China begins laying track on world's longest High Speed Rail line

Track-laying Begins On Beijing-Shanghai High Speed Railway

On July 19, 2010 China's Ministry of Railways held a ceremony in Xuzhou, Jiangsu province, to mark laying of the first tracks for the Beijing-Shanghai High-Speed Railway.

The 1,318-kilometer-long high-speed railway project, which is also known as the Jinghu High-Speed Railway, involves an investment of CNY220 billion. Construction started in April 2008 and the line is expected to open in 2012.

The ministry says that it expects that the laying of the railway track will be completed by the end of 2010.

Trains on the new line are expected to maintain an average speed of 350 kilometers per hour, with maximum speeds of up to 380 kilometers per hour.

This will be world's longest high-speed rail link and will cut the railway travel time between Beijing and Shanghai from the current 10 hours to four hours. It is expected to carry 160 million passengers a year

Meanwhile, the same week, in the United States, formerly the world's leading industrial power, work crews began "geotechnical exploration" - surveying the rock and sand - under two parts of Interstate 4 in Florida for what will be the first U.S. high speed rail route, between Tampa and Orlanda. Yeah, we havn't even broken ground yet for a measly 84 miles (135 kilometers) route to speed a few million tourists to Disney World.

In an interview last week with International Railway Journal, Andy Kunz, president of the US High Speed Rail Association, argued

"I want to end the debate about 110 miles/h as I don't believe in upgrading the network," he says. "I don't think we have the time and we would end up with something like Amtrak's Acela Express for the whole country, which would be a disaster."

Instead, Kunz wants the US to go straight to new construction. He wants to build a national network of around 27,000km in four phases over the next 20 years. "I know this is very aggressive, but at around 1300km a year this is less than in China and Spain," he says.

SNIP

Kunz has done some very rough calculations about what it might cost to build the network. He bases his calculation on the California high-speed project, although he recognises that California's construction costs are likely to be higher than for many other locations due to the need to tunnel though mountains and provide protection against earthquakes. Nevertheless, Kunz has come up with a ballpark figure of $US 600 billion.

"This works out at $US 30 billion a year, but to put it in context, we spend more than that each year on widening and constructing highways," says Kunz. "We want government to switch spending from road to rail - about 90% of our transport money is spent on roads and air."

You know, sometimes it’s hard not to think that the U.S. has been stuck in stupid for the past 30 years – and still is.

Good thing climate change isn't true because Al Gore is fat

It is absolutely amazing what some believe.  But the notion that we can ignore climate change if only we can discredit Al Gore is one of the crazier things I have heard in my life and at 61, I have an extensive collection of examples of crazy.

Phytoplankton's Dramatic Decline

A Food Chain Crisis in the World's Oceans

By Markus Becker

It is the starting point for our oceans' food chain. But stocks of phytoplankton have decreased by 40 percent since 1950, potentially as a result of global warming. It is an astonishing collapse, say researchers, and may have dramatic consequences for both the oceans and for humans.

The forms that marine flora and fauna come in are varied and spectacular. From bizarre deep sea creatures to elegant predators and giant marine mammals, the diversity in our planet's oceans is astounding.

But it is the microscopic organisms like diatoms, green algae, dinoflagellates and cayanobacteria that make it all possible. Phytoplankton is the first link in the oceanic food chain. It is eaten by zooplankton which is in turn eaten by other animals, which are then consumed by yet further sea creatures. Sometimes that chain can be quite short -- the only thing that separates whales from phytoplankton in the food chain, for example, are the krill that come in between.

But it appears that humans may be in the process of destroying this fundamental link in the oceanic food chain. Temperatures on the surface of our oceans are rising because of climate change, resulting in a reduction of the stock of phytoplankton. Just how severe that reduction is, however, has long been a mystery.

Now, a frightening new study reveals the shocking degree of the die-off. Since 1899, the average global mass of phytoplankton has shrunk by 1 percent each year, an international research team reported in the latest issue of the journal Nature. Since 1950, phytoplankton has declined globally by about 40 percent. more

Bush regime and its economic philosophy created conditions for a genuine depression

You will have to follow the link to get the beginning (yes, a bit different than our normal practice here) and to see the very informative graph.

What Half a Depression Looks Like — And How We Escaped (So Far) the Other Half

. . .we can call this a "half depression," because the picture above could easily have been twice as bad if the Federal Reserve, Treasury and Congress under both Administrations had not thrown everything including the kitchen sink to stop a full on depression. That's the conclusion of a just released but as yet little discussed study (e.g., see DeLong on Leonhart) by economists Alan Binder and Mark Zandi.

Binder/Zandi developed a model to estimate how much GDP would have shrunk and unemployment increased if the federal government had taken none of the monetary and fiscal actions of the last two years. From the initial Times story:

"In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration's fiscal stimulus program, the nation's gross domestic product would be about 6.5 percent lower this year.[*]

"In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation. . . ."

Mr. Blinder and Mr. Zandi emphasize the sheer size of the fallout from the financial crisis. They estimate the total direct cost of the recession at $1.6 trillion, and the total budgetary cost, after adding in nearly $750 billion in lost revenue from the weaker economy, at $2.35 trillion, or about 16 percent of G.D.P.

As many have noted before, a huge chunk of today's deficits were caused by the near-depression baked into the cake by 2008. Since this year's GDP growth is now expected to be about 2.5 to 3.0 percent, the Binder/Zandi study suggests that without massive federal intervention, GDP would have shrunk by about 3-4 percent, instead of growing slowly. Worse, instead of 15 million unemployed, we'd have over 23 million without work. So Binder/Zandi provide support for the Obama Administration's (and many other economists') argument that their actions (and the Fed/Treasury bailouts before Obama took office) have at least prevented a depression.

The economists examined the Federal Reserve's actions, which were about double the size of the ARRA stimulus bill and provided trillions in loans, loan guarantees and asset purchases. These actions thus likely had a greater effect on turning the economy around than the ARRA/stimulus bill alone, though they argue the combined efforts likely reinforced each other. This finding should increase pressure on Bernanke's Fed to do even more on monetary easing to ensure the economy does not slide back into a recession or worse and to tackle unemployment more aggressively.

A second point from Rampell's chart is how it helps assign responsibility for the depression/unemployment catastrophe. The worst unemployment level was reached about six months ago, in January/February of 2010, but for a year before that, unemployment had been in free fall. Obama's ARRA/stimulus didn't pass until early 2009, and most of it took 6-12 months to kick in.

What the chart tells us is that gross mismanagement by the previous Administration, their financial regulators and regulatory philosophy created conditions for a genuine depression. That depression was only narrowly avoided, so far, by massive interventions by the federal government.

Even then, the Bush Administration's economic team passed a Great Recession-near-Depression onto the Obama Administration, which has been struggling ever since to turn the economy around.

But this is not just George Bush's legacy; it's the legacy of an entire economic philosophy and regulatory attitude, supported as holy doctrine by the entire Republican Party and all too many Democrats. Most still haven't taken responsibility for this huge failure; instead, they would/could, if allowed to rule again, easily drag us back into a Depression. Voters take note.

Finally, the chart makes clear that the federal government is not even close to doing all it needs to do with stimulus spending and monetary support to reverse course and meaningfully hasten the reduction in unemployment. By any standard, those efforts remain less than half enough; it took a long time for Obama's advisers to concede this (sort of), and there are growing indications the Federal Reserve recognizes this too. [Update: see Fed member's deflation warning hints at policy shift.]

The Obama Administration now has the responsibility to lead the way out of the catastrophe it obviously inherited from Bush's economic team and a shared, failed philosophy. That members of that team or those who retain that philosophy still have jobs as economic advisers is both astonishing and dismaying.

