The Germans as an economic model

Anti-German propaganda has been a constant in USA since at least 1914.  The intensity of anti-German feeling rises and falls of course, but there is always a background simmer.

At the peak of anti-German persecution in Minnesota during World War I, German-language schools were closed, the teaching of German in public schools was discontinued, German-American organizations were driven underground, etc.  People changed their names--Richter became Richards, etc.  People went to jail because they were accused of being "pro-German."  This was a VERY big deal because as much as 40% of the population of the state was of German extraction.

I grew up in a Mennonite town.  The Mennonites have been officially Pacifist since 1534 so have a well-argued body of positions on the subject of war and peace.  In a nutshell, they believe that not only must they personally stay out of warfare, they are not supposed to assist the combatants in any way.  What they ARE supposed to do is organize help for the victims of war once hostilities cease.

In practical terms, this meant that I had childhood classmates who had been born in European refugee camps.  The local Mennonites sponsored these victims of war and because the "official" language of the Mennonites is German, most of the newcomers came from native German-speaking areas like East Prussia.  So I have been around German-American culture my whole life.

World War II threw a giant monkey wrench into the Mennonite worldview--mostly because their core belief that only God could judge who was at fault in a war took a major hit.  Hitler's Germany most certainly had victimized Poland, etc.  And then some of the young men who had defied their upbringing and gone to war anyway came home with pictures of the death camps they had liberated.  The debate over the new reality was still raging when my dad took on a new church and we left town.

The main advantage of seeing this Pacifist German-American culture up close is that it demonstrated for me just why that culture tends to prosper.  You take a group of people with virtually no vices, a love of learning, a skill for social organization, and a crazy work ethic, plop them down in the middle of some of the most fertile soil on earth, and not surprisingly, they are quite well off.  When this Producer Class side of German culture was placed in power by the occupation powers after World War II, the country exploded out of the devastation with the economic miracle they called Wirtschaftwunder.  

When I first read about Wirtschaftwunder, I knew immediately what had happened in big cultural terms.  Now I only wanted the details.  Been collecting them ever since.  And I am enjoying the fact that others are noticing that Germany has figured out how to make industrial, Producer Class Capitalism work for a far wider percentage of its population than our bankster version here in USA.  (Notice, there seems to be a theme here.)

2011 Will Bring More De facto Decriminalization of Elite Financial Fraud - William Black

Only when people like William Black are placed in positions of authority to begin cleaning up the U.S. financial system, will the load of usury, speculation, and economic rent be lifted to provide enough room for the real economy and working people to begin recovering. Until then, wages will continue to stagnate, income disparity will continue to grow, physical infrastructure will continue to deteriorate because of underfunding, social infrastructure will be slashed, and the U.S. continue on its present path of decline. It really comes down to a fight between America and Wall Street.

The role of the criminal justice system with regard to financial fraud by elite bankers in 2011 is likely to reprise its role last decade — de facto decriminalization. The Galleon investigation of insider trading at hedge funds will take much of the FBI’s and the Department of Justice’s (DOJ) focus.

The state attorneys general investigations of foreclosure fraud do focus on the major players such as the Bank of America (BoA), but they are unlikely to lead to criminal liability for any senior bank officials. It is most likely that they will lead to financial settlements that include new funding for loan modifications.

The FBI and the DOJ remain unlikely to prosecute the elite bank officers that ran the enormous “accounting control frauds” that drove the financial crisis. While over 1000 elites were convicted of felonies arising from the savings and loan (S&L) debacle, there are no convictions of controlling officers of the large nonprime lenders. The only indictment of controlling officers of a far smaller nonprime lender arose not from an investigation of the nonprime loans but rather from the lender’s alleged efforts to defraud the federal government’s TARP bailout program.

What has gone so catastrophically wrong with DOJ, and why has it continued so long? The fundamental flaw is that DOJ’s senior leadership cannot conceive of elite bankers as criminals.

Read more.

Chinese conduct first test of Hainan High Speed Rail Line

This is only one of the minor lines being built across China.

The first test train has run on the new 308km high-speed line linking Haikou with Sanya on the southern Chinese island of Hainan. The train reached a maximum speed of 250km/h during the 90-minute run on December 26.

More.

Wikileaks and the Protestant Reformation

I have long subscribed to the idea that Martin Luther's Reformation was the logical outgrowth of the invention of the printing press.  It was a social revolution that followed and was likely caused by a technological one.  It is kind of a convoluted argument that has produced its share of dog-watching-a-ceiling-fan looks.  Or worse.  Some folks think I am being too casual about the religious ramifications of the Reformation which leads the secularists to believe I am not taking the problems of extremism seriously enough and the devout to believe I am ignoring the mighty hand of God.

So even though I am absolutely convinced of the historical accuracy of my argument, I don't bring it out very often.  Too many possibilities for a misunderstanding.  So when I saw one of my favorite arguments applied to the current phenomenon of Wikileaks, I was delighted.  Let someone else do the heavy lifting.

More on why the banksters fear debt more than depression

And it's clear, the global economic consensus is that governments everywhere must toss their citizens overboard to service their debts.  Now the fact that much, of not most, debt is utterly illegitimate is not a subject that will merit much notice because if it were to be, then the question of why we just don't go ahead and cancel or repudiate these these debts never comes up either.

My take on Wikileaks

Wikileaks was inevitable the second the Internet reached some critical mass of installed usage.  The reason is obvious.  The Internet--by design--is perfect for swapping information in its original form and compared to music and video files, swapping print documents is a snap.

I read somewhere that all 250,000 State department cables can be zipped into a 1.5 gig file.  I cannot confirm this figure but it seems about right.  My cable modem can download such a file in less than ten minutes.  Once the Internet proved how good it was at passing around large files, it was only a matter of time before the whistleblowers discovered it.

Not surprisingly, I like to see a site like Wikileaks succeed because its existence validates a bunch of beliefs I have about how the world works.

The defining strategies of the Predator Classes are force and fraud.  Producers have had limited success against force but it is amazing how well they do against fraud.  Producers have invented amazing strategies for exposing lies from printing and universal literacy to the scientific method and systematic basic research.  The Internet is just the latest way for Producers to combat fraud and Wikileaks is a perfect use for the technology.

Of course, this is not all about intellectual validation. Wikileaks is about discrediting the bad guys and it cannot be long before we start to see the evidence of the economic crimes of the past 30 years and the disgusting levels of corruption and complicity of the political classes in allowing them to happen.  There can be no real economic recovery until these crooks are rooted out and removed from proximity to serious economic decisions.  So Wikileaks has the possibility of doing immeasurable good.

But there is also the pure pleasure of watching the smug arrogant bastards that work for the State Department exposed as the clowns they are.  I found out how aggressively ignorant our diplomats were in the early 1980s (by accident) but have had trouble convincing my fellow citizens it is really as bad as I discovered.  Now we get to see evidence of official foolishness on an almost daily basis.  No wonder the Village is in an uproar!

The neoliberal experiment has failed

Now it needs a proper burial.  But how can that happen when the vast majority of establishment economists are determined to flog that dead horse back to life?  Perhaps by listening to the citizens--you know--democracy.

The Germans have grown tired of the Euro.  According to this article, opposition to the Euro has reached at least 57% of the population.

The Ten Biggest American Cities That Are Running Out Of Water

At the end of October, a special study by the folks at www.247wallst.com compiled a list of the American cities most in danger of suffering impending water shortages. The list includes the major water supply; the city's population (unfortuntely, population of the city, not the urban area, which would be even scarier); the city's population growth rate since 2000, and the city's average annual rainfall.

Here' the full list with all the scary details: The Ten Biggest American Cities That Are Running Out Of Water. It's actually not a long read.

Two points - 1. The population shift to the sun-belt has created a potential catastrophe. Or, to be precise about the matter, the failure to apply national planning by the federal government, for over 30 years, has allowed an uncontrolled population shift to the sun-belt that has created a potential catastrophe. 2. Clearly, the United States is not adequately funding the development and maintenance of its physical infrastructure. This lack of proper funding for infrastructure) is one of the means (along with the explosion in amount of debt) that has allowed the United States to maintain the illusion of prosperity. But the bills are now coming due.

