Road trip

Going to the Motor City this weekend to meet up with Tony.  The occasion is the NAMES (North America Model Engineering Society) show where he sells books to the (proudly) technologically literate.  You could start an interesting country with the skills represented at this show.

Some video from last year's gathering.



Posts will resume next week.

Statistical Snapshot of the Murder of the Middle Class

A contributor to ZeroHedge goes through the numbers to show that The Housing Bubble Broke The Middle Class, by destroying one half the net worth of the American middle class. Other important items:

Wages now account for the lowest percentage (51%) of total personal income since the government first began keeping the statistics. Since the crash of 2008, the amount of total personal income coming from direct government transfer payments has zoomed from a historical average of 12.5% to 18.3%.

. . . 70% of the increase in personal income was simply money borrowed by the Federal government (recall the $1.6 trillion annual Federal deficit) and distributed to the citizenry. In other words, people aren't making more money--the Central State is simply borrowing more and it's being counted as "income" when it's distributed.

This amply shows the utter bankruptcy of present U.S. policies. Rather than borrowing money to keep millions of Americans barely living at the edge of subsistence, our government could be using its sovereign powers to create money, and use it to pay millions of Americans put back to work repairing America's broken infrastructure (the American Society of Civil Engineers calculates $2.2 trillion is required just to get our already existing infrastructure back into fully usable condition. No money borrowed, and the new money created is going directly into creating new wealth for the country.

So here's the reality: over one-fourth of all households are at or below the poverty line: 28 million.

The top 10%--10.5 million households--own the vast majority of the financial assets ($45 trillion)(the total owned by non-profits is not broken out).

The next 10% own 10% of this wealth, or about $4 trillion. So the top 21 million households own 93% of all financial wealth.

The Great Middle Class between those in poverty and the top 20%--56 million households-- owns about $2.7 trillion in financial wealth, and the millions with mortgages own an additional $1 trillion in home equity. That comes to $3.7 trillion, or about 6.5% of the total household net worth.

Read the entire article.

New FDIC Paper on the Resolution of Lehman Brothers

Mike Konczal at Rortybomb has a relatively short summary of a new paper just released by the Federal Deposit Insurance Corporation explaining how the Dodd-Frank financial reforms - had they been in effect in 2008 - would have allowed the FDIC to dismantle Lehman Brothers and salvage the good parts of the company without any cost to the taxpayers and without blowing up the entire world financial system.

Two points I want to make: first, Konczal's short summary provides a good idea of how devilishly complex modern finance has become. Whether the FDIC report mentions it or not, this means that it is extremely important that financial regulators be highly trained to be able to deal with these complexities, and highly paid to diminish as much as possible the temptation to slide through the revolving door to a lucrative position with the industry they were previously regulating. I think a senior financial regulator should be pulling down at least $1 million a year, while being subject to extremely strict, almost onerous, ethical codes and security checks. Why? Because we are going to be depending on these regulators to attack and dismantle the most powerful oligarchical faction that now (mis)rules America, and the rest of the world.

Second, the disastrous results of the (mis)rule by the financial oligarchy can be seen by merely scanning the headlines immediately below on the developing world food crisis, which is almost entirely caused by global misallocations of credit and money to predatory financial activities instead of to productive economic investments in industry, agriculture, mining, transportation, infrastructure, and social programs such as education and welfare. What is singularly missing from Konczal's summary, and I assume the FDIC report, is an understanding that a world past the brink of peak oil and global climate change can no longer afford to have six or seven trillion dollars in hot money every day sloshing around the globe in a search of the "highest investment return." Credit and money are creations of society through the agency of government - even if created by private companies, those companies are created and exist at the sufferance of societies and their governments. If credit and money are being misused, then the physical capacity of society to sustain and support human life eventually erodes until the crisis point of widespread penury and starvation is reached, as evidenced in the stories below. If we took just one day of the world's hot money flows - six or seven trillion dollars - what wonders could be created and deployed to make the world's agriculture not only fully adequate, but entirely sustainable?

Until we get to the point where we apply the normative judgment "Does this help society be more economically productive and fair?" rigorously and ruthlessly to every aspect of our monetary and financial affairs, recurring economic crises are inevitable. We don't need trillions of dollars a day in what are essentially gambling bets on interest rates or currency fluctuations. We need trillions of dollars a day flowing through the hands of scientists, engineers, and producers seeking to solve our urgent real problems such as sustainable energy and food production and distribution.

The New FDIC Paper on the Resolution of Lehman Brothers

Posted on April 26, 2011 by Mike

On April 18th, the FDIC released a paper, The Orderly Liquidation of Lehman Brothers Holdings under the Dodd-Frank Act, which explains how it could have used the resolution authority in Title II of Dodd-Frank to taken down Lehman Brothers with no losses to taxpayers and without collapsing the financial system.

It’s always good to remind ourselves what we want our law to do in terms of failure. Failure is a legal concept, and our laws reflect our values on how we want failure to proceed. We want those who benefit the most from risks to take the largest losses. We want to preserve the ongoing value of the firm if there is any. We want to coordinate the behavior of creditors – so value is based on legal rights, not the speed of action – and ameliorate the hardships caused to debtors and provide a fresh start to the entity.

The bailouts shredded these values – those who took the biggest risks also got huge upsides. Creditors were rewarded in all kinds of ways that were unfair. The firms weren’t stripped down to the core ongoing value but instead left with all kinds of bad zombie debts that needed to be recapitalized through earnings and squeezing consumers. We need better laws capable of handling failures of things we hadn’t traditionally expected to fail in a spectacular way, and the FDIC is arguing that Dodd-Frank gets us a lot of the way there. How does it do that?

Read more.

Food prices!

Great list of trouble spots associated with rising food prices.

If Food Prices Keep Surging, These Economies Will Be The Next To Crumble

Mamta Badkar | Apr. 26, 2011, 12:07 PM 

Global food prices jumped 30% year-on-year in February. Food inflation has been pushed by a drop in global food reserves, brought on by severe weather conditions in Russia, China and Australia.

If prices continue to rise by 30% this year, another 193 million people will be forced into poverty, according to a new report from the Asian Development Bank.

We've compiled a list of countries that would be hit the hardest by a 30% rise in food prices and the measures they have taken to ease the burden. Some of these countries with deeper structural problems have a harder road ahead of them. more

 

The real possibility of a global food shortage

Growing up in perhaps the most fertile agricultural area on this earth means that the only food problem I have seen up close is the one where farmers struggle to stay solvent because massive production has trashed prices (again.)  Well, last fall the highly unusual happened--a bin-busting harvest combined with high commodity prices.  This meant that global food stocks were in serious trouble.

I posted about food shortages in late February.  As the spring planting season comes around again, it looks like the food problem is getting even more severe.  Even if you do not agree with all 20 on this list, one or two of these indicators is probably enough.

