Those masters of the universe continue to impress

If ever a man personifies the expression "Just smart enough to be dangerous" it must certainly be Vikram Pandit of Citicorp.  This guy couldn't contribute to the solution of any of the big man-made problems like Peak Oil or climate change with a gun to his head.  But since he was clever enough to get the USA government to save his paycheck, they made him one of six co-chairman of the World Economic Forum—the winter meeting in Davos Switzerland, where the folks who have amassed enough financial power gather to destroy lives around the world.

But let's leave the critique of Pandit to those who know him better—the folks from Business Insider and Bloomberg.

Mike Mayo Totally Ripped Vikram Pandit's Star Role At Davos With This Great Quote
Ben Walsh | Jan. 24, 2012

Bloomberg has a article up heralding Vikram Pandit's return to the limelight at Davos.

The headline says it all: "Pandit a Pariah No More as U.S. Bankers Ascend at Davos"

Pandit was understandably on the sidelines in recent years given the questions surrounding the performance of Citi under his leadership as CEO.

Citi memorably took the most government aid of any US bank and it's shares have dropped 93.7% over the last decade, the most of any US bank.

But now, Vikram Pandit is one of six co-chairs of the World Economic Forum's Annual Meeting In Davos.

Per Bloomberg, Pandit will have two key speaking roles, one on January 25th on the topic of "reshaping the global financial system and another on the 29th discussing the "emerging issues of 2012" with his fellow co-chairs.

But Mike Mayo, the outspoken bank analyst at Credit Agricole Securities, is not impressed: "'Asking Vikram Pandit about the crisis in capitalism is like asking Alec Baldwin about airplane etiquette,' Mayo said." more

Pandit Does Davos, 0.1% Gloat, Madness Reigns
By Jonathan Weil Jan 26, 2012

Sometimes a single fact stands out amid all the clutter, offering a flash of insight and clarity. Here is one of them: Citigroup Inc. (C) Chief Executive Officer Vikram Pandit is a co-chairman of the World Economic Forum’s annual meeting this week in Davos, Switzerland.

At first blush, the notion might seem almost ho-hum, a non- event. Upon further consideration, this looks like it can’t possibly be right. Then it turns out, much to our amazement, that the story is accurate, confirming once again that our world is stark mad. You really have to wonder why anyone outside of Citigroup would pick Pandit to lead anything.

It’s one thing for Citigroup to blow itself up so spectacularly that it needs multiple taxpayer bailouts to stay afloat. What seems strange is that an organization like the World Economic Forum would honor the fellow who was Citigroup’s CEO throughout most of the financial crisis, by selecting him as one of its six co-chairmen. If Sheila Bair had gotten her way when she was head of the Federal Deposit Insurance Corp., Pandit would have been fired years ago.

It’s stunning when you think about it: How does Pandit, who owes much of his fortune to the American public’s largess, wind up being showcased as a paragon of leadership and free enterprise, little more than a year after the U.S. Treasury finally sold the last of its Citigroup common stock?

And what message are the rest of us are supposed to take away from this? That his example is to be celebrated?

Maybe the distinction bestowed on Pandit should be of no surprise at all. Founded in 1971, the World Economic Forum describes itself as an international organization of large corporations that is “committed to improving the state of the world” with “no political, partisan or national interests.” But it’s becoming hard not to suspect that the annual gathering in Davos has become a conclave for global elites to promote crony capitalism and state-backed enterprise, ensuring that national coffers remain available to be tapped for private gain.

Pandit joined Citigroup in 2007 after selling it his Old Lane Partners LP hedge fund, which the bank shut the following year. Pandit’s take from his share of the sale was $165 million, the last $80 million of which he received in July.

In February 2008, two months into his job as CEO, Pandit certified in Citigroup’s 2007 annual report that the company’s internal controls were effective. Eight days before he did that, the U.S. Office of the Comptroller of the Currency had sent him a seven-page letter detailing all sorts of ways in which Citigroup’s controls were inadequate.

In November 2008, in spite of the company’s insistent refrain that it had “very strong capital,” Citigroup took a second federal-bailout package. That boosted its proceeds from the Troubled Asset Relief Program to $45 billion, plus $301 billion of asset guarantees. Another rescue came in 2009, when the Treasury Department let Citigroup repay $25 billion of its bailout money in common shares rather than cash.

Then in March 2010, appearing before a congressional oversight panel, Pandit said Citigroup was a healthy institution back in November 2008 when the government saved it from going under. Short sellers (of course!) were to blame for the bank’s problems, he said.

Today Citigroup says it has returned to profitability, although investors remain skeptical. At a recent price of $30.25 a share, down 90 percent since Pandit was named CEO, Citigroup trades for about 50 percent of its common shareholder equity. In other words, the markets believe that about half of the $178 billion book value on Citigroup’s balance sheet is imaginary. The company probably wouldn’t be standing were it not for its implicit guarantee from the U.S. government.

Is this the right man for the World Economic Forum to pick as one of its co-chairmen for this year’s Davos extravaganza? Pandit’s bromides at a press conference this week were the sort of filler any college advertising major could have written.

“Banks have to serve clients, not serve themselves,” Pandit said. (Were they not serving clients before?) Or this: “It’s important for the financial system to acknowledge that there’s a great deal of anger that’s directed at it for the crisis, and trust has been broken,” he said. “We’ve got to start addressing that.” The unwashed protesters at Zuccotti Park had keener insights than this.