SNIP

*Blinder/Zandi correction:

"JULY 28, 2010 1 P.M. CORRECTION: This article now contains corrected figures for our estimate of 2010 GDP with and without the stimulus. As the article now reflects, GDP in 2010 would be about 11.5% lower without the government's response, and the fiscal stimulus has raised GDP by about 3.4%."

Update: Dean Baker critiques the study's assumed counterfactual:

"While the analysis of the stimulus is pretty standard and very much in keeping with other estimates, this is not the case with the analysis of the financial sector policies. The problem with the study is the implicit counterfactual. It effectively assumes that if we did not do the TARP and related policies, that we would have done nothing even as the financial sector melted down."

Like Baker, I'm uncomfortable with the Blinder Zandi study to the degree it ignores that other options besides bailing out the TBTF firms on Wall Street were possible (though not likely under the Bush regime: Treasury Secretary Paulson, after all, was Goldman Sachs through and through). As I argued at the time, September 2008, in Let Wall Street Burn:

We want to force a shift of the financial system way from the big-money operations of Wall Street, back to the relatively small lending operations to Main Street. So we let the top dozen or so institutions go under. At the same time, the Fed should make a very public show of back-stopping the smaller commercial banks all around the country - just like it did for JP Morgan Chase in the Bear Stearns "bail-out." The one nagging problem is what to do about all the shareholders? Whoever the next President is can send emissaries to the various pension funds and mutual funds to tell them in no uncertain terms of the intent to let the big Wall Street players meet their well-deserved doom, taking their shareholder with them. If someone wants to bet in a game of chicken that the next President would not actually let the big Wall Street players go under and remain a shareholder, well, they were warned. Yes, this is "talking down" the big Wall Street banks, but it would only be them getting a taste of the medicine they themselves have been cramming down the throats of the rest of the economy (such as having conniptions over Costco paying its employees much more than the retail industry average).

What remains of the big Wall Street players can be sliced and diced, and parceled them out to all the thousands of remaining small banks. For example, a Chase branch or Citi branch in Peoria is offered to 1st National Bank of Peoria for a song.

The Obama administration, unfortunately, has failed to solve the Too Big To Fail problem, making another financial crisis inevitable at some point in the next few years, perhaps even just months. At that point, we will again have the opportunity to let the big Wall Street money center firms destroy themselves, and give control of the credit system back to local and regional bankers who are closer to and more in tune with Main Street and its real economy.

Oh goody! the speculators are messing with the food supply again

The last time they caused widespread starvation.

Choc Finger's Big Bet

Speculators Rediscover Agricultural Commodities

By Susanne Amann and Alexander Jung

With the financial crisis fading into the past, speculation on agricultural commodities markets has returned in force. Food prices are climbing once again as hedge funds rediscover the immense profits that can be made -- led by a British chocolate baron.

Even by the standards of London's exclusive Mayfair neighborhood, businessman Anthony Ward leads a luxurious lifestyle. He and his family live in a 500-square-meter (5,380-square-foot) townhouse with five bedrooms, each with its own bath. There are separate quarters for the staff. When Ward opens a bottle of wine on his veranda in the evening, it's likely that it comes from his own vineyard at the foot of Paardeberg Mountain near Cape Town.

Ward's fabulous wealth comes as a result of his involvement in the cocoa business. The 50-year-old Briton with the nickname "Choc Finger" heads Armajaro, a commodities business and hedge fund he co-founded in 1998. In recent weeks, the hedge fund has caused a furor in the commodities markets. Traders report that Ward has purchased a vast number of futures contracts for the delivery of 241,000 tons of cocoa worth $1 billion (€770 million).

The cocoa represents about 7 percent of annual world production, enough to supply Germany with chocolate for an entire year. It was also enough to substantially drive up prices on the cocoa market. Last week, the price of cocoa climbed to a 33-year high.

What is so unusual about the British investor's coup is that he did not resell the contracts on the London International Financial Futures and Options Exchange (LIFFE) before they expired, but instead took delivery of the beans. As a result, Armajaro now controls almost all the cocoa beans currently stored in registered warehouses in Europe, from Liverpool to Rotterdam to Hamburg. more

WE need a HUGE stimulus package

In the midst of a global economic calamity of historic proportions that sees deflation stalking every economic sector, we are told by "serious" economists that reflating a crashing economy can only cause inflation.  (sheesh)  The problem is that the economics profession has been taught that inflation--the horror of the investing classes--is the only problem worth addressing.  Sort of reminds one of the old saying, "if your only tool is a hammer, pretty soon every problem looks like a nail."

Yet the economies of the world NEED a jolt of stimulation.  AND there are HUGE problems--the end of the Age of Petroleum, climate change, etc.-- that need to be addressed.  So there we have it--we have tons of work that needs doing and we have millions of increasingly desperate people looking for work, yet we cannot get those two clearly compatible needs together because of some ridiculously old-fashioned notions that our kids learned from batshit insane economic professors.  (I HAVE covered this topic in greater depth.)

One other thing.  Japan is widely portrayed as an economic basket case because they never "recovered" from their investment bubble of the 1980s.  Of course, this is only true if you are a speculator.  If you view the Japanese economy from a real economic perspective, Japan has done very well, thank you very much. Keep this in mind when you see Japan's economy portrayed in a favorable light.

I could bore you with stats but I'll cite two personal examples.  I have seen the evolution to high-definition video close up because I care for systems that can edit high-def footage.  The Japanese (mainly Sony) make the VAST majority of broadcast-quality gear.  My other example involves my beloved wheels.  I drive a 1996 Lexus LS that I bought with 130,000 miles on the clock.  It is still nearly flawless and is by FAR the finest example of manufacturing excellence I have ever seen or touched.  Remember, while Japan's economy in the last 20 years was supposedly going into the toilet, Toyota managed to capture the luxury car market with its Lexus brand against competitors who had been building their brands for decades. We will have Japanese-style stagnation only IF we have Lexus and broadcast video gear dominance waiting in the wings somewhere (we don't.)

Read the whole article--it is VERY good.

No Convincing Economic Arguments Against More Stimulus Spending

Jobs, Stimulus and Debt

By MARK WEISBROT

In much of the world, including the United States and Europe, a debate is taking place about whether the government’s first responsibility should be to reduce unemployment – which is at elevated levels – or to reduce government deficits and debt. Many of the arguments for deficit reduction are simplistic, based on ignorance, or ideologically-based. For example, there are inappropriate comparisons of government to household debt, a fixation on absolute numbers without any comparison to national income, or just right-wing opposition to government in general. Although these are the most commonly propagated views on television and through the media, it is worth taking a moment to examine the (ostensibly) more sophisticated and economics-based arguments and see whether they hold water.

Kenneth Rogoff is professor of economics at Harvard University and a former chief economist at the International Monetary Fund (IMF). This week he responded to some of the pro-stimulus arguments:

“Some portray Japan, with nearly a 200 percent government debt to income ratio, as a poster child for extremely indebted countries with low interest rates. Japan’s 'success,' of course, has a lot to do with its government’s ability to sell debt domestically. How the country will handle its finances as saving by retirees shrinks and as its labour force rapidly shrinks, remains to be seen.”

Some background: Japan has a gross debt-to-GDP ratio of about 227 percent of GDP. This is more than three times the level of the United States. But more than 100 percentage points (of GDP) of this debt is owed to the Japanese central bank. This means that the interest payments on this debt go to the government of Japan, so there is no interest burden added by this part of the debt. In fact, Japan’s net interest payments are less than 2 percent of GDP, which is a modest amount.