New Platinum Substitutes Could Make Hydrogen Fuel Cells, Electric Cars More Affordable

Two things to note about the article linked to below. First, there appear to be new breakthroughs in using a substitute for platinum in electric fuel cells. Platinum is unbelievably expensive, and its cost is the major reason why vehicles using fuel cells are expected to cost over $50,000 each. Not having to use platinum will bring the cost of electric cars down to the same price level, or even lower, as cars with internal combustion engines.

Second, note that these breakthroughs come out of the public sector - the Department of Energy, and Case Reserve University. This entirely coheres with how the U.S. economy has historically developed: with the government playing a crucial role in developing and incubating new technologies until they are ready for wide-spread commercial use which allows private profitability: a partnership between the public and private sectors to promote the general welfare through technological improvements which feed economic growth.

"Sir, you are going to have to leave the room."

What happens when you stand up to a panel of "respected" economists and propose to tax Wall Street's financial transactions?

"Sir, you are going to have to leave the room."

The deficit hawks will kill us

On February 28, I wrote a piece I am particularly proud of called Oil prices on the rise--inflationary or deflationary?  In it, I argue that while oil prices WANT to be inflationary, inflation cannot break out unless incomes rise.  Therefore expensive oil will almost certainly lead to deflation.  For years I have pegged Whitney as an inflation hawk so I am delighted to see he essentially agrees with me these days.

Elevator Speech #7--inventing a sustainable future

Invention is hard.  That great inventor Thomas Edison is supposed to have said "Genius is 1% inspiration and 99% perspiration" and he may have been off by several orders of magnitude.  

When it comes to inventing a sustainable future, the inspiration part is pretty easy.  It is clear we must figure out a way to power our societies with the energy we can capture from the sun and live our lives so we produce no waste--toxic or otherwise.  So while the inspiration for building a green future falls into the "well, DUH!" category, actually pulling this off is so insanely difficult, we have mostly put off even thinking about it here in USA for the last 35 years.

Contrary to the picture of some lone genius achieving a spectacular breakthrough while armed with nothing but pure motives, green technology can only evolve out of the best methods already in existence.  Sustainable technology is by its very definition, a superior technology to what we already have.  Those working at technology's leading edge have a HUGE advantage in producing the next generation of improvements.

There are no primitive solutions to the technological problems that already exist.  There are no back-to-nature solutions—do you think our forebears worried about their waste products? or using up all the premium resources? or?  Well we have to worry about these things and romantic dreaming will never produce more than 1% of a solution for living gracefully in our crowded biosphere.  The rest is just organized hard work.

The EPIC fail of the economics "profession"

One of the things I discovered doing the research for Elegant Technology was that the economics "profession" had become almost irredeemably goofy.  As someone who had fallen in love with economic thinking by reading The New Industrial State or The Worldly Philosophers, the discovery that ECONOMICS had fallen into the hands of people who were at best delusional depressed the hell out of me.

There have been many reasons offered for why the economics business wandered off into the tall grass including the notions that economists are just guys with little dicks who hate the rest of the world, or that they have been hopelessly corrupted by their patrons in the FIRE (finance, insurance, and real estate) businesses.  I have several dozen institutional reasons including the fact that to get ahead in USA economics, one simply MUST do a tour of duty with a Federal Reserve Bank or another central bank internationally--don't want anyone wandering off THAT reservation, ya know.

But if I had to point to the main intellectual flaw in economics as it is currently practiced, I would have to say it is the arrogant assumption that human behavior can be mathematically modeled.  The primary reason I believe this is so is because I was there when it became hip to be a math nerd in the economics departments.

Another conservative myth bites the dust: medical tourism

From Dan Crawford at Angry Bear:

Medical Tourism, separating facts from fiction

One of the greatest myths that I hear on a somewhat regular basis, centers around the belief that the US must have one of the greatest health systems in the world, because everyone comes here for their care. Well, let’s examine that shall we?

As with many things, reality is a little different from the mythology.

According to the Deloitte Center for Health Solutions and Health-tourism.com, there will be roughly 561,000 inbound medical tourists to the United States by 2017….Conversely, 750,000 Americans traveled to foreign countries in 2007, and this grew to between 1.1 and 1.3 million outbound tourists in 2008. Spending on healthcare in foreign countries was estimated to be 20 billion dollars in 2008.

Estimates for growth demonstrate a consistent 35% growth in outbound medical tourism annually. Projections indicate that roughly 1.6-2.5 million Americans will travel abroad in 2012, and spending could reach 100 billion dollars. That’s right, 100 billion US dollars being spent in foreign countries for healthcare such as elective surgeries, complicated dental surgery, plastic surgery, and even coronary bypass surgery.

Read more.

The Fundamental Criminality of the U.S. Financial System

Last night I pointed to former savings and loan fraud prosecutor Bill Black's extraordinary article , Fiat Justitia Ruat Caelum (Let Justice be Done, Though the Heavens Fall), but it is so important I want to link to it again. And here's a few paragraphs to whet your appetite:

U.S. Military Unable to Find Domestic Manufacturers for Many Items

Yet more evidence of the collapse of the U.S. industrial base.

Michael Mandel, the chief economist for BusinessWeek, was recently doing some research for a textbook he’s revising when he stumbled upon a surprising entry in the Federal Registry. On March 21, the U.S. Air Force waived the “Buy American” provision of the American Recovery and Reinvestment Act of 2009 for a construction project at Eielson Air Force Base in Alaska. As workers tried to build a few stimulus-backed housing units, it became apparent that a number of simple domestic items couldn’t be procured from American manufacturers – namely, ceiling fans, shower rods, towel racks, toilet-paper holders, and all manner of screws and fixtures.

According to the registry entry, a contracting official

has determined that the above items of manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality. The domestic nonavailability determination for these products is based on extensive market research and thorough investigation of the domestic manufacturing landscape. This research identified that these products are manufactured almost exclusively in China.

In fiscal year 2009, more than 44,000 waivers of federal “Buy American” provisions were granted, worth nearly $14 billion.

Read more.

The Corruption of American Christianity - and Resulting Destuction of Capitalism

One of the most infuriating characteristics of American conservatives is their attempt to claim they are "christian." Conservatives' faith in "free market" economics directly contradicts the most basic tenets of christian thought and teachings. Simply put, American conservatives are trying to worship both god and mammon. This is especially evident when one considers the popularity among conservatives of the narcissistic ideas of Ayn Rand. As a DailyKos diarist pointed out today, Ayn Rand explicitly rejected the Christian concept of the sacrifice of Christ.

Elevator Speech #6--Education--what folks must know

In spite of the fact that I spent nearly 20 years inside of classrooms, I don't even claim to understand what schools are trying to accomplish.  I have this notion that folks attend school to learn things but in truth, I learned almost nothing from my formal education.  

Part of this was a function of geography--K-11 was whatever a tiny town on the Minnesota or North Dakota prairies could afford and often that wasn't much.  Part was religious--my father thought it was a splendid idea to send his children to a school run by Mennonites K-6 as cultural enrichment.  It was an interesting cross-cultural experience all right--the kind you never really recover from.

But I spent my senior year in one of those luxo Minnesota High Schools and discovered there really were teachers that hadn't just graduated from college or that libraries could have more than 500 books, etc.  It was just enough to make me believe that school could be something other than an endurance contest with crushing boredom.  