Or perhaps the problem here is me, and I’m looking at the situation the wrong way. For all we know, these little rough patches in the financial industry offered just the kind of hands-on experience the forum’s organizers were looking for in a leader, in which case they found their man.

Maybe if Citigroup blows up again someday, they could put Pandit in charge of the whole conference. more

Miss the Cold War?

It is highly unlikely that anyone who lived through the "duck and cover" days of the Cuban Missile Crises, the building of the Berlin Wall, and the rest of the fear-mongering that went with our perpetual state of war post-1945 will ever have a detached and scholarly view of Marxism.  The enemy was communism and the god of communism was Marx.  I knew people who quite seriously believed he was a modern incarnation of the devil.

I know I was scared shitless.  I had nightmares.  I lived in a town settled by Mennonites who had been farming in Russia before being driven out in the 1870s by an evil new Tsar, Alexander II.  These people were predisposed to believe that Russians could be wicked—Russians led by atheists was their worst nightmare.  One neighbor built a stand-alone fallout shelter connected by a tunnel to his house.

But I got lucky—I got to know some Scandinavian Marxists who mostly demonstrated to me why practicing Marxists were a lot like any other devoutly religious person.  As a preacher's kid who was exposed to deeply religious people from earliest childhood, this made them seem pretty normal.  Their belief set was filled with noble sentiments and my friends had more than their share of idealistic altruism.

The problem with the Marxists wasn't that they lacked high moral purpose, the problem was that they couldn't run a modern economy.  Turns out Marxist thinking may well be suited to organizing education and medicine but screws up agriculture and manufacturing.  No Marxist would have dreamed up the iPad in any imaginable timeline.  Saddled with Ladas, long lines, and crop failures, the tide of Marxism would start to recede from its economic misconceptions, mistakes, and mismanagement.

Of course, the economists who informed me in the beginning didn't treat Marx as much of an economist anyway.  So I became one of those mixed-economy types who believed that Marxism was only useful when the project was large and public—but keep these people AWAY from agriculture and the manufacture of anything complicated.

Anyway, we recently had a demonstration of the preservation of archaic traits.  The Republicans had a debate in Florida and the candidates were asked to explain how they would react to the death of Fidel Castro—the last of the Cold War era official enemies.  The responses were predictably sub-reptilian.  But of course, Fidel is still with us.  And he had a response.  I must be getting old—this Cold War exchange no longer frightened me but rather inspired a sentimental nostalgia.

So here is a part of the Castro response as told by RT.  His description of the Republican candidates is, if anything, overly generous.

Castro calls the GOP race a "competition of idiocy"

Published: 26 January, 2012, 00:33

At Monday’s Republican debate, both Mitt Romney and Newt Gingrich came to an agreement on something: they each wished Fidel Castro would just die already. Days later, the former Cuban president fired back and offered some words of his own for the GOP. 

According to Castro, the race on the right is full of idiots. 

The Republican frontrunners spent a few minutes on Monday debating how they would react to the hypothetical news that the 85-year-old revolutionary has passed away. Romney was first to answer, saying that his initial reaction would be to “thank heavens.” Next was Speaker Gingrich, who was a bit more harsh with his response, suggesting that the communist commando wouldn’t make the cut at the Pearly Gates and would instead be subjected to an eternity in hell. Never mind what they think, though. To Castro, their opinion is absolutely meaningless. 

In an op-ed column published Wednesday, Castro writes, “The selection of a Republican candidate for the presidency of this globalized and expansive empire is — and I mean this seriously — the greatest competition of idiocy and ignorance that has ever been.” 

A good rule of thumb is not to question a retired Cuban leader capable of overthrowing a political system and ruling a nation for nearly 50 years. But when Castro says he’s being serious, you best believe that he means business. 

Texas Congressman Ron Paul handled the query on Monday by saying, "We propped up Castro for 40-some years because we put up these sanctions and this only used us as the scapegoat, he could say anything wrong is the United States' fault,” adding, "I think it's time to quit this isolationist business of not talking to people." For Castro, that might not be the best idea, either. He adds in his write-up that he is too busy with other matters to get involved with the Republican race for the nomination, so it’s safe to assume that, if any of these “idiots” are elected, Castro will continue to cast his opinions elsewhere. 

That isn’t to say that Castro will be endorsing incumbent Barack Obama later this election year either, though. After the current president addressed the United Nations in September 2011, Castro asked in a separate op-ed, “Who understands this gibberish of the President of the United States in front of the General Assembly?” 

Earlier this month, Castro remarked that, faced with a choice between Obama, a top-tier Republican rival or a robot, “90 percent of voting Americans, especially Hispanics, blacks and the growing number of the impoverished middle class, would vote for the robot.” more

Heterodox economics, heterodox thinking

We are often told that the big distinction in learning strategies is between the specialists and the generalists.  Academia in USA is so heavily skewed to the production of specialists that it is almost impossible to become a well-trained generalist.  And this state of affairs certainly has its advantages.  People who devote the majority of their energy to learning one subject are highly useful members of society.  We certainly want our heart surgeons and tower crane operators to be more than gifted amateurs.

Unfortunately, the same strategy that produces our gifted specialists is terrible for producing the sort of generalists necessary for the kind of thinking required to make community-wide decisions.  So while our computers become more intricate (the output of specialists), our politics (a profession requiring generalists) become more primitive—and thousands of other excellent examples.

