Archive for December, 2009

Neither liberty nor security…

December 30, 2009 Leave a comment

They read your email.

They listen to your phone conversations.

They have the right to enter your home without your knowledge and search it.

They can collect what you read at the library, grab you off the street and imprison you – whisk you away to some location, domestic or foreign, torture you. hold you indefinitely without charges.

They make you remove your shoes, your laptop, take off your jacket. Produce your identification three or four times just to board a flight.

They have satellites that can pick you out in a crowd at the Superbowl, drones that can kill you in the middle of a wedding, software that can track the movements of your money anywhere in a banking systems with trillions upon trillions of dollars flowng at blinding speeds.

They have files on you – your mother, father, friends, who you are sleeping with, and how much you paid for the privilege.

This is all, they say, to keep you safe.

This is because the Constitution is not a suicide pact.

But, let a father walk in to an embassy and tell them his son is acting strange – that he may be harmful to himself and you – and all those things we mention are useless to stop the young man from getting on a plane and killing hundreds of people – people who are walking today only owing to his incompetence or to something worse: That he was setup to take a fall.

In the end, all the money being spent, and all the whiz bang technology, is merely a pretext for a special interest to maintain itself at your expense – on your dime, and at the price of your freedom.

By way of reply to Chris Bowers…

December 26, 2009 Leave a comment

Jane Hamsher

Last week, Jane Hamsher shocked progressives by joining one of the arch enemies of big government, Grover Norquist, in demanding the investigation and prosecution of Rahm Emmanuel on charges related to Washington’s housing market debacle.

Grover Norquist is best known for his statement:

I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.

In the following excerpt, Hamsher explains her tack:

So, it’s not an issue of “personalities.” It never should be. It’s about principles. And principles aren’t pliant — you either have them or you don’t. You can’t just use them as a yardstick to measure the inadequacy of people you don’t like, and then throw them away when it comes to your “friends.”

Rahm Emanuel is destroying not only the Democratic majority but the Democratic Party.  There isn’t enough pork in the world to hold his “Blue Dogs” in office with the legacy of bailouts that he has engineered, and that’s why his “big tent” is now collapsing in his wake.  Parker Griffin, and now (possibly) Chris Carney, may blame Nancy Pelosi for their defections to the GOP, but that’s pure demagogurery. The mess they are fleeing — the corrupt back-room deals, the endless bailouts — belong to Rahm.

The ground is shifting. You can feel it. And the Rahm dead-enders have become no different than the Bush dead-enders, completely unaware that the President whose malfeasance they are defending on the basis that one must not “consort with Republicans” is the one who ran on — consorting with Republicans.  It is knee-jerk authoritarianism in the extreme. Rick Warren is okay because Obama says so. Principles? Who needs them.

If Obama/Rahm want to triangulate against progressives (and they do), they’re not the only ones who can make cause with people on the other side of the aisle.  If that’s what it takes to shake up the corporate domination of our political system, we’ve done it before and we can do it again. Because working within the traditional political order to support “progressives” whose conviction lasts only as long as it doesn’t matter just doesn’t seem to be working.

Progressives are nursing their hurt feeling…

December 26, 2009 Leave a comment

As viewed by Chris Bowers, in an Alternet piece: Marginalized, and impotent, it is slowly beginning to dawn on progressives that they are irrelevant to the Messiah:

Overall, this leaves progressives on the short-end of an ideological divide within the American center-left, with relatively little organizational ability to shift that hierarchy, and facing the very real prospect of being squashed if they step out of line.  This is why so many progressives are frustrated right now.

The pitiful thing is Bowers has absolutely no idea how progressives differ from the Washington mainstream. Waterboard this analyst, and he still could not come up with a single policy difference between the Messiah and his progressive allies. Progessives demand more power be given to Washington over significant portions of the economy, and Washington keeps out-sourcing that additional power to its cronies on Wall Street:

These are the three major examples of the difference between the left-progressive view of government and [Washington’s] view of government.  To solve major problems, from health care to climate change to the financial crisis to education (an example Kilgore discusses in his piece), [Washington’s] philosophy is not for the public sector to take over where the private sector has failed (which would have meant temporary bank nationalization, carbon tax, single payer / expanded public options, and equitable education funding) but instead to use a heavily subsidized and moderately regulated private sector (which meant purchasing toxic assets and loan interest loans to struggling banks, non-auctioned cap and trade, health insurance mandate with subsidies, and charter schools).