It also means something else that most of the economists in this debate are not eager to talk about: Japan has financed nearly half of its public debt by creating money. In otherwords, instead of the government borrowing money from investors, the central bank created money and lent it to the government. In the popular imagination, this creation of trillions of dollars (in yen) to finance government deficits has to cause serious inflation. However, the Japanese experience has been the opposite: Over the last 20 years, Japan’s consumer price index has risen about 5 percent – that’s the 20-year total, not annual inflation. more

The declining middle class

When I wrote Elegant Technology over 20 years ago, I bemoaned the decline of the USA middle class which I branded as "under assault".  The evidence was already quite compelling. Well, now the stats are beyond reasonable debate because not much has changed economically since the 1980s.

The Middle Class in America Is Radically Shrinking. Here Are the Stats to Prove it 

Posted Jul 15, 2010 02:25pm EDT by Michael Snyder

Editor's note: Michael Snyder is editor of theeconomiccollapseblog.com

The 22 statistics detailed here prove beyond a shadow of a doubt that the middle class is being systematically wiped out of existence in America.

The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.

So why are we witnessing such fundamental changes? Well, the globalism and "free trade" that our politicians and business leaders insisted would be so good for us have had some rather nasty side effects. It turns out that they didn't tell us that the "global economy" would mean that middle class American workers would eventually have to directly compete for jobs with people on the other side of the world where there is no minimum wage and very few regulations. The big global corporations have greatly benefited by exploiting third world labor pools over the last several decades, but middle class American workers have increasingly found things to be very tough.

Here are the statistics to prove it:

• 83 percent of all U.S. stocks are in the hands of 1 percent of the people. 

• 61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.

• 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.

• 36 percent of Americans say that they don't contribute anything to retirement savings.

• A staggering 43 percent of Americans have less than $10,000 saved up for retirement.

• 24 percent of American workers say that they have postponed their planned retirement age in the past year.

• Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.

• Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.

• For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.

• In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.

• As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.

• The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

• Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.

• In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.

• The top 1 percent of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.

• In America today, the average time needed to find a job has risen to a record 35.2 weeks.

• More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.

• or the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.

• This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.

• Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.

• Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.

• The top 10 percent of Americans now earn around 50 percent of our national income. more

Consumer Confidence Drops By More Than Expected

Vincent Fernando, CFA | Jul. 27, 2010, 10:02 AM | 901 | 21

The consumer confidence index dropped to 50.4 in July, which was a larger decline than consensus had anticipated.

The consensus forecast was 51.0 according to Finviz and June's reading was 54.3.

The Present Situation Index and The Expectations Index declined to 26.1 from 26.8, and 66.6 from 72.7 respectively.

Conference Board:

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer confidence faded further in July as consumers continue to grow increasingly more pessimistic about the short-term outlook. Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves. Given consumers’ heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season.”

Consumers’ assessment of current conditions was more downbeat in July. Those saying conditions are “bad” increased to 43.6 percent from 41.0 percent, however, those saying business conditions are “good” increased to 9.0 percent from 8.4 percent. Consumers’ appraisal of the job market was also more negative. Those claiming jobs are “hard to get” increased to 45.8 percent from 43.5 percent, while those saying jobs are “plentiful” remained unchanged at 4.3 percent.

Consumers’ short-term outlook also deteriorated further in July. The percentage of consumers expecting an improvement in business conditions over the next six months decreased to 15.9 percent from 17.1 percent, while those anticipating conditions will worsen rose to 15.7 percent from 13.9 percent.

Consumers were also more pessimistic about future job prospects. Those expecting more jobs in the months ahead decreased to 14.3 percent from 16.2 percent, while those anticipating fewer jobs increased to 21.1 percent from 20.1 percent. The proportion of consumers expecting an increase in their incomes declined to 10.0 percent from 10.6 percent. more

Industries Find Surging Profits in Deeper Cuts

By NELSON D. SCHWARTZ

Published: July 25, 2010

By most measures, Harley-Davidson has been having a rough ride.

Motorcycle sales are falling in 2010, as they have for each of the last three years. The company does not expect a turnaround anytime soon.

But despite that drought, Harley’s profits are rising — soaring, in fact. Last week, Harley reported a $71 million profit in the second quarter, more than triple what it earned a year ago.

This seeming contradiction — falling sales and rising profits — is one reason the mood on Wall Street is so much more buoyant than in households, where pessimism runs deep and joblessness shows few signs of easing.

Many companies are focusing on cost-cutting to keep profits growing, but the benefits are mostly going to shareholders instead of the broader economy, as management conserves cash rather than bolstering hiring and production. Harley, for example, has announced plans to cut 1,400 to 1,600 more jobs by the end of next year. That is on top of 2,000 job cuts last year — more than a fifth of its work force.

As companies this month report earnings for the second quarter, news of healthy profits has helped the stock market — the Standard & Poor’s 500-stock index is up 7 percent for July — but the source of those gains raises deep questions about the sustainability of the growth, as well as the fate of more than 14 million unemployed workers hoping to rejoin the work force as the economy recovers. more

And of course, Carlin got it right before he died too.  This may be his best rant ever.

 

Producers vs. Predators post WW II

When I first understood that Thorstein Veblen believed that the greatest human distinction was between the Leisure Class and the Industrial Class--between business and industry, I was so stunned by the quality of the insight, I actually gasped.  I could immediately think of 100s of examples of each.

Ordinarily, it should be much easier to click off examples of Leisure Class behavior because this sort of behavior--military, religion, sport--attracts media attention to the point where it has come to completely dominate the culture.  But I didn't grow up in a Leisure Class world even though I grew up in a parsonage.  And it's hard to be more Leisure Class than a clergyman.

There are many ways to illustrate an Industrial Class childhood but my personal example is toys.  I was probably an annoying child--always pestering folks to explain something or other.  So anything that occupied my time in big chunks was probably most welcome.  Enter the build-it toys.  My parents probably discovered how much I enjoyed these things by accident but once they found out, they repeated the experiment.

This toy is called Skyline which consists of small plastic parts that push together. This "masterpiece" was an attempt to see how tall a building could be made using all the parts in the set.  It is taller than I am even before being placed on a stool.  I have discovered that playing with the light meter was a good distraction while my dad sets up the picture.

By the next Christmas, I have been given an Erector Set.  (Set no 6 1/2 page 40--pdf alert).

This set came with an electric motor that plugged into the wall.  Here I am fiddling with gearing because I am going to power up the windmill I have built.  The power section is the blue part just to the left of my right hand while the steel stamping sections directly below my hands contain the step-down gears.  Let's see, you have a 110 volt motor turning gears you can make turn at high speeds, connected to a propellor shaft with store string, mounted on a structure bolted together by a nine-year-old's hands.  What COULD go wrong?

Never hurt myself, however.  I was appropriately afraid of motors that plugged into wall outlets.  But I am sure there were folks who DID hurt themselves with these toys.  So even though Erector sets are considered classics, they are not made anymore--at least not like mine.  I have wondered how many of the folks who got Apollo 11 to the moon played with Erector sets when young?  My guess is most of them--and most of them loved it.

The cheap thrill in the summer was kite flying.  The kites were only $0.10 but the string could get expensive.  And on the prairie, there was plenty of wind and space for kites.

But nothing got my attention like flying model airplanes.  I built over a dozen of them.  This one was probably the most complex.  It was a kit from a company named Jetco called the Sabre Stunt.  You can still buy the plans.

