Thursday, February 28, 2013

Lessons from Italy's election

It's pretty damn obvious what happened in Italy.  An unelected neoliberal economist named Mario Monti was installed as her prime minister a year ago to make certain the German banks wouldn't fail.  The banksters loved his willingness to impose great suffering on the Italian people.  And if they loved him, the bought and paid for economists and their brethren in the corporate press loved him—calling his economic calamities the height of responsible behavior.

Not surprisingly, the victims of EU neoliberalism wanted Monti and his thinking gone!  The question is, How do you do this?  This is an especially interesting question because the folks suffering this time around are the productive middle classes who don't want a revolution, they just want to be able to live their lives and do their work.  So they voted for a professional comedian.  Hey, we did it here in Minnesota and while Al Franken isn't exactly Floyd B. Olson, there are actually US Senators who are doing worse jobs.

And this is what the sober Predator Class press around the world is calling an outbreak of "wildcat populism."  Mercy me.  I believe some of these folks are about to get the vapors.  As well they might—after all, if the victims start exacting revenge at anywhere near the levels of their suffering, things could get seriously ugly for the rip-off artists who have presently gained control of the important economic levers.

But you can relax banksters—I have not seen anyone suggest bringing back crucifixions for you thieving vandals...yet.  So far, they have only voted for an energetic jester.  Get a grip.  And oh yeah, straighten up your act before someone thinks of that crucifixion idea.

Wednesday, February 27, 2013

Bank of Japan is serious about ending deflation

PM Abe is serious about his plans to end Japan's economic woes.  After all, any country that works as hard as the Japanese and produce so much excellence SHOULD be prosperous.  If they are not, it is obvious that something is gumming up the works.  The idea that the "something" is medieval thinking over at the central bank is likely to be spot on.  And why should we believe that prosperity will return with a more enlightened central bank? 1) Historical examples—when progressives like Marriner Eccles and folks like him ran central banks, things got better.  2) We have been experimenting with reactionary neoliberalism since the glory days of Thatcher and company.  Whether you call it neoliberalism or voodoo economics, it is a failure by any objective measure.  We gave it a 35+ year shot—time to try something else.

The most efficient way to change the economic game—by FAR—is reform at the central banks.  We are literally destroying lives AND the planet because we live in societies that select for one of its most important occupations—central banker—people who are profoundly ignorant about how the real economy works, devoted to crazy religious ideas with the fervor of monks, and more arrogant than the Pope's red Prada loafers.

Now IF we can replace the ignorant-devoted-arrogant crowd with folks who understand the problems of nation-building, the rest of us can go back to work and leading our lives.  I mean, we COULD have a revolution or some other civic upheaval but if that revolution doesn't lead to more enlightened monetary policies, it's pretty much a waste of time.  So why not just jump ahead to a better central banker?  And since most of the folks employed by central banks are good sycophants anyway, a change in leadership at such institutions actually makes a big difference.

Getting a new central banker with a different worldview is what Abe intends to do in Japan.  I predict this move will be wildly successful.  There is AMPLE evidence to support this view.  It's good to bet on plans that are supported by both theory and a track record.  I drive a 17 year old Lexus that is still nearly perfect so I get a regular demonstration of what the Japanese believe to be possible.  This is a nation of Lexus-builders—they DESERVE a central banker who understands this.

And it looks like they may be getting one.

There IS an alternative

Margaret Thatcher made famous the saying, There Is No Alternative (TINA) when selling her economic snake-oil to a skeptical public.  So it's fun to read a good Brit explain that there ARE alternatives and they are succeeding quite splendidly in Latin America.  It also contains a shout-out to our man in Ecuador, Rafael Correa, Ph.D. in economics, University of Illinois at Champaign-Urbana—someone who figured out progressive economics somewhere.  The fact that it might have been in the state that gave us the madness of the Chicago Boys is just frosting on a great story.

Tuesday, February 26, 2013

The Italian elections 2013—Populism wins in Europe

The Italian elections are over and the biggest vote getter was Grillo's Five Star movement.  Naturally, the European "elites' are horrified—Grillo is certainly not one of them.  They call him a "populist"—something that crowd always does when someone who isn't of their club dares to advance political ideas.  They have spent years and millions to turn "populist" into a curse word.

Of course, the big problem is that the elites have fucked up—badly.  Their mismanagement of the economy is so wretched, they are damn lucky the rest of us have not started lynching them.  So we blog.  And make fun of them.  And shout in whatever way we can because we're too damn "civilized" to resort to violence.

Here is a sample of stories about the election from the Guardian.  They pretend they are these great and tolerant liberals, but when it comes to economics, they come down firmly on the side of the crooks in The City.  They are their classmates—in school and professional aspirations.  The historical Populists taught us that the opposite of Populism is elitism.  By self-definition, the Guardian is an elitist publication.  It's their business plan, after all.  (I have bolded the examples of Guardian's elitist biases in the clips below.)

So not only do they call Grillo a populist, they belittle his legitimate political gripes by calling him a clown, comparing him to a character in a children's book, and letting us know the Grillo's accomplishments aren't in pointing out the criminality of the "elites," but his effectiveness in mastering a new methods of communication (the medium is the message, ya know.)