So, it all comes down to whether an irretrievably corrupt Washington will educate our children, care for the sick, and protect the environment, or whether it will be out-sourced to the Wall Street cronies of this same irretrievably corrupt Washington.

But, Bowers doesn’t even have the courage of principles to label Washington corrupt to its core. Washington is not engaged in the worst kind of crony capitalism, it is merely committed to relying on private means to accomplish public good. To drive home his point, he quotes another writer:

To put it simply, and perhaps over-simply, on a variety of fronts (most notably financial restructuring and health care reform, but arguably on climate change as well), the Obama administration has chosen the strategy of deploying regulated and subsidized private sector entities to achieve progressive policy results. This approach was a hallmark of the so-called Clintonian, “New Democrat” movement, and the broader international movement sometimes referred to as “the Third Way,” which often defended the use of private means for public ends.

What we are witnessing here, in other words, is not the continued fusion of the most predatory and unequaled economic power with the very machinery of state, to the exclusion of all other human and global environmental considerations, but the mere out-sourcing of good government practices to the private sector.

Okay, fine.


December 23, 2009 Leave a comment

In our last post, you probably noticed something that not even young Raj has discovered yet about the field of economics: One can decide to provide unemployment benefits to a population of ruined workers, or one can leave them to their fate. However, as Raj points out, policy makers’ choices have consequences:

“Standard models predict that we should have no safety net,” said Chetty … [but] because most Americans have so much income tied up in fixed commitments, such as payments for houses, cars, and furniture. “There are a lot of things you can’t adjust in the short term” …

Unemployment compensation should be provided, in other words, because if people aren’t provided an income to make up for their lost wages, gangsters on Wall Street can’t collect on their debts. See, you have to continue eating, so Wall Street can get paid.

If you were paying attention you also caught how it neatly fits with the introductory statement to the piece regarding the food chain:

Occasionally, an economist will say something that makes it all clear exactly your position in the food chain.

That, even though we did not intend it, neatly sums up your position in life: domesticated animal:

Moo, motherfucker. Moo!

Categories: General Comment

Crisis quote of the day…

December 23, 2009 Leave a comment

Occasionally, an economist will say something that makes it all clear exactly your position in the food chain. This one was just a link on Angry Bear to an article on still another blog:

“All of our current models prefer people to starve and die.”

A link on the second blog will take you to this article in the Harvard Gazette about a young prodigy – a tenured professor of economics – who has discovered that economics is a load of crap.

What! An economist who admits his field is pure ideological claptrap?

Okay, not actually.

His insight is limited to the conclusion that economic models used today miss something important: reality.

[Raj] Chetty, who just turned 30, is looking for ways to make the serenity of mathematical economic theory more descriptive of the tangle of economics in the real world. “People are not human calculators,” he said, and so sometimes make decisions that defy traditional models of economic theory.

As is to be expected in a profession that is highly politicized by Washington’s pretense that its particular interests are in fact the general interest of society – indeed the world – Raj has set out to fix this problem – and, apparently, he is drawing some attention for it – not by burying economics, but seeking to remedy its defects with some ingenious work around.

In one example provided by the article, Raj explains that the standard models argue against any support for unemployed families in the middle of this economic collapse:

When someone is laid off, should the government provide high benefits? Traditional theory says no, since big benefits seemingly reduce the incentive to find a job. “Standard models predict that we should have no safety net,” said Chetty.