Larry Summers' role in derivatives deregulation and his relationship to Enron

A few days before Christmas, Kevin Connor, Co-founder of the Public Accountability Initiative, pointed to a few emails, circa 2000, from Enron lobbyists that show the key role Larry Summers played in preventing regulation of financial derivatives. References to "Lee" are to top Summers aide, Lee Sachs, who was Counselor to Treasury Secretary Timothy Geithner from January 2009 until March 2010, when Sachs left for a relatively less public position at the "liberal" think tank, the Brookings Institute. The reference to "Ken" is to Ken Lay, then chairman of Enron.

As you know, Ken has talked to Larry Summers about serving on Enron's Board of Directors. Larry told Ken that in light of his selection to head Harvard, he wants to hold off going on any corporate boards for now. My understanding is that Larry will most likely accept Ken's offer at the end of the year.

In the meantime, let me suggest a candidate for Enron's Advisory Committee. Lee Sachs was Assistant Secretary of Treasury for Financial Markets under Bob Rubin and Larry. Lee coordinated the energy negotiations for Larry at the end of the Clinton Administration. You probably met Lee at those meetings. Lee is brilliant. He was a Managing Director at Bear Sterns before joining the Treasury team. He is a huge fan of Enron and is constantly telling me how extremely well positioned Enron is for the future. He has done considerable research on our business model and is constantly talking to his buddies on Wall Street about us. Lee will undoubtedly be a significant player in any future Democratic Administration. I know he would be an invaluable addition to this Committee. He has not decided what he is going to do next, but has several extremely good offers on the table from large investment firms and hedge funds. None of these would conflict with this type of activity. I thought I would plant this suggestion with you not knowing exactly how these things are done.

There is a lot more detail, and a few more damning memos, in Conner's short article, Celebrating Ten Years of Derivatives Deregulation. It's well worth the time to read the entire article.

The Euro seems ready to destroy itself because like the Gold Standard, it is not flexible enough to meet the needs of a modern economy.  Of course, this absurd rigidity is a conscious decision by the right-wing nuts who run the big financial institutions in Europe.  It is not an intrinsic failure built into the idea of a Europe-wide currency itself.

It's harder than it looks

Converting a car to run on electricity seems pretty straightforward.  Get rid of the smelly gasoline-powered parts and replace them with an electric motor, some batteries, and the electronic controllers to make it all work.  Sounds like something a person could do in his garage on weekends.

And it would be except for one MAJOR problem--the amount of energy stored in a small amount of gasoline is more than the energy stored in hundreds of pounds of the best batteries we can make.  Well, that shouldn't be such a problem--simply make the rest of the car lighter to compensate for those heavy batteries.

Putting the whole car on a diet seems like such a virtuous exercise.  The lighter the car, the less energy it requires to run.  And some elements of a modern car could simply be discarded--the premium sound system, the 8-way powered seats, the GPS-nav system, etc.  But a lot of the "frivolous" weight in the modern automobile is for things mandated by law such as the airbags.  Ok, then cut the weight out by replacing the steel in the structure with something lighter.

Using aluminum gets you some weight savings but to get a significant weight reduction, carbon fiber is the way to go.  Unfortunately, mass-producing carbon fiber parts is nearly impossible and the affordable automobile requires mass-produced parts.  And while fabricating carbon-fiber parts can be a garage project, doing it for profit is so difficult, very few auto makers will even try.  BMW claims to have made progress but the carbon-fiber car is still incredibly expensive--even by BMW standards.

A Christmas flash mob in Ontario

Having way more fun that anyone could ever imagine singing Handel's Messiah.

Merry Christmas

Well, this explains a lot

I have long wondered how I came to have a value system that was so contrary to that around me.  The easy explanation was that I was subjected to some cultural signals that ran seriously athwart the prevailing consumerist gospel that swept USA after WW II--most notably the disgust at displays of wealth taught by those Mennonites.

But the Mennonites were clearly not responsible for my greatest difference between me and my culture--my distaste for intellectual specialization.  Of course there are GOOD reasons why folks specialize--the best being that to be really superb at something, it helps to devote large blocks of time and considerable effort to learning one thing.  But since I was born with a nearly unlimited curiosity, I did not like the idea of knowing only one thing at all.  I wanted to know a LOT about everything!

Then somewhere along the way, I discovered that the really interesting stuff is found where intellectual specialties intersect--for example between biology and chemistry.  The reason I was so intellectually attracted to town planning is because it involved so many of these intellectual intersections--such as those between demographics, transportation, housing, environmental design, sanitation, etc.  And of course, one important measure of the success of these arrangements was called economics.

Unfortunately, the subject of economics had been atomized into tiny sub-specialties in the post WW II period too.  The big economic thinking that would be relevant to town planning was now just a tiny room filled with folks who called themselves heterodox economists.  So here I am, a self-described heterodox economic thinker who got this way because I dislike learning about only one thing.

However, it turns out my "tribe" has a similar value set to mine--at least according to one recent study.  So even though my Swedish ancestors came to North American in the late 19th century, enough cultural signals filtered down so that I agree with most of this.  I am pretty sure that the most important cultural signal was the idea that it was virtuous to be well-read.

Merry Christmas from the Predators

Michael Hudson on Why Government is More Afraid of Debt than Depression.

Ah, the Predator classes--spreading the love of the Prince of Peace.  Kinda makes you feel warm and fuzzy all over.

Reform or replace the Fed?

I have mixed feelings about Congressman Kucinich.  He has represented the Cleveland Ohio area during the period when that city declined from the status as one of this richest and most important cities in USA to the poster child for deindustrialization.  Some actually blame him for the decline of Cleveland but that is just wrong.  What is true that he has fought a largely ineffective rearguard action to stem that decline.  And while it is true that he has lost a majority of the battles he has fought, it is also true that almost no one on planet earth has a much better track record against the forces of neoliberalism.

In the meantime, Kucinich has run for President several times and has attracted a small but loyal following over the years.  And while some of his ideas have seemed wildly impractical (Department of Peace, anyone?) his economic positions have been surprisingly sound.  And lately, he has decided to take on the Fed--which of course is not surprising because it is the logical institution to target in any period of economic decline.  He calls this effort the ‘‘National Emergency Employment Defense Act of 2010.’’

As the last practitioner of industrial capitalism

Germany finds itself increasingly caught in traps--some of them not of her own making--although many are.  On one hand, the great neoliberal experiment called the Euro is blowing up on them and as it self-destructs, is dragging the German economy down with it.  And while this assault on the German economy continues, her great contribution to humanity in redesigning the industrial infrastructure away from its over-reliance on carbon-fueled fires has taken a hit.

Doubling down on foolishness

Whenever I get depressed about the future of the USA, three reasons predominate.

1. Our failure to maintain what we have built 
2. Our absurd energy "policy" of pretending oil will exist forever 
3. We are ruled by morons 

Actually, #3 is a bit imprecise and an insult to regular morons.  It requires time, money, and cultural commitment to produce a Sarah Palin, or a Mitch McConnell, or etc.  Yes, the tipping point has been reached and nobody wants to admit the system is broken and we are acting just like every imperialist when the cracks are too big to fix or hide.

My good friend has offered friendly amendments to my core complaints:

1. The complete indifference to workers, the sick and children. 
2. The total corruption of the institutions from Congress to health care. 
3. The glorification of policeman and the constant fear factor of enemies around every corner. 
4. The private prison industry and the gathering of information by ill-trained monkeys believing they are doing their patriotic duty. 
5. The use of the Ivy League as the source of stockbrokers and company CEO's and presidents. 

"And the list goes on...primarily the hoarding of the wealth by the predators and the money wasted on keeping the empire intact. The worst for me will be the final tyrannization of the worker and the student once they are economically impotent."

Plotting the raid in advance

The scandal isn't so much about what the banksters have done that's illegal, it's what is now legal.  After all, corrupt legislators in many countries have now decriminalized many of the banksters more egregious activity.  Even so, the ability of banks to cover their gambling losses by raiding the public till seems criminal to us innocent bystanders--even if the laws don't protect us as they should.

Here is the story of how the big October 2008 raid on the public purse--the one we were told was critical to the survival of the global financial system--was already well planned in March.  And of course, this particular evil just HAD to involve the Bank of England.  Of course.

Honesty and the real economy

You can always tell when a college freshman has had WAY too much dope--he will start asking what he considers to be the deep mystical questions like "what is truth?"  Actually, this famous question is pretty old--it can be found in the Bible asked by one of history's sleazeballs named Pontius Pilate who was about to order the execution of an innocent man.  Asking "What is truth?" may seem profound to the freshman / doper but mostly it is just a huge warning sign that someone is about to tell a whopper and is justifying his dishonesty.