As someone who blogs, I am VERY impressed by what Grillo has accomplished.  But let us NEVER forget that beneath his incredible gift for humor, his message is about as profound and serious as humans get.  I think his message is excellent—one can hope that honesty and a war on corruption will seriously damage the elites who rely on fraud to maintain their undeserved status. Whether this desire translates into a concrete program is another matter entirely—he's up against professionals at wrecking things.

Monday, February 25, 2013

Why the rich act the way they do

The past week I have seen a welcome development on progressive blogs: attacks on the rich for their unremitting war to shape public opinion in favor of austerity. On DailyKos, jamess directly targeted Peter Peterson for fomenting a fear of deficits as a means of gutting Medicare, Medicaid, and Social Security. A day later, Ray Pensador posted How Billionaires-Funded Propaganda is Unraveling The Country.

What the rich want to do is simply safeguard their investments made over previous years, or even previous generations. This is quite understandable: we all do it. We "sink money" into a house, or a vehicle, so we decide to "make it last a little longer." The problem for the rest of us arises from the fact that the rich largely control society's flows of credit and money. They will not invest in new technologies and new economic potential unless they know they can control those new things. So, this results in what economists call rent seeking behavior (tip o' the hat to maddagg, for what I consider one of the most important DailyKos diaries, ever. No exaggeration).

Michael Hudson has done extraordinary work explaining how the rich, over the past century, have deliberately corrupted the profession of economics to eradicate the concept of economic rent. For example, see Hudson's Simon Patten on Public Infrastructure and Economic Rent Capture.

Krugman on the Italian elections

While Paul Krugman doesn't find Grillo as charming as I do, he is in total agreement that politicians like Grillo are the logical outcome of austerity policies.

The election results should begin to filter in later today.

The 401k scam

When 401ks began to displace defined benefits plans, I just knew this could not end well.  But I mostly kept my doubts to myself because my yuppie friends and neighbors acted as if they had been invited to play in an exciting new game.  And they had.  It was fun.  I had a neighbor who not only religiously watched Louis Rukeyser (PBS' financial guru), he and his wife even went of a Rukeyser cruise.  One guy subscribed to both Barrons and The Economist.  Of course, being high achievers, they all thought their investments would gloriously outperform the market.

Now their homes are mostly under water and most of their 401k plans are a pathetic shadow of their expectations.  Turns out not everyone can be a millionaire in retirement—no matter what the financial planners were claiming.  Of course, the worst feature of turning everyone into a mini-investor is that millions of people now believed that their interests were the same as Wall Street's.  One of the reasons the bankster's crimes have gone unpunished is that large numbers of people want Wall Street to create some more magic—how it's done is utterly irrelevant.

A writer by the name of Helaine Olen has written a book about the delusions pitched by the world of financial planners called Pound Foolish.  I have not read it but I thoroughly enjoyed the description of the problem on the Daily Show.  John Stewart, the host, is from that world—his brother was once the president of the NYSE.

The interview ran long for the cable show but all three parts are available at the Daily Show site.  The following is Pt. 1.

Sunday, February 24, 2013

Grillo—an Italian Pop?

One of the few things that really annoys me about educated Europeans is their habit of calling anything they believe beneath them "populist."  I have some understanding of the history of the People's Party—the folks who actually coined the word Populist to describe themselves.  So most of the time when I hear an European "intellectual" use the word populist, I just assume he is showing his historical illiteracy.

But this time, they may be right about Beppe Grillo—the surprise politician in the Italian elections today and tomorrow.  Even by my extremely fussy standards, I believe his has earned the right to be called a Populist.  First of all, he embraces the label.
In response, the mainstream leaders had called him all sorts of names: "populist", "demagogue", "megalomaniac", he told the crowd before inviting them to do the same. "One … two … three …" "POP-U-LIST-A", the crowd roared back. It was a neat way of dodging the most pertinent criticism of his movement.
And then there is this.  The real Populists succeed when they are profound.  Ignatius Donnelley himself would be proud of the following from a Grillo rally yesterday:
...Words that had been abandoned for a long time, which had lost their meaning, have become powerful weapons we are using to change everything, to overturn an artificial reality where finance became economics, lie became truth, war became peace, dictatorship became democracy. Warlike words sounding new and old at the same time, such as community, honesty, participation, solidarity, sustainability are spreading like a wave of thunder, and are arriving everywhere destroying the old policy.
Grillo is a real Populist for one obvious reason—the political problems he is addressing are very similar to the conditions of 1892.  Mix that with the perspective of an outsider, and it is not at all surprising that he sounds like a delegate to the Omaha convention.

Saturday, February 23, 2013

USA medicine 2013—the economy doesn't get much more real


My God!  Reality has entered the world of establishment journalism.  They are FINALLY getting to the important question of USA medicine—Why is it so damn expensive?  I mean, if folks could afford it, they would probably love their medicine.

Anyway, this serious piece on medicine's COSTS was written by Stephen Brill and it's what folks used to expect from journalism—thoughtful, informative, well written, comprehensive.  Time freaking Magazine gave it 36 pages!