The problem is that there aren't many agreed-on paths to becoming a high-level generalist.  So even natural generalists blessed with an omnivorous curiosity tend to get funneled into some specialism.  Schools have experimented with cross-disciplinary degree programs and the whole idea of liberal arts distribution requirements is to encourage a basic generalism.  But in the end, about the only way to produce a high-level generalist is to train curious kids to a specialist level in three or four skill-sets and hope the intellectual sparks created by the process will encourage them to fill in the gaps on their own.

Back when I learned economics, the great practitioners were all generalists.  Some of this was the legacy of Thorstein Veblen who was called "the last man to know everything."  There really was once a time when with great effort, someone could essentially learn everything humans knew.  Of course, now it is almost impossible to know even 1% of those bits of knowledge that are beyond rational debate.  So in the 1970s the economics profession essentially threw in the towel and abandoned any sort of generalist approach.  The result is that we have had a profession devote 30 years of big computers and big math in an effort to prove the narrow and utterly bogus proposition that markets are infallible.  The specialist economists who are dazzling at fast algebra are unfortunately so socially backward and narrowly focused they regularly prescribe disasters.

So it is comforting in a small way to discover that an over-reliance on specialist thinking doesn't work very well in medicine either.  The following from Wired Magazine about Pfizer's $21 billion dollar disaster drug torcetrapib is a real economics manifestation of the intellectual problem that reduced economics to its present level of irrelevance.

Trials and Errors: Why Science Is Failing Us
By Jonah Lehrer
December 16, 2011

Every year, nearly $100 billion is invested in biomedical research in the US, all of it aimed at teasing apart the invisible bits of the body.

On November 30, 2006, executives at Pfizer—the largest pharmaceutical company in the world—held a meeting with investors at the firm’s research center in Groton, Connecticut. Jeff Kindler, then CEO of Pfizer, began the presentation with an upbeat assessment of the company’s efforts to bring new drugs to market. He cited “exciting approaches” to the treatment of Alzheimer’s disease, fibromyalgia, and arthritis. But that news was just a warm-up. Kindler was most excited about a new drug called torcetrapib, which had recently entered Phase III clinical trials, the last step before filing for FDA approval. He confidently declared that torcetrapib would be “one of the most important compounds of our generation.” 

Kindler’s enthusiasm was understandable: The potential market for the drug was enormous. Like Pfizer’s blockbuster medication, Lipitor—the most widely prescribed branded pharmaceutical in America—torcetrapib was designed to tweak the cholesterol pathway. Although cholesterol is an essential component of cellular membranes, high levels of the compound have been consistently associated with heart disease. The accumulation of the pale yellow substance in arterial walls leads to inflammation. Clusters of white blood cells then gather around these “plaques,” which leads to even more inflammation. The end result is a blood vessel clogged with clumps of fat. 

Lipitor works by inhibiting an enzyme that plays a key role in the production of cholesterol in the liver. In particular, the drug lowers the level of low-density lipoprotein (LDL), or so-called bad cholesterol. In recent years, however, scientists have begun to focus on a separate part of the cholesterol pathway, the one that produces high-density lipoproteins. One function of HDL is to transport excess LDL back to the liver, where it is broken down. In essence, HDL is a janitor of fat, cleaning up the greasy mess of the modern diet, which is why it’s often referred to as “good cholesterol.” 

And this returns us to torcetrapib. It was designed to block a protein that converts HDL cholesterol into its more sinister sibling, LDL. In theory, this would cure our cholesterol problems, creating a surplus of the good stuff and a shortage of the bad. In his presentation, Kindler noted that torcetrapib had the potential to “redefine cardiovascular treatment.” 

There was a vast amount of research behind Kindler’s bold proclamations. The cholesterol pathway is one of the best-understood biological feedback systems in the human body. Since 1913, when Russian pathologist Nikolai Anichkov first experimentally linked cholesterol to the buildup of plaque in arteries, scientists have mapped out the metabolism and transport of these compounds in exquisite detail. They’ve documented the interactions of nearly every molecule, the way hydroxymethylglutaryl-coenzyme A reductase catalyzes the production of mevalonate, which gets phosphorylated and condensed before undergoing a sequence of electron shifts until it becomes lanosterol and then, after another 19 chemical reactions, finally morphs into cholesterol. Furthermore, torcetrapib had already undergone a small clinical trial, which showed that the drug could increase HDL and decrease LDL. Kindler told his investors that, by the second half of 2007, Pfizer would begin applying for approval from the FDA. The success of the drug seemed like a sure thing. 

And then, just two days later, on December 2, 2006, Pfizer issued a stunning announcement: The torcetrapib Phase III clinical trial was being terminated. Although the compound was supposed to prevent heart disease, it was actually triggering higher rates of chest pain and heart failure and a 60 percent increase in overall mortality. The drug appeared to be killing people. 

That week, Pfizer’s value plummeted by $21 billion. 

The story of torcetrapib is a tale of mistaken causation. Pfizer was operating on the assumption that raising levels of HDL cholesterol and lowering LDL would lead to a predictable outcome: Improved cardiovascular health. Less arterial plaque. Cleaner pipes. But that didn’t happen. 