In the world of Producers, the reality is that truth can be rather easily determined.  If you claim that you have planted a field and have not, the evidence that you lied rather quickly emerges when plants fail to sprout.  If someone claims to have fixed the brakes on a school bus and has not, the result can be loud, dramatic, and very tragic.  ETC!  In the world of Producers, there is so MUCH truth that is beyond any reasonable debate, a person could spend their life collecting these truths and only gather a tiny fraction of them.

It is impossible to run the real economy well without a large percentage of the population totally dedicated to honesty in their dealings.  This means whenever there is a segment of a society whose prime operating scheme is force and fraud, their success will cause real and significant damage to the real economy.  That is why you can easily predict the success of a given society simply by measuring the general levels of either honesty or corruption.

More fallout from Cancun

It's pretty obvious that USA is NOT going to be leading the pack when it comes to creating a reduced-carbon-emissions infrastructure.  USA is run by banksters and banksters cannot solve the problems of climate change--they can only prevent a solution from happening.  This outcome is baked into the roles the money-grabbers must play to collect all those huge bonuses.

Then there is the problem of allowing lawyers using standard debating techniques to bargain over carbon limits.  Some folks think this is a deal to be negotiated.  What they forget is that the laws of nature are not negotiable.

Winter HAS arrived

Our weird weather continues--same extreme march of large systems that brought us the lowest barometer reading ever recorded in North America last October.  This time, we had temperatures low enough for snow and got a BIG blizzard.  It was enough to collapse the roof on the Metrodome in downtown Minneapolis.  And we got five more inches out here than they did.  16" (40 cm) predicted, 22"(56 cm) "measured" although with all the wind, it was hard to be accurate.

Wikileaks on the real economy

I must say that so far, the Wikileaks releases of State Department cables have been as boringly predictable as they are depressing.

Anyone with a nodding acquaintance with the folks in the State Department cannot be even a little surprised at the revelations. I haven't read that many of the documents but can see already that they are infused with the official state religion which teaches that because we are #1 in all ways important, we don't have to know anything about anyone else because if they are worth knowing, they will be struggling to be ever more like US! 

Besides the outrage that comes from acute embarrassment, official Villager reaction to the WikiLeaks dump is, "Of course these assessments of others are blunt. We have to be like that in our back-channel communications--lives are at stake." What will not be talked about when this unprecedented document release is discussed is why we in USA feel entitled to treat the rest of the world so shamefully, a non-neglible fraction of the planet's youth want to kill as many of us as they can.

But aside from the routinely ignorant and self-important horseshit coming from our "diplomats," there really ARE interesting nuggets to be found.  My favorite is their assessment of critically important elements of the real global economy.  Given the overwhelmingly Predator Class bias of the diplomatic corps, their list of critical infrastructure around the world is only interesting to them for it's military and strategic value, whatever rents can be extracted from control of these industrial choke points, or whether they are potential targets for "terrorism."  The questions of how these industries came to be, whether they should be so important, their current state of repair, or their environment impact just don't much interest the Predator mind.

The fight over bank bailouts is FAR from over

The idea that the average citizen in Europe should lower their living standards to bail out crooked bankers is NOT popular.  Imagine that!

Why Cancun really failed

Cancun failed because such gatherings MISS THE POINT!

And the point is completely obvious.  It is utterly impossible to impliment any meaningful solutions to the problems facing planet earth until we reform the way we fund such projects.  What possible good can come from research into solar energy systems, for example, if the world of finance will not allow the new infrastructure to be built.

We have allowed some greedy pinheads to convert money, an essential element of the economy, into a video game.  And while (mostly) kids plunder the planet playing their online video games--only with real flesh-and-blood victims--the rest of us are told we cannot possibly do anything meaningful with our lives because they must have ALL the electronic money or their game is over.

Happy St. Lucia Day

We almost lost my sister over the weekend to a botched anastheia in a routine surgery.  She is the expert in her little college town on the proper Swedish celebration of Lucia.  So for her, here is a clip from the 2007 Lucia celebration in the Globe Arena of Stockholm.  These wonderful young women are doing the classic Swedish Christmas carol jul jul strålande jul.

The economic crises and the Germans

Since USA appears to be doing nothing or actually doing the wrong things in this economy, the most interesting story out there is Germany.

On one hand, Germany's real economy is recovering from the various financial catastrophes quite nicely.  Exports are up.  Unemployment is down.  Bet you could find some smug damn Germans these days.  Even though industrial capitalism has taken a mighty beating at the hands of the neoliberals around the world, it still burns in Germany--even if not so brightly as it once did.

Of course the banksters, noticing that the Germans have some prosperity to go rob, have figured out a way to make the German taxpayer bail out their sour loans in Ireland, Portugal, Greece, etc.  And of course, since Germany also is home to some of the more ham-fisted banksters headquartered in Frankfurt, it is clear that this is in some ways just a move by German banks to seize a greater share of German industrial output.

Of course, none of this is especially new.  In 1915, when Americans were first being told that they must enter WW I with Germany as the enemy, Thorstein Veblen wrote an incredible book called Imperial Germany and the Industrial Revolution.  It would be the best example of Institutional Analysis he would write.  It's a big book with lots of conclusions that are almost eerily accurate today.

In one example, Veblen postulated that the Germans got the way they were because they are the product of nearly equally-powered cultural elements.  The newcomers were the upstarts--the titans of industry who built the Ruhr valley into a colossus that by 1900 had surpassed both France and especially England.  For sake of simplicity, I call them the "geniuses."  But Germany was also the country of the Prussians, the Junkers--the "militarists."  This combination of genius and militarism pushed Germany into waging war in 1914, argued Veblen, and it was a cultural problem that would guide German behavior for a long time no matter the outcome of WW I.

Of course, WW II pretty much destroyed the German militarist class which caused an industrial renaissance they called Wirtshaftwunder.  But as global finance took on a more predatory tone after 1973, the Germans have discovered they still have a lot of Prussian left in their culture.

Ah yes Veblen--right again.  What a shockeroo!  And I am certain he would just love the piece in today's Spiegel.  On one hand, we see Ms. Merkel who has listened to the geniuses at some level, and on the other hand, we see Finance Minister Schäuble who could be a freaking Junker come back to life.

No really?  Merkel is also being criticized by a guy named Juncker?  I just love it when the militarists start criticizing the geniuses for 'simplistic thinking'.  You cannot make this shit up. (sigh)

Feeding the world

Earlier this fall, I had a post on the nearly miraculous conditions of Minnesota agriculture 2010.  A bin-busting harvest combined with near-record prices for agricultural commodities, had put a smile on the faces of upper midwest farmers for the first time in years.

It turns out that the same conditions that made 2010 so good here in Minnesota is exposing severe strains in the way the planet feeds itself.

The military-industrial complex explained

In the fall of 1967, I was a scared, small-town, skinny kid trying to figure out this huge mega-university I had decided to attend.  During Welcome Week, I had signed up for a bunch of activities I thought I might find interesting including working for the student newspaper, auditioning for the choir, and signing up for an organization that sought to promote international understanding by helping the rather large contingent of foreign students adjust to their new school.

One of the first parties held by the international organization was a meet-and-greet with the school's new president--a little guy with the funny name of Malcolm Moos.  (Yes, I was tempted to ask him if he was related to Bullwinkle but thought better of it.)  I knew absolutely nothing about the man except for the fact that he had been appointed to please the Republicans in the state legislature and that he had worked for Eisenhower.  Turns out Moos and I would stay at the University of Minnesota for exactly the same length of time 1967-74.

As I passed through the reception line that day, I wish I had known he had authored one of the more famous speeches of the 20th century.

Snowed in

It's warm inside.  We did our grocery shopping yesterday.  We have a new toy to play with--a Blu-ray player with a wifi connection.  And we don't have anywhere to go.  Which is a good thing because the wind is just howling out there and the snow is falling fast.

Some pictures from out our windows.  This clip starts out with the plowing of the last snow followed by pictures of this latest blast of winter.  I feel sorry for those who spent all fall working on a Christmas program that would have been performed tonight.

Ireland vs banksters

One of the great sayings in finance is, "If you owe your banker $200,000, you have a problem.  If you owe your banker $200,000,000--your banker has the problem."