College was at a mega-university that resembled an intellectual smorgasbord with an infinity of choices, but between too much work to feed myself and too much anger at the complicity of some of the big-name professors in the "design" of such lovely war crimes as the Phoenix program, I probably missed those moments when someone actually explained something that was important to know.

Fortunately, this is Minnesota.  Remember that wonderful Matt Damon line in Good Will Hunting where he tells the Harvard prick that someday the prick will discover that he paid "$150,000 for an education he could have gotten at the public library for $1.50 in late fees?"  Well, our public libraries are so well organized, they render bogus any claims that someone has a valid excuse for ignorance.

Damon is right--you CAN get a Harvard education down at the public library (or on the Internet) if you have a bit of curiosity and a well-honed set of skills at soaking up the contents of a good book.  And usually it's better than the Harvard experience because when you read on your own, you typically read only one or two books at a time.  In college, you may read five books for four classes per semester. (20)  Obviously, one cannot explore in much depth with that much simultaneous competition for brainpower.  (Every once in a while, someone will tell me they read Veblen in college.  I have yet to meet anyone who actually absorbed any Veblen in college--including me!)

So in spite of considerable effort and expense we find that schools are not an especially good place to learn anything.  There are exceptions--usually associated with degrees that most resemble old-fashioned apprenticeships like medicine or engineering.  But the schools most of us attend are usually underfunded and poorly staffed--although in fairness, their graduates are usually no more ignorant than those from the luxo schools that are primarily designed to inculcate a proper respect for money and what it can buy.

Since we are mostly on our own when it comes to education and our learning depends on our own initiative, it becomes critically important to understand why anyone wants an education in the first place.  This is especially true for those of us who reject the notion than a degree should be an indicator of status.  So here's what I have learned is important to know.

Reading is still the biggie.  It's the ultimate intellectual shortcut--in a few hours you can read a book that may have taken the author a lifetime of learning to write and when you are done, you know roughly as much about the subject as the author.  If you can extract good information from books (and now the internet) it doesn't make a bit of difference how poor you were or how crappy your schools because you can still find out the important stuff on your own.  Even better, reading is self-reinforcing--the more you read the better you get at it.

Writing is still important but these days, other methods for getting an idea from your head to another's should be learned as well.  These include illustrations, charts, schematics, and video production.

Knowing basic math is essential to understanding your surroundings.  This does NOT mean you are a failure if you never quite understand calculus.  But you should know the difference between a million, a billion, and a trillion, how to calculate and understand percentages, how statistical sampling works, and the rest of the skills one must have to extract meaning from news, government documents, and campaign literature.

Knowing history is critical.  If you don't know history, you must think that that world was mostly complete (transportation, buildings, governments, etc.) the day you were born.  This is the perfect prescription for infantile thinking.  Worse, if you don't know how the world got the way it did, it is impossible to understand your point in human development.  If you don't know where you come from, you cannot know who you are--and if you don't know who you are, you cannot know where you are going.  Historical illiteracy leads to personal aimlessness--every time.

There is a Predator lie that claims that "educated" people don't have to understand tools.  And while everyone doesn't have to operate tools on a daily basis to understand the lessons that technological gracefulness teach, it is also true that people who never learn to use tools and in fact, look down with disdain on those who do, are usually confused about very basic issues.  Not surprisingly, technological illiterates cannot contribute much to a discussion of technology-based issues like Peak Oil or climate change.

So if you must educate yourself for sociological or geographical reasons, concentrate on history, arithmetic, the use of tools, the ability to learn and extract meaning from your surroundings, and the ability to communicate what you have learned with your fellow humans.

Ireland--another poster child for neoliberalism's failures

Neoliberalism is truly a form of insanity because it keeps getting tried in spite of its awesome track record of failure.  A FEW people make out like bandits so I guess it can be argued that neoliberalism isn't a TOTAL failure but as the revolutionary reaction to it builds from Tunisia to Madison Wisconsin, even those few must wonder if their days are numbered.

In the following clips, Max Kaiser views the wreckage caused by neoliberal madness in Ireland.  It isn't pretty but the descriptions of the problems seem especially accurate and poignant coming from those Irish who have seen the future of their country destroyed by incompetence and naked greed.

Update: Real Finns make stunning election gains

The Euro has been generally popular in Finland since its introduction.  While the economic benefits have been questionable, there is strong sense that using the Euro gave Finland membership in a very exclusive club.  The Finns have rarely been invited to the best clubs even in Finland for most of her history--those have been operated by her Swedish and Russian colonial masters.  So flattered by being admitted to the Euro, Finland has been one of its most diligent supporters.

The fact that a right-wing populist threatens to upset Finland's cozy relationship to the Euro is probably very upsetting to the educated and respectable Finns.  Timo Soini and his Real Finns are a real embarrassment to them.  (BTW, my sources in Finland say "True Finns" is a bad translation.  They say Real Finns is much closer to the original meaning.  So I will use Real Finns even though others may still use True Finns.)  And they have reason to worry.  Soini has the potential to do serious damage to the whole idea of the Euro.  From Helsingin Sanomat

Elevator Speech #5--Believing in magic and the new dark ages

The real economy cannot operate on magic.  

My grandfather had a colorfully weird bachelor-farmer brother who loved to entertain us kids with his collection of aphorisms that passed for wisdom in his life. "Everything comes to him who waits--especially poverty," he once told my sister in all seriousness.  His big advice to me was, "There is only one thing you really must know in life and that is this: if you want a harvest in the fall, you must plant in the spring."

It is absolutely impossible to overstate the importance of that basic Producer truth. In a world where the Predators have elevated the "market" to iconic status, it is important that SOMEONE still understands all the steps it takes to actually get something to that market.  Within that simple and blindingly obvious Producer truth are the seeds of civilization itself.

Unfortunately, the Leisure Classes reject this Producer truth--starting with the rejection of the possibility or even the existence of Producer truth.  And because they believe in a world where nothing can be known, they turn to infinite manifestations of magic to describe their lives.  Some magical beliefs are relatively harmless--such as about 99% of all religious practice including the modern "New Age" practices.  

But some "magical" incantations are utterly lethal.  There are hundreds of them but the three most dangerous are:

• Only the market can determine value
• Effective society-wide planning is impossible because it impinges on the freedoms of those perfect markets
• It is possible to have compound growth in a finite biosphere

One of the ironies of industrialization is that, over time, fewer people need to understand Producer truth.  If 2% of the population can grow all the food and 18% can accomplish all the manufacturing, that leaves 80% of the population quite able to indulge themselves in as many beliefs in magic as they can afford.  To fill this market, the range of magic output is stunning and now includes education and government.

When 80% of the population must devote their lives to trading in bullshit that has only the slightest link to anything a sane person would call reality, it is hardly an exaggeration to declare the coming of a new Dark Ages.  Given this reality, can the teabaggers or Fox News or post-structuralism come as a surprise?  Remove the gravity of Producer truth and the world becomes a place where one magical thought is as valid as another.