Such failures occur all the time in the drug industry. (According to one recent analysis, more than 40 percent of drugs fail Phase III clinical trials.) And yet there is something particularly disturbing about the failure of torcetrapib. After all, a bet on this compound wasn’t supposed to be risky. For Pfizer, torcetrapib was the payoff for decades of research. Little wonder that the company was so confident about its clinical trials, which involved a total of 25,000 volunteers. Pfizer invested more than $1 billion in the development of the drug and $90 million to expand the factory that would manufacture the compound. Because scientists understood the individual steps of the cholesterol pathway at such a precise level, they assumed they also understood how it worked as a whole. 

This assumption—that understanding a system’s constituent parts means we also understand the causes within the system—is not limited to the pharmaceutical industry or even to biology. It defines modern science. In general, we believe that the so-called problem of causation can be cured by more information, by our ceaseless accumulation of facts. Scientists refer to this process as reductionism. By breaking down a process, we can see how everything fits together; the complex mystery is distilled into a list of ingredients. And so the question of cholesterol—what is its relationship to heart disease?—becomes a predictable loop of proteins tweaking proteins, acronyms altering one another. Modern medicine is particularly reliant on this approach. Every year, nearly $100 billion is invested in biomedical research in the US, all of it aimed at teasing apart the invisible bits of the body. We assume that these new details will finally reveal the causes of illness, pinning our maladies on small molecules and errant snippets of DNA. Once we find the cause, of course, we can begin working on a cure. more

The education of David Stockman continues

I have a special interest in a decreasingly tiny sliver of American life—the really smart farm kid.  My favorites includes Thorstein Veblen and Henry Ford but there have been thousands of them and much of the industrial midwest was built by them.

So I was hopeful when one of those obviously smart farm kids was named to be Ronald Reagan's Budget Director.  Of course, he came in spouting supply-side horse shit but I kept hoping that rural reality would show up when it counted.  In some ways it did.  In 1981, William Greider published an interview in the Atlantic Monthly called The Education of David Stockman where he blew the whistle on the supply-siders.  It wasn't a major awakening but it was a start.  And Reagan "took him to the woodshed" over it and eventually he lost his job.

Stockman still doesn't understand things very deeply but it is obvious he is still evolving.  So when he sat down with Bill Moyers to discuss his take on today's economy, it was a good place to see how far he had evolved.  Well, not so much as I had hoped but he does draw a distinction between crony capitalism and the real thing—so there's a start.

Gordon Gekko in Florida

Mitt Romney is having some more trouble pushing his big lie that Bain Capital was a creator of jobs.  This time, it's the Miami Herald that is calling him on his BS.  Romney was once leading the Florida Primary by 25% in the polls.  That lead is gone.  Say what you will about the current Republican Party—it seems more obvious by the day that their voters are not going to back Gordon Gekko.

More financial corruption of government

The sheer amount of corruption that surrounds the property financial bubble is quite literally breath-taking.  And because the size of the corruption is so vast, it includes nearly everyone including the biggest and most well-know white-shoe law firms in the land.

Shades of Catherine the Great

One of the more noticeable things here in the northern corn belt is the prevalence of German surnames.  Farming is a LOT harder than it looks and after 150 years of harsh climate, Predatory economics, and assorted other major hazards, a large percentage of the survivors are German.  A surprising number of these immigrants, however, came from Russia.  This is an interesting story and one I heard from kids in my grade school who spoke German at home but whose grandparents had fled Russia in the 1870s.  Here is their story as told by a North Dakota historian in 1910.

Germans from Russia Now Second Largest Immigrant Group
Hard Work Pays Off for Hardy Homesteaders
Bismarck, 1910 

Sometimes they are called “the other Germans.” Sometimes they are called the “Ruzlands.” Some come from the lands that border the Black Sea. Others from Mariupol or Dobrudja or the Caucasus country or the Volga Valley. Some are Mennonites; some are Hutterites. Some belong to the Roman Catholic Church; others are Lutheran. These are the German-Russians. They all lived in Russia, but they all were Germans by birth or heritage. Thousands have left Russia for the United States, and about 32,000 have migrated to North Dakota.

What were these Germans doing in Russia? In the 1760s Catherine II, the ruler of Russia, invited Europeans, especially Germans, to settle in Russia. Catherine, who was a German by birth, knew that Germans were excellent farmers and that Russia needed a more stable and plentiful food supply. She promised that immigrants would receive free land, could exercise religious freedom and would be exempt from service in the Russian army. In other words, Germans in Russia could continue in their German ways. Because Germany was going through political turmoil and war, over 50,000 Germans went to Russia by 1870.  Alexander I, who became Tsar in 1801, continued to recruit Germans to live in lands that Russia had taken from Turkey along the Black Sea. Thousands more Germans took up land in Russia.

In Russia the Germans remained German. They kept their religion and their language. They did not mingle with the Russians and only a few learned the Russian language. Their elementary schools promoted Germanism, things German, not Russian. 

These Germans in Russia earned reputations as hard-working farmers who were able to overcome a hostile environment. They were good farmers. Most eventually prospered.

But things changed for the Germans in Russia when Alexander II became Tsar in 1874. He ended German exemption from service in the Russian army and began a program of Russification — Germans were no longer a special people; they were to become Russians. 

