales, but you cannot eat optimism or wrap it up and put it under the Christmas tree.

Paul Krugman and a host of others are quite clear that we are not only headed in the wrong policy direction, but that it is already too late to prevent agonizing years of continued unemployment. It seems that Advisor Summers and Secretary Geithner believe that the market will produce the needed jobs and that their duties as stimulus wielders are over. They are obviously wrong.

But, disaffection with Obama and his crew is beginning to get down close to the bone. Maureen Dowd is beginning to call it like she has been seeing it for the past few months. There seems to be a serious problem at the very top. Yes, of course, Larry Summers is an arrogant person, and Tim Geithner a conspicuously opportunistic parasite, and Rahm Emanuel a profane, cynical, arrogant martinet and bully, but Barack Obama is beginning to be discerned among the shadows of this cave, and the apparition is not pleasant.

Both Dowd and Frank Rich let loose this past Sunday with columns about the tone-deafness of the Obama administration and indeed the Washington punditocracy. Palin and by extension Beck, Limbaugh, O'Reilly and the rest of the Fox propaganda machine represent a reality in American life, a reality not far removed from the unemployment map you saw. Dowd and Rich wrote about Sarah, and truthfully, Sarah is the graceful side of a pure seething anger right now. She appeals to every wound—real and imagined—suffered since the Great Society, since Rowe v. Wade, since Vietnam, since 9/11, since Affirimative Action, ... you name it. Change came and people were jostled, hurt, maimed, and soldiers killed ... and the anger about this is very, very real.

Obama will soon present his "plan" for Afghanistan and we all know that 30,000 more troops will be sent into that country to ... what? ... defeat the Taliban for once and for all? Is that possible? Where are these troops going to come from without a draft? How many deployments and how long can we and our troops stand this? These are not the jobs we want and need. Main Street jobs is the key, but Obama and his crew have done virtually nothing directly to create jobs. I am telling you now that this will back up on him and us, and the devil take the hindmost!



End of an Era?

Nearly eight months ago I wrote an essay entitled "End of the Marshall Plan" in which I noticed that President Obama had deftly and fairly quietly defined an end to several generations worth of American economic policy. He, in effect, said that the Marshall Plan was over. Europe—and by extension the rest of the world—is on its own from now on. The world's largest economy, the world's largest base of planetary consumerism is done. The cost is too great, the penalties too steep. We are finished.

I remembered that essay vividly as I read the Boston Globe Saturday morning noticed that of the country's major newspapers only the Globe has the courage to tell its readers what the prognosis is for the holiday economy. It is bleak. In a way, if you read the last statement made in the article, it ties right in with the whole concept of change in America, the long overdue realization that consumerism does not produce jobs in America. It makes producers greedy for "more" and they ship their factories out to low-income economies where they also can avoid environmental regulations.

Who knows whether the Great Recession of 2008-2010 will turn the trick or not. Consumerism is very addicting and the panoply of goods, especially high-tech "toys," is likely to enthrall the society again and again. Still, though, there is a palpable sense abroad that enough is enough. We have seen the country sink deeper into debt with China, and yet China does not liberalize. The dominos do not fall. The ideology of free-market consumerism does not convert foes into friends.

Of course, the prospect of another poor performing winter holiday sales season implies much more than broad brush "end of an era" pronouncements from retired historians. It is sure to set off another cascade of bankruptcies in both retail and manufacturing and consumer banking. This will mean even higher unemployment statistics for 2010, stats that are already locally at 15% in some areas. For historians dismal economic stats like these are, in fact, the engine of significant change. The worse it gets the stronger the pressure to change our "wicked" ways.

The Obama administration would be astute to see the political fallout from this. Clearly they are not responsible for the crash or for the underfunding of the stimulus package, but they are inexorably being seen as responsible for the lack of recovery on main street. Dumping Obama in 2012 might seem like the right thing to do, given the (widely seen as) ineffective activities of the White House during all of this, but the mid-term elections a year from now may obviate the 2012 issue. If Republicans turn the Senate and chop the Democrat's lead in the House in half, the message will be clear enough.

Personally, I think it is the beginning of a new era, and I am thankful for it, but I am cautious as well, because the changes necessary to move us off the addiction of consumerism are going to have repercussions throughout the culture and, indeed, across the planet.