The reason flying models are so engaging is that getting model airplanes to fly requires you understand the science of flight.  It took humanity from the dawn of recorded history until 1903 to figure out powered flight.  By 1966, flying had become an amusement for a teenager living out on the North American high prairie.  A textbook example of technological diffusion.

And then there was the summer my brother found a packing crate that could be made into a treehouse.  So we did.

What is amazing in all this is that the legal profession has just about made a childhood like mine illegal.  I cannot imagine how an Erector Set with its dozens of small parts and a 110-volt electric motor could be sold to children.  Or model airplanes that need butyrate dope to build and nitromethane / methanol fuel to fly.  And even I am pretty sure a couple of kids shouldn't be allowed to build a treehouse 25' in the air out of recycled scrap lumber.

But damn, it was fun.  I would go on to engage in historic preservation and process invention but none of this would have happened without a culture that had turned science into a plaything for children.  And such a childhood taught just volumes about persistence and planning and the other prime concerns of the Industrial Classes.  So when I encountered Veblen, I immediately appreciated his understanding that the important distinction IS between the builders and the Leisure Class.  Because as the son of a clergyman in a world of science-based toys, I had seen both sides so clearly.

Found an interesting web site on alternative currency systems

It is really VERY comprehensive and includes at least ONE link to a "pure genius".  :-)

Alternative Currency Systems

Local and Interest-Free Currencies, Social Credit, Social Lending and Microcredit etc. 

Virtually all civilizations, except the Incas, developed some form of money. Today our currencies and banking systems increasingly extend beyond national boundaries. However, co-existing with that movement there has been a revival of interest in alternative financial systems. This page of links to resources on microcredit systems, local and interest-free currencies is one of a number of pages on Money - Past, Present and Future maintained by Roy Davies. more

Banksters and their attack on nation-states

Yes, they picked on little Greece.  And yes, they can do this to other nations.  The question is why?  At some point, some powerful governments WILL turn on them.

The U.S. Need Not Fear a Greece-Like Crisis

Why "Sovereign Debt" is an Oxymoron

By ELLEN BROWN

We did not hear much about “sovereign debt” until early this year, when Greece hit the skids. Investment adviser Martin Weiss wrote in a February 24 newsletter:

“On October 8, Greece’s benchmark 10-year bond was stable and rising. Then, suddenly and without warning, global investors dumped their Greek bonds with unprecedented fury, driving its market value into a death spiral.

“Likewise, Portugal’s 10-year government bond reached a peak on December 1, 2009, less than three months ago. It has also started to plunge virtually nonstop.

“The reason: A new contagion of fear about sovereign debt! Indeed, both governments are so deep in debt, investors worry that default is not only possible — it is now likely!”

So said the media, but note that Greece and Portugal were doing remarkably well only 3 months earlier. Then, “suddenly and without warning,” global investors furiously dumped their bonds. Why? Weiss and other commentators blamed a sudden “contagion of fear about sovereign debt.”

But as Bill Murphy, another prolific newsletter writer, reiterates, “Price action makes market commentary.” The pundits look at what just happened in the market and then dream up some plausible theory to explain it. What President Franklin Roosevelt said of politics, however, may also be true of markets: “Nothing happens by accident. If it happens, you can bet it was planned that way.” more

What ARE we going to do about coal?

As far as I am concerned, coal-fired electrical generation is so abominable, nuclear power looks positively enlightened by comparison.  Yet the countries of the world continue to build coal-burning facilities.  And if the Germans, who are miles ahead of everyone else in renewable think we need coal, we probably do. (sigh)

Black Future

The World's Ever-Increasing Hunger for Coal

By Frank Dohmen, Alexander Jung and Wieland Wagner

Coal-fired power stations are a major producer of the greenhouse gas CO2, but there is no alternative to the fuel in the near future. Energy companies are hoping that carbon capture and storage technologies may be the answer, but many local residents don't want CO2 stored under their backyards.

When Rolf Martin Schmitz, a manager with the German energy giant RWE, drove to the North Sea resort island of Sylt last summer, he immediately noticed the signs. Along the side of roads throughout the northern German state of Schleswig-Holstein, he was greeted by images of skulls. Residents had installed the billboards to protest against underground storage sites for carbon dioxide that may be built in the region.

Citizens fear dangerous leaks of the gas, which can be hazardous at high concentrations, and other health risks. Schmitz, on the other hand, is worried about the future of his company.

Schmitz is the head of the domestic operations of RWE, Germany's second-largest electricity producer, whose most important energy source is coal. Burning the material creates large amounts of the greenhouse gas CO2. Energy companies are working at full speed to develop so-called carbon capture and storage (CCS) technology, which involves capturing CO2 and storing it underground. Schmitz believes that the technology provides a way to solve the emissions problem associated with coal-fired power plants. more

Essential history--Marriner Eccles

John Kenneth Galbraith writing about his Depression-era experiences once noted (and I cannot remember where) that Eccles was the most important Keynesian of them all.  Makes sense--if the Fed hadn't cooperated with the New Deal and WW II expansion, none of it would have worked.

So the Fed named its headquarters in Washington after Eccles and then promptly forgot what he was all about.  BTW, the link I provide links to a larger article.  If you don't know much about the Great Depression, this is a fine place to start.

Marriner S. Eccles: Keynesian Evangelist Before Keynes

Thursday, 07/22/2010 - 1:39 pm by Henry Liu 

Learning lessons from Eccles’ economic conversion.

Central bankers around the world nowadays may not know about Marriner S Eccles. The second phase of the Great Depression can be blamed on the early policies of the Federal Reserve under Eccles (November 15, 1934-January 31, 1948). Eccles, the president of tiny First National Bank of Ogden, Utah, became nationally famous through his successful effort to save his bank from collapse in the late summer of 1931.

Eccles defused depositors’ panic outside of his bank by announcing that his bank would stay open until all depositors were paid. He also instructed his tellers to count every small bill and check every signature to slow the prospect of his bank running out of cash. A mostly empty armored car carrying all First National’s puny reserves from the Federal Reserve Bank in Salt Lake City arrived conspicuously while Eccles announced that there was plenty of money left (which was true except for the fact that none of it belonged to First National). The crowd’s confidence in First National was re-established and Eccles’ bank survived on a misleading statement that would have been considered criminally fraudulent in a vigorous investigation.

Eccles was a quintessential frontier entrepreneur of the US West and politically a Western Republican. Beginning with timber and sawmill operations, his family’s initial capital came in the form of labor and raw material. He learned from his father, an illiterate who immigrated from Scotland in 1860, that the way to remain free was to avoid becoming indebted to the Northeastern banks, which were in turn much indebted to British capital. Among Eccles’ assets of railroads, mines, construction companies and farm businesses was a chain of local banks in the West. more

Different disasters--same idiotic noise from "experts"

A quite amusing sample of the similarities between the Great Depression and now.