Interestingly, in spite of mountains of evidence to the contrary, politicians have been led to believe the sky will fall if we cease to pay the tribute that the moneychangers demand.  And it's utterly amazing what politicians will socially destroy at the will of the lords of international finance.

There are hundreds of examples.  My favorite concerns Nelson Mandela.  Here was a guy who spent long years in a South African jail because of his battle to overturn Apartheid.  He had supporters who risked their lives to keep the flame alive.  Finally the day came and it was announced that South Africa would renounce Apartheid.  There would elections.  Mandela would go from prison to the governor's mansion.  Except sometime before his inauguration, he was presented with the "message."

The message said, "Mr. Mandela, you are about to become President of South Africa.  All the serious institutions of power in the country believe this is a good idea.  But there is one small detail, your government has to agree to service the debts of the country."  By agreeing to this economic "detail," Mandela sold out his movement.  All the promises and expectations of his supporters would go unfunded while Mandela would have to tax his supporters to pay the debts run up by the people who had imprisoned him.

Shit sandwiches don't get much shittier than that!

News from Cancun

As regular readers no doubt remember, I had few expectation for anything that remotely resembled success coming out of the latest convention to save the world.  Now that Cancun 2010 is nearly over, it's time to add up the score.

First of all, we should recall the fiasco that was Copenhagen 2009.  It turns out that there was more than simple incompetence at work in that mess.

Evil, cowardly, historically illiterate, or just plain lazy?

Not surprisingly, I am not much of a fan of politicians. The vast majority of them are lawyers and as such, are as relentlessly attached to the goals and strategies of the Leisure Classes as they have been for the past, oh, 5000 years. They tend towards irrelevancy because the BIG problems facing society today—specifically Peak Oil and other forms of resource depletion, plus climate change and the other manifestation of turning the planet into a dump—are problems of industrial design, not law. These are life and death issues yet using easily corruptible lawyers to address these threats is likely a waste of time. Lawyers like to deal with things like property rights and gay marriage because those are subjects that they can, at least, understand on some level.

So I try not to get into specific political personalities here at Real Economics. Even so, the plunge of a "progressive community organizer" like Obama into the utterly depraved depths of neoliberalism has me in a near state of shock—and I didn't even vote for the man.

The Obama tax deal with Republicans is insane

The central premise of U.S. economic policy since the election of Ronald Reagan in 1980 has been that the people in the private sector who know how to invest – the rich – do a much better job allocating society’s financial resources than the federal government. In fact, Reagan told us in his first inaugural address, “government is the problem."

In order to get as much of society’s financial resources into the hands of the rich - the people in the private sector who supposedly would do a better job investing it - Reagan, the Republican Party, and American conservatives in general developed a simple-minded faith in tax cuts, especially in reducing taxes on the highest incomes.

What are the results of this thirty year experiment low taxes? The Reagan / Republican / conservative theory DOES NOT WORK. For the first time in American history, we now have a generation that has less education and worse economic prospects than their parents did thirty years ago.

But first you must learn how to smile as you kill

If you want to be like the folks on the hill.

It was 30 years ago today that John Lennon was silenced by an assassin.  A reminder of how good he was.

Working Class Hero.

The silliest set of arguments that have ever been created by serious intellectuals

James Crotty is one of the few dozen economists in the United States worth listening to. Among his writings, he has explained the problem of financiers' "portfolio view" of industrial companies.

This is the silliest set of arguments that have ever been created by serious intellectuals. If I told you the list of assumptions required to prove that markets are efficient, you would think I was kidding you.

Watch or read the entire 11 minute interview, here: What Does Wall St Want Out of Austerity and What Benefits Does it Gain From a Small Government?

And forgive us our debts

When I was little, I spent a bunch of time around religious folks.  And not just any religious folks, but those who believed the Bible was the inspired word of God!  There were no contradictions or mistranslations in the Bible for this crowd--there was only our failure to understand the great truths.

Such people are often called "Fundamentalists" and I was raised to be one.  This was a fairly grueling process involving attending a lot of Bible studies classes where a handful of verses would be discussed in excruciating detail.  And then there were those Mennonites who educated me K-6 who believed a good education involved memorizing hundreds of Bible verses.  These Mennonites were purists--the only Bible worth learning was the "Yea, though I walk through the valley of the shadow of death" King James Version.

Actually, if you are forced to memorize Bible verses, The King James version is probably the one to learn.  It was translated by favored establishment scholars whose elegance and grace with the language made their contemporary Will Shakespeare's writing look vulgar and primitive.  Learning such English at a very early age promotes a profound literacy that is difficult to produce any other way.

On the other hand, my Lutheran preacher father was of the opinion that the elegance of King James English posed a formidable obstacle to understanding.  After all, the essential Lutheran stress on universal literacy was the belief that everyone should be able to read and understand the sacred texts for themselves.  So when it came to translations, he was quite the trendy--embracing any new version that lowered the language barriers to understanding.

The absurdity of doing nothing

One would think the economy of USA was doing just fine considering how little the politicians did to alter the course of events.  Many reasons have been offered--the growing identification of the Democratic Party with the views of the plutocrats, the naiveté and historical illiteracy of Obama, and the entrenched power of the banksters.  All these explanations have some merit.

Mostly, however, I believe the reason folks do nothing is because they don't understand the nature of the problems they face NOR the sorts of solutions that have been tried in similar situations in the past.

The Four Horsemen of the Teapocalypse

Meet the dead thinkers who defined 2010.

That Dec. 7 assault on banks...

There is an idea out there that we can fight back against the banksters by coordinating a mass withdrawal on Dec. 7, 2010.  It even has celebrity backing from a major soccer star.

Eric Cantona's call for bank protest sparks online campaign

Thousands of French protesters have taken up the former Man United footballer's call for a mass cash withdrawal

The Fed is back in the news

The long awaited explanation for how much money the Fed has pumped into the system came out yesterday.

IT'S OUT - Federal Reserve Bailout Details Released

Courtney Comstock | Dec. 1, 2010, 12:02 PM |

In 2008, a Bloomberg reporter used the FOIA to request details from the Federal Reseve on the bailout that they don't want to publish. 

Well, THEY'VE JUST BEEN PUBLISHED. Everything but the info about the discount window, which will be published in 2 weeks.

You think the Irish pols in USA are fiery?

Then you must watch this latest Sinn Fein video on the Irish crises.  Apparently, a few of the great rabble-rousers have been left behind.

The crises in Ireland has almost nothing to do with Ireland

Yes, indeed, the Irish people are being sold off into debt peonage.  Yes, the country is ruined for as long as anyone can reasonably foresee.  But the terms being forced on the Irish have almost nothing to do with "saving" a rogue Irish bank.

Just like bailing out AIG was really about bailing out Goldman Sachs, so bailing out Anglo-Irish Bank is about saving some very large German banks.

Bankers Gone Wild in Ireland AND Germany 

Cancun and climate change

So it is November 2010 and we see another example of "we don't know what to do so let's have a convention" on the very serious topic of climate change.  This time the ultra-concerned are flying to the lovely resort of Cancun Mexico.

Don't get me wrong, I have been convinced by the science of global warming since 1988.  It, and it's sister problem Peak Oil, are easily the two most serious problems facing humanity.  But the idea that some folks with laptops, powerpoint presentations, and an ocean view are going to somehow address these problems is literally beyond insane.

Why do we know this to be true?  Well, look at Ireland.  Let us assume that they have a comprehensive plan to reduce their carbon footprint by 90% and erect a new infrastructure powered by renewables.  Let us also assume this plan will cost roughly 100 billion Euros.  Oops!  That money has just been spent bailing out crooked banks.

Ireland--like watching a slave auction

The tragedy that is about to befall Ireland--and by extension the rest of Europe--is absolutely inevitable unless there is a major rethinking about how debt is managed.  It must be remembered that bankruptcy laws and other restrictions on the moneylenders over the years have been enacted in response to outrages like we are seeing in Ireland.

The Chains of Capital are Only as Strong as the Weakest Link

Ireland and the House of Cards

Meanwhile, back in the real economy

While the banksters mount their assaults on sovereign nations, it is easy to forget that even at its worst, these Predations are only a distraction from the much bigger problems like securing the energy supply.  The implication here is that even if we could get folks back to work doing something, that "accomplishment" would trigger an oil price hike that would choke off any economic recovery.

Peak Oil Is Officially Set To Starve The Economy

Ireland vs the banksters

The crooks who are currently destroying Ireland have a very similar MO to the folks who attacked Iceland.  Only Ireland, so far as I know, is not calling for a new constitution.