Telling the Truth

If you have been paying attention, you will have noticed that the economy is not in very good shape, despite professions of confidence from Washington and Wall Street and particularly the stock exchanges. If small businesses are the key to employment, and you did not hear this from me—you heard it from Washington endlessly this past year—we are not out of the Great Recession by a long shot. Unemployment continues to spiral downward. This means that small businesses are not healthy or confident or hiring. Unemployment reached 10.2% as a national average in October, while "underemployment" (a clear sign that the government can read minds and intentions) is pegged at 17.5%. Some areas are very hard hit, Michigan for instance.

Small and medium-sized banks—not big enough to be kept from failure—continue to close their doors over ugly weekends as FDIC accountants march in and decide whether there is any good timber in the structure. Most depositors are covered, of course, but there's nothing like a hiccup in the midst of swallowing whole the administration's scheme to spread oil on the trouble waters of our national economy.

In Sunday's Washington Post there is finally a leak in the conspiracy of silence about the true situation. The leak is important in and of itself—as a leak. It is true that Paul Krugman and others have been writing for months about the inadequacy of the federal response to the crash last Fall. It is also true that the administration has not denied or countered the Krugman thesis, except to ignore it and to continue on the path of propping up Wall Street (sans Lehman Brothers) for the world to see.

The Post article is eerie in several ways and asks questions I have been asking since the stock market began to "recover." Who is buying? Why are they buying? The answer is that the Dow-Jones is a Potemkin Village, manipulated by four banks (!) to give the impression of confidence to a nation of investors that just had been thrashed in the crash. Part B of this is that the four banks are now beginning to see that they cannot hold up the ruse indefinitely, so with the aplomb of a arborist out on a limb, they are trying to scramble back to safety with a chainsaw whining away on their only visible means of support. The invisible means of support, Geithner, Summers, and Bernanke will soon be asked to get under the emerging debacle and hold the safety net (again)!

The Post article cannot possibly contribute to confidence. The truth is that "confidence" as a racket cannot be sustained. Confidence as an emotion of exuberance and courage will dwindle away, even as President Obama tries to explain to the Chinese this week that their holdings of US debt instruments will drop like lead balloons from the winter sky if China does not cooperate in trying to salvage the world economy.

The most annoying things about the administration policy at this point are that Krugman's first principles were thought to be too draconian and too bitter a pill for the American psyche to metabolize. How much better it would have been for someone in authority to just tell the damned truth about how much was lost and what damage had been done. Clearly George W. Bush understood (in his own fratboy way) what a dangerous situation Wall Street had created. Why else would a GOP conservative even consider a $772 billion dollar bailout? It was 180 degrees from his brand of orthodoxy ... and that was our first clue. The second clue was that John McCain who actually believes in the free market mythos did not have a clue what to do. Letting Lehman go is another clue that the situation would soon engulf the U.S. Treasury and lead to yet untold implosions, so it was sacrificed to save a moment in time and a few bucks to support the rest.

The Post article can be viewed optimistically, you know. It will be seen as a sign that Americans can now "handle the truth" (to evoke Jack Nicholson in Gitmo). I am not so sure, but I am willing to lean that direction on the principle that Americans are far more ready to hear than governments across the planet were in November 2008.



Too Big To Fail Means Too Big To Exist

You may have seen a fleeting reference a week or so ago to a new proposal in the Senate to break up the big banks—those which were deemed too big to fail. Senator Bernie Sanders for Vermont is the activist behind this effort. Please take a look at commentary on this issue and sign the petition.



Bust the Fed

Senator and one-time Presidential nomination hopeful Christopher Dodd of Connecticut, sitting in the Senate Banking Committee has come up with a regulatory plan that is worth studying ... even if it does not have a chance in hell of getting into law. As reported this morning in the Washington Post. Dodd's plan is to relieve the Federal Reserve Board and Banks of their responsibilities for regulating the operations of the nation's commercial banks, leaving them with the conduct of "monetary policy" only. I like this idea of the face of it, since the current situation has the Fed regulating the immediate and direct outcomes of the Board's decisions. In effect the Fed is regulating itself ... and good luck with that!

Although it is buried at the bottom of the article, the regulation of bank operations and decision making will probably fall to FDIC, which under its leadership has stood up to both Bernanke and Geither and which has garnered quite a bit of preliminary support in Congress ... if not the White House.

I believe that if Dodd and Frank (in the House) can wade through all the lobbying and threatening from Wall St., Obama will come around. Summers and Geithner will be entrenched, but a good hew and cry from the vox populi ... as with Health Care Reform ... should make this possible. The alternative, of course, is to put your marbles into gold and store it in the Caymans!



Unemployment Up and Stock Market Up???

Both the NYT and the Washington Post ran articles today "explaining" the resurgence of the Dow-Jones Average over 10,000. Later on, however, the Post revealed the net loss of jobs in October to be 190,000. This is a medium-sized city worth of people who will be having a very glum holiday this year ... at a minumum.