Great Depression:

“We will not have any more crashes in our time.” – John Maynard Keynes, 1927

“There will be no interruption of our permanent prosperity.” – Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

“There is no cause to worry. The high tide of prosperity will continue.” – Andrew W. Mellon, Secretary of the Treasury, September 1929

“Stock prices have reached what looks like a permanently high plateau.” – Irving Fisher, Ph.D. in economics, Oct. 17, 1929

“Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board.” – New York Times, October 14, 1929

“This crash is not going to have much effect on business.” – Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

“…despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression…” – Harvard Economic Society (HES), November 2, 1929

Today:

“Home sales are coming down from the mountain peak, but they will level out at a high plateau — a plateau that is higher than previous peaks in the housing cycle.” – David Lereah, Chief Economist, National Association of Realtors, Dec 2005

“We may see a blip up in foreclosures and delinquencies.” – Leslie Appleton-Young, Chief Economist, California Association of Realtors, Dec 15 2005

“The U.S. housing market appears to be emerging from its recent travails and the worst may well be over”,Federal Reserve Chairman Alan Greenspan, Reuters release Oct 9, 2006

“The subprime mess is grave but largely contained” – Federal Reserve Chairman, Ben Bernanke May 17 2007, Speech before the Federal Reserve Bank of Chicago

“This is far and away the strongest global economy I’ve seen in my business lifetime.”- Henry Paulson, US Treasury Secretary, July 12th, 2007

“The market impact of the U.S. subprime mortgage fallout is largely contained and the global economy is as strong as it has been in decades.” – Henry Paulson, August 2007

“This is not a rescue” – Goldman Sachs Chief Financial Officer David Viniar after Goldman poured $3 billion into one of its hedge funds, Aug 13, 2007 more

BP has caused a $TRILLION in damages to Gulf

And this is probably a low-ball estimate.  Because, after all, how do you value that which is priceless?

Matt Simmons Says Gulf Clean Up Will Cost Over $1 Trillion, Sees BP At $1, Says "We Have Now Killed The GoM"

Submitted by Tyler Durden on 07/21/2010 15:04 -0500

Matt Simmons shares some startling revelations in his latest Bloomberg TV interview, in which he says none of the propaganda matters on TV 24/7 (photoshopped or not) as the ultimate clean up cost will likely be well over $1 trillion, and a result he is unconcerned about his BP short. He ultimately see the stock going down to $1. What Simmons alleges however is far more startling and audacious: that this is a joint cover up effort between the administration and BP, in which both entities keep throwing sand in the eyes of observers while distracting everyone from the matter at hand: "What we don’t know anything about is the open hole which is caused by the drill bit when it tossed the blow-out preventer way out of the hole…and 120,000/day minimum of toxic poison has now covered the floor of the Gulf of Mexico. So what they’re talking about is the biggest environmental cover-up ever. And they knew that that well, that riser, would finally deplete. And then they could say it’s over." On blaming the catastrophe on Transocean: "For two days they kept saying it’s a rig fire. When the rig sank they could no longer call it a rig fire. It’s a riser leak…Because if they said the truth they would all go to jail." The conclusion: "Unfortunately, we now have killed the Gulf of Mexico." more

 

The rest of the world MAY be emerging from the Great Recession

But you have to have a real economy to participate.  ABB sells energy-efficient upgrades.  That is sort of a real economy strategy that seems to work.

ABB upbeat as demand for efficient systems grows

The headquarters of Asea Brown Boveri (ABB) in Zurich-Oerlikon. Swedish-Swiss engineering giant ABB issued an upbeat forecast, saying demand was recovering for technologies delivering energy efficiency and productivity.

AFP - Swedish-Swiss engineering giant ABB issued an upbeat forecast on Thursday, saying demand was recovering for technologies delivering energy efficiency and productivity.

"We feel more confident about the recovery in most of our markets than three months ago and believe that our short-cycle businesses will continue to perform well over the rest of 2010," said Joe Hogan, ABB's chief executive.

"After the worst economic recession seen in decades, customers are returning to invest in the energy efficiency solutions, for both power and automation, to enhance their efficiency, productivity," he added.

"We expect customer capital expenditures, especially on the power side, to recover later in 2010 and into 2011," said Hogan, as the group published its second quarter earnings. more

The rape of the middle class continues

And the attack is now coming from the institutional organs of the rich.

Pushing for Living Wages and Jobs for All

Labor Fights Back

By SHAMUS COOKE

If the U.S. economy eventually recovers and current trends continue, U.S. workers won’t be celebrating in the streets. The corporate establishment has made it clear that a “strong recovery” depends on U.S. workers making “great sacrifices” in the areas of wages, health care, pensions, and more ominously, reductions in so-called “entitlement programs” — Social Security, Medicare, and other social services.

These plans have been discussed at length in corporate think tanks for years, and only recently has the mainstream media begun a coordinated attack to convince American workers of the “necessity” of adopting these policies. The New York Times speaks for the corporate establishment as a whole when it writes:

“American workers are overpaid, relative to equally productive employees elsewhere doing the same work [China for example]. If the global economy is to get into balance, that gap must close.”

and:

“The recession shows that many workers are paid more than they’re worth…The global wage gap has been narrowing [because U.S. workers’ wages are shrinking], but recent labor market statistics in the United States suggest the adjustment has not gone far enough.”

The New York Times solution? “Both moderate inflation to cut real wages [!] and a further drop in the dollar’s real trade-weighted value [monetary inflation to shrink wages] might be acceptable.” (November 11, 2009). more

I've been screaming about de-industrialization for years

So it is wonderful when someone else takes up the fight.  This is an excellent description of what happens when Leisure Class values run amok.

Learning About Wages from Henry Ford

Made in China

By DAVID MACARAY

The U.S. no longer makes stuff. In their wisdom, America’s politicians, academics and corporate leaders willingly relinquished our manufacturing base to the Third World. Our trade deficit remains huge, we’re trillions of dollars in debt, our infrastructure (roads, bridges, ports, aqueducts) is begging for repair, and our states and municipalities are going broke.

We’re fighting two expensive wars which, with each passing day, seem to make less and less sense to the public; the gap between rich and poor is widening; our health care system (even with the tepid reforms set to take effect in 2014) is spiraling out of control; and our public education system—once a source of national pride—is scandalously under-performing. 

Pharmaceuticals remain one our few growth industries, but much of that growth is fueled by drug companies inventing new diseases (shyness, excessive blinking, etc.) so they can sell us remedies for them. Currently, they’re trying to convince American women that their natural sex drives are dysfunctional, hoping to create a market for female Viagra. more

Remembering when this country was run by builders

By a guy who calls himself the Rogue Columnist.

Atlas mugged

I've been on a mission for several years to right the wrong done to Charles Erwin Wilson, the president of General Motors from 1941 to 1953. He later served as Defense Secretary under President Eisenhower, a man with a keen interest in the well-being of the military. You know Engine Charlie: He's the one who said, "What's good for General Motors is good for America." The very epitome of the selfish, imperious chief executive. Except he didn't actually say it. His real words were, "for years I thought what was good for the country was good for General Motors and vice versa." In other words, the interests of big business couldn't be divorced from the well-being of the nation. This represented the best ethos of our business leadership when America stood at its zenith.

James Cash Penney, founder of the department store chain, operated not by exotic swindles cooked up by his Ivy League MBAs, but by the golden rule. The vinegary head of National Cash Register, John Henry Patterson, turned his factories into boat-building plants to save residents of Dayton during the 1913 great flood. Henry Ford, crackpot and anti-Semite though he became, established his business on this foundation: "I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary will be unable to own one." In doing so, especially paying good salaries, he made one of the seminal steps to create the modern middle class. Ford also said, "A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large."

Now we have a different breed of cat running our largest companies. Their model is not J.C. Penney or even Henry Ford, but Jack Welch and the moguls of Wal-Mart. And they may be on a mission to sabotage the chief executive of the United States. more

This happened in the 1930s too

While USA staggered through a never-ending depression that lasted the whole of the 1930s, the Germans had their economy up and running by 1935.

This time, the Germans appear to be the first to emerge from the financial calamities that began in 2008.

Here's How Germany And Russia Are Forming The World's New Nexus Of Power

Isabelle Schafer | Jul. 22, 2010, 1:19 PM  

Last week, Chancellor Angela Merkel visited Russian President Medvedev for a day, bringing high officials and CEOs of selected German companies with her. It was the 12th official meeting of the German and Russian governments.

