Friday, November 28, 2014

Germany starts to feel the sanctions' bite

Well, this was like predicting the dawn.  The German Leisure classes have been surprisingly enthusiastic about inflicting sanctions on Russia.  In that, they are almost identical to the USA Leisure Classes.  In fact, there have already been accusations that some of the extreme right-wing garbage that has emerged from an otherwise fundamentally sound German media has in fact been written by the CIA.

What is especially interesting about this is that Germany had become an almost perfect prototypical Producer Class state.  Up until WW II, Germany had been a pretty even mixture between her phenomenal industrial power and her historical Prussian militarism.  After the war, Germany's militarism pretty much disappeared under a serious program of de-Nazification and her industry was forced out of military production.  Then in 1969, the Social Democrats won an election and the immediately began a program of trade with the USSR they called Ostpolitik.  Suddenly, it was official government policy to trade with the East.

However, as neoliberalism started to make its comeback in the 1970s, the institutions of militarism and the other Leisure Class manifestations of force and fraud began to make a comeback too.  And so, there was a fertile climate for starting Cold War 2.0 in the non-industrial elements of German society.  However, Ostpolitik and similar social /political movements had resulted in a situation where there were now 6200 enterprises doing business in Russia. For many of them, their Russian business was the difference between making and losing money.  Not surprisingly, these people are furious over the sanctions.

Anyone who has any doubt that the most significant class conflict has always been between the Leisure and Industrial classes need only look at German politics these days.  This conflict threatens to sink the Merkel government and redraw Germany's political landscape.  If the German industrial classes prevail on this one, it will be a mighty victory in the struggle against neoliberal insanity.

German Businesses Suffer Serious Fallout as Russia Sanctions Bite

Economic fallout from the conflict in eastern Ukraine has forced small businesses to seek insolvency protection

Chris Bryant (Financial Times) Stefan Wagstyl 27 NOV 2014

This article originally appeared at Financial Times

Alexander Schuke Potsdam Orgelbau has supplied pipe organs to cathedrals and concert halls for almost 200 years, surviving a wave of upheavals including war and nationalisation under the communist regime of the former East Germany.

But the economic fallout from the conflict in eastern Ukraine has forced the family-owned company to seek insolvency protection. Its problems arose after Ukrainian and Russian customers failed to pay for two instruments that took months to build, leaving the company some €400,000 out of pocket.

“A small company like ours cannot withstand that kind of shortfall,” says Matthias Schuke, chief executive. “We’ve never known something like this. We know Russia as a very reliable partner.”

Germany’s close business links with Russia, in part a legacy of its cold war Ostpolitik, were once a source of growth and profits. But they have become a vulnerability as the international sanctions (which include banking curbs and restrictions on the export to Russia of energy-related goods and technology with potential military application) championed by Angela Merkel, German chancellor, start to bite at home.

German exports to Russia fell 16.6 per cent to €20.3bn in the first eight months of the year. Euler Hermes, the credit insurer, expects a full-year decline of 20 per cent, which would equate to a shortfall of €8bn compared with the previous year.

Ralf Meurer, head of its German unit, says that at companies particularly dependent on Russian sales, “the situation is very dramatic”. Insolvencies could rise in the second half of this year, he warned.

Germany’s machinery sector has been particularly hard hit. Russia is the fourth most important export market for German machinery and plant technology. Sales were worth some €7.8bn last year but are drying up.

At Herkules, a family-owned machine tool maker based in Siegen, western Germany, orders from Russia have fallen by half, due largely to the economic downturn that has seen the rouble slump and local bank finance become harder to obtain. The country normally accounts for 15-20 per cent of the group’s €165m annual turnover.

The German business sector had hoped Russia and the EU would quickly settle their differences over Ukraine, but as the conflict grinds on this is beginning to seem a pipe dream. “The sanctions will remain in place for a long time,” warns Anton Börner, president of the BGA, the German exporters association. “We won’t get rid of them . . . Rather they will get tougher.”

Although Russia accounts for less than 3 per cent of Germany’s total exports, some 6,200 German companies do business in Russia and the uncertainty threatens jobs, says Ulf Schneider, managing partner at Russia Consulting in Moscow.

“If you ask people whether they see the crisis over in a year or two, nobody can predict this,” he says. “I see the risk that companies will lose hope for better times and may part with some of their workers.”


Around 300,000 German jobs depend on trade with Russia. Vladimir Putin, the Russian president, was careful to remind the German television audience of this number in a recent interview with broadcaster ARD. “Sooner or later it will begin to affect you as much as us,” he said.