Turns out that organizing medicine around the economic concept that sick people should be treated as prey doesn't work very well.  It's why the affordability of medicine is one of those issues that should transcend politics.  Yet the medical-industrial complex spends billions on a highly productive effort to corrupt the political process.

Wow—treating the sick as prey not only diminishes health care, it bankrupts a nations and corrupts politics.  Hard to imagine a worse idea.

Bitter Pill: Why Medical Bills Are Killing Us

By Steven Brill Feb. 20, 2013


Taken as a whole, these powerful institutions and the bills they churn out dominate the nation’s economy and put demands on taxpayers to a degree unequaled anywhere else on earth. In the U.S., people spend almost 20% of the gross domestic product on health care, compared with about half that in most developed countries. Yet in every measurable way, the results our health care system produces are no better and often worse than the outcomes in those countries.

According to one of a series of exhaustive studies done by the McKinsey & Co. consulting firm, we spend more on health care than the next 10 biggest spenders combined: Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia. We may be shocked at the $60 billion price tag for cleaning up after Hurricane Sandy. We spent almost that much last week on health care. We spend more every year on artificial knees and hips than what Hollywood collects at the box office. We spend two or three times that much on durable medical devices like canes and wheelchairs, in part because a heavily lobbied Congress forces Medicare to pay 25% to 75% more for this equipment than it would cost at Walmart. more

Saturday toons 23 FEB 13

Friday, February 22, 2013

What do you expect? They're banksters after all

Matt Taibbi is outraged that HSBC bank got away with dozens of crimes that would have put any of the rest of us behind bars for a very long time.  But in important ways, HSBC's behavior is utterly normal and quite predictable.  One of the "crimes" they got away with is the one of laundering drug money.  But think about it, the Hong Kong and Shanghai Banking Corporation was organized and chartered to facilitate the British opium trade in China.  Making the drug trade run smoothly, and more importantly, profitably is built into their institutional DNA.

In this day and age with favorable 24 hour cable coverage of the financial "services" business, we tend to forget that banking has always been a dirty business.  Christ, according to the Bible, drove the moneychangers out of the temple.  In the Christian world, usury was considered a mortal sin for the first 1500 years of its existence.  For most of history, us ordinary mortals believed that banking was such a vile business, bankers must have sold their souls to the devil.

On the other hand, the folks who organized HSBC have long thought of themselves as the absolutely indispensable gears in the machinery that made British imperialism work.  Without the drug trade, the Indian colonies were rarely profitable.  Without opium, ripping off the Chinese would have been MUCH more difficult.  Without HSBC, Hong Kong as the British jewel of Victorian enlightenment in Asia would have been just another filthy seaport overrun with diseased hookers.  In fact, the folks at HSBC must wonder, what gives such lowly creatures as the USA government the cheek to haul us into court for doing what we do best?

Wednesday, February 20, 2013

Gas prices and other energy issues

While clueless WalMart execs try to figure out where their customers have all gone, might I offer a humble suggestion—the filling station.  It very difficult to buy less gasoline.  You could buy a new car that gets better mileage.  You could move closer to your job or find someone to split the driving chores.  But beyond that, there isn't a whole lot you can do when gas prices go up except cut back on spending somewhere else.  And so the economy spends its vitality on the energy it takes to build fires at the rate of at least 4000 per mile.

Climate change is mostly about fire

I detest futile gestures.  I find insane any expectation that somehow the laws of nature can be modified because you don't like them—especially if that expectation is based on religious ritual or magical incantations.  And yet, that is exactly what happens in an astonishing number of human examples because all of our scientific rationalism is usually just a thin veneer over our ignorant, barbaric core.  Last weekend saw a perfect example of how shallow our scientific pretensions really are.

The scene was Washington DC.  The gathering was organized by a man who exhorts the rest of us to "Do the Math" on the subject of climate change.  So there it was, a small group of committed souls braving sub-freezing wind chills to demonstrate their desire to make this nation's government change its legal structure to stop the warming of the planet.

There are so many things wrong with this picture one barely knows where to start.  But it was clear that the most obvious mathematical calculation—how much had each protestor contributed to the overloading of the atmosphere just getting to the rally—was not being done.  It damn hypocritical to add to a problem that you seem willing to get arrested to protest.  Then there is the little matter of how relevant national politics is to addressing a global problem.  This is Washington, the capital of American Exceptionalism—most people in that town believe the rest of the planet is not worth thinking about.  It's pretty hard for people who wallow in their narrow-mindedness to begin to understand the biggest single problem to have ever faced the human race.

Of course, the mismatch between self-absorbed miniature thinking and a global catastrophe pretty much explains why nothing gets done.  Take Al Gore's classic An Inconvenient Truth.  The first 80% of that movie is hard science, well-designed graphs, and statements from people who have devoted their lives and considerable talents studying the subject.  Then we get to Al's "solutions" that include reviving the practice of drying the wash on clotheslines.  Not only are these suggestions hopelessly lame, they undercut the message that burning a billion years worth of accumulated carbon in 200 might alter the chemistry of the atmosphere to the point where it no longer supports human life.  At some point, you want to drag Al over and ask, "Did you ever watch your own movie?"