A guy who is something of an expert on banks and their ridiculous assumptions, the infamous Nick Leeson thinks Ireland should just default.

Democracy vs the banksters in Iceland

One of the rarer birds in creation is the progressive Lutheran clergyman.  Obviously there have been some over the years--most recently during the efforts to unseat communism during the days of DDR.  One of the most interesting was this 19th century Danish bishop by the name of Nikolaj Frederik Severin Grundtvig.  According to Wikipedia, "Grundtvig and his followers are credited with being very influential in the formulation of modern Danish national consciousness. It was steeped in the national literature and supported by deep spirituality."

Grundtvig was a teacher who became a passionate reformer.

Happy Thanksgiving

In many ways, Thanksgiving is the purest of the holidays.  No matter what your religious heritage, learning gratitude is essential to becoming a civilized being.

In our house when I was a child, we were expected to be able to answer the question "What are you thankful for" in a ritual that came before we ate.  Over the years, I have settled on one answer, "I am thankful that skilled people grow my food."

This is a picture of my grandfather and his brothers threshing wheat in Wilson County Kansas in late summer 1940.  Skill, hard work, AND organization brought in the harvest.

This is what the harvest looked like last fall in Minnesota.  7720 views the last I looked.

As the banksters crush Ireland

This story is getting old.  A bunch of crazy bankers who did not think the laws of financial gravity applied to them made some seriously bad bets and now they must either eat their losses or else get someone else to cover for them.

So the socialization of losses begins.

More thoughts on the Chevy Volt

Officially, I don't have a position (yet) on the Chevy Volt.  Even as a kid, I was never a GM guy (long story and trust me, my brother has more than made up for it by buying GM religiously over the years).  But the idea that you would have essentially an electric car that had an on-board recharging system sounded like a good idea to me.  After all, the best way to increase the efficiency of an internal combustion engine is to run it at a constant speed.  If the IC engine in a car was mostly there to recharge batteries, it could be pretty small AND you could run it at a constant speed.  So even though this was GM, I HAVE been watching Volt pretty closely.

Well now that Volt is about to appear in showrooms, we are seeing the reviews.  Two are quite interesting.  First we have a review by David Pogue of the New York Times.  As a long-time Mac person, I have read Pogue a lot over the years because he has been NYT's goto guy on all things Apple.  So even though he is not a car guy, Pogue is probably qualified to write as someone who really understands electronics AND new product introductions.

November 11, 2010, 1:28 PM

The Volt Recharges My Batteries

David Pogue 

I’ve been fascinated by the Chevy Volt since the day I heard about the concept.

Which is this: it’s an electric car without the short range of electric cars.

Usually, when your electric car’s battery dies, you’re dead on the road. You have no choice but to tow it, or wait hours for it to recharge.

General Motors’ concept is to equip the Volt with a tiny gas-powered generator that can power the electric motor even after the battery’s dead. It’s sort of like a reverse Prius: instead of having a gasoline-fed car assisted by a battery, it’s an electric car assisted by gasoline.

It’s a huge gamble and a huge challenge. Three years ago, I interviewed Bob Lutz, General Motors’ vice president of product development, about how difficult the Volt project was. Especially developing a battery that can last 10 years (it’s warrantied for eight), work in blazing heat and freezing cold and have enough capacity to power the car for 40 miles a day on electricity alone. (That, says G.M., covers the driving needs of 82 percent of Americans.) more

And then there is Motor Trend--one of those testosterone-laden car magazines that usually have orgasms over 200 mph sports cars--especially red ones that look good on the cover.  They have a "Car of the Year" award that is highly coveted by the car company's marketing departments--mostly because the award is bestowed for mostly objective reasons.

2011 Motor Trend Car of the Year: Chevrolet Volt

Worse than evil--utterly useless

Folks often get lost in the minutia of the never-ending scams the banksters seem to invent.  And you have got to hand it to these crooks--a credit-default swap really IS an amazing way for the clever to separate money from the credulous.  But the real question is rarely asked--does the money business serve any useful purpose?  And the reason this question is rarely asked is because the answer is almost always NO!  Remember, the following is from the New Yorker.

ANNALS OF ECONOMICS

What Good Is Wall Street?

Much of what investment bankers do is socially worthless.

by John Cassidy

Displacing old technology with new is VERY difficult

And here we see some of the problems the new electric cars will face. It's yet another reminder how wonderful petroleum is.

5 Reasons Electric Cars Will Disappoint

Rick Newman

2011 Nissan Leaf

They're cool. That's for sure.

The Nissan Leaf and Chevrolet Volt could turn out to be the most innovative mass-produced cars in a century. By taking some or all of their power from a household electrical outlet, they offer the first real glimpse of transportation that doesn't rely on petroleum—and could even crest the magical 100-miles-per-gallon threshold, once the official electricity-to-gasoline conversions are complete. Even better, the two electrics offer something new without the ugly packaging that has doomed futuremobiles in the past. They're cute, actually.

The Leaf is a perky five-passenger hatchback with sporty handling that can go about 100 miles on an eight-hour charge. The Volt, a bit edgier, is a four-passenger hatch that can go about 40 miles on a charge, with a gas engine that kicks in after that. Both offer a comfortable interior, futuristic controls, and do-gooder credibility. Together, these first-generation electrics set worthy standards for competing models from Toyota, Ford, Smart, and even Chinese manufacturers to meet or beat as they arrive over the next few years.

Now for the bad news: Hardly anybody will buy one, and for a good long while most car buyers will consider electric vehicles to be a great purchase—for somebody else to make. more

The problem with historical illiterates in high places

I tend to shock people when I say that I didn't vote for Obama because he tended to screw up his history.  Paul Krugman provides another interesting reason why not knowing history is turning Obama into such an abject failure.

FDR, Reagan, and Obama

November 21, 2010, 2:07 AM 

Some readers may recall that back during the Democratic primary Barack Obama shocked many progressives by praising Ronald Reagan as someone who brought America a “sense of dynamism and entrepreneurship that had been missing.” I was among those who found this deeply troubling — because the idea that Reagan brought a transfomation in American dynamism is a right-wing myth, not borne out by the facts. (There was a surge in productivity and innovation — but it happened in the 90s, under Clinton, not under Reagan).

All the usual suspects pooh-poohed these concerns; it was ridiculous, they said, to think of Obama as a captive of right-wing mythology.

But are you so sure about that now?

And here’s this, from Thomas Ferguson: Obama saying

We didn’t actually, I think, do what Franklin Delano Roosevelt did, which was basically wait for six months until the thing had gotten so bad that it became an easier sell politically because we thought that was irresponsible. We had to act quickly.

As Ferguson explains, this is a right-wing smear. What actually happened was that during the interregnum between the 1932 election and the1933 inauguration — which was much longer then, because the inauguration didn’t take place until March — Herbert Hoover tried to rope FDR into maintaining his policies, including rigid adherence to the gold standard and fiscal austerity. FDR declined to be part of this.

But Obama buys the right-wing smear. more

Chalmers Johnson R.I.P.

This is a man whose very existence I cursed during the days of the struggles against the Vietnam War.  At the time, he was an arrogant prick who claimed that because we protesters hadn't had extensive experience in Asia working for the C.I.A., we were unqualified to have legitimate opinions on the subject.

Well, in his book Blowback, he wrote an extensive introduction as to why we got it right and he got it wrong--and then proceeds to write the trilogy for which he will be remembered that corrects the record.  As I often say, it's the folks with the capacity and willingness to evolve that are the most interesting.  I have written about him before.

Chalmers Johnson

G20 Seoul Korea--the gathering of the Predators

There is a depressing sameness to these gatherings that has destroyed any motivation to write about Seoul 2010.  Finance types gather to carve up the world and their trained lapdogs in the economics "profession" scramble to write absurd praises to the wisdom of the markets, the virtue of naked greed, and the evils of trade unions, blah, blah, blah.  Predicting this outcome was like predicting dawn.

The Predators really ARE evil

There are times when the Predator Classes look almost harmless.  After all, they provide us with royal families, investment banks, soldiers all dolled up in useless uniforms, professional sports, churches, armies of lawyers, and much of the rest of the trappings of what we call civilization.

So once in a while, we need a reminders of just how dangerous and how much damage the Predators can do.  Taibbi gets it.