Okay, fine. But then you run into the problem that, eventually, families without any income can’t pay off their debts, mortgages, or rent, buy groceries, clothes, heating oil, 42 inch high definition wide screen televisions, and lose all connection with the economy, and finally die from starvation under a bridge. And, since people who have no income can’t do all of the things we mentioned, banks, shops, landlords, car dealerships, and eventually even Wal-Mart go belly up:

But in reality, higher benefits are more in line with actual needs, because most Americans have so much income tied up in fixed commitments, such as payments for houses, cars, and furniture. “There are a lot of things you can’t adjust in the short term,” he said.

So the traditional economic models that are used to determine unemployment benefits miss a simple fact: People have bills to pay. “You miss certain features of reality,” said Chetty, “when you’re trying to write down simple models of the world.”

The question to be raised at this point is not how this can be fixed, but how anyone, much less a 30 year old tenured professor, at one of the nation’s most prestigious and influential universities, could admit to using a model which fundamentally ignores the fact that a starving population of indebted workers might be bad for business?

Is there, in any other branch of science, a model of the real world that suffers such a defect?

Could medicine argue that the efficacy of some particular treatment of a disease does not depend on whether the patient is alive and breathing, or decomposing in the graveyard?

“He’s dead – too bad! Well, at least we can treat that cold!”

Categories: Off Blog Tags:

Why Barack is a failure: Jesse’s take

December 22, 2009 Leave a comment

According to Jesse,

Obama is captive to special interests, as are many of the key members of the Congress, and the Obama Administration, and the Federal Reserve. And I should add his two predecessors.

It explains why he cannot articulate a coherent ideological position and make it stick. Make no mistake, he is a smart and verbally adept individual, a gifted person intellectually. But he cannot adhere to principles because he has abandoned whatever principles he may have had to serve a variety of corrupting interests. And he appears laissez faire and distant because he is a figurehead, a household servant, and not in control.

We think Jesse has it exactly backwards: The Messiah is not a captive of special interests, he is just the member of that exclusive club who made it past the auditions with the rubes. All the principal candidates of the two parties in last year’s election could have served, more or less, as close substitutes had they garnered more votes than he – McCain, Clinton, Romney, etc.

When this is no longer true – when a candidate emerges who does not fit this profile – you will know it, because the military will be patrolling the streets of America before the election.

We will be told that, “The Constitution is not a suicide pact,” or, something to that effect.

With great passion, they will quote that slave owning serial rapist, Thomas Jefferson:

[a] strict observance of the written law is doubtless one of the high duties of a good citizen, but it is not the highest. The laws of necessity, of self-preservation, of saving our country when in danger, are of higher obligation. To lose our country by a scrupulous adherence to the written law, would be to lose the law itself, with life, liberty, property and all those who are enjoying them with us; thus absurdly sacrificing the ends to the means.

Categories: Uncategorized

Throwing in the towel…

December 22, 2009 Leave a comment

With today’s revision of third quarter GDP, from 3.5 percent growth to 2.2 percent, it is clear that we were right: What failed in 2008 was not simply the five biggest investment houses on Wall Street, but the actual Rube Goldberg mechanism that is the American Dollar Empire itself.

First, with Krugman, DeLong, and Galbraith, now the defeatism is setting in among the independent economics writers as they begin to throw in the towel on stimulus measures as well.

From Naked Capitalism:

From the very start, Obama’s lead by negotiating with oneself approach led to a weak and poorly crafted stimulus package.  My comments in “Obama takes middle road on stimulus and taxes that leads nowhere” from February sum up what was likely to happen (emphasis added):

In my view, it has become ever more apparent that the Obama administration is caught in some sort of muddle, trying to fudge between the calls for fiscal discipline from conservatives and the calls for stimulus from liberals.  Obviously, it is in Obama’s nature to lead by consensus, and he has looked for an inclusive political and economic strategy since he came to office.  However admirable these intentions may be, this middle path is unfortunate because it will leave no one satisfied.  Moreover, taking this middle path on the economic front — some stimulus but not massive stimulus, some tax cuts but also some increased spending, increased spending now but tax increases or budget cuts in a few years – is the worst of all outcomes; the economy will not gain enough traction to get the desired ‘jump-start’ and stimulus will ultimately be seen as ineffective.  If the Obama Administration later attempts to return to Congress for more of the same after a failed stimulus bill, it will find a more skeptical response

My view here is that Obama is forging a middle path that leads to a dead-end. The stimulus is not nearly enough by half to get the job done. The proposed deficit reduction measures for 2013 are outright scary as they risk repeating a mistake from the 1930s. And the banking sector and mortgage plans, both of which I failed to mention, are dubious half-measures as well. One needs to act aggressively and proactively or not at all.