For example, the Progressives want us to believe that if we eliminate fossil fuel subsidies, we will suddenly cut back on our carbon consumption.  Oh really?  Gasoline is roughly twice as expensive in most of the rest of the world as USA and still everyone who can swing it owns a car and the rest envy those who have one.  As former GM executive Bunkie Knudsen once asked in response to what he considered boated advertising budgets, "How hard can it be to sell something that takes people where they want to go sitting down?"

Climate change is caused by starting too many fires.  It really is as simple as that.  What is not so simple is that many of those fires are utterly necessary to keep us from dying from exposure or cooking our foods.  Fires feed us and move our goods.  Getting rid of all those fires will be extremely difficult even though it is obviously a necessary thing to do.

Tuesday, February 19, 2013

Rafael Correa wins re-election in a laugher

One of Joseph's Stiglitz's more ardent admirers, Rafael Correa, won Sunday's re-election in a laugher.  Now Stiglitz is one of the few economists with any linkage back to the Progressives that used to have so much influence in the formation of USA public policy—back when economics was still important to the left.  Well economics IS important to Correa—he actually has a Ph.D in economics from the University of Illinois (one of those colossal land-grant schools in the USA Midwest.)  They still teach development economics in rare corners of the land-grant system and as a Big Ten grad, I am very proud of him.  In Ecuador, he has amazing economic development problems including grinding poverty, a history of incredible levels of political corruption, and an utterly Predatory upper class.  But because Ecuador is also a member of OPEC, he has resources.

There are very few examples these days of anyone trying economic policies that were not hatched in the fevered imaginations of some neoliberal somewhere.  Correa is one so his experiment bears watching.  They seem to love him in Ecuador—of course not the old corrupt oligarchy but apparently most everyone else.

Monday, February 18, 2013

G20 on Japan's Yen devaluation

There was a very interesting G20 meeting in Moscow last week.  Not surprisingly, Japan's strategy to re-inflate her economy after nearly 15 years of deflation is not exactly popular in a room full of professional austerity / hard money ghouls.  Of course, the truest believers in austerity these days are the Germans who have essentially inflicted their misery on all of Europe.  Not since 1945 have the Germans acted so badly on the international stage and it's not just the Greeks who hate them.

But it is not only that the Germans are monetary religious nuts, they have national interests to defend.  In many areas of the real global economy such as automobiles and capital goods, Japan is Germany's only serious competitor.  If the Yen is weakened, this puts German industry in a serious bind.  Take for example the competition between Daimler and Toyota.  The Lexus already outperforms Mercedes by fairly wide margins in comparisons run by outfits like J.D. Powers.  Now give Lexus a $10-30,000 price advantage per vehicle and you can understand why the Germans are worried.  The fact the her economists are especially good at chanting neoliberal slogans is merely an unfortunate side effect of the zeitgeist.

Sunday, February 17, 2013

Climate change is not British imperialism

President Obama, after absolutely ignoring climate change during the fall's campaign, at least had the sense to bring it up in his State of the Union address.  He's still not taking the subject seriously, mind you, but he did bring it up which proves to a big chunk of Democratic loyalists that they and their party are on the side of the angels.  All of this has been leading up today's high mass—the Forward on Climate rally in Washington DC.  We have already had the "holy week" arrests—Daryl Hannah was taken in on Valentine's Day for chaining herself to the White House fence.

Democratic loyalists are quick to point out that such events "raise awareness" and prepare the ground for more enlightened legislation to come.  And usually I tone down my critiques of street actions for that reason although I am FAR from convinced by it.  But this time, there is something especially irrelevant about protests.  Climate change is a chemistry event caused by over-oxidation of carbon by billions of people with access to too many fires.  So the question becomes, given this is a mass-participation chemistry event, what exactly can one address by getting ritually arrested at the White House?

When Mohandas Gandhi, the great spirit of mass protests was organizing the Salt March, his opposition was an economic and political system—something that could be changed in response to his demands.  It think it a major stretch to think such methods are remotely applicable to a mass-based science problem like climate change.  Just remember, the only way the non-scientifically and technologically literate folks can hope to help solve the climate problems is to make sure the folks who CAN solve the problems are properly funded.  Now IF you can show us how getting symbolically arrested leads to the funds necessary to build the green society, then have at it.  Otherwise, you are nothing more than attention-hogs.

Friday, February 15, 2013

Chickens come home to roost at WalMart

WalMart executives are freaking out over lousy sales, according to this article in Business Insider. After a disastrous January, one WalMart exec wrote in an email that February sales so far are a "total disaster," according to a Bloomberg news story.
“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal- Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.” 
Don't count on the geniuses running WalMart to figure out the problem anytime soon. Rather than looking at how meager is the pay of millions of working Americans, the execs are blaming the expiration of the payroll-tax break on Dec. 31. The Bloomberg report noted that "For a person making $40,000 a year, that is about $15 a week." $15 a week is wrecking WalMart? Really? Or is it the fact that nearly one in every five U.S. households earns less than $20,000 a year?

WalMart, in fact, leads the list of  The 20 Companies With The Most Low-Wage Workers. As Henry Blodget pointed out, Walmart could give every single one of its 1.4 million U.S. workers a $5,000 a year raise and STILL have $17 billion in profit.