Angry over these broken promises, many Germans began to leave Russia. The 160 acres of land that the Homestead Act provided lured most to America, especially the Great Plains states. Now in 1910 about 60,000 Germans from Russia (the immigrants and their American-born children) live in North Dakota. They began arriving through north-central South Dakota in the mid-1880s. more

My childhood classmates were Mennonites and the BIG beef they had with Alexander II's great betrayal was his plans to draft their young men into military service—a huge no-no for a Protestant splinter group that had been devout pacifists since the 1530s.  Nothing so provokes traditional leaders like the idea that some folks think themselves too holy to participate in their wars.  So even though the Mennonites had been working Russian soil for over 100 years, they were persecuted and essentially tossed out of the country.

Flash forward to today.  23 MILLION hectares of fertile Russian farmland lie fallow—the result of the failed experiment that was Marxist agricultural collectivism.  So the Russians have taken a page from their history and have invited German farmers to come and make their prairies bloom again.

Pigs and Protection Money
German Farmers Seek their Fortunes in Russia
By Steffen Winter   01/12/2012

In the 18th century, Catherine the Great invited German farmers to come to Russia and cultivate the land. Over two centuries later, the country is recruiting Teutonic pioneers once again in a bid to put vast tracts of fallow land to use. The land holds great opportunities for agricultural entrepreneurs -- provided they have strong nerves.

The roads are a problem. The dark, frost-damaged asphalt is patched in many places. As the black Toyota Camry bumps along the road, Alexander, the driver, glances quickly into the rear-view mirror and steps on the gas, passing trucks that look like they haven't seen the inside of a repair shop in a long time.

Sitting in the back seat, Stefan Dürr is being thrown back and forth on the bumpy road. As he looks out the window, he sees trees and low shrubs flying by. Beyond them is a vast, shimmering Russian landscape, a region of dark fields and kilometer upon kilometer of black earth -- the Voronezh Oblast. The German points to the signs along the side of the road. On one sign, the words EkoNiva Agro are painted in black on a white background. "It all belongs to us," he says cheerfully.

When Dürr, 47, a former activist with the Bavarian Young Farmers Association, studied agriculture in the northern Bavarian town of Bayreuth, he anticipated leading a comfortable life on his grandfather's farm in the Odenwald region near Heidelberg. Instead, he is now the owner of more than 170,000 hectares (about 420,000 acres) of prime Russian farmland. 

With his curly hair, and in his blue wool sweater and gray jeans, Dürr could be mistaken for a tractor driver. But he has achieved breathtaking results as a businessman. He now speaks Russian with almost no accent, and is cultivating fields in the Kursk, Voronezh, Orenburg, Novosibirsk and Kaluga regions. Through his holding company, EkoSem-Agrar, he employs 2,800 people in farming, owns a herd of 28,000 cattle and most recently generated revenues of €80 million ($102 million). In good years, he earned €200 million selling agricultural machinery, a business he has since spun off. According to Dürr, EkoNiva, one of his subsidiaries, is among the top 30 agricultural companies in Russia. 

Dürr's success story, and his pioneering achievements as a Western European deep in the heart of Eastern Europe, serve as a model for the Russian government. Almost 250 years after Empress Catherine the Great attracted tens of thousands of German settlers to her realm, Russia is once again courting Western settlers to revive a farming industry that is ailing in some areas. 

Dürr has, in fact, attracted imitators. The Westphalian meat baron Clemens Tönnies has just announced a plan to invest millions in Dürr's neighborhood. Together with a Russian partner, Tönnies wants to build 10 new pig farms, which are expected to produce 62,500 tons of meat a year. It is one of the largest projects ever planned in Russia, and it promises an investment of more than €100 million in the Voronezh region. 

Eckart Hohmann, a former banker with the German state-owned bank WestLB, is already there. He and a business partner from the northeastern German region of Mecklenburg are farming an area of 29,000 hectares 400 kilometers (250 miles) south of Moscow. His "Rheinland Farm" produces brewers' yeast, seed grain and wheat. "The Russians practically forced the land on us," says Hohmann, adding that the business already achieved profitability some time ago. Not far from his farm, three farmers from Ingolstadt, in Bavaria, are cultivating a total of 4,000 hectares -- and they plan to expand. 

Some 23 million hectares of fertile farmland is currently not being used in Russia. Much of this land is in the coveted Black Earth Region. In the early 1990s, after the fall of the Soviet Union, collectives everywhere went bankrupt, and the country was forced to import grain. The Kremlin has since made agriculture a top priority, and it is openly recruiting Western expertise. 

Its efforts have been successful. When Bavarian Agriculture Minister Helmut Brunner returned from a tour of Dürr's vast farms, he was so enthusiastic that he practically called upon Bavarian farmers to leave the country. "The Russians have made it clear that they want more Bavarian farmers," Brunner said. more

Citizens United – The Sedition of the Roberts 5

Two attorneys involved in defending Occupy Wall Street make a very interesting argument that the notorious Citizens United decision does NOT rest on the concept of corporate person-hood, and therefore the effort to get a Constitutional amendment ending corporate person-hood is a waste of time and resources.

While I disagree with their opposition to a movement to declare corporations “not human” (or, even better, “inhumane”), the two attorneys, Rob Hager and James Marc Leas, do force us to find firmer ground on which to combat the pervasive and perverse influence of money in politics. I think that ground can be found by returning to the ideas of the American Revolution concerning the best form of government being a republic, and identifying the money in politics as being the result of new oligarchies having come into being – remembering that oligarchies are always and everywhere hostile and inimical to a republican form of government.