And, despite continuous German warnings on Human Rights issues - Merkel mentioned the unresolved murder on the Chechen Human Rights activist Natalya Estemirova - German-Russian relations seem to be going great.

During this visit, multi-billion deals were struck between the two countries' companies. In previous years, other deals and agreements have been signed between the two countries, not always without controversy. more

I NEVER believed Pickens would ever come through on wind

My father's brother was a petroleum engineer who worked for a Bartlesville Oklahoma company named Phillips 66.  Bartlesville was obviously a company town and my uncle lived in an overeducated neighborhood filled with folks who designed refineries, found oil in the remotest corners of the planet, and tried to figure out ever more efficient ways to extract value from a barrel of crude.  One of his neighbors figured out how to make styrene from the sludge at the bottom of the barrel which made him industrial-class royalty in any book.

Phillips was an interesting oil guy and his company town in remote Oklahoma sported a symphony orchestra, an office tower designed by Frank Lloyd Wright, and an olympic-sized pool that regularly hosted AAU swim meets.  And this little paradise for intellectuals responded with of host of important innovations.

So in 1984, this pirate swaggers into town to "extract some shareholder value" from these pampered scientists.  The pirate's name was T. Boone Pickens.  The residents of Bartlesville were understandably horrified and eventually drove him off but at a horrible cost.  Phillips was now so deeply in debt, those expensive science labs became unaffordable as a river of income was diverted to debt service.  Not even a war could have done as much damage to Phillips Petroleum as T. Boone Pickens.  The Phillips of incredible innovation is no more.  The man is a destroyer of the highest order.

So when T. Boone Pickens said he was going to get into renewables, I was HIGHLY skeptical.  How could a man who spent his life wrecking things of great value suddenly become a builder?  So the following does NOT surprise me AT ALL!

T. Boone Pickens Just Dropkicked The American Wind Industry

Gus Lubin | Jul. 22, 2010, 3:09 PM 

T. Boone Pickens' newest version of the Pickens Plan to reduce oil imports depends almost entirely on natural gas. Wind power, which played a key role in the original Pickens Plan, isn't even mentioned.

Which is clearly a bearish sign for US wind.

Forrest Wilder at Texas Observer has more on the Pickens turnaround:

Recall that the original Pickens Plan had two main, interlocking components: First, thousands of new wind turbines would be installed in the Great Plains along with the infrastructure needed to move the electricity to cities. Second, the wind turbines would free up natural gas – currently burned to make electricity – for use in vehicles instead of instead of foreign oil. more

The big issue is lack of jobs

And the BIG problem is that Producers can be quite inventive.  Just remember, the American Revolution was ideologically driven by some highly educated and well-read inventors--Jefferson, Franklin, and Paine.  Fortunately for the banksters, USA Producers aren't very revolutionary these days because it is quite interesting to imagine what would happen if they turned against their builder instincts and became destructive.

Worse Than Ever

The Path of Unemployment

By DEAN BAKER

It has been two-and-a-half years since the recession officially began in the United States. While the economy has been growing for more than a year, unemployment remains near the 10.1 percent peak of October 2009. Few economists predict a rapid decline from its June level of 9.5 percent and, with stimulus being phased down over the next year, it is very plausible that the rate will edge higher in coming months.

The US, unlike most western European countries, is not set up to sustain long periods of high unemployment. Its system of social welfare is very much centered on work. This is most evident with health care. The vast majority of non-elderly people get their health care through employer provided health insurance. Individual policies tend to be very expensive, especially for people with any history of medical problems. When people lose their jobs, they generally lose their health care coverage as well. While there is a public program for low-income families, it doesn’t cover most of the unemployed, and the quality is often quite poor.

The same is true of other forms of public support. The US was never very generous to people who are not working, and it has become less so in the last three decades. That is why the prospect of a prolonged period of high unemployment in the US is likely to mean serious hardship for large numbers of people.

The unemployment seen in this recession is already as bad as in the worst previous post-war recession, and it is almost certain to linger much longer. In the 1981-82 recession, unemployment in the US peaked at 10.8 percent in December 1982. However, the economy turned sharply upward at the beginning of 1983, and the unemployment rate fell back quickly. By July 1983 the unemployment rate was down to 9.4 percent, and it had fallen to 8.3 percent by the end of the year. more

We might just see a lot more of this

When someone loses their house and car in USA, life suddenly becomes VERY bleak.  It is but a short intellectual leap before that person decides that since he is about to die anyway, he might as well extract some revenge on whomever he holds responsible for his plight.

Man Tries To Blow Up Bank In Lockport; Was Reportedly Facing Foreclosure

First Posted: 07-19-10 05:32 PM | Updated: 07-19-10 05:32 PM

An Illinois man facing foreclosure and repossession of his vehicle attempted to blow up a bank in southwest suburban Lockport Friday.

Just before 8 p.m. on Friday, Lockport resident David Whitesell allegedly crashed his car into the PNC branch in his home town before detonated some incendiaries in his car, blowing its roof off and shattering several windows of the bank, the according to the Chicago Tribune. 

Just think if the Producer classes had this kind of money to spend

The following clip is somewhat entertaining but mostly frustrating as hell.  It is congressman Alan Grayson trying to get some flunky from the Fed to tell him where $9 trillion of off-the-books spending went.

Actually Alan, we know where it went.  It went to pay off the gambling debts of the banksters who pissed it away playing electronic games with electronic money.  And while it may be interesting to know which irresponsible buffoons needed that bailout, in the end, the only interesting thing is that $9 trillion could have gone a LONG way towards building a post-petroleum economy.

SEE! what happens when your economy takes care of producers

When I wrote Elegant Technology in the 1980s, I was pretty sure that the German (and Japanese) were most likely to build the new green economies.  I based my predictions on the fact that as the "losers" of World War II, their countries had lost a lot of their Predators and were forced by post-war treaties to enhance their Producer activities.  Over the years, it has become a mighty advantage when your Producers are the best (have I ever told you folks how much I love my Lexus LS?)

So here are the Germans gloating about emerging from the economic meltdown.  And Spiegel is lauding Keynesians.  Ah yes, Germany and Japan had some of the best economists to have ever walked the earth help with the rebuilding of their destroyed post-WW II economies.  Most of those American economists were Keynesians.  By the 1960s, the German were calling their economy Wirtschaftwunder (economic miracle.)

A Keynesian Success Story

Germany's New Economic Miracle

Germany's economy is rapidly rolling toward recovery. During the worst of the global financial meltdown, Berlin pumped tens of billions of euros into the economy and spent hundreds of billions propping up German banks. Now, the country is reaping the benefits as Germany is once again Europe's economic motor. 

By SPIEGEL Staff

It was just the sort of photo-op German Chancellor Angela Merkel urgently needs. Peter Löscher, the CEO of electronics giant Siemens, was sitting on a throne-like chair in the governor's palace in the central Russian city of Yekaterinburg. Contracts were being handed to him in brown leather folders, and every time Löscher signed one of the documents with his malachite green pen, the chancellor clapped with delight. The procedure took place four times, and by the time the round of contract signing ended, Siemens had secured Russian orders worth about €4 billion ($5.2 billion).

The real purpose of Merkel's five-day visit to Russia and China last week was to hold political talks with the two countries' leaders, but the most important message of the trip was meant for the German people. Look, Merkel seemed to indicating to German citizens, German industry is in demand worldwide, even if the government at home is divided and lacking direction.