In his State of the Union address, President Obama proposed pushing the minimum wage up to a whole nine bucks an hour. A really serious proposal would have been $12 or more an hour.  As Dean Baker explained a few days ago, if the minimum wage had kept pace with productivity growth the past few decades, it would have been $16.54 in 2012.

And let's note here the stunning news that The top 1% captured 121 percent of income gains since 2009. How is THAT possible? As a Naked Capitalism writer explained, " How did that happen? Incomes to the bottom 99% fell by 0.4%." That means income inequality is getting worse faster under Obama, than it did under Dubya.

UPDATE: A big swooping tip o' the hat to PuddyTat and grover, who note in comments to my cross posting on DailyKos that there is also the factor of "the negative publicity and exposure that WalMart has gotten that has increased the number of folks who won't walk in their door anymore." Grover points to the highly interesting information that Sams Club, the membership retail warehouse owned by WalMart, is also suffering from slack sales, while its competitor, Costco, is not.

Saturday toons 16 FEB 13

Thursday, February 14, 2013

Protesting the invasion of Iraq 2003

Where were you ten years ago?  On this day in February 2003, 15 million people in 800 cities around the world had enough energy and moral courage to take to the streets to protest the impending USA invasion of Iraq.  Of course, this did not put the smallest dent in the plans—there were expensive bombs to explode and brown people with oil under their lands to kill.  Big media and spineless politicians joined in a chorus of lies.

And why not?  The liars, for the most part, still have their jobs—Thomas Friedman I'm looking at you.  The merchants of death got richer.  So what if the country is now crawling with seriously damaged Iraq vets—they will probably just kill themselves over some combination of PTSD and guilt.  So what if the whole war was put on the public's credit card—the debts will just provide a convenient excuse to destroy necessary social programs like Social Security.

Yeah we were right—the invasion was a disaster.  It wasn't even good for the USA oil interests.  But the Predator Class scum got richer and that's what seems to count.  Most of us are a lot worse off than we were ten years ago but the usual suspects are happy so I'll bet this day passes unnoticed by anyone who thinks they are important.

A conversion to renewables has many steps

What most people fail to understand about technology is while it's a long way from an idea to an actual product, it is usually an even longer distance to a product that is reliable and affordable.  That idea was the driving concept behind Elegant Technology—that the developmental distance between living in caves and watching a giant flat-screen television might even be less than the developmental distance between an industrial society that can make LED flat-screen TVs and an industrialization that doesn't screw up the planet.  Oh, and that progress will only happen one tiny detail at a time.

Wednesday, February 13, 2013

Currency wars—why Japan's spat with BoJ matters

There is a good reason why, generally speaking, it doesn't make a whole lot of difference what political party is in power or what they claim to believe about economics.  In any country.  That reason is the "independence" of the central banks.  And while central banks cannot do that all much about spurring prosperity, they are really, REALLY, good at bringing misery and wrecking things.  And since the 1970s, the world's central banks have decided that the only task they think worthwhile is "price stability"—which means that at the first sign of an outbreak of generalized prosperity, they feel the need to choke if off in the name of fighting inflation.

This is why what is happening in Japan may be the year's (decade's?) most important economic story.  The 1980s saw a real estate bubble (and several other kinds) sweep Japan.  And when that all went pop, Japan withdrew its newfound economic muscle behind a wall of conservative conventional wisdom. Sure they tried a little economic stimulus here and there but these minor outbreaks of economic activity were soon stifled by the folks at the Bank of Japan.  By 2006 (or so) the BoJ had not only achieved price "stability" in Japan, but had engineered a nasty little outbreak of deflation.  The global economic system of banking and markets were delighted and rewarded BoJ's diligence by making the Yen one of the strongest currencies in the world (only the Swiss Frank and the Norwegian Krone are in the same league.)

Be careful what you wish for.  "Price stability" has led to a serious deflation trap and the powerful Yen has all but wiped out Japan's ability to compete in the global markets—even though the quality of Japanese goods remain world-class.  But there has been an election and Japan's new prime minister Abe has gone to war against all the sacred ideas dear to the cold hearts of central bankers.  He reasons correctly that it is impossible to change the economy until he first changes the policies of the central bank.  He's gone after the BoJ's independence.  He is actually calling for higher inflation.  And he wants to drive down the value of the Yen.  In short, he is trying to kill the holy trinity of central banking's sacred cows.  The howls of outrage will surly be heard in the heavens.

Abe will be condemned for initiating a currency war.  But how exactly do you drive down the value of a currency?  In the past, the best way was to anger the gnomes of central banking.  With Japan, this might not be enough because people will still want to buy their Lexus and Canon video gear.  The markets may thoroughly disapprove of Abe slapping around the BoJ, but they will still need yen in their portfolios.  Japan isn't Ghana, after all.

Tuesday, February 12, 2013

Climate change forces halt in ethanol production

The serious drought in the corn belt has caused the price of corn to rise to near historic levels.  This means that everyone who uses corn as an input has just discovered how costly it can be to grow hogs or milk cows.  And of course, the biggest single buyer of corn—the ethanol industry—is REALLY hurting.  Not only do they use a lot of corn, they use millions of gallons of water.  Corn-based ethanol wasn't a very good idea even when corn was cheap.  When corn gets expensive, it is an insane idea.