Quantitative Easing

I have been meaning to write on the subject of quantitative easing (QE) for some time but have not because this is a HUGE topic and I hate getting it wrong.  But here goes...

QE is the name given to the process whereby the Fed injects money into the economy by purchasing assets like stocks and bonds.  The difference between this method and the usual method is that money is "created" without increasing debt.  As can be imagined, the investor classes hate QE because it undermines the essential rates of usury.  And so it is almost never employed and the protests are loud and organized whenever it is.

But here's the deal, mechanisms to create money without simultaneously creating debt has quite an enviable track record in stimulating economic activity.  Marriner Eccles was quite fascinated with his QE powers and used them to extricate the USA from the Great Depression and fight WW II.

Interestingly, Paul Krugman is such a fan of QE that he thinks we should be talking in terms of $10 trillion.  Since I think we should be spending in the neighborhood of $2 trillion per year to solve the problems caused by the end of the Age of Petroleum, I like it when economists talk about trillions of QE.

Hedges confirms a suspicion

Like many other folks who went through the educational system in USA, I spent my time wondering how folks who were so aggressively ignorant came to run our schools.

Part of my problem came from the simple fact that most of my rural schools were underfunded in important ways.  K-6 was spent in a school run by Mennonites in an experiment in ecumenicism my father claimed was worth it no matter how loudly we children would protest.

The good part was that the Mennonites were education junkies who also believed that an elementary education could be sufficient for most adult members of their society.  The idea that a graduate of their elementary school could not read, write gracefully, or do arithmetic was so unthinkable as to be labeled evil.  And because Mennonites can be found in unusual places around the world, they taught an international perspective that is quite unusual for the typical USA student.

The bad part is that this international perspective was the perspective of a tiny element of Protestant Christianity.  Ironically, because Mennonites are so clannish that joining their tribe is neigh unto impossible, it makes the whole missionary venture pretty pointless.  Even so, because I had a serious crush on a missionary daughter in sixth grade, I got to know quite a bit more about the Belgian Congo than even a serious student of National Geographic would have.

The high schools I attended were in tiny rural towns.  The lifer teachers were the hopeless incompetents who never got a better job offer.  Occasionally, young teachers fresh out of college would provide some respite from the normal mediocrity but they didn't last more than two years before moving on.

Quite honestly, there wasn't a day before I left for the University of Minnesota that I didn't go to school fully expecting to know more about any given subject, and be better prepared, than my teachers.  But the U was going to change that--or so I hoped.  The mighty U was so loved and lavishly funded that the problem of "learning" from folks who didn't know their subject just had to be in my past!

Well not so fast!  The spring of my freshman year saw the assassinations of M. L. King and Bobby Kennedy.  We young Democrats got all excited about the battle between Eugene McCarthy (YEA) and Hubert Humphrey (Dump the Hump).  This was especially interesting because these two were our Senators--the wounds of that political battle were still visible 25 years later.

And so I soon discovered that my university education was going to be quite political.  Only, my professors were remarkably silent about the big events of the day.  I sat through four weeks of lectures on War and Peace the same quarter as the Tet Offensive and my professor couldn't find it in his heart to bring up the Battle of Hue.  How could this possibly be?

It took me many years to figure it out but when I did, the answer was amazingly clear.  Just like the organized ignorance of my childhood was brought to me by the intellectual left-behinds, so my University education was this mish-mash of incoherence brought to me by the folks who were left over after the purges of McCarthyism.

So in today's Truthdig, Chris Hedges writes about some of the talent we lost to political repression.  Because we were taught by the sort of people who could make a Sarah Palin happy, we boomers are damn lucky we can pick our noses.

Chris Hedges on the death of liberalism

The guy is trying to sell a book.  He talks about the historical decline of the liberal institutions in USA.  Since he dates the beginning of this decline to the USA entry into World War I, I am inclined to give him a lot of credibility because that is how I read history as well.  BOTH of my grandfathers--who were quite unalike as men--refused to cooperate with their draft boards during WW I--one for religious reasons, the other for political ones.  Hedges talks about how they shut down the magazine "An Appeal to Reason."  My grandfather subscribed to that too.

Good stuff!

The energy problems encapsulated

The biggest frustration I have whenever I try to explain why something like Peak Oil is such a threat to civilization is that folks usually do not understand the processes that are necessary to produce something new.

And why should they believe the introduction of new products is difficult?  If anything, the biggest problem most have is that they are overwhelmed by new products that show up every day clamoring for their attention.  "How difficult can it be to find and switch to a new energy source?" such folks wonder.  "After all, I have switched between cooking with electricity and natural gas several times in my life."

At that point, I am usually reduced to helpless sputtering.  First of all, switching between methods of cooking is perhaps the easiest conversion possible.  And even that isn't so easy--even IF both electricity and natural gas are already hooked up to your dwelling.  A project to replace an electric stove with a gas-fired one will involve running a gas pipe from your furnace room to the kitchen--a job best handled by a licensed pro.  Holes will have to be cut in walls and floors, etc.  The fussy cook could easily spend $3500 even before the stove was purchased.  At that point, most folks will just say, "Screw it, I'll just keep cooking with electricity."

This also points out my Rule #1 of energy consumption--because it is SO hard to change the energy usage of something once it is built, the MOST important considerations comes at the design phase.  (A longer version of this argument can be found here.  It's my best thinking on the subject of energy efficiency.)

And yet...we are going to have to do exactly that which we would rather avoid.  The problems we have concerning our reliance on oil are not explained by a psychobabble term like "addiction."  We need oil because we built our society to run on 87 octane gasoline and #2 Diesel fuel.  And changing that reality will be orders of magnitude more difficult than running a natural gas pipe to the kitchen.

In fact, someone has actually calculated the size of the problem facing a society built for 87 octane gasoline.  I am willing to bet these guys aren't very far off.

It Will Take 131 Years To Replace Oil, And We've Only Got 10

Is it getting bad enough yet?

As someone who personally gave up on street protests in April of 1970, I have mixed feeling about taking to the streets.  On the other hand, when nothing changes through elections and other institutional methods, what else is there?

So really, when do Americans begin to riot?

The Nouveau Poor

Recession Shadows America's Middle Class

Casting bread on the water

When I was growing up, I must have heard at least three dozen sermons on the following text:

Cast thy bread upon the waters: for thou shalt find it after many days.  Ecclesiastes 11:1.

This passage was a favorite of both my rural Lutheran preacher father and the Mennonites who educated me.  And while there were minor variations on what exactly this verse meant, there was wide agreement that it was a call to use one's God-given gifts (talents, time, resources, and labor)--the "bread"--in the service of the wider community.  The point was if you cast your "bread" without asking for a reward, you would discover that your "bread" would return anyway in wonderful and unexpected ways. (This idea is quite similar to Buddhist concept of Karma.) And so communities are built, one generous and selfless act after another.

For me, this blog is in many ways about the purest example extant of casting bread on the waters I can think of.  It is a LOT of work.  It required a lifetime of research and investigation to be able to write coherently on the topics I write about.  I know I have readers because of Google analytics but almost all of them are "lurkers" so feedback is minimal.  And I am not being paid for my efforts.

But last Tuesday, some "bread" floated back into view.  I got a wonderful email from a long-time "hero" of mine by the name of Amory Lovins.  Even though Lovins is a couple of years older than I, our lives and thinking have traveled along remarkably similar paths.  For example, while we both discovered that high energy efficiency was desirable for housing, my efforts were directed at what could be done with the existing housing stock while Lovins was off building a no-holds-barred demonstration project that employed as many energy-efficient ideas as he could put in one building.

The real economy, fall 2010 (Minnesota)

Under some orders from the significant other, I went for a drive in the countryside of the Minnesota River watershed last Monday.  For November, it was a gorgeous day.  Except for the mighty rains in late September, is has been warm and dry for weeks--perfect for drying out the grains in the field.

After several years of economics that drove some farmers to bankruptcy, the Producers on Minnesota's corn belt are facing the incredibly rare circumstances of a HUGE crop combined with high prices.  I talked with one young farm kid who was grinning like he had won the lottery.

The Lake Crystal Coop pictured in my video serves eight locations and its members cultivate over 500,000 acres of land.  They have built that ginormous Medelia fertilizer plant in the video.