This issue of a republican form of government will come up more and more frequently, as the one percenters move to impose increasingly dictatorial political restraints in their effort to control the or even avert the social explosion being brewed by their continued looting of the economy. Recall that in early December 2011, Representative John Conyers requested U.S. Attorney General Eric Holder to determine whether Michigan's new state law that could place Detroit and four other cities in Michigan under the control of an unelected emergency manager violated violates Article 4, Section 4 of the U.S. Constitution guaranteeing to the states a republican form of government.

Saturday toons 21 JANUARY 12

The cartoonists have been very good recently because in my mind, the story of this election is the story of Mitt Romney as a vulture capitalist—Gordon Gekko explaining to Bud Fox why he was wrecking Blue Star Airlines in spite of his promises not to, "Because it was wreckable."  Can it be possible that the citizens of the USA will vote for a corporate raider—someone who personally destroyed their lives and got extremely rich doing so?

What was so utterly loathsome about the raiders was how casually these sociopaths destroyed vital industries that took sometimes four generations to build.  So now the pirates are going to scream "If you are against seizing and destroying assets—you are against holy capitalism!"  And the papers and pundits will shuck and jive around this issue.  But facing the apologists for this crime spree is an irrefutable fact—there IS a difference between up and down, between building and destroying.  I am betting reality wins this one.

Of course, Romney is an example of another persistent scab on the face of the Republican Party—the idiot sons.  W. raised the bar but he has plenty of company.  George Romney (Mitt's father) made cars—cars so ugly and badly-made American Motors is out of business but at least he made something difficult.  Mitt gave us Staples—a big box office supply store—and wrecked a whole lot of other enterprise.  The slippage between George and Mitt Romney utterly trivializes the slippage between W. and dad.

So here's to Gordon Gekko—the face of the new Republican Party.  I wonder how well this gang of uber-thieves is going to get along with the fundies.

Citizens United and corporate personhood

Two attorneys involved in defending Occupy Wall Street make a very interesting argument that the notorious Citizens United decision does NOT rest on the concept of corporate person-hood, and therefore the effort to get a Constitutional amendment ending corporate person-hood is a waste of time and resources.

As I read the article below, I thought that more fundamentally, we need to address the issues of what a republic is supposed to be, and how the people are supposed to direct the affairs of the republic through their representatives -- which brings us to the issues of oligarchies and political factions, which WERE considered in the Constitutional Convention and in The Federalist Papers, as I noted in Wealth and Income Inequalities are Markers of Oligarchy.

The "brilliance" of mainstream economists

Larry Summers is the perfect example of what an economist looks like these days.  This man was once the youngest person to ever get tenure at Harvard.  He has not one but two uncles who have won the Riksbank Prize (Nobel) in economics.  Not surprisingly, he has been disastrously wrong about just about everything he has ever written about—which might be a problem except that economics these days is a "profession" where the surest route to the top is to have been involved in nearly every crackpot decision made in the past 35 years.  That's our Larry.

In a normal world, a guy like Summers would have long since been retired to a home where some poor minimum-wage caregiver has to change his drool buckets every shift.  But economics is more than just another fail-upward gig, the occupation has so ruthlessly run off the sane that there are almost no alternatives to the neoliberal mouth-breathers.  This means a potential replacement for Summers isn't some brilliant Institutionalist who wrote his Ph.D. thesis on market failures and has done amazing work on the factors contributing to structural underemployment—because those people mostly don't exist anymore.  So if you need an economist to run the World Bank and don't pick Larry Summers, you are almost certain to get someone who is just as goofy only without the pedigree or CV.  Or the "brilliance."

Hungary—well that was fast

This is what a 'thoughtful' observer in the mainstream press was saying about Hungary only a week ago.  The Prime Minister is called an "authoritarian populist."  (Oh horror!)  It warned of a default.  It warned of a breakdown in talks between the IMF and the government.

I would not be the least surprised that the bondholders are worried.  After all, there are almost 200 nations that could default any day now.

Slapping the little guys back in line

After watching the banksters swagger around, looting and pillaging, for over a generation, I have pretty much decided that the most we can hope to achieve in controlling these criminals is serious regulation.  I still applaud the wag who suggested that "the regulation of the financial services business should be so comprehensive and strict, the head of Goldman Sachs would have to get a hall pass from Marcy Kaptur to take a dump." But in reality, I would settle for financial services being treated like a regulated utility.

But look what happened to Hungary when she attempted to put some restrictions on the "sacred" independence of the central bank.  The EU has stepped in to explain how her government will be allowed to run.   Actually, the restrictions Hungary wanted impose are very reasonable—which pretty much means my reform wish list will never happen. (sigh)  I especially liked the part where central bankers were required to swear a loyalty oath the the country.  Imagine asking a central banker to place the well-being of his country above the institutional needs of the central bank. (the horror)  Gotta bring the big guns down on that!

Bankster bashing for good reasons

The bad guys are worried.  After making off with the world's assets and crashing the real economy, the banksters are suddenly concerned that maybe people really ARE pissed at them.  This precious little piece from the Economist wants everyone to know that even just sending these pirates to jail would be so over the top.  Because banksters are really not simply a gang of ignorant rapacious thugs, they are a responsible group of misunderstood geniuses who go to work every day with a goal of social betterment firmly fixed in their steely gazes.  Or words to that effect.