This is exactly what has transpired.  To make matters worse, his team’s lack of accurate economic forecasting has led to an Armageddon scenario at the state and local level, where even unemployment benefits are not adequately funded. All of this was predictable as evidenced by these two posts from early in the year.

The President has effectively discredited fiscal stimulus as a policy tool. What’s more is the bailout of the too-big-to-fail institutions without strings, the apparent cronyism in how these bailouts were done, and the gutting of financial reforms by the financial lobby has also discredited government as an agent to level the playing field for struggling households and taxpayers. See Blodget: Obama suffers because “taxpayer always finishes last” for now, but I will take this subject up in another thematic post.

I certainly underestimated the degree to which cronyism and special interests ruled the roost in Washington. I no longer believe government can be an effective agent of change in the U.S any more than it has been in Japan (see “Japan: stimulus without reform leads to a policy cul de sac”).   As I wrote in “Stop the madness now!

If you are going to deficit spend you need to do it in a big way. You need to stop the deflationary spiral.  That means hitting the reset button by promoting private sector savings and deleveraging and purging all built-up malinvestments. The risk in addressing the situation this way, of course, is replacing the imperfect invisible hand of markets with the imperfect hand of politicians and legislative fiat.

This is a risk I no longer see as worth taking. I have bailout and deficit fatigue just like most Americans. It is abundantly clear that this Administration has absolutely zero intention of purging any malinvestment or promoting any deleveraging. All they want to do is continue business as usual and go back to the asset-based economy that caused this mess. This is why we have seen bailout after bailout coupled with easy money. It makes for record profits on Wall Street but it does nothing for the unemployed.

Moreover, the political process in the U.S. is such that any stimulus money will be diverted to pet projects and used to pay off political constituents. While this may increase aggregate demand, it does so at the risk of serious social unrest as the outrage will certainly spill over into populism.

So, I have developed a case of big government revulsion as I suspect many Americans have done. I will let Marshall Auerback argue the case for fiscal stimulus and its role leading to a sustainable recovery.  I am moving away from stimulus happy talk to focus on malinvestment.

No comment…

December 21, 2009 Leave a comment

Health care stocks since Obamacare was unveiled:

Click the image to read the dirty details.

Obscure, Deny, Qualify: How economists lie…

December 21, 2009 1 comment

Pravin Krishna

Two economists, Pravin Krishna and Mine Z. Senses, recently undertook a study of the impact of global trade on the wage income of American workers.

A good study, you might say, since as American corporations appear committed to off-shoring most – if not all – of American production to places like China, Brazil, and other low wage nations, the affected workers might want to know how this process will affect their ability to put food on the table and keep warm in the winter.

So what did our scholars find?

Well, you are jumping into the study far too quickly, you see. First, we have to advance the prevailing viewpoint of the American corporation: namely, that,

As has been argued on this site before, protectionism is the wrong response because import protection stifles access to a greater variety of goods, raises prices and hinders the efficient allocation of resources. Moreover, if the major trading nations were to engage in retaliatory protection against each other, the impact on world growth would be devastating.

Mine Z. Senses

This is to get your head shaking, “Yes.” Protectionism, bad! Free trade, good! “Free trade good for everyone, because it means the price of 42 inch high definition wide screen plasma television go down.”

OK. Cool. We agree that free trade is good. Nobody wants to pay a penny more than they need to for toilet paper – now what?

Unfortunately, for the economist, free trade poses something of a problem since, despite all the propaganda and hype, a bunch of auto workers in Detroit are living in $7,000 homes, and freezing this winter, because their jobs went, “Bye, bye.”