Of course, the biggest concern with a population trained to believe in magic is that the major problems like the end of the Age of Petroleum or climate change, the ones we would wish away if we could, are precisely the sorts of dilemmas that can only be solved by folks who have left their beliefs in magic behind.

News on renewable energy

One of the prime hazards of speaking out for renewable energy is that invariably, some well-meaning soul will come up after the speech to explain how someone (totally unknown) has invented a process using (unspecified) methods that allow folks to produce a reliable stream of electricity using nothing more than rainwater (or whatever.)  Then I am asked if I have ever heard of such a product (usually no) and doesn't the existence of this product prove the bright green future we all want is just around the corner?

Not wanting to discourage such people but at the same time, wanting them to have a better way to evaluate such a claim, I have over the years figured out the following response.  "No," I will say, "I have never heard of the product you are describing, but I have a rule for evaluating claims for new technologies.  I will only take such products and claims seriously when I can buy one down at Home Depot."

So it is with some amount of joy that I saw the other day that you can now buy solar panels at Costco.

The Confederates have fired on Fort Sumpter

As the nation remembers the 150th anniversary of the beginning of hostilities between the North and South, debates about the Civil War are breaking out again.  I am left out of the best of these debates because most of my friends know much more about the Civil War than I.  For all my interest in history, I have never mustered much interest this particular outbreak of madness.  There are many reasons for this but three stand out:

• All wars tend to all look alike after a while.  The details of this one are not very interesting because the Civil War changed so little for such a short time.  The differences between slavery and Jim Crow, for example, are not great.
• The world we live in and the one we must fix is the industrial outcome of the discovery of oil.  While the Civil War didn't change all that much, the age of petroleum changed EVERYTHING.  I find myself spending 99.9% of my energy trying to understand the world created by liquid fuels and as little time as possible trying to judge whether Pennsylvania was more enlightened and virtuous than Virginia.
• My ancestors didn't arrive in USA until the 1880s.  My people aren't exactly newcomers but the conflicts they experienced were bankers and land speculators vs. farmers or robber barons vs. steelworkers.  The Civil War was not their fight.

Tony, on the other hand, knows about as much Civil War history as I don't know.  He's been working on me.  And he has come up with a debating point that is quite compelling.  (I paraphrase here)

If you do not believe that the Southern aristocracy was an evil influence so extreme, it had to be put down in armed conflict consider this: When the USA didn't have to deal with the backwardness of the South after they left the government in 1861, all sorts of good things got accomplished including land-grant colleges (1862) and the beginnings of the transcontinental railroad (1863).  Now that our southern brethren are (sort of) back in the fold, they have resumed their role as a cultural drag.  From Strom Thurmond and the Dixiecrats to Nixon's "Southern Strategy" to their right-wing Democratic governor-turned-presidents Jimmy Carter and Clinton, to Newt Gingrich and Phil Gramm as "intellectuals", Southern cultural backwardness still defines this country.

The most interesting policy innovation that occurred as a result of the Progressive opening that happened during the Civil War has to be Abe Lincoln's Greenbacks--easily the most enlightened monetary policy in the nation's history.  When the Greenbacks went out of circulation in 1873, it created an economic catastrophe out here in the heartland.  Trust me on this--my forebears WERE interested in this subject.

In the days when folks still foolishly assumed that our new black president would have to represent Northern Progressivism, Ellen Brown wrote this optimistic letter explaining the genius of Lincoln's Greenbacks.

Finland and the Euro-zone debt crises

I certainly do not claim to be an expert on Finland.  Compared to the typical citizen of USA who is lucky to know that "sauna" is a Finnish word however, my credentials to describe that most obscure of the Nordic countries are solid.  In 1989, a draft of what would become Elegant Technology was published in Finland as Tuottajat ja Saalistajat.  My Finnish publisher tried its best to make my book as famous as possible and I got to meet a lot of highly intelligent and informed examples of their culture.

Getting to know a culture through her intelligentsia may not be the best way to understand that culture but it most certainly is a good way.  And one I had open to me.  And this is what I discovered about Finland.

Finland has certainly been subjected to the neoliberal trends that caused the current global debt crises.  Example--a man I knew who was a member of the Communist Party and could defend the teachings of Marx as a university student in the 1970s was writing a book on Adam Smith in 2005.  But neoliberal trendiness aside, Finland has a long history of treating debt VERY seriously.  Finland has the distinction of being the only country on the planet to pay off her WW I-era debt and when the Soviet Union demanded reparations to remain independent after WW II, the women of the country melted down their wedding rings to help meet the payments.  This is NOT a culture predisposed to be frivolous about debt.

The Finns are also incredibly hard-working in a country that has only water, rocks, and trees as natural resources and clings to an existence at the edge of nowhere.  For example, when the borders moved at the end of WW II, Finland found itself swamped with at least 400,000 refugees from Soviet Karelia.  Because of the economic crises, Finland needed to harvest some of her forests but could not afford chain saws.  So many of those Karelian refugees were put to work cutting pulpwood with axes.

So there you have it--a country with the world's best schools and a work ethic that a good Protestant would find positively erotic, harboring a hatred of debt that burns like a 1000 suns and guess what, the Finns do not have the debt problems of a Greece or Spain.  But this doesn't get them off the hook because they drank enough of the kool aid to convert to the Euro in 1999.  So instead of being forced to reduce their living standards because of debt, they are being forced to lower their living standards to pay for the bailouts of others in debt--mostly because they have accumulated enough wealth to attract the attention of the banksters.

Not surprisingly, folks are PISSED!

America's Dual Justice System: One For Wall Street And One For Everyone Else

While Larry Summers performs damage control - promoting the wrong-wing fabrication that most of the blame for the 2007-2008 financial crash should be heaped on Freddie Mac and Fannie Mae; and, oh, financial derivatives are innocent, innocent! I tell you - other, less eminent (and less bought-off) elites have far more interesting things to say.

Lisa Murhpy of Bloomberg interviewed the chairman of the now defunct FCIC, Phil Angelides to discuss the findings presented yesterday by Carl Levin. The topic was the "greased pig" that is Wall Street. The conclusion is that America now has a dual justice system: "One for ordinary people and then one for people with money and enormous wealth and power." As for crime deterrents, considering that to this day not one person has gone to prison, even an idiot can foresee what Angelides has to say on this issue: "To the extent laws were broken, we need deterrents. If someone robs a 7-11, they took $500 and they were able to settle the next day for $50 and no admission of wrongdoing, they'd knock over that 7-11 again. And we've seen time after time where people and firms have made tens, one hundreds, billions of dollars. They've settled charges for pennies on the dollar. At Citigroup for example they represented that they had $13 billion of subprime mortgage exposure when they really had $55 billion. The penalty to the chief financial officer who made $19 million that year, 2007, was $100,000. Goldman was fined $500 million but the date they settled their stock moved up $2 billion. There's been no real consequence." Too bad there is no acknowledgment that it is people like Angelides who through their corrupt behavior over the years allowed Wall Street to singlehandedly usurp the democratic process and replace it with that of a fascist corporatocracy. But that's irrelevant: at some point, sooner or later, the American peasantry will snap. Maybe not tomorrow, maybe not the day after the Apple borg hypnosis ends, and the fascination with American Idol expires, but at some point thereafter, absolutely. And the primary reason will be the glaring trampling of the tenets contained in both the Declaration of Independence and Constitution, by the kleptocratic "superclass." Then what happens when the billions of ones and zeros held in some bank vault and imparting some ephemeral monetary greatness to these people, finally is exposed for the sham it is, and they have nothing to protect them from the hordes of hungry, angry and very well armed? We can only hope they will be able to bribe their way to the top in that world order as well as they can in the current one. Somehow we doubt it.