The German economy has indeed come roaring back to life this summer. Two years after the outbreak of the financial crisis, the auto industry is adding extra shifts once again. The machine building, electronics and chemical industries are all reporting a rapidly growing number of orders. Total unemployment is expected to drop below the 2.8 million mark this fall, the lowest level since 1991.

For the first time in decades, the former "sick man of Europe" is back to being an engine for economic growth. According to an internal government assessment, the country's gross domestic product increased by more than 1.5 percent in the second quarter of this year. In their last prognosis, completed in April, government officials had predicted only 0.9 percent GDP growth. Production in the manufacturing industry increased by 5 percent over the previous quarter. The government assessment also shows that exports grew by more than 9 percent in May. more

How soon until we get serious about investment?

Because without a massive dose of investment, many of the large economies of the world are obviously doomed to a MAJOR slowdown.

Except, Roubini, it doesn't have to be this way.  In fact, we could have a new golden age in 18 months if we ignore the fools who have driven the economy into the ditch.

Double-Dip Days

Nouriel Roubini

2010-07-16

NEW YORK – The global economy, artificially boosted since the recession of 2008-2009 by massive monetary and fiscal stimulus and financial bailouts, is headed towards a sharp slowdown this year as the effect of these measures wanes. Worse yet, the fundamental excesses that fueled the crisis – too much debt and leverage in the private sector (households, banks and other financial institutions, and even much of the corporate sector) – have not been addressed.

Private-sector deleveraging has barely begun. Moreover, there is now massivere-leveraging of the public sector in advanced economies, with huge budget deficits and public-debt accumulation driven by automatic stabilizers, counter-cyclical Keynesian fiscal stimulus, and the immense costs of socializing the financial system’s losses.

At best, we face a protracted period of anemic, below-trend growth in advanced economies as deleveraging by households, financial institutions, and governments starts to feed through to consumption and investment. At the global level, the countries that spent too much – the United States, the United Kingdom, Spain, Greece, and elsewhere – now need to deleverage and are spending, consuming, and importing less. more

The failure of imagination WILL kill us

Rall is accurate here--MOST economists don't have a clue as to what sort of investment in the future would actually restart the real economy. (That's what my blog is for, after all.)

For the Economy, Help Is Not on the Way

Ted Rall

July 16, 2010 - 10:39am

TORONTO--Twenty years ago, in 1990, the American economy was in the third year of a deep recession. It was impossible to find a job. The 1980s housing bubble had popped; high-end housing prices in New York City dropped by 80 percent. Then, as now, the president seemed oblivious, aloof and clueless. Two years later, with no recovery in sight, angry voters turned him out of office.

But help was on the way. Something called the World Wide Web appeared in 1991. Two years later, Mosaic--the first graphic web browser, which would evolve into Netscape--was introduced. The Internet boom began. It flamed out seven years later, but in the meantime tens of millions of Americans collected new, higher paychecks. They spent their windfall. Consumer spending exploded. So did government tax revenues. When Bill Clinton left office in 2001, the Office of Management and Budget was projecting a $5 trillion surplus over the next ten years--enough to pay off the national debt and fund Social Security for decades. Unemployment had fallen to four percent. United States GDP accounted for a quarter of the global economy.

It's different this time. We are in a deep depression: calculated the same way as it was in the 1930s, the unemployment rate is the same as it was in 1934. Global credit markets have stalled. Investment has ceased.

And help isn't coming. more

Taking stock

My birthday was the 17th.  I am now 61.  I believe it appropriate to make some judgments on my life and how it relates to the current zeitgeist.

The good news.

The infinity that is the Internet continues to astonish.  For those of us who remember how research papers were written in the old days, Google, etc. is nothing short of miraculous.  I absolutely hated the Reader's Guide to Periodical Literature.  You would finally find something that looked remotely relevant only to discover your library never had subscribed to that magazine, or the subscription had lapsed for the years you wanted, or the magazine existed but the page you wanted had been torn out, etc.  You would plow through books only to find the topic you wanted to reference was utterly useless.  And when you had finally assembled the necesssary information, you had to type it up on paper using this primitive device that struck a ribbon.  Including illustrations or even simple graphs was so difficult as to be nearly impossible.

Simple reality--if you have a decent connection to the Internet and you are still ignorant, it is a conscious decision you have made to be that way.

On the other hand, there ARE advantages to learning things the old way.  There is still no substitute for reading a book for the simple reason that some ideas are so complex, they really do require a book-length treatment.

The bad news--we can't get anything serious done

I have MANY WTF days.  Take, for example, the related problems of peak oil and climate change.  The solution is thunderingly obvious--the human race is going to have to get along without its favorite invention--fire.  Fortunately, we have pretty much figured out that because of electricity, fire is optional.  So we have to figure out how to rebuild our societies to be non-fire based.  Yet NOTHING gets done while the clock runs out on options for actually saving the biosphere.  The science of climate change was pretty much settled by 1989 yet 21 years later there is a whole movement of climate denialism in the middle of the hottest year of recorded history.

Governments are hopelessly corrupt.

I have a friend who spent part of his childhood in Mexico--the son of a prosperous land developer.  Being in the building business, his father is an EXPERT in all the forms of official corruption.  Friend likes to say, "It isn't that USA politicians are corrupt and sell out their constituents, it's that they sell out SO CHEAP!"  Of course the tragedy is that they always sell out to the folks who think like slum landlords.  Perhaps that is because folks who think like slumlords are the ones who have the most to invest in the corruption of the society.

Education is sub-moronic.

Last April, I had a nasty run-in at a party with some teacher's union Obamabots who wanted to know why I hadn't voted for their man.  Two reasons, says I, 1) in his acceptance speech in Denver, he promised to get the USA off foreign oil by spending $150 billion over 10 years.  Since such a task would require more like $15 trillion, he was trivializing one of the most important problems facing the nation by a factor of 1000 which proved he was scientifically illiterate, innumerate, or both, and 2) He claimed in a campaign speech that his uncle had helped liberate Auschwitz.  This claim was historically impossible and I try not to vote for known historical illiterates.

I live in a state that still glorifies public education.  My community's high school is so luxurious and extravagant, it makes the Taj Mahal look like a random pile of rocks.  So here were a couple of employees of this system informing me that I was being hopelessly unfair to the President by expecting him to know that only by joining the Red Army could his uncle have helped liberate Auschwitz.  I said, "Look, we are not expected to know much about World War II except that the Germans were hyper-evil because they wanted to kill Jews, Churchill's Britain was brave in continuing the fight against Hitler but ultimately, we had to bail him out, and there are some other details but essentially USA saved the human race.  The war ended when we stopped the Germans from killing Jews.  Since this is virtually all anyone under the age of 80 knows in USA, is it really so crazy to expect a presidential candidate to know that the biggest death camp was Auschwitz and that Auschwitz is in Poland?"

I was informed in no uncertain terms that is WAS unfair to expect Obama to know that Auschwitz is in Poland.  In fact, it is unfair to expect anyone to know anything.  In their minds, school is a place where one teaches tolerance and an open mind.  I said, "This is crazy--until a person has a reasonable grasp on the events of history, it is literally impossible to think as an adult."  I was informed that I was talking to a grown woman with a Ph.D. in behavioral sciences so it was quite possible to think as an adult without knowing any history.  As this point I was reduced to helpless sputtering, "Let me see if I have this straight--you are comparing history, the subject that every culture insists is critically necessary, with psychobabble?"

We tax ourselves to build palaces where folks who have no idea why education exists can waste the curiosity of our children by having them learn the 10,000 excuses for why it isn't important to actually know math, or science, or how the world they live in got to be the way it is.  The only good thing you can say about the products of such an "education" is that they don't have much to unlearn.