IKA, which supplies a granulate for plastic window frames, is dependent on Ukraine and Russia for two-thirds of its €35m in annual revenues. Because of the crisis, it expects Ukrainian revenues to fall by half this year and Russian sales to decline around 30 per cent.


Reinhard Beck, chief executive, says his Ukrainian customers are having difficulties converting local currency into euros to purchase imports, while the rouble’s decline makes IKA’s products very expensive for Russian customers.

“If the situation remains the same we will have to move from a three shift to two shift operation,” he says. “Our assumption is we’ll have to talk about redundancies in the new year. ”

Stefan Dastig, general manager at Maschinenbau Dahme, a family-run supplier of agricultural machinery components, says he could have to let about 10 per cent of his staff go as the Ukraine crisis hits demand for tractors and harvesters.

Meanwhile, carmaker Opel is cutting a quarter of the jobs at its St Petersburg plant in Russia and Volkswagen has halted production for several days at its Kaluga factory. VW’s Seat brand is pulling out of Russia altogether.

JenOptik, the eastern Germany-based maker of laser and optical systems, which has 3,500 staff, warned in its interim report earlier this month that export restrictions had hit sales at its metrology and defence divisions. In October the company lowered its full-year sales and profit targets.

As business with Germany becomes more difficult, German companies fear their Russian customers are turning elsewhere, in particular to China.

“The risk is that this is not a temporary effect,” says Mr Schneider. “Companies worry it will be very difficult to get business back later and rather it will be lost in the long term.”

For this reason, Mr Beck says, sanctions are counterproductive for Germany. “Russia and Germany had a good relationship,” he says. “The government’s policies are too much against Russia at the moment.”

But for some, wider political concerns trump business difficulties. “I support sanctions 100 per cent,” says Christoph Thoma, who heads Herkules.

“If Chamberlain had imposed some sort of sanctions on Hitler things would have been different. Both Hitler and Putin held Olympics, and after his Olympics Hitler went to war. If things go on like this our children might have to go to war.” more

Thursday, November 27, 2014

William Black on economic illiteracy at NYT

To call neoliberals economic illiterates may seem a bit harsh.  But what else can you call people who subscribe to a set of ideas that have been so thoroughly discredited on a regular basis since at least 1873?  The historical record demolishes any claim they may have that their economic beliefs will benefit anyone except a hyper-tiny minority.  And IF the USA government had allowed these people to fail as their own "rules" demanded instead of bailing them out, even the 0.01% would have become victims of neoliberal stupidity.

The crazy noise put out by the New York Times—along with the the rest of the big players of USA "journalism" like the Washington Post—have been so consistently wrong about just about everything for so long, the only reason they exist anymore is because the useless rich enjoy owning loud voices that are anxious to glorify their greatness.  They don't care if such a venture loses money.  There are mobs to distract and disarm, after all.

Unfortunately for planet earth, it will not survive on a diet of neoliberal bullshit much longer.  Fortunately, we do not have to reinvent the wheel to find a better alternative.  The economic thinking that brought about the greatest prosperity in human history may have disappeared into dusty book collections, but it has not gone away. I try to celebrate that wisdom every day on this blog!  The lies of the neoliberals may be relentless but they're still utterly wrong and following them is mathematically certain to create regular economic catastrophe.  Of course we can do better.  People no more sophisticated than our great-grandparents brought FAR better ideas into existence than ANYTHING they have taught at Harvard or Chicago in the past 25 years.

Wednesday, November 26, 2014

Do people really want Cold War 2.0?

With all the talk about a new Cold War, I recently found myself looking at something I wrote in 1993 expressing my profound disappointment that Cold War 1.0 had never really ended.  It turned out that the lies necessary to keep that madness alive had embedded themselves so deeply in the USA consciousness, they still affected public policy long after they outlived any reasonable ability to describe life in USSR or its satellites.  Not surprisingly, there was NO ONE who would predict the fall of the Berlin Wall or the dissolution of the Warsaw Pact in spite of $Billions spent collecting "intelligence."

Well, its 21 years later and folks are being told the same lies about Russia they were once told about USSR.  And why not?  They still work.  It takes a long time for people to alter basic beliefs.  It required over 300 years for Christianity to absorb the Protestant Reformation, after all, and it didn't even touch on any really important belief differences.

There are two essential reasons why an essay this old holds up so well.  1) Not much has really changed when it comes to global thinking on the part of the USA elites, and 2) Institutional Analysis forces us to look at the really important forces moving societies.

An interesting historical note here: The talk about Cold War 2.0 comes roughly 22 years after the supposed end of Cold War 1.0.  This is also approximately the interval between the end of WW I and WW II in Europe.  Same war—different weapons.  The people pushing Cold War 2.0 are every bit as insane and dangerous as the folks who thought the World War I had to be fought to its blood-drenched conclusion.  They deserve every bit of any contempt the rest of us can muster.