Read more.

What are the actual tax rates in the U.S.?

From the Economic Policy Institute:
Read more of this very short article.

Where's the Obama surge in bankster prosecutions?

Yep, a picture is worth a thousand words. Not much to add to this graph showing the number of referrals by financial regulators to the Justice Department for criminal prosecution.

New Reports Put Financial Regulators in the Hot Seat

By Michael Smallberg

In case you missed it in our Morning Smoke, we wanted to highlight two must-read stories that came out today on the key causes of the financial crisis and the alarming absence of criminal prosecutions for the major players who drove the economy to the brink of collapse.

The first is a front-page story in today’s New York Times that thoroughly documents the drop in criminal referrals by financial and banking regulators in recent years. Drawing on data compiled by the Transactional Records Access Clearinghouse (TRAC), the article raises troubling and largely unanswered questions about recent changes in the federal government’s approach toward prosecuting white-collar crime (full disclosure: TRAC co-director David Burnham is a POGO board member).

The lack of criminal referrals by our nation’s top regulators, widely observed by financial commentators and legal experts, is thoroughly documented in TRAC’s data:

The university’s Transactional Records Access Clearinghouse indicates that in 1995, bank regulators referred 1,837 cases to the Justice Department. In 2006, that number had fallen to 75. In the four subsequent years, a period encompassing the worst of the crisis, an average of only 72 a year have been referred for criminal prosecution....

Read more.

Taking on the banksters

Of all the people standing up to the banksters, the folks in Iceland win the award for bravery--hands down.

Of course, every time someone stands up to the crooks in suits, the clearer it becomes that the banksters, while seeming to have a great amount of power, are actually paper tigers.  They can't even foreclose on frightened homeowners without the hired muscle of state power represented by the Shire Reeve (Sheriff).

Installed Wind Power Capacity per GDP

No surprise here: at 2,748.9 megawatts of installed wind generating capacity per every $1 billion of GDP, the U.S. is far down the list. Here's the full list:

Yesterday marked 50 years of man in space

By 1961, I was already enthusiastic about the space race so when I heard that Yuri Gagarin had orbited the earth, I was CRUSHED!  How could we already be so far behind?

In 1972, I found myself in Leningrad (St. Petersburg) and discovered I was in the company of a fellow space "nut."  I found out that (not so surprisingly) a Russian kid my age had been just as thrilled about Gagarin as I had been disappointed.  Guy knew a great deal about Soviet-era rocketry and as we talked, I came to the conclusion that what we had in common was FAR more interesting that what separated us--no matter what the Cold War propagandists were trying to make us believe.  The Cold War pretty much ended for me that day.

So here's to Gagarin--a VERY brave man.

(Almost) Everyone got played by the budget deal.

In the immediately preceding post, Jon praises "the genius that allows editorial cartoonists to distill a complex subject into a humorous picture." Sorry, what I have is not humorous. But it is an excellent, short distillation of a complex picture. It doesn't require a "Read more" link at the bottom.

Everyone got played by the budget deal.

by LaFeminista

The right wing bloggers may well be angry and so are many on the left.

In a bipartisan flurry in DC all but the top 1% got screwed by shared sacrifice.

The plot so far:

A flurry of "free" money was used to finance every crack pot loan for decades resulted in the rich got richer and the poor got deeper in debt.

When the inevitable defaults began we bailed the rich out with a shot of TARP and a dram of TALF. The interest in the loans were so low you could pay for them by loaning the money back and still walk away with a handsome profit all you needed were some dodgy securities. In other words you had to be wealthy to get your welfare check without even the hint of risk.

The solutions proposed for this extravaganza

Extension of the tax cuts that helped dig the hole in the first place.

A cut in the payroll tax to destabilize social security just a little bit more.

Meanwhile some of the richest corporations pay zero tax.

TALF also assisted offshored and foreign companies and banks.

In other words the greatest heist of the century.

What do we get in return?

Shared sacrifice where any program that helps those that really need it will be cut.

The feeling we have been had.

I think it is time that we all were somewhat pissed off by the deal since most of us are supporting this socialism for the wealthiest. Perhaps we didn't share the pain to the level the right wing wanted; but don't tell me this was a good deal and we won.

Evolving a bankster (and other yuks)

I have long appreciated the genius that allows editorial cartoonists to distill a complex subject into a humorous picture.  Some recent favorites.

Ever wonder why Republicans and Democrats are so alike when it comes to banking?

Or why union pension funds will invest with hedge-fund crooks who are busily destroying union jobs?

Of course, my explanation is that once folks become members of the Leisure / Predator classes--or even aspire to become members--all links or solidarity with the Producing Classes are broken.  And I still believe this is a pretty good explanation.  Now Robert Reich, Clinton's midget Labor Secretary who enthusiastically sold out USA labor by backing NAFTA, offers an even simpler explanation.

Keynes still right about defunct economists

One of the things that never ceases to astonish me is the power of ideas.  When I was younger, my father served as an officer of a small Protestant mission board--folks who sent their members to "third-world" nations to spread the "good news of the Gospel of Jesus."  As a result, we had many guests in our home that usually lived among the most wretchedly poor on earth.  While many were just religious types who couldn't get a job in someplace like Kansas, some were doctors who chose to work under hellish conditions to treat epidemics of eye disease in Africa or the complications of malnutrition in Bangladesh.  These were highly educated people who could have had prosperous suburban medical practices but chose, for ideological reasons, to work among the world's poor.

Knowing people who voluntarily chose poverty made me highly skeptical about economists who taught that "economic man" sought nothing more than to maximize his wealth and pleasures.  I knew better because I had seen so many examples that demonstrated otherwise.  The economists who appealed to me were always the ones who rejected the simplistic nonsense of the pleasure maximizers.  And so I have long admired John Maynard Keynes--mostly because of the following quote:

The banksters are furious this morning

Yesterday, the voters in Iceland rejected another "negotiated" settlement of the Icesave mess.  The fact that there is absolutely NO moral or legal obligation for the Icelanders to pay off "debts" that they did not incur will not stop the crooks from trying to collect.  The Predators think they must collect from someone and a tiny country with essentially no military looks like a good place to start beating up on people.

First up--Hudson provides a thumbnail sketch on what happens when you listen to neoliberals--especially the kind that come from the banking business.