Our economics only measures the activities of pirates and vandals.

35 years of "free-market" hegemony has reduced the economics profession to its current state of disgrace.  Whiz kids who can do fast algebra until the cows come home but couldn't organize the building of a birdhouse, much less a conversion to a fire-free economy.

We are crippling our work force.

The blase view of official Washington on the subject of unemployment and under-employment is magnified when one considers that after 35 years of shipping industrial expertise overseas, we don't have the skills to do much anymore.  Even IF we were to start spending the necessary money for a sustainable solar infrastructure, there is a good chance we would flounder around for a VERY long time making huge mistakes.  Don't believe me?--imagine you were put in charge of building a USA high-speed rail system.  Where would you even start.  This country has never made high-speed locomotives so we would have to start from virtually nothing.  It would be a bigger problem than Japan had emerging from the rubble of WW II.

Our large media organizations are utterly hopeless.

Hard to exaggerate here.  We are spoon-fed information by folks who know even less math, science, and history than Obama.  It is hard to address serious problems as a society when the organs of information are run by drooling morons.  It really is.

Our politics are pathetic.

It's no damn wonder that about half the nation cannot be bothered to vote.  Take the last election.  The choice for president was between an overprivileged Annapolis slacker who was known for wrecking expensive aircraft who then parlayed his "victimization" into a senate seat where he became embroiled with some of the more lurid crooks in USA history like Charles Keating.  He picks as a running mate an Uberditz who still entertains us with her buffoonish behavior.  On the Democratic side, we have someone who had a grand total of TWO years in the Senate and was best known for his ability to raise large sums of money from the biggest and most aggressive Predators on Wall Street.  He chose as his running mate, a buffoonish hack from the great state of Delaware--where all the great Predators go to incorporate.

Makes you feel warm and fuzzy all over.

Understanding the mechanics of modern Predation

The Financial Con Of The Decade Explained So Simply Even A Congressman Will Get It

Submitted by Tyler Durden on 07/10/2010 21:13 -0500

Sometimes, when chasing the bouncing ball of fraud and corruption on a daily basis, it is easy to lose sight of the forest for the millions of trees (all of which have a 150% LTV fourth-lien on them, underwritten by Goldman Sachs, which is short the shrubbery tranche). Luckily, Charles Hugh Smith, of oftwominds.com has taken the time to put it all into such simple and compelling terms, even corrupt North Carolina congressmen will not have the chance to plead stupidity after reading this.

Of course, to those familiar with the work of Austrian economists, none of this will come as a surprise. 

1. Enable trillions of dollars in mortgages guaranteed to default by packaging unlimited quantities of them into mortgage-backed securities (MBS), creating umlimited demand for fraudulently originated loans.

2. Sell these MBS as "safe" to credulous investors, institutions, town councils in Norway, etc., i.e. "the bezzle" on a global scale.

3. Make huge "side bets" against these doomed mortgages so when they default then the short-side bets generate billions in profits.

4. Leverage each $1 of actual capital into $100 of high-risk bets.

5. Hide the utterly fraudulent bets offshore and/or off-balance sheet (not that the regulators you had muzzled would have noticed anyway).

6. When the longside bets go bad, transfer hundreds of billions of dollars in Federal guarantees, bailouts and backstops into the private hands which made the risky bets, either via direct payments or via proxies like AIG. Enable these private Power Elites to borrow hundreds of billions more from the Treasury/Fed at zero interest.

7. Deposit these funds at the Federal Reserve, where they earn 3-4%. Reap billions in guaranteed income by borrowing Federal money for free and getting paid interest by the Fed.

8. As profits pile up, start buying boatloads of short-term U.S. Treasuries. Now the taxpayers who absorbed the trillions in private losses and who transferred trillions in subsidies, backstops, guarantees, bailouts and loans to private banks and corporations, are now paying interest on the Treasuries their own money purchased for the banks/corporations.

9. Slowly acquire trillions of dollars in Treasuries--not difficult to do as the Federal government is borrowing $1.5 trillion a year.

10. Stop buying Treasuries and dump a boatload onto the market, forcing interest rates to rise as supply of new T-Bills exceeds demand (at least temporarily). Repeat as necessary to double and then triple interest rates paid on Treasuries.

11. Buy hundreds of billions in long-term Treasuries at high rates of interest. As interest rates rise, interest payments dwarf all other Federal spending, forcing extreme cuts in all other government spending.

12. Enjoy the hundreds of billions of dollars in interest payments being paid by taxpayers on Treasuries that were purchased with their money but which are safely in private hands.

Charles' conclusion does not need further commentary as it is absolutely spot on:

Since the Federal government could potentially inflate away these trillions in Treasuries, buy enough elected officials to force austerity so inflation remains tame. In essence, these private banks and corporations now own the revenue stream of the Federal government and its taxpayers. Neat con, and the marks will never understand how "saving our financial system" led to their servitude to the very interests they bailed out.

The circle is now complete: in "saving our financial system," the public borrowed trillions and transferred the money to private Power Elites, who then buy the public debt with the money swindled out of the taxpayer. Then the taxpayers transfer more wealth every year to the Power Elites/Plutocracy in the form of interest on the Treasury debt. The Power Elites will own the debt that was taken on to bail them out of bad private bets: this is the culmination of privatized gains, socialized risk.

In effect, it's a Third World/colonial scam on a gigantic scale: plunder the public treasury, then buy the debt which was borrowed and transferred to your pockets. You are buying the country with money you borrowed from its taxpayers. No despot could do better. more

If You're Going to Do Something Illegal in America, Do Something Spectacularly Illegal!

How Bank of America Got Away With a Huge Swindle

By DAVE LINDORFF

If you want to avoid facing a tough prosecution for malfeasance, be a banker, not a biker.

That appears to be the lesson of Saturday’s front page of the Wall Street Journal, where the lead story was about how Bank of America repeatedly hid its massive bad debt holdings from regulators and investors through a creative accounting device called “repurchase agreements,” and the second story, just above the fold, was about how US Food and Drug Administration prosecutors are “Casting a Wider Net” investigating the use of steroids by competitive cyclists.

According to the BofA story, the bank, during a Securities and Exchange Commission investigation into the real financial condition of the nation’s biggest financial institutions, admitted that at the ends of all the quarterly reporting periods from 2007 through 2009, it had used repurchase agreements, or “repos,” to temporarily shed bad debt before drawing up and releasing its required public filings. That is to say, it managed to lie about and hide from view its weakened liquidity position all through the financial crisis.

Astonishingly, the Wall Street Journal article reports that this practice, known euphemistically in financial industry parlance as “window dressing,” is “not illegal in itself,” unless it is done with the intent of misleading investors. The article is quick to note that “Bof A said its incorrect accounting wasn’t intentional.” (The newspaper didn’t go to the SEC or to any independent source such as an academic expert or lawyer for comment on this laughable whopper.)

BofA, every three months, was transferring mortgage-backed securities briefly to a trading partner in return for a simultaneous agreement to repurchase similar securities from the same partner, once the required SEC filing had been shipped out in the mail. As the Wall Street Journal’s reporter Michael Rapoport writes, “The practice amounts to a bank renting out its balance sheet for short periods; the bank gets fees, and the client on the other end of the trade gets short-time cash.”

If this kind of thing is not deliberate fraud I don’t know what is, and yet the bank, in its statement to the Wall Street Journal, claims the “effort to manage its balance sheet” was “appropriate,” and that the intent behind the shell game was not to mislead investors or regulators, but rather was “to reduce the specific business unit’s balance sheet to meet its internal quarter-end limits for balance sheet capacity.” more