I have two old friends who are making a documentary about (among other things) the problems of nitrogen run-off in the Minnesota basin--which leads to problems in the Mississippi and eventually the dead zone in the Gulf of Mexico.  Since the farmers would prefer that NONE of the nitrogen they spread on their fields would be lost to run-off and are actually pretty careful about such matters, it is obvious that there must be enormous amounts of nitrogen spread on the fields if mere run-off can kill the life in a significant areas of the Gulf.

This video is about the agricultural infrastructure that traffics in massive amounts of fertilizer.

Oh no! we didn't see this coming

The Riksbank (Nobel) prize hasn't even been awarded yet and the winning Britwit is already sounding off on how nations need to cut off benefits to the unemployed.  I wrote October 11, 2010 about this year's winners.  First from the "winners" statement and my reaction.

Thinking about money (again)

The problem that folks are not able to work to solve necessary problems because we cannot "afford" it eventually leads back to the questions about the nature of money.  Understand, these questions have been raised before--especially by Producer Class giants like Thomas Edison.

Thomas Edison on Government Created Debt-Free Money

In December 1921, the American industrialist Henry Ford and the inventor Thomas Edison visited the Muscle Shoals nitrate and water power projects near Florence, Alabama. They used the opportunity to articulate at length upon their alternative money theories, which were published in 2 reports which appeared in The New York Times on December 4, 1921 and December 6, 1921.

Scale matters

Matt Taibbi has written a new book on Wall Street so naturally, he is making the promotion circuit.  Damien Hoffman of the Wall Street Cheat Sheet (isn't that name just SO Predator Class?) asked Taibbi possibly the most interesting question of all--why are the teabaggers so willing to work against their own interests?

I think about this question a lot too because I have been defending regulated capitalism for over 30 years now.  Trust me on this, swimming against the tides of economic orthodoxy has been a struggle but here's my "elevator speech" on why you simply MUST strictly regulate the organs of capitalism like the financial business.

1) Regulated capitalism ALWAYS outperforms deregulated capitalism because it creates the space that allows the honest businessperson to thrive.  Honest businesspeople make better products and provide better services than crooks.

2) Regulation, unfortunately, can become an end in itself.  There ARE bad rules that get in the way of honest interactions between people.  Perfect example in today's Swedish Local.  Imagine being a taxpayer and knowing your taxes are going to pay for THIS:

Sweden mulls sex ethics rules for overseas staff

The Swedish government plans to invest 10 million kronor ($1.49 million) to enable state agencies to develop clearer ethical guidelines for staff working overseas in order to curb the buying of sexual services and improper sexual relations.

3) The difference between necessary regulation and goofy regulation is scale.  The bigger the organization and the more people its actions affect, the more it should be regulated.  Individuals and small organizations should be subject to minimal regulation.  (I have a longer version of this argument here.)

Matt Taibbi: Wall Street Has Seduced America With Randian Pseudo-Libertarianism

Greider on "free" trade

Of all the ideas used to crash the living standards of the American Middle Class--especially those in production--NOTHING has worked better than the notion of "free" trade.

Now the "free" traders are discovering that the opposition to their "wonderful" idea is as dug in as it was when folks like us tried to derail NAFTA (see my response back when).

And Greider is spot on (again).  He hasn't gotten much wrong since I first started reading his stuff in the early 1980s (The Education of David Stockman).

The End of Free-Trade Globalization

Goodbye banksters

This last election has left me reeling.  I am not sure what I find more shocking--the fact that the Republicans seem to determined to nominate and elect drooling morons or that the Democrats are so pathetic they cannot handily beat such creatures.

Me, I am taking a cue from my buddy the Wege who has claimed he will stop blogging about politics.  Since this blog was never meant to be about politics itself, a decision to drop politics should be pretty easy for me.  But since my discussions about economics often fall into the category of "political economy" is isn't as easy as it would first appear.  I may have no problem ignoring the nuts and bolts of politics and elections, but I cannot ignore the reality that politics is often intimately intertwined with economics.  Obama and the Obamabots forgot this reality in the last election and got their hats handed to them.

But what I do promise is that I am going to concentrate on the real problems facing the real economy--and let the fight over which moneychangers broke which laws to someone else.

I am also going to try to paint a better picture of what the economy could look like if a more enlightened political economy took hold.

Let's start by restating the biggest problem of them all--climate change.  The solution to this problem is obvious--we humans are going to have to do without our favorite invention of all time--FIRE!

Climate change: How do we know?

Watchable election analysis

Cenk Unger, Glen Greenwald, and Dylan Ratigan

The election changed almost nothing

The same people who believe the same damn things are still in charge of everything important.  For example, the global economy still sucks.

The Shipping Glut Is So Bad Globally That Ships Are Now Sailing Slower Than 19th Century Clippers Just To Keep Busy

Moving on

For quite a while, one of my favorite blogs has been this aggregation called Norwegianity.  The blog's creator calls himself the "Wege" and is this almost perfect example of the guys I grew up with.  Most importantly, he is an Iowa farm kid.  My father was a preacher but the folks in our churches were always rural so I got to know quite a few boys like Wege as a child.

Farm kids at their best are amazing.  Because of their lives and locations, they get to witness hundreds of biological processes up close so tend to be very grounded.  Every farm kid I knew had real jobs by the time they were in first grade so they understand hard work.  Because farms are isolated, the best of them wind up extraordinarily well read--the Wege once claimed he went through a period in life where he was reading 150 books a year.  I have NO problem believing him.

When I started blogging, the Wege provided me with a template for how I wanted to do it.  He blogged every day--farmers never get a day off, ya know.  He was grounded in the reality that teaches "if you want crops at harvest time, you must plant in the spring."  And his wide-ranging reading had taught him that there are a LOT of interesting parts that make up the whole.

Yesterday, the Wege claimed he was quitting--at least he claims he will not blog any more about politics in USA.  After watching the Democrats piss away their incredible mandate of 2008, I can understand his frustration and rage.  But more importantly, I believe the Wege is on to something very interesting--the possibility that politics isn't the problem but merely the symptom.  Think about it--on paper Obama was the second coming of Franklin Roosevelt.  In practice, he was George W. Bush in blackface--a Harvard Law Review editor who fumbled every opportunity he faced.  Obama has been SO inept, it started looking like he was dropping the ball on purpose.

Of course, the problem of the best and the brightest doing incredibly stupid and evil things is not new.  It's why Halberstam wrote his book, after all.  In this view of the world, Obama isn't W. in blackface, he's Robert McNamara--screwing up the world with his pinched Harvard worldview.

And Obama is, unfortunately, not the only example of a Democrat who can say all the right things but underneath, is really REALLY screwed up.  Here in Minnesota, we have perhaps an even better example (at least I can understand it better.)  In the DFL primary for governor, we had a guy who--on paper--should have been my absolutely perfect candidate.  His name is Matt Entenza.  And the reason I liked him was he understood that building a society powered by renewables required hard work, a LOT of money, and leaders with a clear vision.  He said so in his political ads.

Matt did not stand a chance of becoming the DFL nominee.  Not only had he committed the unpardonable sin of suggesting that doing right by the environment was going to require more than folks rolling a fat one and proclaiming their heartfelt concerns for mother earth, he was widely known as Mr. Lois Quam.

Ms. Quam is just an extreme example of another sort of person from my childhood--the hyper-accomplished Norwegian Lutheran preacher's daughter.  I have a sister who played Bach for a wedding when she was nine--trust me, I know women like Quam.  She was the kind of woman my parents sent me to Bible Camp to meet.

Ms. Quam has made a LARGE pile of money in life--millions came from exercising some stock options granted her while working for United Health.  What she did was, from all accounts, perfectly legal.  But at a time when the rest of the country is literally going bankrupt because USA medicine is so ridiculously over-priced, a person who made a killing with a paper maneuver in the medical-industrial complex will never be looked at as a paragon of virtue.

And Quam SHOULD have known better.  The Lutherans who settled the upper midwest built and ran hospitals.  (In Minneapolis, they even built one called Lutheran Deaconess--a deaconess is this rare nun-like creature no one has seen for decades.)  The idea was to provide quality help for the sick who were usually poor because they were sick.  The idea that someone should make millions profiting off the misfortunes of others was once for a Lutheran, literally unthinkable.  It is certainly NOT what the Lutherans had in mind when they opened their hearts and wallets to build those hospitals.

So the interesting questions are: how did a black community organizer become so reactionary, he makes Herbert Hoover or Richard Nixon look progressive? or, how did a little-miss-perfect Lutheran preacher's daughter become so wicked she thought it perfectly fine to rip off the sick?