There is no alternative to going green

Rebuilding the nation to cope with the obvious reality of Peak Oil should be the battle cry of every person who believes themselves to have any Progressive tendencies whatsoever.  Here, the inestimable Meteor Blades over at Kos makes a case of going green big time (well, not as big as necessary but...you know).

Still being screwed by the banksters

There is a tendency to forget that the victims of theft do NOT usually recover on their own.  And when the thefts are as large as those perpetrated by the scam artists from Wall Street and its imitators, there remains the possibility that the structural damage they caused is essentially permanent.

An inside view from Big Pharma on how MBAs killed innovation

Hat tip to Lambert at CorrenteWire for pointing to Riverdaughter blogging about her last day at work doing research modeling at a big pharmaceutical company. Those of you who are in IT might be grossly offended at some of what she writes, but I want to spotlight one paragraph:

Here’s my theory about how it all went south since the 90′s: It’s the 401K. Yep. It puts the whole dismal phenomenon in the proper framework. But how could something that appears to be so innocuous bring the country’s scientific and industrial framework to a screeching halt, you ask? Think about it. MBAs and executives are hired by corporations to “increase shareholder value”. Before the rise of the 401K, that meant building a better mousetrap and finding a better aspirin. Now, the only thing that matters is pleasing the finance guys who rate your stock from buy to hold to sell. And those same finance guys have a stake in the outcome. They set their own terms of compensation as well as service large institutional investors and mutual funds that we get to choose from in our 401K plans. Corporations are now driven to serve the finance industry and the shareholders, which are us. They’re not in it for the new products anymore. And once you start hiring executives whose goal it is to optimize the ROI, well, it doesn’t matter where the money comes from anymore. It’s just money, numbers on a spreadsheet. It doesn’t matter if those numbers represent people with families and caloric intake requirements and 10,000 hours of expertise. It doesn’t matter if there are fewer products to sell. Once the patent is dead and the money is gone, the investors will follow the money to the next hot thing. There’s nothing mysterious about this. It’s not personal. It’s just the reward system we have set in place since pensions became too old-fashioned for those up and coming 30 somethings in the 90′s (um, that would be us). We’re like rats pushing a pellet bar for another shot of cocaine. We can’t help ourselves and will keep doing it until we die from the pure pleasure of getting that next teeny bump to our retirement accounts.

Read the entire article.

Elevator Speech #4--Producers vs Predators and the importance of honesty

The easiest way to distinguish a Producer from a Predator is to determine how important honesty is in one's work. If honesty is the dominant virtue in the task (school bus brake repairman, bridge designer, airline pilot) it is a Producer job. If cunning, deception, and fraud are necessary to succeed in a task (broker selling "naked shorts", preacher pushing "gay" cures, the petty real estate speculators who claim your worn out $50k house is actually "worth" $550k so you can take on more debt, etc.) then it is a Predator job.

The only way for a Producer to become excellent at what he does is to be relentlessly honest with himself, his understanding of the world, and in his dealings with his fellow man.  The folks charged with designing the bridges you must cross better not have cheated while learning materials and structures nor while performing the calculations on the new design.  The folks who built the bridge better not have cheated on welding techniques nor cut corners on the concrete mixes, etc. etc.

Modern societies, by NECESSITY, operate on honest dealings.  Those who lie and cheat are literally nothing less than industrial saboteurs.

As most Producers eventually discover, love for the truth may be the strongest love of all.  When you love the truth, you don't tell it when it's merely convenient or when you are absolutely cornered, you hunt for the truth because it makes you feel good.  Discovering a new and interesting truth becomes an occasion of joy and celebration.

As the Producers gained power through the discovery of ever more indisputable facts--complete a mechanism for modifying the understanding of those facts when new information arrives--this produced an explosion of knowledge that changed the way humans understand themselves.  This has been especially true of the last 200 years.

But there are still liars out there.  In fact, lying has become an epidemic.  And every time a liar succeeds in misleading his neighbors or absconding with his unearned share of the wealth, the ability of the folks who simply MUST be honest to do their jobs well, if at all, is sharply diminished.

More on this utterly fascinating subject

Tony on Pecuniary Culture (my favorite of his posts here)

The culture of Predation
Social Darwinism

What actually happens if the government is shut down?

A big tip of the hat to Rortybomb, which pointed me to this very timely and important interview concerning the looming shut-down of the federal government. New Deal 2.0 interviewed Roosevelt Institute Senior Fellow Bo Cutter, who was Director of the National Economic Council and Deputy Assistant to the President from 1992-1996 during the Clinton Presidency and was one of the key bureaucrats who managed and directed the shut-down of 1994.

Are we finally going to get serious about renewables?

The Fukushima disaster is changing the way folks look at the energy mix.  Of course the institutional realities may still take a while to catch up to the facts on the ground.  Around here, we have a couple of nukes run by the local power company.  A few years back, it needed a modification of its operating license so it could store more spent fuel rods on site (because no one imagined there would not be a "permanent" waste storage solution by now.)

In return for a modification of the storage rules, Minnesota insisted that Xcel Energy promise it would invest in renewables.  In Minnesota, renewables means wind power and sure enough, Xcel was soon building windmills.  In institutional terms, this meant the Xcel soon had a whole wing of employees who were acquiring wind energy skills.  This, in turn, means that next time Minnesota demanded its energy companies do renewables, there was bureaucratic pressure from within the firms themselves to support expanded capacity.

This takes time.  It SHOULD take time--energy companies are best run by by-the-book folks who are highly resistant to change.  Even so, it's time to get going and even the haughty nuclear engineers must eventually understand--volts is volts!

Elevator Speech #3--Globalization can be good AND bad

Producer vs. Predator globalism

There is probably no intellectual concept that scares people more than the subject of globalism—the idea that large international institutions both public (example, the United Nations) and private (example, Goldman Sachs) can make decisions that affect their lives in powerful and often negative ways.  People SHOULD fear such concentrations of power—even when they are absolutely necessary (example, coordination of atmospheric pollution standards.)  But fear cannot be allowed to impede actions necessary for the survival of humans on the planet.  So the question becomes—are there good and bad forms of globalization?  And if there are both kinds—how do we know the difference?

The Producer forms of globalization happen when people of good will decide to cooperate across international borders to solve a problem that cannot be solved alone.  The international agencies dedicated to weather forecasting and international air traffic control are excellent examples of the hundreds of similar sorts of agencies that do critically important work every day.  When globalization is defended, it is these people and their work that gets trotted out as positive examples.

The problem is that the same tools of cooperation that work so well in weather forecasting turn extremely sinister when they are used to benefit a tiny minority at the expense of the rest of us.  Dangerous Predator global institutions include the Bank for International Settlements, The International Monetary Fund, and the yearly gathering in Davos.  The number of people who actually benefit from such institutions is tiny while their victims can number in the billions of people.  And there is no part of planet earth isn't terrified of these organizations because they have had unpleasant dealings with them.

So while the international efforts that benefit us all should be encouraged and those that benefit the few should be regulated and watched closely, there is a form of global awareness that we Americans should practice much better.  Let me explain.