Tuesday, November 25, 2014

Watching neoliberalism crash and burn

Any American who does some international travel with anything like an open mind will soon discover that most people in the rest of the world have better educations because they worked harder in school, speak more languages, and have a better grasp of their place in the world because they know more history and geography.

I remember the night I had this reality hit me in the face like a bucket of ice water.  It was early July 1970, Ostend Belgium.  I had been in Europe for about three hours and was spending my first night in a youth hostel.  I was nervous and pumped in my determination to not be an ugly American.  I figured our war against the Vietnamese pretty much covered that topic—I certainly did not want to add to the problem.  I wandered down to the common room where young travelers from around the world had formed several informal discussion groups.  The topics seemed to include getting by on the cheap and potential interesting destinations.  And there was one on world events with a heavy doses of the sexual, music, and cultural revolutions, 1968, and the biggie—Vietnam.  Yes indeed, I chose to join the group debating world events.  Since I had spent nearly two years trying to figure out an appropriate response to USA warmongering, I thought I could bring some insights from the peace movement.

As someone who had spent most of my life being the most informed guy in the room, I had few doubts about holding my own.  But within minutes it became abundantly clear that in this room, I was the village idiot.  At first I didn't like it at all.  (In fact, I disliked it so much I would spend the next forty years reading a least three serious books a week trying to "catch up")  Then it dawned on me that if I really intended that this trip was going to be a learning experience, I should be delighted my "teachers" were so smart and informed.

That summer, I spent a lot of evenings in youth hostel common rooms marveling at the creatures who had obviously taken their high schools more seriously than anyone I knew.  I already knew MY high school experience had been a grotesque waste of time—now I saw the results of all that goofing off.  And yet, I came from the superpower.  Our economy was so powerful it meant that if one was careful, it really was possible to tour Europe on $5 a Day, as the book claimed.  We were the folks who just put men on the freaking moon.  And yet, students my age were not responsible for any of that greatness.  Whatever had allowed our forebears to rise to the top of the economic pile was not in evidence in our American Graffiti behavior.  If what was on display in those common rooms that summer was typical, there was absolutely no reason why our stay at the top of the heap was going to be anything but short-lived.

Being rich makes you lazy.  And careless.  And while there was plenty of poverty in USA, 1970 was a year when USA was as historically rich as any nation in history.  If I the son of an impoverished rural clergyman could be making a three-month grand tour of Europe, then we were rich.  We were so rich we didn't even have to think about why we had it better than everyone else.  We didn't have to think about anything serious at all.  We would become the first generation in history that thought a meaningful life could be had by indulging in an infinity of entertainment and play.  Veblen's Leisure Classes had become nearly universal.  We goofed off in high school because we had come to believe that goofing off was life's goal.

Unfortunately, the real economy does not do well goofing off.  And so the fall from economic grace gains speed.  Remembering what I saw in 1970, I am not the least bit surprised.

Monday, November 24, 2014

Why George W. Bush and Barack Obama had almost identical presidencies

Or, Why ignorance is rational (see last paragraph)

I spent much of the summer of 1966 in Washington in the home of a young couple who were determined to become permanent, highly-paid public employees.  Listening to those two recount their day over supper made me highly aware that their choice of career paths was going to be a success or failure based on how much critical, "insider" knowledge and influence they could accumulate.  Because they so obviously enjoyed the process of understanding how the permanent government actually worked, it was pretty easy to guess that they would soon be high-level civil servants.

Contrast these folks with your typical newly-elected official.  Dazed from a grueling campaign, he or she arrives in DC with ideas of how they want the government to work for their constituents—but without even a basic idea of how to organize their new office or even where they should park their car.  Not surprisingly, they are WAY in over their heads when it comes to doing something difficult like changing a long-established policy at the State Department.  The folks at State are not exactly sitting around waiting to implement new policies proposed by a freshman Senator—they are trying to minimize any disruptions from the outside.  The contest is so unequal that it really isn't even a contest.  The politician loses.  That he or she loses isn't a matter of some vast conspiracy to thwart the people's will—it's simple Institutional Analysis.

Which is really, REALLY bad news if the times demand new thinking or a change  in public policy.  The unfortunate reality is that when change is super necessary, that is when the holders of conventional wisdom really dig in their heels.  Instead of bursts of innovation, we get more extreme versions of what caused the problems in the first place.  So we see the EU make ever more extremely ignorant economic decisions.  We see USA / NATO make even more aggressive moves against Russia because Cold War thinking is all anyone in the permanent government knows.  I discovered how true this was back in the early 1980s and yet I thought in 1991 when the Warsaw Pact went out of business that the Cold War had come to an end.  Unfortunately, it has taken my whole life to appreciate the staying power of the conventional "wisdom."