If you look at the graph of the recent market activity at the top of the linked article you will see a classical left shoulder, neck, and the beginnings of a right shoulder traced out in the ending values of the DowJones. I am no expert on stock market numerology or grapholalia, but the econopundits say that a two shouldered apparition is not good. We are headed shortly for a right "elbow," which is anatomically much lower than a right shoulder.

If you look at the histogram on the righthand side of the article near the top you will see portrayed the number of jobs lost by month over the past year ... and hopefully you will notice that these are all negative numbers, hanging from the line that would represent economic health. The decrement of job losses for October is what set the market above 10,000, so wildly avid are the traders for some good news ... even if it is negative good news ... and even if it is "seasonally adjusted," cooked, and presented AS IF things were getting better. You ask the nearly 200,000 laid off this past month how much better things are!

As Paul Krugman wisely comments today in the NYT, Obama is facing not his Rubicon, but his Anzio beachhead. True to his long-standing belief that the Administration is doing too little ... and in fact may be foreclosed from doing anything much more ... Krugman is aptly suggesting that the forces are in place to make the xmas retail and first quarter 2010 into that slippery slope that nearly brought our country to its knees 75 years ago.



The Recovery is Beginning to Fail also published as Talking Our Way Out of the Recession

There is a tendency to seek ... and to find ... simple answers to complex questions and situations. We like to be able to wrap our heads around a couple or a very few pithy comments and pretend that they are the summation of truth on a subject, the nub of explanation, the enlightenment that we were desperately short of just before. The economic situation is very much like that, and the ranting you hear about how it's going has major components grounded in simplism.

One of the truly exasperating explanations and commentaries is that Obama and his crew are deer in Wall Street headlights and have caved in completely to the moguls and their kin. As I reported to friends a little while ago, most of that kind of rant are little more than snapshots taken in the middle of a movie, pictures of ravenous beasts munching on the remains of some poor unfortunate impala, proving only that the movie has scenes set on the savannah in Africa, but not one thing about the plot or the main characters.

Here's an explanation that is not simple and not very palatable, so I think it has some merit. The Bush Administration began bailing out the defaulting banks. Secretary of the Treasury Hank Paulson, no less (and quite a bit more) grounded and nurtured in the culture of Wall Street got Bear Stearns covered by JPMorgan Chase when it toppled of its own bad business acumen. Then when Lehman Bros. toppled, a much larger institution, with Merrill Lynch in the background clawing for resources and Citicorp (not to mention Wachovia and Bank of America and several others) also gasping for capital the decision was made to let Lehman go. When this happened the crash came ... just before the election.

What ensued before, during, and after the election, but before the Obama Administration was inaugurated was a rapid deflation of the economy, a virtually total freeze on credit for any purpose, a major contraction of production, sales, all led by the housing industry, which was thought to have a momentum and safety all its own ... a sort of flywheel effect ... but now damaged, out of balance, and spinning out of control, values plummeting.

Some of the credit default swaps and other forms of "derivatives" designed to spread natural credit risk around and thereby attenuate the risk were purchased and traded abroad, particularly in Europe. Soon European banks, including all the banks of Iceland, the Bank of Scotland, and major institutions all over the Continent were gasping for air. The derivatives were just the fuse to ignite panic about other forms of mischief that banks and investment corporations had become accustomed to (and rich beyond their wildest imaginations). The crash in New York spread world wide and soon countries like Russia were seeing two decades of capitalism kick them in the teeth.

Enter Barack Hussein Obama, inheritor of the worse financial ... and monetary ... situations ever, two wars, and several hot spots threatening to boil into Third World War proportions: Iran and Israel. The question begging for answers was "what should be done first?" The simple answer is that Obama and his advisors recognized that if the situation in the U.S. were allowed to deteriorate much further, the consequences (several) abroad would insure that a world wide depression would occur, bringing with it untold political consequences abroad ... and domestically if it really got bad.

So, job #1 was to stabilize the world financial markets by taking a posture and doing at least the minimum necessary to stabilize Wall Street, the very center and heart of world finance. One should mention at this point something not quite so simple, but just as important. The U.S. dollar is and has been the "reserve currency" of the world since the Breton Woods Agreements during WWII. This means that the U.S. dollar is the denomination of all (significant) financial dealings, with value cross-referenced to the US$. The Breton Woods Agreement called on the U.S. to maintain a trustworthy currency and in exchange all the rest of the world would grant to the U.S. the benefits that accrue to being the financial hub.