One of the really cool things about folks from small countries is how outward-looking they are.  They speak many languages but even better, they view the rest of the world as possible holders of ideas they think they should try.  By contrast, here in USA, there are many, MANY people of all income levels and educations that thoroughly believe one thing "USA is #1 and the rest of the world is scrambling to become just like us."  Anyone who believes they are #1 is probably NOT looking around the world for ideas on how to improve the way we do things.  And even IF the pet slogan had been true in say, 1962, it certainly is no more.  For example, NO ONE is trying to imitate our overpriced, under-performing health care system in 2010.

There is no greater impediment to progress than the mistaken belief that "We're #1."  It is as ignorant as it is arrogant and it keeps us from taking advantage of the experience of others.  Since the problems we face are so grave, it is the height of stupidity to reject the learning of others through pure bigotry.

Elevator Speech #2--Continuous geometric growth in a finite biosphere is impossible

Continuous geometric growth in a finite biosphere is impossible

There is nothing quite as seductive as extrapolation.  I remember when I was in junior high study hall, we budding gearheads would sit around making "calculations" such as "if you can get a car to go 80 mph with 150 horsepower, you should be able to go 320 mph with 600 horsepower." And while this childish foolishness was wrong for dozens of sound reason, it was certainly no worse than the typical budget, growth, or profit calculations one finds in daily newspapers or teevee newscasts.  

Geometric extrapolation is even worse.  It is probably the most commonly practiced form of utter insanity. For how long have we known this is crazy?  The Sumerians taught us about the S-curve at least 4000 years ago.  The S-curve is based on the historical experience of producing things--whether corn or iPhones.

Michael Hudson on the humans who knew better

Hudson says that – in every country and throughout history – debt always grows exponentially, while the economy always grows as an S-curve.

Moreover, Hudson says that the ancient Sumerians and Babylonians knew that debts had to be periodically forgiven, because the amount of debts will always surpass the size of the real economy.

For example, Hudson noted in 2004:

Mesopotamian economic thought c. 2000 BC rested on a more realistic mathematical foundation than does today’s orthodoxy. At least the Babylonians appear to have recognized that over time the debt overhead became more and more intrusive as it tended to exceed the ability to pay, culminating in a concentration of property ownership in the hands of creditors.

Babylonians recognized that while debts grew exponentially, the rest of the economy (what today is called the “real” economy) grows less rapidly. Today’s economists have not come to terms with this problem with such clarity. Instead of a conceptual view that calls for a strong ruler or state to maintain equity and to restore economic balance when it is disturbed, today’s general equilibrium models reflect the play of supply and demand in debt-free economies that do not tend to polarize or to generate other structural problems.

And Hudson wrote last year:

Every economist who has looked at the mathematics of compound interest has pointed out that in the end, debts cannot be paid. Every rate of interest can be viewed in terms of the time that it takes for a debt to double. At 5%, a debt doubles in 14½ years; at 7 percent, in 10 years; at 10 percent, in 7 years. As early as 2000 BC in Babylonia, scribal accountants were trained to calculate how loans principal doubled in five years at the then-current equivalent of 20% annually (1/60th per month for 60 months). “How long does it take a debt to multiply 64 times?” a student exercise asked. The answer is, 30 years – 6 doubling times.

No economy ever has been able to keep on doubling on a steady basis. Debts grow by purely mathematical principles, but “real” economies taper off in S-curves. This too was known in Babylonia, whose economic models calculated the growth of herds, which normally taper off. A major reason why national economic growth slows in today’s economies is that more and more income must be paid to carry the debt burden that mounts up. By leaving less revenue available for direct investment in capital formation and to fuel rising living standards, interest payments end up plunging economies into recession. For the past century or so, it usually has taken 18 years for the typical real estate cycle to run its course. more

It is important to understand the reasons why geometric extrapolation is ultimately impossible because those assumptions are built into almost every newscast, financial arrangement, political planning, etc.  It would be a rare days anymore when the subject is implicitly brought up at least ten times.

At this link, you can find 23 different charts showing historic geometric growth of human activity--which is why all of them are destined to crash in the very near future.

The human economic growth story is incredible. Population increased exponentially, as did global wealth, factory output and other measures of development.

But the flip side is the steady exhaustion of resources and destruction of the environment. As growth continues, planetary tensions will increase too. This is why we're running into peak everything.

Wachovia Let Off the Hook for Laundering Drug Funds Equal to 1/3 the Mexican Economy

For the past two years, I've been able to buttonhole my Congressman at the County Democratic Party Convention. I've told him that big Wall Street firms like Goldman Sachs and JP Morgan Chase must be destroyed. Annihilated. He thought I was nuts, and ended the conversation as quickly as possible. Local Dem officials thought I was nuts also, but they were more willing to listen. And now, I think they are coming around to my point of view. They're initiating the conversations, not me. And they're asking good questions, such as "What can be used to go after a bog Wall Street firm and shut it down?"

My reply is that criminal activity is rampant throughout the financial and banking system: snorting cocaine on trading floors: falsifying expense accounts to enable tax fraud and pay for sexual services; failure to follow legal procedures for conveying real estate deeds and trusts; outright falsification and forging of documents in the mortgage foreclosure crisis; the fraud the rating agencies committed in assigning safe ratings to securities based on sub-prime mortgages; the failure to completely explain the risks involved in financial derivatives sold to clients, then turning around and using more financial derivatives to bet against those clients.

And, laundering drug money. Here's a story from Naked Capitalism that has yet to be picked up in the U.S. mainstream news media.

Wachovia Paid Trivial Fine for Nearly $400 Billion of Drug Related Money Laundering
If this news story does not prove that banks are effectively above the law, I don’t know what does. The Guardian, in an account yet to be picked up anywhere in the US media (per Google News as of this posting, hat tip readers May S and Swedish Lex) reports that Wachovia was at the heart of one of the world’s biggest money laundering operations, moving $378.4 billion into dollar-based accounts from Mexican casas de cambio, which are currency exchange firms. While these transfers took place over a period of years, the article notes that it equals 1/3 of Mexican GDP. And the resolution?

Criminal proceedings were brought against Wachovia, though not against any individual, but the case never came to court. In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. Now that the year’s “deferred prosecution” has expired, the bank is in effect in the clear. It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine.

Read more.

Elevator Speech #1--evolutionary thinking

Real economics are best described by evolutionary theory

In 1859, Charles Darwin would publish his seminal work entitled "On the Origin of Species by Means of Natural Selection, or the Preservation of Favoured Races in the Struggle for Life."  This work would set off controversies that resound to this day.

Before Darwin, the generally accepted idea was that the world was the way it was because that is how the Creator wanted it.  The majority of intellectual speculation, whether of a scientific, philosophical, or religious nature, assumed that the goal in life was to discover those divine rules that ordered a fixed universe.  After Darwin, while folks still sought to discover the natural laws with universal applications, the focus shifted to describing the mechanisms of change.

No wonder Darwin is often considered the most disruptive thinker in history.