Sunday, November 23, 2014

The preservation of archaic traits—monetary thinking

One of the great frustrations caused by the contemporary practices of economics is that while the world has actually converted to a fiat / electronic money system that would have utterly delighted the most loyal members of the Greenback Party, the people who run monetary policy and vote on publicly financed programs think and act as if we are still on the gold standard.

I once watched Ron Paul describe his thinking on money and his related critiques of the Federal Reserve.  He was surrounded by acolytes who were nodding their approval.  At one point, Paul said ominously, "the problem is that the money the Fed creates isn't backed by anything!"  (What makes money valuable is the issue the Greenbackers—and similar—addressed for years and is the primary focus of my chapter on money in Elegant Technology)  One follower started nodding so vigorously that it looked like he might literally lose his head.  This crowd was suffering from a theological attachment to the gold standard that was so irrational, anything that smacked of fiat money to these believers was certain to provoke the wrath of God himself.  In their minds, not only did they have reason, but virtue, on their side.

Well no!  The reason there is no more actual gold standard is that reasonable people have long understood that it is a primitive and incredibly stupid way to run an economy.  Smart people like Ford and Edison once said as much in public.  If reason actually prevailed, Paul and his acolytes would be escorted back to their padded cells.  But reason is a minor consideration compared to the arguments over virtue.  Gold standard thinking even in the absence of a real gold standard is the primary reason why the EU is absolutely crippled these days by people who actually believe that austerity leads to growth.  A whole generation of young people are being sacrificed on the alter of primitive monetary thinking and the ghouls who believe this ridiculous tripe are causing catastrophic levels of human misery.  These people are FAR from virtuous.

Veblen often bemoaned the preservation of archaic traits—human responses to the world that may once have been a part of a successful survival strategy but now just get in the way.  Pretty hard to top the attachment to primitive, pre-industrial thinking on money as a prototypical archaic trait.

Saturday, November 22, 2014

BND and the North Dakota fracking boom

Oil booms tend to be messy and chaotic.  They tend to attract too many get-rich-quick artists who soon overwhelm the local infrastructure.  Suddenly there are not enough housing units or schools and the enormous movements of heavy equipment tend to chew up roads.  In the case of North Dakota, its population is only in the 600,000 range so while local governments tend to be largely uncorrupted, there are rarely enough police to cope with the problems that show up with rootless groups of mostly lonely and unattached men who are making decent incomes without a lot of places to spend it.

Outsiders look at an oil boom and usually envy those close enough to make money from it.  But for most of the locals, it merely means sky-high prices for basics like food and housing, over-crowded schools, increases in crime, and traffic jams of very large trucks causing delays and depleting funds set aside for road maintenance.  Not surprisingly, the locals grow to resent the oil outsiders very rapidly.  In places like Ecuador, this resentment has roared past lawsuits and political movements to open conflict involving weapons.

North Dakota has handled the chaos and disruption of the fracking boom amazing well—all things considered.  The climate is so harsh, only the hard-working and diligent tend to stick around.  The fracking itself happens in very deep wells far below the aquifers which tends to minimize the environmental conflicts.  The sparse population means there is room for a lot of development without crowding anyone out.  But it also has an economic ace in the hole—the State-owned Bank of North Dakota (BND) that has minimized the problems caused to the state's physical infrastructure.  It is a development bank which means expanding infrastructure is one of its primary missions—one that has been successfully exercised for decades.

Ellen Brown, the BND's biggest booster looks at how it has coped with fracking and discovers a public bank with better returns than Goldman Sachs—not bad for an institution created by hard-pressed farmers who were barely surviving the economics of the early 20th century.  The agrarian Progressives had a laundry list of demands going into the election of 1916 but at the very center was their demand for a democratically-run bank.  It is why I argue that the Non-Partisan League was, hands-down, the most successful progressive political movement in USA history and arguably the history of the world.

Friday, November 21, 2014

Escobar on G7's neoliberalism

As one of the world's preeminent journalists, Pepe Escobar has for a long time covered the crazed, destructive actions of the large neoliberal institutions as they organize the looting of the global south.  In spite of the fact that there must be moments when he has seen too many victims with ruined lives, he keep pressing on with surprising amounts of humorous scorn which he heaps on the smug, self-satisfied economic lunatics who clearly have NO idea how much damage they cause or if they do, clearly do not care.