Two generations of Americans, and in particular two generations of U.S. corporate and Congressional geniuses, forgot the first part of the Agreement—that the U.S. has the responsibility to maintain a stable currency. The U.S. clearly indicated to the world that this had been forgotten when we inflated our currency after the Vietnam War and in effect shipped a major part of our national debt for that adventure to foreign holders of Treasury bills. They were annoyed, of course, but saw that thirty or forty years downstream they were locked in. This provides them incentive, by the way, to get as rich as possible as fast as possible, richer and faster than U.S. players hopefully, so as to have some kind of leverage over U.S. fiscal policy.

In the November 5th edition of the New York Review of Books there is an article by Jeff Madrick about Obama's failure to implement timely and sufficient regulations over Wall Street. And, true enough, there are articles all over the place about how Goldman Sachs and others are back to their old business of creating derivatives, making obscene profits, and paying themselves even more obscene salaries and bonuses.

I am sure that Obama does not like this, and he has gone to Wall Street himself and said so. Still, there should be more than just me thinking that Wall Street is playing into the hand of Obama's more vital game abroad. It is essential to the U.S. that we remain for the foreseeable future (ten to twenty years at least) the owner of the planetary reserve currency and all that brings to our vastly over mortgaged domestic economy. The natural excesses of the arbitrageurs of Wall Street are a clear sign to the world that Wall Street is back on its feet ... and also that Wall Street is not the puppet of Washington (to anyone familiar with Plato's Allegory of the Cave).

And, if the explanation of Bernanke's, and Summers's, and Geithner's activities and supposedly weak response to regulation is not convincing, you need only look everywhere else to get a context for "recovery." California is sliding into the Pacific financially, unable to control by line-item-veto or any other means a ruined economy and governance process. 2009's deficit of $7 billion promises to be $15-21 billion in 2010. Next door, Arizona with a trifling economy is $3 billion down the tube with no relief in sight.

Michigan has double digit unemployment matched by several other heavily industrialized states. Unemployment is driving retail sales into the ditch and early signs of the Xmas buying period promise to be not only dismal, but as contagious as swine flu, also having its effect on the nation's economy.

Meanwhile banks in Florida (and elsewhere) are closing (or on Friday evenings being closed by FDIC). The total number of small and medium sized banks topped one hundred a month or two ago, and the rate is accelerating with several hundred banks expected to fail next year.

Foreclosures are up, despite valiant if inadequate efforts to get banks to renegotiate mortgages. It seems that bank officials just do not know where to begin trimming their profit-motivated sails, so they hope they can sail over the reefs and shoals, ... but of course they cannot.

Then there is the stock market, which took a 2.5% tumble on last Friday from the opening bell. This was not a sell off set off by some bad news somewhere. It was a sell off over due from bad news everywhere, including Pakistan and Afghanistan and Iraq and Somalia and Iran and Main Street. Yet Thursday this week it surged ahead again on erroneously reported unemployment news which was 190,000 not 165,000 as first reported. Which is to say, btw, a medium sized city just went down the tubes.

The 2009 TARP funded at mid-low level by the Congress, a mere $772 billion bail out, seems to have averted a steady plummet into the darkness of a national and worldwide depression, although there are those who are not yet satisfied that this is the case. At least Paul Krugman, an earnest critic of the TARP's low funding and the Administration's weak-kneed application, thinks it probably has been avoided for now although in a more recent article he says that Obama's soft, timid landing on the hostile shore will bite him bad and soon.

The great party game of the day is predicting whether the recovery will be V-shaped, that is down quickly and up quickly ... and highly unlikely ... or L-shaped, that is down quickly and staggering out and up over a long indeterminate period, or W-shaped, with a double dip into the wilds near depression, or some other branding iron shape with multiple recoveries each less satisfying than the last.

Ultimately, the current recovery is at least partly a matter of propaganda from Wall Street and Washington. That much is clear ... and as much as it is propaganda, it is a dangerous finagling with the truth of where we are. To be sure we never know exactly where an economy is, but we do have some confidence in predicting trends ... and believe me the current crisis was predicted years before it happened and even predicted by me months and months before the crash. Obama and his advisors would do well to make a clean break with the "attaboy" propaganda designed to keep people from absolute panic.

They should begin to bail out states that have shown evidence of fiscal maturity, but are hanging by threads over the precipice, out of control through no real fault of their own. This may not include California, alas, but clearly California, the world' 8th largest economy cannot be allowed to fail ... either.


--------- Copyright ©2006-2010, James R. Brett.