Rising food prices accelerated by speculators

Cheap food—the ultimate bribe to 99% in USA.  It has been official government policy since I can remember.  I grew up hearing farmers curse cheap food policies.

But food isn't so cheap as it once was.  Could we ever see "first" world food riots? I have no idea but I do know, letting speculators in on this action is going to make things MUCH worse.

The Great Decline (consolidated)

This past week, I have attempted to briefly summarize why the prosperous USA of my youth no longer exists.  This is a HUGE subject so naturally, a lot of things were left out but considering this is a story that most people missed even though they lived though it, it's a pretty good basic primer.  So today, I am mushing all six articles together into a single post for the convenience of anyone who wants to pass this history around.

There are many reasons why folks missed this major change in the fortunes of a nation.  Economics is poorly covered by the mainstream media.  Economics is a subject shot through with specialized jargon.  The 1% who actually benefitted by these economic changes controlled many of the communications channels so many of the greatest disasters were presented as a necessary improvement.  Etc.

Thanks to all who have already commented.

Saturday toons 14 JANUARY 12

Today we see the cartoonists take on the interesting topic—will USA elect as President a man who has made his pile as a vulture capitalist?

The war on Producers

The whole point of deregulation was to make it possible to organize massive plunder and not go to jail.  All other reasons proffered are just so many distractions.  At the start of the Reagan administration, there were still a lot of heavy assets to loot.  There have been books written about this era—some of them very good—and there will be a lot more.  The reason is simple—the era of neoliberal plunder of real assets and the deindustrialization that followed represented a historical reversal of a national pro-industrial development strategy that goes back to those inventor founding fathers such as Jefferson, Franklin, and Tom Paine.

During the madness, it mattered little how well an industrial concern was managed.  Loyal customers, good products, great research teams, whatever—didn't matter to a raider.  In fact, suppose a company had set aside a nice nest egg to pay for the development of new products.  In the world of Producers, this made such a company a shining example of industrial capitalism.  In the mind of a raider, this nest egg was what he intended to grab during the hostile takeover.  The idea that the "restructuring" specialists only destroyed the weak and deserving is utter nonsense.  Lots of fine companies were destroyed.  Not merely stolen—destroyed!

It was during this era that USA lost its economic muscle.  I am not going to try to summarize the destruction or highlight some especially bad actors because in truth, EVERYONE got sucked into the madness.  Union pension funds were used to destroy the very industries that would pay future pension costs.  Environmental NGOs invested their endowments in currency swaps.  City administrators bought junk bonds because the higher return meant raises down at city hall without raising taxes.

Bad theory becomes law

The whole point of changing the teaching of economics was to make it acceptable to trash the regulations that had been put in place during the New Deal to prevent another Great Depression.  And as would become readily apparent, these regulations had been put in place to address real needs.  Well written and administered regulations lead to more scientifically advanced and prosperous societies because regulations protect and permit honest entrepreneurs to thrive.  The more complex the society, the more of these honest people it takes to keep all the parts working.  Take away the rules and the cheaters will drive out the honest operators.  The only historical outcome of "deregulation" is a rise in corruption of all forms and a destruction of industrial potential.  Pretty much describes the past 35 years, huh?

Deregulation in all its forms has been an ongoing project.  There are literally countless examples.  This is just my list.  I have also created a separate category for the decriminalization of usury because this involved special levels of cultural warfare.

The new reality

Peak Oil presented the USA model of prosperity with a VERY unwelcome dilemma.  In any era where energy supplies are rising and prices are falling, big sprawling projects are possible.  Interstate highway system—no problem.  Urban sprawl—no problem.  A two-ton car for every adult in the land—a goal to be cherished.  But when energy prices rise, making big heavy things for a living becomes risky indeed.  Anything that was called a "heavy" industry had encountered a major roadblock.

So while major industries like steelmaking staggered under the new reality, the enterprises that made the small and light thrived—most especially those associated with the computer industry.  The daily output of an automobile factory required trains to haul away—the daily output of a microchip factory could probably be packed in a van.  And then there was software—a vital requirement for computers that was actually weightless.

In short, there was a real economy reason why the steel mills of Reading Pennsylvania were shut down and left to rust while companies like Microsoft became the darlings of the financial press.  But these changes were about to be accelerated by that ultimate in weightless enterprise—financial "services."

So what? you say.  Out with the old—in with the new.  Creative Destruction is a good thing according to various economic gurus and replacing steel mills with traders in the various manifestations of weightless electronic money is probably an environmental benefit.  What's not to love?  Well two things actually.

The foundations are laid for the Great Decline

The Great Prosperity following World War II was product of many forces but was based on the material wealth churned out by the amazing productivity of the American Industrial System.  As late as 1962, USA made more things than the rest of the planet combined.  As a result, we were a creditor nation and had a massive trade surplus.

But the 1960s saw an explosion of overseas expenses—most notably for wars of imperial aggression.  Yup, Vietnam.  (I have a friend who believes the decline of USA was the direct result of the "bad karma" we earned invading Vietnam.  He has a point.)  As the trade balance tipped into negative territory, something very important happened to the real economy.  In 1970, domestic oil production peaked.  After that, the oil bill would contribute ever larger amounts to the trade deficit.

Did economics once work better?