The only thing that keeps driving someone so aware has to be a flicker of hope that someone, or a group of someones, will someday be able to stand up to such evil and ignorance.  With the rise of China and the re-emergence of Russia, that flicker of hope these days seems a bit brighter that a group of someones will finally be able to stand against the destructive economic bullies.  Whether that will happen is still very much an open question, but Escobar's hope is grounded in the reality that the bullies are currently "led" by some of the more inept, lazy, and careless creatures to have ever been allowed near the steering mechanisms of a great empire.  The Obama-Merkel-Camerons of this world may be soon discovering that greed and cruelty, death and destruction, are not enough to thwart the life forces of the world's over 7 billion inhabitants.

Unfortunately, there doesn't seem to be a well-thought-out alternative to neoliberalism.  And as pleasant as the destruction of neoliberals and their whacky ideas might be, getting rid of them will leave a very large hole to fill.  As someone who has spent much of my time and energy learning about the movements formed to combat the defenders of colonialism, feudalism, slavery, and the rest of the manifestations of classical economic thought, I am fully aware how hard such tasks really are.  Not impossible, but very, VERY difficult.

Thursday, November 20, 2014

Putin interview for German television

Though it may feel like not much is happening in the news these days, I get the sense that behind the relentless business-as-usual reassurances that come from the big corporate media here is USA, some big things are rumbling to life and I intend to watch them closely.  They include:
  • While the real economy has been in a major decline since the crash of 2007-8, the world of finance has done quite well.  This disconnect cannot be maintained and there is a large chance that the big monetary authorities like the Fed and the European Central Bank will do something monumentally stupid which will crash the electronic money economy down to the level where people are hopelessly in debt, cannot find a decent job, and generally live in a world without hope.
  • Climate change is about to get worse at the same time the deniers like Inhofe will chair the Senate Committee on Science and Technology.  True science does not depend on who believes the evidence.  So even as the facts change, guys like Inhofe will cling fiercely to their pre-enlightenment worldviews.  He can never make things better—only worse.
  • And as preposterous as it may sound, we may be witnessing the final days of the American Empire.  Yes, USA can bring incredible firepower to parts of the world far from it shores, but it is rapidly losing its legitimacy and soft power.  Not only has USA lost its overwhelming industrial dominance, its economic power is severely diminished by its ridiculous levels of debt.  If that weren't enough, Vladimir Putin is demonstrating to the world that when it comes to producing a coherent worldview, USA doesn't seem to be intellectually up to the task.  And while the widening gaps in awareness between USA and China / Russia seem obvious to most sentient beings on planet earth, the citizens of USA seem to believe that W. Bush and Obama and the State Department notwithstanding, this is still a country with elite thinkers.  "We're the essential country, the rest of you have to listen to us."  (Hey, they believe the same garbage in UK and they haven't been a serious empire since the 1940s.)
Below you will find a transcript of a Putin interview conducted by German TV (ARD) conducted last Thursday (broadcast Sunday).  What is especially remarkable is how deeply Putin has thought about some very important topics.  We just went through an election here in USA and I personally saw ZERO evidence that any of the politicians asking for our votes could stay with Putin on any subject for five minutes.  This is scary.  USA is about to get run over by some very big problems—it would be helpful if some folks had Putin's level of awareness.  In the second half of this interview he discusses economics—I have boldfaced the paragraph that I believe shows he really "gets it."

Putin's Sunday Interview on German TV (Dubbed + Transcript)

  • In the last decade US has grown its network of military bases close to Russia and expanded NATO
  • Even when Russia had grounded its bomber aircraft, the US continued to fly nuclear-capable bombers in the vicinity of Russian borders
  • Due to existing deals, the EU-Ukraine Association Agreement would have enabled EU goods to enter Russia tariff-free
  • Germany, France and Poland did not stick by the February 21st Agreement they had imposed on Yanukovich
  • Crimea follows the precedent of Kosovo
  • Ukraine has a future as a large, European country, but for that all its inhabitants must feel at home within its borders
  • Russia does not want special responsibility for Ukraine. Ukraine is independent, free and sovereign
  • Concern that Ukraine tolerates people fighting under SS emblems, fear of possible ethnic cleansing
  • The fundamental cause of conflict in Ukraine is that in the wake of the coup the new central authorities in Kiev sent the army against people who did not recognize them instead of attempting dialog
  • A negotiated way out of the deadlock in East Ukraine is still possible
  • Sanctions have been harmful for Russia and everyone else, but there were some positives as well and the Russian economy has grown regardless
  • "Today there is fighting in eastern Ukraine. The Ukrainian central authorities have sent the armed forces there and they even use ballistic missiles. Does anybody speak about it? Not a single word. ... This points to the fact, that you want the Ukrainian central authorities to annihilate everyone there... we won't let it happen.
  • "Russian banks have currently extended a $25 billion loan to the Ukrainian economy. If our European and American partners want to help Ukraine, how can they undermine the financial base limiting our financial institutions’ access to world capital markets? Do they want to bankrupt our banks? In that case they will bankrupt Ukraine."
  • Russia will not call in loans, wants Ukraine to get on its feet
  • Germany ostensibly wants the conflict in Ukraine to be solved, but has been reluctant to influence its clients in Kiev to this end
  • "We are told again and again: pro-Russian separatists must do this and this, you must influence them in this way, you must act in that way. I have always asked them: "What have you done to influence your clients in Kiev?"
  • Russia and Germany have established a great friendship in the last 10-15 years that it would be a shame to lose.