Monday, February 11, 2013

Too big to jail?

One of the great accomplishments of the financial services business is that they have managed to con people into believing that what they do is a force of nature.  During the days of Margaret Thatcher she popularized the expression "there is no alternative."  Of course, there always was an alternative—usually MUCH better than one she was offering—but she kept managing to steal the mantle of inevitability.  It is all a part of an act that has worked for centuries to keep people feeling guilty about debts, giving police and state power to the lenders, bestowing respectability on the whole edifice of moneychanging, but most of all, convincing everyone that the bankers are keepers of the secrets of money and anyone who threatens their freedoms is threatening to destroy the whole economy.

Not surprisingly, you can erect quite a racket behind a wall of lies that complex. What keeps surprising people is just how brazen the rackets have been.  And now the shock is that no matter how brazen, the perpetrators are going to get away with their thefts.  And the story du jour is that during the fiscal meltdown of 2008, the only profitable activity at HSBC was laundering money for the Mexican Drug Cartels.  If prosecutors had punished the folks who set up that scam, the whole banking system would have been in danger of collapse.  That, according to Lanny Breuer of the DOJ's enforcement division, was official government policy.  So an old banking myth (regulate us and you will destroy our magic) saves their thieving asses one more time.  You cannot make this shit up!

The clip at the bottom is our old pal Max Keiser.  He's pretty steamed about the criminals running the banks.  What I like about Keiser (in small doses) is that he has worked in the moneychanging business and clearly does not believe most of the myths the bankers use to fool us.  He thinks it funny that the gangs of Wall Street, who have made cocaine their overwhelming recreational drug of choice, have gone to such (profitable) efforts to make the cocaine trade possible.

Sunday, February 10, 2013

Austerity—an unethical experiment on human beings

While I agree with Krugman that the economic prescriptions of the austerity ghouls are certainly unethical, I am not so sure I would call them "experiments."  I always thought an experiment was something you did when you do not know the outcome.  I would challenge the austerity ghouls to name one historical instance where austerity led to generalized prosperity.  Yeah, I know, the whole of the economics profession is littered with bald-faced liars who will claim with straight faces that bleeding will save the patient this time, but serious evidence this has ever worked?  Nah!  So without a reasonable doubt and predictable outcomes, the global austerity "experiment" is nothing more than naked plunder.

Saturday, February 9, 2013

So God made a banker

As someone with both grandfathers as real, on-the-land, dirt farmers in central Minnesota and SE Kansas, and having grown up in a tiny town in the corn belt with less than 2000 souls, I thought the Dodge Superbowl ad was touching, as in—it nearly brought tears to my eyes.  The photography was spectacular and was authentic because those are real Montana farmers—who looked a lot like the folks who attended my father's churches.  I was hardly alone on this—real-life farmers absolutely loved it—you can read how the pork producers responded on their own website.

But to read the criticisms of this ad in nice liberal websites (esp. Crooks and Liars) you would think it was celebrating pedophilia.  Supposedly it was racist because all the faces are white—farmers like those pictured barely exist anymore.  It was patronizing, it was inaccurate, it used God to sell pickups.  It was a rip-off of a Youtube effort.  Worst of all, it used a speech by Paul Harvey to a 1978 Future Farmers of America convention.  So it was sentimental exaggerations by a guy who never learned political correctness.  Not. Even. Close.

Even though much of Harvey's speech was agricultural stump-speech boilerplate, some of it was pretty goofy.  Best example.  Harvey is talking about the ingenuity that is such a prized virtue in agriculture.  Unfortunately he talks about keeping the equipment running with baling wire.  Several problems.  Baling wire wasn't being used by 1978—it had been replaced by twine.  Guys who "fixed" things with baling wire were usually failing in other ways—it was the fussy-maintenance types who usually did best.  To make matters a bit more absurd, this comment appears in the ad nearly simultaneously with a picture of a magnificently restored tractor (fussy maintenance raised to an art form.)

So yes, Harvey was technologically obsolete even in 1978. But that's not really a problem—agriculture is applied science so we all know it evolves.

  But his narration was still good.  Farmers traffic in life.  Farmers must be involved with their community.  Farmers must be hard-working, honest, ingenious and technologically literate.  Farmers DO like it when they have kids who knowing what is involved, want to go into farming anyway.

  All I know is that at my Superbowl Party, everyone fell silent for this ad. With the exception about half-way through someone asked, "What's this trying to sell?"

Then this.  Someone who understood the sentiments that Harvey was glorifying has come up with a perfect update of the rural progressives who understood that while they had many crooks trying to steal their output, their prime enemy was the bankers with their mortgages that never slept.  This "So God made a banker" ad spoof is beyond superb.  But notice no one has turned this into a YouTube yet.  Making these things like the Dodge ad is really harder than it looks.

Thursday, February 7, 2013

How long?