Taking Darwin out of the biology context is a hazardous occupation.  The ugliest of the non-biological manifestation of Darwin's theories is often called "Social Darwinism."  Perhaps the most famous social Darwinist in USA was the 19th century chairman of Political Economy at Yale by the name of William Graham Sumner.  His most famous student was a kid from Minnesota named Thorstein Veblen.

Veblen was influenced by Sumner--though not in ways usually expected.  Veblen thought Social Darwinism was a monstrous error and devoted much of his life's work to debunking Sumner's teachings.  This did not mean Veblen rejected the theories of evolution.  Far from it.  In 1898, even before his first book was published, Veblen wrote an incredibly important paper entitled “Why is Economics Not an Evolutionary Science”.

Suddenly, the extant economics looked as static and ridged as any holy book.  Veblen would go on to write a body of work that would described "economic man" as a dynamic actor with complex motives who was constantly evolving.  Veblen is usually considered one of the fathers of a discipline called evolutionary economics.  Wikipedia defines this speciality thus:

Evolutionary economics is part of mainstream economics as well as heterodox school of economic thought that is inspired by evolutionary biology. It stresses complex interdependencies, competition, growth, structural change, and resource constraints but differs in the approaches which are used to analyze these phenomena.

Evolutionary economics deals with the study of processes that transform economy for firms, institutions, industries, employment, production, trade and growth within, through the actions of diverse agents from experience and interactions, using evolutionary methodology.

Evolutionary economics is validated by the existence of something that can only be called evolutionary industry.  Toyota imported evolutionary concepts into their system of quality control and called it Kaizen (continuous improvement).  The results were stunning--Toyota so revolutionized quality control they were able to leverage this reputation into their present status as world's largest automaker.

Why this is important

Evolutionary economics, especially in its heterodox manifestations, is hands down the best ways to understand and describe the complexity of the real world.  Typical non-evolutionary economic statements like

The market is always rational

A corporation exists only to maximize the return to the shareholders

Free Trade will bring generalized prosperity

are wrong because they are as static and ridged as any theological statement they so resemble.  This blog rejects static economics--mostly because dynamic descriptions of economic behavior are far more accurate.

Evolutionary industry is important because if we ever produce one, the green sustainable society will happen one tiny little improvement at a time.  And the folks MOST likely to create those new green bits and pieces are those most industrially evolved already.

Links to other posts at real economics on this subject

• Why I don't believe the Toyota slander
• Japan's moon shot--the Lexus LFA
• Why I defend Toyota
• Social Darwinism part xxxx

The elevator speeches

While it is always good to be able to explain one's intellectual positions in detail, there comes a time when there are sound reasons to distill those positions down to bullet points.

When it comes to discussions of the economy in the early 21st century, the need for distilled debating points is especially critical because the understanding of economic issues has been so muddled by various neoliberal right-wing ideologies.  Being overwhelmed by rightwing bullshit would be bad enough if it actually had produced anything other than economic catastrophe, but now it has seriously impaired our abilities to function as a society.

A few days ago, I got into a debate with a guy who lives in Northwest Washington DC.  A veteran of Reagan's Office of Management and Budget, among other accomplishments as a senior public employee, he is Washington conventional wisdom personified and these days, he simply cannot understand why folks cannot come up with a working austerity budget.

While his economics are historically extremely right wing, he isn't a teabagger.  For example, he understands the thinking behind Peak Oil.  The fact that every oil well ever put into production has a similar production curve appeals to his statistical side--which occasionally trumps his George Mason-approved ideology.  I had sent him my link to the Kunstler videos on Peak Oil and he had watched them.  Trying to inject a few notes of realism and urgency into the very probable idea that we have in fact already reached global Peak Oil, I wrote:

If we have really reached peak oil, it means that we have at most twenty years to replace the technostructure powered with oil.  This is at minimum a 50-year job!  And thanks to the sociopathic greedheads on Wall Street and their water-carriers in Washington, we have destroyed our ability to even respond.  God, I am glad I don't have kids.  This will be a catastrophe.

But since he had brought up the "dire" need for an austerity budget, I decided to give a quick thumbnail of what I consider necessary for a return to social and fiscal sanity.

Here is the minimum necessary for survival.

1.  Immediately place a 2% tax on financial transactions.  Not only will this raise a ton of cash--it will slow down the hot money.  Absolutely essential!

2.  Stop trying to be an empire.  We are TERRIBLE at it!  Cut Defense spending by 90%.  Cut intelligence budgets by 99%--we can replace the whole apparatus with interns watching Al Jazeera and quintuple the effectiveness of actual intelligence gathering.

3.  Send the war criminals who lied us into Iraq to jail and ban any journalist who was caught cheerleading this effort from ever writing for a national media outlet.  (If Thomas Friedman wants to bestow on us his ignorance, he can blog like the rest of us.)  We need leaders who understand the value of facing up to facts--NOT figuring out the most graceful lies to hide them.

4.  We simply must stop listening to neoliberals.  They have produced this economic catastrophe--they should be forever discredited.  Ever publish a neoliberal paper?--you can flip burgers from now on.

5.  Someone must stand up to the Hatfields and McCoys in education who spend their bizarre lives trying to figure out better strategies for making our children stupid--from prayer in schools to post-modernism.  We need a workforce that can quickly execute difficult strategies for rebuilding a nation--not make more absurd arguments over whether presidential blowjobs rise to the level of high crimes.

6.  Finance MUST serve the needs of the real economy.  If folks want to turn finance into a casino, fine.  Just do it on your own and away from the taxpayer's dime.  The fact that speculators even have the ability to crash the real economy is beyond criminal and enters the world of pure madness.  If the denizens of Wall Street cannot come up with ways to provide the real economy with $2-3 TRILLION per year for infrastructure upgrades, we cannot build what needs to be built.  This makes them useless (at best) and so should be regulated like prostitution and other vices.  You know, banking is by far the easiest way to make money wearing a tie--we can certainly replace those plunderers on Wall Street with public servants with civil service pay grades.

----------------------------- 

I have some more, but you get the point.  NONE of these things has a prayer of happening--at least not in the time frame necessary. Our very survival is threatened because the folks doing the long term planning for USA are monsters like the Koch brothers.

As you can see, beyond being overly theatrical, this quick list is incomplete.  So this exchange has spurred my resolve to finish a little project I have been working on for some months.  Over the next few weeks, I intend to distill the economics necessary to implement a strategy to deal with the implications of calamities like Peak Oil.

It will be the ideas contained in Elegant Technology reduced to elevator speeches (or when I am feeling lofty and pretentious, First Principles.)  I should have done this long ago.  I hope I can do it even now.

Winning hearts and minds

Well it took a while.  After weeks of standing by and watching the uprisings by brave people willing to stand up to truly evil governments like that of Hosni Mubarak's, the USA has finally chosen to act.  The chosen battleground is oil-rich Libya.  Not surprisingly, the rest of the world is not exactly impressed by the "humanitarian" aims of this neocolonial venture.  Pepe Escobar over at Asia Times is especially unimpressed by this latest clusterfuck.