Wednesday, November 19, 2014

The lessons from a little screw

The first time I encountered cement tile-backer-board was about 1980.  A friend's brother was attempting to remodel a house and gotten himself in way over his head.  So we went to give him a hand and the job of the day was laying floor tile.  The recipe was backer-board over plywood and subfloor, then thinset, and then tile.  The ply was already well-screwed down when we arrived so installing backer-board was the first order of business.  Keep in mind that this product is essentially a thin portland cement slab wrapped in a fiberglass envelope.  This makes it very heavy so it usually comes in a 3' x 5' (92 cm x 153 cm) sheets, unlike drywall that comes in 4' x 8' (or 12') [122 cm x 244 cm (or 366 cm)]  Since most framing in USA is based on 2' centers, 3' x 5' material doesn't match all that many spaces.  So to install cement backer, you will soon need to make a bunch of cuts.

The instructions at the time assured us that we could install backer using the same methods as used to hang drywall—utility knives and screws.  Supposedly, if you scored the sheet through the fiberglass layer, if would break just like drywall.  And drywall screws would snug up just fine.  Well, no.  Between the fiberglass and the cement underneath, a knife blade lasted about two cuts and the cement had a tendency to crumble at the break line.  The latter problem was so serious, any cut less than 2" (5 cm) from the edge of the material was effectively impossible.  I took one look at the cutting problem and volunteered to screw the pieces down.  Turns out that was problem two: drywall screws are not strong enough to countersink their bugle-shaped heads into a slab of cement.  You would just about get the screw to set when the head would twist off—not such a tragedy if it broke off well below the surface of the backer-board but a major headache if it snapped just above the surface.  Then the problem was somehow backing out the busted shaft with nothing to grip.

When I discovered that the plans for our project included cement backer, I cringed at the memory and determined that I would only proceed if there were better solutions for both the cutting and screwing parts of the installation.  As for cutting, the folks at Bosch have developed a carbide-tipped blade for their hand-held jig saws designed especially for backer.  They wanted over $20 for the thing but as my Bosch jigsaw is one of my favorite tools, that decision was easy.  The better screws were also a revelation.  Apparently, I am not the only person who cursed drywall screws for backer installation because someone has devoted an incredible amount of clear thinking to the problem.


The local supply store devotes a whole aisle to specialty screws.  There are stainless steel screws for fastening outdoor treated-wood decking and different screws for composite decking.  There are finish screws that actually replace finish nails. And hiding in this vast array of goodies were the backer screws.  They are teflon-coated to ease their way through the fiberglass layer.  They have square drives which transmit torque without all the down pressure required to keep phillips screws engaged.  And best of all, they have little ridges on the underside of the head which "drill" their own countersink holes.  Yes they wanted $9 for a box of 150 and a drive point, but considering how well they worked, they would have been a bargain at five times the price.

One of the reasons I do projects like this is that they remind me of just how different the Producer Classes really are.  Here are two excellent examples of how they create prosperity.  Cement backer-board is by far the best mounting surface for ceramic tile.  Yet because it was so difficult to work with, there were probably many projects that created seriously expensive waste, and in the case of DIY projects, some were probably abandoned because the going got so tough.  And yet a simple blade and some truly innovative screws turned this irksome task into something that smoothly built to a satisfying and morale-building conclusion.  It is clever little designs like this that are the true engines of human progress.

And if you really want a nice tile job, it should look like this at some earlier stage.  The house framing was still remarkably square after 58 years which is good because tile is very unforgiving when it comes to getting it straight.