How long? one wonders, will the Producing Classes of the developed world stand for the pirates stealing their livelihoods.  These situations do not go on forever.  Yes, of course, conditions are markedly different from the 1930s when there was only a minimal safety net for the unemployed, sick, and elderly.  So this time around, the deliberate destruction of jobs has gone on now for 35 years since at least the "glory" days of Margaret Thatcher and because there has been a safety net, there has been only tiny amounts of social disorder.  But now the greedheads are trying to steal the safety net—dumb, VERY dumb—so soon we will see similar conditions as in the 1930s.  Folks should be reminded of how well that turned out.

When factory workers threaten to blow up their factory, you can actually feel the extremes of desperation.  The factory is their creation, after all.  Blowing it up would be similar to killing their own children.

Greece is still a mess

The way the news is typically covered, the crews fly in to film the disaster and a few days later, fly on to get the next story.  The wreckage left behind and the efforts required to repair things are almost never covered.  The audience is left with the impression that somehow things will get better on their own.  In the world of living things, sometimes wounds do heal on their own.  But in the world of devices and institutions built by humans, things most certainly do NOT repair themselves.

And so it is February.  The crazy drought of last summer is hidden under an almost irrelevant but beautiful dusting of snow.  The lights are back on in New York after a devastating hurricane.  The USA elections could have had a worse outcome.  The stock market is going nowhere but at least it isn't going down.  Etc.

So this story about Greece is a vivid reminder that absolutely nothing has been solved since 2007.  There are more homeless, the economy is still run by fools/crooks, the climate is worse, the infrastructure is still a mess, our institutions are increasingly irrelevant, and nothing is being talked about that has even the slightest chance of fixing anything.  I scour the Internet every day for signs of life and hope and while I usually find some, there are not many of them.

I'll keep looking but in the meantime, I intend to cover more of those stories about how the creations of humans do not repair themselves.

Wednesday, February 6, 2013

Rare earths worth fighting over?

You cannot make something out of nothing.  These days, much leading-edge manufacturing involves the use of so-called rare earths.  The big user of rare earths are cellphones.  It doesn't matter that each cellphone only uses a tiny amount of these minerals, if it needs ANY at all, you need a secure supply or you are out of the cellphone business.  Suddenly China, which is the sole producer of many of these rare materials, has discovered the real importance of strategic materials and has banned their export.

But as it turns out, China is the sole source of many of these materials only because they have been more willing to trash their environment to get them.  But many countries actually have these minerals in the ground and folks in Western Europe have the clean mining technologies necessary to extract them.  In fact, the Germans are warning the Chinese that soon, they will have to import their rare earths because their primitive mining methods won't keep up with their manufacturing needs.

"Let us reason together," argue the Germans, "and we can engineer our way past this production bottleneck."  And if the critical industries can keep the Predators out of the mix, it is very likely reasonable people will solve these problems.

Tuesday, February 5, 2013

Stalingrad or Volgograd?

On 31 JAN 1943, in a basement room in the rubble of Stalingrad, Friedrich Paulus surrendered his 6th Army to General Zhukov. The most brutal single battle of human history would end three days later having lasted from August 23, 1942 – February 2, 1943 (5 months, 1 week and 3 days).  The German army would never recover—their war was lost.

So on the 70th anniversary of probably the most significant turning point in human history, an interesting question is being asked.  Should the city which was renamed Volgograd in 1961 after Stalin's monstrous crimes against humanity had been revealed change its name back to Stalingrad because that's the name in all the history books?  Since there are good arguments on both sides of this debate, there is now talk of holding a referendum.  Who knows—maybe they'll get this all straightened out before the 75th anniversary rolls around.

[Update. President Putin has declared that Stalingrad will never make it back on the map.]

Michael Lewis on Goldman Sachs

Michael Lewis certainly needs no help from me to become more famous and I have an almost religious aversion to linking to something from The New Republic, but this review from some supposed chastened Goldman Sachs insider asks some interesting questions.  So I have cut to those questions.

Now some very good arguments can be made that NONE of the activities of Goldman Sachs are remotely necessary for the community's survival and that it would be good to just put them out of business.  Some of my long-time readers insist this is true.  I am tempted to side with them except for one belief of mine—we institutionalists are convinced that an institution as big and powerful as Goldman Sachs would not exist unless it fulfilled some useful function at some level.  Now maybe GS is only socially useful 2% of the time but in an institution so large, this is still a lot of activity.

For example, I know a guy who went through some seriously rough economic times over the past fifteen years.  He went through an ugly divorce and then a wife who died of cancer.  All this was happening while he tried to start a business out of a small buyout settlement from a downsizing employer.  The one thing that got him through this string of disasters was his house in a nice neighborhood that was mostly paid for when all this started.  You know those "liar" loans that got packaged by the crooks?  Well his paper was in that pile.  He should have never been given those loans according to traditional banking standards and yet, they probably saved his life.  Yes he still has a lot of debt on a house that was once almost paid far, but his current mortgage is still less than 4% and I'm pretty sure it is not under water.

I understand most people got scammed during the housing bubble and are much worse off because of it.  But "loose" lending standards were probably not the problem and are not the big dilemma with the current economy.  Yes the hard-money austerity ghouls would like to make it the problem—they even use the term "moral hazard" un-ironically.  But they are wrong—the biggest problem facing the economy is the absurd costs of the 98% uselessness of Goldman Sachs and the rest of the banksters.  The real economy simply cannot afford these to-big-to-fail creatures.  Not only must they be broken up as Lewis suggests below, they must be scaled down to the costs of providing the services they claim we need.  The rest of us would be more forgiving of Goldman Sachs if they cost $0.02 on the dollar they cost us now.