Of all the wrong-wing gibberish, the most annoying is the claim that we Progressives are just dreamers who don't have a track record to run on.  Wrong.  We have a track record that is the envy of any political movement ever.  When it comes to economics, WE are the grown-ups in the room.

In the days to come, I intend to explain how a system that produced significant prosperity was destroyed and the events that destroyed it.  This is a pretty big project so today, I post an introduction that outlines the basic historical contours.  We will get to the specifics soon enough—starting tomorrow when I intend to discuss the decision to allow free-floating currency exchange rates and the impact of domestic Peak Oil in USA

A blueprint for a dump

One of the things that always fascinates me is talking to folks, say, 35 years old and realizing that the USA that I grew up in doesn't even exist as a possibility for them.  It hasn't existed at any time during their lives and since the teaching of contemporary history is virtually non-existent in the country, the ONLY possible way that USA could exist in a 35 yo mind is if they got very lucky and read some good books.

My father was poor as only a small-town preacher can be.  During much of my childhood, he made $300 a month.  There were six of us.  We did get to live in a parsonage so housing was free but there wasn't much left over in any month and it was always welcome when a farmer from church slipped some fresh food into the car.  But this was not poor by any stretch of the international definition of poor.  We children went to well-lit, well-heated mostly new schools that had music, art, and science departments.  Our house had central heating and indoor plumbing.  We had a telephone.  Even though we didn't get television until I was a high-school sophomore, we had radio and a record player.  My oldest sister took music lessons on the piano, flute, double bass, and pipe organ becoming proficient in all of them.

When it came time to go to college, I had a big land-grant university waiting for me that charged $125 in tuition and $300 for a dorm room each quarter.  Jobs within walking distance of campus paid at least $2.00 an hour and because I knew how to build houses, I could get $4.00 an hour working construction during the summer.  Do the math.  It was a lot of work but it was possible to self-finance a university education.

And about those jobs.  In the fall of 1969, I got a part-time job delivering critical care medical equipment.  In the spring of 1970, I got into a hassle with my draft board and would up dropping out of school (long story).  In three month of working full time at the medical delivery service, I was able to save up enough money so I could spend the whole summer hitchhiking through Europe—one of my most profoundly significant life experiences and one only the children of the truly wealthy can afford now.

The other astonishing memory was of a house I helped build the summer I graduated from high school.  It was a modest affair for the times—three bedrooms, a full bath, kitchen, dining room, living room, central heating, a full basement, and a two-car garage.  It would cost the new homeowner $18,400 ready to move in.  Here was the interesting part—the guy we were building it for worked on the line at the local shoe factory doing things like pulling lasts and stitching soles.  Sometimes he would come by after his shift to watch us build his house.  He always looked very tired.  I am sure he earned every cent he made at that factory twice over but he was getting a brand-new house that was literally beyond the imagination of some teenaged girl toiling endless hours making shoes for Nike in Indonesia these days.

Today these things seem to me like a fantasy and I lived through them.  I grew up in a nation that went to the moon just because we could do it.  I was there when the Interstate highway system was new.  I remember when the Boeing 727 brought the jet age to small airports and dozens of other aviation triumphs that culminated with the 747 in 1969—still considered the best subsonic transportation plane ever designed.  The optimism was so heady, my high school graduation speaker (1967) promised our class that we would be the last humans to walk solely upon planet earth.

Well obviously, that USA doesn't exist any longer and so I have decided, as a new year's project, to explain as best I can the economic, social, political, and cultural changes that destroyed the country of my childhood.  None of this is new.  All of the events I will describe happened in public.  In fact, the only reason this isn't common knowledge is because contemporary history is not taught.  I am calling this tale of extended disaster "a blueprint for a dump."

Saturday toons 07 JANUARY 12

As the New Year staggers in, we may have become slightly more aware of our condition but not much else has changed.  Note that one of these toons is from 2004.  And yes, the Brits still hate the French and the Germans—imagine that.

Peak oil and climate change hits food prices

Yesterday, temperatures shattered all high-temp records for January here in Minnesota.  In Rochester, the record was broken by 15° F.  That's not merely breaking a record—that's demolishing it.  It has been said that the further you are from the oceans, the equator, and sea level, the more noticeable the effects of climate change are likely to be.  We don't have a lot of elevation but we are in the middle of a large continent and are half-way to the north pole.  15° F!

None of this would matter so much except that we grow a LOT of food around here.  15° F hotter than usual is amusing in January.  In July, it would cause a catastrophic crop failure.  Last year, we had a difficult growing season.  Spring was cold and wet.  Some planting didn't get done until June.  Then heavy rains washed out many low spots.  Finally, by the end of July when the corn began to pollinate, the weather turned very hot.  It turns out corn does not pollinate when the temps are above 90° F.  So when the sweet corn came on the market in August, you could see the damage cause by that "minor" heat wave—the ears were not filled out with about 2" of the tip un-pollinated.  Three days of excessive heat and the corn yield suffered by 10-20%.  It turns out we don't actually need enough climate change to turn Minnesota into the Sahara.  Just a small change is enough to cause tremendous problems.  This also applies when a 2" rainfall becomes a 5" flash flood or when a 30 mph windstorm becomes a 60 mph blow.

And you watch—even with these looming catastrophes, neither Peak Oil nor climate change will rate even a passing mention in this fall's elections.