And yes, the insulation disaster has been fixed.  2" ridged foam was cut to create a force-fit between the framing and then 50-year silicone caulk was used to compensate for any future problems caused by expansion / contraction.  On top of that, a layer of aluminum-backed foam was placed at a 90° angle to provide a thermal break on top of the studs.  Not surprisingly, even though it was already below freezing outside, the room got dramatically warmer as it was buttoned up.  Hopefully, long hot baths will stay longer and hotter.

Sunday, November 16, 2014

Can a New Silk Road road live up to its hype?

One of the few bits of worthwhile news to emerge from the APEC Summit in Beijing was about the serious commitment that China was making towards a project dubbed, "The New Silk Road."  The original trade route called the Silk Road ran from about 115 b.c. until 1450 a.d. so this is hardly a new idea.  The original route went out of business because of competition from sea traffic.  The new link is often thought of as the rail route between Chongqing China, the largest city in the world and Duisburg Germany, world’s largest inland port.  Rail shipments are twice as fast as transport on the sea route, but only half as expensive as air freight (see: Think RailwaysFurther development of the modern Silk Road linking Germany and China).

The big news is that China is about to spend real money on infrastructure outside its border.  And while the mainstream press pretty much ignored this story, the business press found it at least a little interesting.  Examples include:
Of course, none of this might not mean all that much to the bigger economic picture.  Why? The world may have maxed out on trade.  There are finite advantages to more concentrations of production facilitated by hyper-efficient transportation methods.  Seriously?  Do we really need better methods for shipping auto parts from China to Germany.  Maybe some of that production would be better sourced in Germany.  Besides, sea transportation is already very efficient—so efficient we in central USA can easily afford to buy bluejeans assembled in Vietnam or Bangladesh because shipping costs are measured in pennies.  Just remember, it was called the Silk Road because it mostly trafficked in luxury goods like silk.  It had to—those old transportation methods were VERY expensive.

One of the more interesting things I learned from my brushes with city planning issues was that transportation decisions drive a great deal of economic development.  Part of the attraction of the Silk Road idea is that big links like this change the way people interact with each other.  Not only do they tend to bring peace and prosperity, they change the cultures that touch them.  The original Silk Road certainly did.  And so part of the promotion of this idea is that a hard link between China and Central Europe will bring these people closer together—especially if that hard link include high-speed rail and fiber-optic communications.  Because of my enthusiasm for big infrastructure projects, I have been running into Silk Road partisans since the 1980s.  I met one in Stockholm (1995) who gave me an impromptu hour+ lecture on why the world needed a new Silk Road.  In his telling, a new Silk Road would certainly foster world peace.  He was so enthusiastic, it was quite infectious.  Such folks must be very happy these days.

Saturday, November 15, 2014

Michael Hudson on the APEC Summit

Institutionalists tend to believe that while personalities come and go, institutions abide.  In this case, we are seeing that what was called the Sino-Soviet alliance during the Cold War has been revived in time to respond to the current economic warfare against Russia.  And why not?  An awful lot of effort over the years has gone into building a relationship between those countries and while economic strategies have changed since 1991 for both countries, there are still a lot of open channels that were reactivated or re-energized during the current economic difficulties.

Michael Hudson, arguably the premiere practicing Institutionalist of his generation, was recently in China to watch the APEC Summit.  As you can see if you watch the video, he is amused by how easily and quickly the Chinese and Russia have agreed to a new strategy to counter the economic warfare managed by The City / Wall Street and the rest of the financial power centers.  The moves by China / Russia are incredibly brazen because they go to the very heart of the power interests in the West.  As Smedley Butler, the Marine Corps Major General wrote in his famous 1935 piece, War is a Racket, the military exists mainly to enforce the arrangements of Wall Street.  There are folks who get very upset if someone goes outside the boundaries of acceptable behavior set by the financial institutions.  I am convinced that at least 99% of the Putin-bashing that goes on these days was triggered when he decided to take on Butler's "racketeers"—especially when he had the temerity to throw one of them (Khodorkovsky) in jail.

Unlike many small counties that have tried to escape the "Washington Consensus" and failed, China and Russia will not be so easily bullied.  Russia brings vast natural resources to the party.  Both are industrially sophisticated.  Both have incredibly well-educated populations.  Both have nukes.  And both have been provoked by the banksters over the years so have plenty of motivation to build their economies outside of that greedy and predatory reach.

One Hudson prediction of note here.  He is quite sure that the Republican takeover of the Senate means that the TPP trade pact is likely a done deal in Washington—he predicts that Obama will gladly sign such a pact.  However, he also believes that TPP seems dead as a doornail in Asia.  Since economic control of Asia is the primary goal of TPP, this only makes sense.  However, it is damn difficult to sign a trade agreement if only one side wants it.

Friday, November 14, 2014

Has Europe gotten wise to neoliberalism?