Monday, February 4, 2013

Superbowl Sunday

Had some friends over for the midwinter ritual.  The football was pretty good.  The commercials were not especially inspired.  The half-time show was dazzling.  But nothing, absolutely nothing, topped the little demonstration of the rickety USA infrastructure when for reasons still to be announced, the lights went out in the Superdome during the second half.

That such a symbol of Leisure Class wretched excess as the Superbowl could be stopped by the reality of industrial neglect was a subject of some mirth around here.  Maybe the Leisure Classes will take notice when their symbols are disrupted but somehow, I doubt that means they will demand more investment in public goods.  Just a guess.

Oh the anxiety over a cheaper Yen

A cheaper Yen (up to a point) will certainly benefit the Japanese real economy.  Not so much some of her competitors who have made rapid gains during Japan's recent strong-yen period—such as the Korean automobile industry.

The question will be, "How will Korea act now that the won is destined for a period of over-valuation?"  After all, lots of people will believe an expensive won is an indication of Korea's economic virtue—many of them Koreans.  But as the exporters begin to howl in economic pain, the pressure to do something about the high-priced won will intensify.  We could easily see a period of competitive currency devaluations in Asia.

We intend to follow this story.

Sunday, February 3, 2013

Steven Chu resigns

I haven't been especially complimentary about Steven Chu.
I considered Chu lacking in imagination.  It seemed impossible but we had a Nobel Laureate in PHYSICS (a real Nobel) who seemed not to comprehend the scope of the problems that come from a changing climate.  This impression was hardly mine alone.  Chu arrived on the international stage with a thud—at the Ouch! This hurts link above, there are links to a Guardian article that is very patronizing.

But I actually feel I now owe the poor man an apology.  Even Chu's limited agenda was tenaciously opposed by fair means and foul.  Poor guy probably never did comprehend how organized ignorance and superstition can be.  I am not certain this forgives Chu's willingness to downscale his agenda in the face of such unreasonable opposition.  I am far from the world's greatest negotiator but I am under the impression you start out with your BIG wish list.

Saturday, February 2, 2013

Moyers / Taibbi plus Uygur / Chomsky (video)

This Sunday's homilies on video.  First up, Taibbi on too big to jail banks.

Plus Chomsky on the rightward shift in USA politics.  Of course, any sentient being old enough to remember pre-Reagan can easily see this.  Even so, Chomsky seems especially qualified to speak to that topic.

Saturday toons 2 FEB 13

Friday, February 1, 2013

Job poaching

In the 1980s when pirate "capitalism" (leveraged buyouts, hostile takeovers, greenmail, etc.) really got going, there were a few rearguard attempt to slow down the looting (legislation, lawsuits, shareholder activism, etc.)  These efforts were usually failures.  After all, institutional investors like city and union pension funds participated enthusiastically in the crimes against the economy.  I met a guy during that time who was responsible for investing the retirement funds of Lutheran missionaries.  I was actually shocked!  Obviously there are different kinds of Lutherans—I am absolutely positive my father would not have approved of his pension fund being parked at KKR.

The reason this looting was just plain WRONG lies in a basic understanding of how the Producer Classes make their money.  The basic strategy is to make something very difficult (or at least so difficult most people cannot make it themselves) and make it extremely well.  The crown jewels of American industrial capitalism were all examples of this.  Many were survivors of extremely competitive environments (the auto makers) had perfected technologies that bordered on magic (Xerox, Polaroid, Kodak) or built something so complex only a government could afford it (nuclear submarines, fighter aircraft.)  Sometimes it was a matter of doing something simple very well (Red Wing Shoes.)  Most of these companies had taken several generations to learn how to do what they did.  Nearby communities opened colleges to train their workers.  In perhaps the greatest act of vandalism in human history—and that includes World War II—pirates raided these crown jewels for something as simple as the pension funds or the cash set aside to fund R & D.

And the states and local governments watched this and did nothing.  Correct that, they opened thousands of "industrial development parks" and set about poaching each other's job base.  And "invested" their spare cash with the most odious of the corporate raiders (Calpers).  The Leisure Class in action.  They actively participated in wanton destruction because they thought it would make them easy money.  They glorified the pirates giving them cute names like "Chainsaw Al".  They held conferences to teach each other better methods of plunder.  De-industrialization became a central part of the culture.  Respectable people read The Economist—the official journal of the Predators.  It was insane.

Good questions about electronic money

A long-time reader named Meyers sent me this link yesterday.  It is of a Brit comedian who asks a perfectly reasonable question which is: Why should we wreck the economy simply because a bunch of drunken bankers typed in some foolish bets into their computers?  Instead of bailouts and austerity measures, why don't we just have these wankers type some new instructions into their computers?

Actually, I have been saying this for years.  In the early 1990s I wrote in Chapter Six of Elegant Technology “Are we really going to let a bunch of preindustrial, techno-illiterate, computer-chip idolators march this country down the road to ruin? Really?”

Mitchell is funnier.