The problem is solved by treating the propaganda about free trade as a fact rather than an as yet unproven assertion:

Despite these facts, heightened public concerns regarding globalisation remain – and not without justification since greater trade may induce reallocation of workers across sectors and firms and in the process expose workers to the possibility of income losses and unemployment.

Well, you see, there is the fact, asserted but never proved, that we all benefit when trade is open and free, and then there is the fact called Detroit.

The first fact looks like this:

Stock market 1980-2009

And, the second fact looks like this:

Detroit, after globalization (Don't worry. Obama can fix it by giving billions to the health care industry.)

You see? Everyone has their facts. It is not up to us to judge which facts are real and which facts are total fucking bullshit, because, we’re just economists.

As to the latter shock, the authors acknowledge that, “Shit happens.”:

… an increase in foreign competition increases the elasticity of demand for domestic goods and thereby raises the elasticity of derived labour demand. This, in turn implies that shocks to labour demand could lead to large variations in wages and employment with significant economic consequences.

Yes, such significant economic consequences as the collapse of an American city, and the resulting catastrophic immiseration of its entire population.

But, now that we established the ground rules:

  1. Free Trade is good for everyone, but
  2. Shit happens

There are still problem with facts like Detroit.

The first problem is that they are unpredictable – even though Michael Moore made a fucking movie about it – and, second, no one knows if they will be temporary or permanent. Because, you see, the fact that your job ended up in a maquiladora in Mexico, and then was moved a slave labor camp in China, doesn’t mean it might not eventually return to you in Detroit.

Moreover, we really do have to factor in that your skills designing, engineering, building, and assembling automobiles may not be fucking valued at your new job with Wal-Mart, or Home Depot.

(Yes. The authors of this study really did say this.)

For example, during the adjustment process following trade liberalisation, workers may experience temporary job loss resulting in a temporary loss of income. Alternately, individuals moving across sectors may see permanent income losses since their work experience may not be valued and, thus not be rewarded, in their new sector.

You cannot make this shit up.

Not surprising, the potential impact on your wages might just hinge on how long it takes for that inmate in China to lose HIS job to off-shoring back to the United States:

When faced with transitory income shocks workers can borrow or use their own savings to smooth consumption. However, this is clearly not feasible when income shocks are permanent. As a result, highly persistent income shocks will have a far more significant effect on the well-being of workers compared to transitory shocks.

Wow! Gravity is real!

So just how much do you have saved up? Can you go a couple of decades on only half of your previous wages? Economists really want to know this, because retail consumer goods companies want to know it. They need to know how many 42 inch high definition wide screen plasma televisions to put on order for the next Christmas glut-o-fest.

And, everyone has a share – except you.

As shareholders of J.C. Penney (we are all shareholders of J.C. Penney, right?) we are all interested in two things:

  1. Will your boat sink? And,
  2. How long can you tread water?

The answer to the first question is: “Boy, you’re gonna need a bigger boat!”

How big? Well, China has 700 million peasants just itching to do your job, and the shareholders at J.C. Penney want to take the kids on an educational rock climbing tour of Kazakhstan with their own private tutors.

Which means, if it can be made, it will be made in China – with technical support from India and the Philippines.

You’re fucked! LOL

Totally fucked.

In the dictionary, there is a definition of fucked with your picture.

Lorin Feldpausch, aka Fucked

Yes, the authors found what appears to be an outsized impact of free trade on your wages:

The relationship is strongly positive. An increase in import penetration by 10% of its initial (1993) level raises the standard deviation of shocks to income by around 23%.

Most of that sentence is gobbledygook to us, but it look pretty bad, guys. Home Depot just ain’t paying union wages. If someone told us that our deviations would be penetrated by such shocking standards, we just might punch them – but, you can vote Republican (or, Democrat, we do get these things mixed up.)

Again, the authors insist at the close of their article that they are not saying free trade is bad for everyone – just you, asshole.

You, and, some guy named Lorin Feldpausch, who used to have a real job.