In the following, there is a claim that Europeans are pushing back against neoliberalism.  As well they should for it is a VERY dangerous belief set.  But it is one thing to want to be rid of the evil and hardship that is part and parcel of allowing the Predator Classes to make the economic rules.  Neoliberalism is brought to you by the same sorts of people who enriched themselves through slavery and feudalism.  So overthrowing the neoliberals will be roughly as difficult as getting rid of slavery.

But perhaps the bigger problem is "What comes next?"  Already, we can hear the rumblings of the doctrinaire Marxists warming up their pet theories to explain why neoliberalism is such a failure.  Big problem with that—huge!  Marxism, for all its warm and fuzzy rhetoric about the noble working classes is essentially a Leisure Class set of beliefs too.  Marxism may have been a favorite economic theory of revolutions but those revolutions sputtered and ultimately failed because when it came to organizing the community's necessary work, it was even MORE inept than neoliberalism.

As someone who grew up around living, breathing Midwest Progressives, I mostly just want the Marxists to go away and stop wasting our time.  After all, WE are the people who figured out how to generate genuine prosperity.  We are the ones who developed the great institutions that allowed the maximum number of folks to share in this prosperity.  The reason that Marxism never gained traction in USA is because the home-grown economic teachings were so dramatically superior.

Lest anyone think these claims preposterous I would suggest one thing—read the theorists of USA economic Populism / progressivism.  I especially recommend Veblen (surprise) but knowing about a critically important industrial political economist like Henry Carey is useful too.  One note about Veblen.  There are lightweight academics who compose scholarly texts that assert that Veblen was some sort of Marx-lite.  Nothing could be further from the truth.  Not only was Veblen from a completely different intellectual tradition, he managed to write 10 books without mentioning Marx once.  I challenge anyone to name one person who buys into Marxist ideas who never mentions the great teacher—at least in some footnote somewhere.

Because Veblen understood economic development from the level of creating a civilization out of virgin prairie with hand tools, his ideas about the nature of industrialization were orders of magnitude more profound than anything a technologically illiterate man like Marx could ever aspire to.  Or as I like to put it, "Karl Marx was not intellectually qualified to carry Veblen's briefcase."  So for those who spent a bunch of time and energy learning the fine details of Marx's teachings—sorry you wasted your time.

Thursday, November 13, 2014

Greider on Krugman and free trade

The "free traders" have an ambitious agenda ahead of them in the next term of congress.  A couple of agreements, the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Free Trade Agreement (TAFTA) are almost certain to come to a vote.  Since these two possible trade agreements are conceptually very similar to the grand-daddy of these things, NAFTA, the same sort of tactics are being used to sell them (lying, corruption, intellectual bullying) and the same crowd of opponents (labor, people worried about trade deficits, economic nationalists, historical literates) lining up to fight the good fight yet once more.  Before these last elections, it didn't look especially promising for TPP / TAFTA.  The opposition isn't so easily bullied anymore—especially since we have discovered post-NAFTA that "free trade" is FAR more likely to cause real economic damage than any benefits it may have in theory.  But a large crop of senatorial newbies will probably prove easy pickings for the next round of trade agreements.  And Obama is as likely to sell out to the neoliberals as Clinton was at the end of his presidency—and largely for the same reasons.

The fight over NAFTA was especially traumatic for me.  I saw it as a naked assault by the moneychangers on the accomplishments of industrial capitalism.  I saw it as a threat to our very ability to feed and clothe ourselves because it would promote de-industrialization—which was the destruction of generations of innovative work constructed by the greatest builders to walk the earth for pennies on the dollar.  As I saw it, it was criminally insane.  And yet, to argue against NAFTA was to be branded as a kook.  I did not like the spectacular injustice of that—AT ALL!

Because I was a nobody from noplace, they didn't even bother to acknowledge my opposition to NAFTA.  On the other hand, William Greider was not so lucky. He wrote an insanely great book on the problems of the free trade manifestation of neoliberalism entitled One World Ready or Not: The Manic Logic of Global Capitalism.  For writing this carefully crafted work of thoughtful, investigative journalism, Greider was treated to intellectual bullying by no less than Paul Krugman.  Just because Krugman can be found considerably to the left of much of the economics profession these days, this does not mean that compared to the economic center of thought as late as 1974, Krugman is deep down a hopeless right-wing stooge.  And his treatment of Greider is exhibit A.  Unfortunately, Krugman is WAY over his head in this debate.  Not only is Greider arguably the most important writer of his generation, on this subject he was almost completely right and Krugman was wrong.  So for laughs, Greider here reminds Krugman just how wrong he was.