The Predators' Boneyard: A Conversation with James Kenneth Galbraith

“Veblen was a forerunner of what I hope will be the development of economic thought; the understanding that principles that underlie biological systems are the same principles that underlie all living systems. The concepts of hierarchies and controlled and uncontrolled predatory conduct are universal. And so when we encounter a doctrine of harmonization, of the smoothly functioning realization of the interests of all, the great and the small, which is textbook market economics, people should recognize that this is sand being thrown in their faces—that this cannot possibly be a realistic representation of the world in which we actually live. Take it as an analytic principle that one has to look at the behavior of the great with a cold eye.”
—James Kenneth Galbraith, interview with The Straddler, March 14, 2010

By way of introduction
In mid March, The Straddler met with James Kenneth Galbraith in midtown Manhattan to seek his perspective on recent events—and the way in which orthodox modes of thought, and ingrained habits of behavior, affected the response to the collapse of 2008.

Galbraith holds the Lloyd M. Bentsen, Jr., Chair in Government/Business Relations at the LBJ School of Public Affairs at the University of Texas, Austin. A Senior Scholar of the Levy Economics Institute, he also directs the University of Texas Inequality Project and is chair of Economists for Peace and Security, a professional association. He previously served on the staff of the U.S. Congress as executive director of the Joint Economic Committee.

In his most recent book, The Predator State (2008), Galbraith mounts a sustained attack on the “legitimating myth” that has delineated the parameters of permissible debate surrounding economic activity in the United States since the ascent of an ideology that saw itself comfortably ensconced in the seats of power with the election to the presidency of Ronald Reagan. At its core, Galbraith argues, this myth presents us with a Manichean narrative in which we are urged to believe, with Panglossian certainty, that “the market,” divinely efficient, delivers the best of all possible outcomes to all, in contradistinction to “the state” or “the government,” which, in the elegant simplicity of Ronald Reagan’s famous formulation, “is the problem.”

Some of the best material is near the end; READ MORE.

Ending the Age of Petroleum will NOT be easy

The biggest problem, of course, is that no one actually has a clear picture of how this will happen.  The "easy" part is the substitution for fixed-site electrical generation.  Actually, not so easy.  We are now seeing a shake-out in the wind industry.

Winds of Change

Big Firms Gain Ground in Ballooning Wind Power Market

The rule of law--election day 2010

Elections trigger a flood of memories.  When I was very young, my parents would sit up late into the night listening to election returns on the radio.  I remember when my mother suspected that my father had voted for Eisenhower in 1956--she was so disgusted she fumed about it for days.

And this is Minnesota.  If we don't lead the nation in voter turnout, we'll be very close to the top.  Our political history is so colorful, we once had the top two candidates for president from the Democratic Party in the same year (1968 Humphrey McCarthy).

My grandfather (mother's side) was part of that history.  After immigrating from Sweden in 1899, he worked in a foundry in Chicago until 1921 when he opted to try farming in central Minnesota.  Terrible timing.  The Great Depression may have started in 1929 but the agricultural depression started in 1921.  There was NO Roaring 20s in rural Minnesota--the work was backbreaking, the winters bitterly cold, and the long dark winter nights were lit by expensive kerosine.  My grandmother grew so homesick for Sweden, she would weep about it often.  My mother and uncle couldn't go to high school because of the expense.

As the Depression ground on, my grandfather turned to political organizing.  As a trade unionist from Chicago trying to make a living farming, he was a natural fit for the Minnesota Farmer-Labor Party, although he had his misgivings.  "There are probably two groups less alike than farmers and factory workers--the only thing they have in common is that they are being robbed by the same people."

He had some political success when the Farmer-Labor Party elected a Swede named Floyd Bjornstjerne Olson as Governor during the Depression.  But my grandmother died suddenly in 1935 during a monster heat wave.  The reason given was that she was felled by a botched gall bladder removal.  But the real reason, I suspect, is that she simply could not go on--the struggles of life had defeated her.

These days, I keep wondering about the whole idea of failed immigration–is it really possible to think and act as a Nordic person and thrive in North America? Think about who we are. In every meaningful measure from life expectancy to quality educations, from care for the sick to meaningful cooperation with the environment, the Nordic countries routinely top all the lists. How are Nordic people like us supposed to exist in a country run by folks who believe Jesus was a warmonger who would have supported capital punishment (among MANY other absurdities).  And so a people who once were so advanced in boat-building and other Producer arts that they had an empire that stretched from Canada to Constantinople, have been reduced to comic-book characters like Kirk Douglas’ “Vikings” or the kindly dunces who attend the Lake Wobegone Lutheran Church.

The secret to Nordic societies is that they actually believe in democracy.  They believe that societies work best if everyone follows the rules. And, if everyone is going to follow the rules, those rules had damn well better be carefully crafted.  And if you want good rules, you better have widespread participation in the rule-making.  You must have active, professionally-run parties, you need the highest-quality journalism, and you need schools that are rigorous because you know there really are things worth knowing.

I believe that describes my belief set when it come to governance.  Yet it clearly does NOT describe the USA.  Our political parties are run by hacks, our journalism is almost comically incompetent when it isn't outright lying, and our schools crank out self-important grads who know absolutely nothing of importance.  We are not ready to govern ourselves--we barely can be bothered to vote.

A reminder on how serious the bankster problem really is

Those of us who actually know real bankers often find it hard to believe just how dangerous this one business can be to all the rest of the business and industry in a country.

How A Gang Of Predatory Lenders And Wall Street Bankers Fleeced America — And Spawned A Global Crisis

Time for a new Reformation

On October 31, 1517, on the Eve of All Saint's Day, a feisty Saxon monk named Martin Luther walked up to the church door of Wittenberg Germany and there nailed 95 thesis against the corruption of the Roman Catholic Church.  In doing so, he touched off one of the biggest social revolts in human history.

In retrospect, this seemingly minor theological dispute would hardly seem the stuff of social revolution.  After all, these sorts of church fights are depressingly common to this day.  But this fight was about more than theology.  The Church was selling "indulgences" (a key beef in the 95 theses) to fund the completion of the Vatican.  So while Luther was enraged over the theology of selling forgiveness for the dead, the rulers of Saxony were worried about the monetary drain those indulgences represented.

When the Catholics threatened to kill him for his "heresy," Frederick III of Saxony (often called "The Wise") took Luther to his Wartburg Castle at Eisenach and gave him protection.  It was there that Luther translated the New Testament of the Bible into German--thereby cementing his Reformation by providing a more universal access to the foundations of the faith.  Luther insisted his followers should read the Bible for themselves and come to their own conclusions through study.  This act alone would have MANY ramifications including a near-universal literacy rate for those areas that became Lutheran.

Luther's church fight would become revolutionary because it embraced economics and empowered the lower classes through literacy.  In doing so, he left a profound legacy.  I remember growing up as a Lutheran preacher's kid being taught that it wasn't merely enough to "get it right" theologically--your beliefs should also improve everyone's economic and social circumstances.  Hence my father, even though very conservative theologically, could also be a New Deal Democrat whose ministry provided social services for those struggling against their personal economic catastrophes.

Personally, I was sick to death of theological disputes by the time I was 15 but I never lost my passion for enrichment through reading or my love of progressive economics.  And since the study of economics was originally a branch of moral philosophy, I have long thought it quite appropriate to examine economic questions from a theological perspective.  And the place where theology and economics most logically intersect is the subject of debt.  As I put it in my speech to the American Economic Association in 1993:

So this is what we have come to: We know we are killing ourselves and our planet; we know there is a possible solution because we can see other humans perfecting one; and, we have millions of highly skilled unemployed whose lives would become infinitely better with useful work. 

Why can we not go to work to solve our dilemmas? We are told that there is no money. In fact, all the nations on earth are in debt! We are told there is no money for useful purposes now, and there will be even less in the future as governments are forced by the lords of international finance to devote more of their tax revenue to debt service.

And why are we all in debt? Because we decided that money was a video game, programmed it with the banking assumptions and economic ideas of the middle ages, and let irresponsible children play with the futures of whole regions of the planet. more

(I believe Dr. Martin would have approved.)

When the subject is debt, the ugly stepsister of debt--monetary policy, moves front and center because as it is currently done, money is almost always a function of the creation of debt.  Put simply, money is debt.  When money is debt, you have a host of related problems.