At least they have identified the proper villain

My response to the mostly young people protesting in New York's financial district is to watch and see if they can figure this out for themselves.  So far, they're doing just fine.  The fact that they have already made an alliance with organized labor must scare the shit out of the banksters.  A student-worker alliance damn near brought down the government of France in 1968.  And this time, the target is not a government but arguably the strongest power center that may in fact own the government, but it is still just one of society's unelected institutions.  As John Kenneth Galbraith would say, "All successful revolutions are the kicking in of a rotten door."  Hard to get any more rotten than the global banking system.

The kids certainly have good reason to protest.

The cavalry arrives

Over the years, there have been few moments in life more pleasurable than when I discover someone else has come to the same conclusion as I have only using a completely different path.  The video below provided me with my most recent such moment.

The reason I tend to be pretty skeptical about pronouncements from folks who have worked in the financial community is that I look at the whole crowd as a bunch of knuckle-draggers.  Excuse me, if you are famous because you got lucky on a string of trades, what sort of comments do you have to offer about the real economy where folks make absurdly difficult things and manage to market them to the far corners of the globe?  You are comparing being a gifted casino player with acts of staggering human genius.

Of course, most of these "market" players are also right-wing psychopaths so I really want to ignore them, but occasionally there is a self-styled "progressive" who wants us all to know that it is possible to sin at the casino while still being a good person.  Since at least 95% of the Democratic Party believes this and it is supposed to represent the working people (or once did) these folks are hardly as rare as one might believe.

So here we have Max Keiser—a libertarian (probably) who is a real full-blown financial type that ordinarily annoys me but is occasionally worth watching because he loves to reveal the scumbaggery of the Wall Street crowd—engaged in pretty sane discussions about the damage the casino crazies are causing the real economy.  It's wonderful!  And he has on Nomi Prins who has written what sound like a pretty interesting book on the Great Depression called Black Tuesday.  It's a novel.  I haven't read it.  But it sounds like she did some interesting research.

Taking it to the streets

Quite honestly, I am not especially enthusiastic about taking politics to the streets. I participated in a few protests during my youth including a march to celebrate the life of Martin Luther King in April of 1968, a big gathering in Washington to end the war in Vietnam November 1969, and a march on the GE shareholders meeting to celebrate Earth Day 1970.

And then I quit.  I think the straw that broke this camel's back was the woman who chanted "save mother earth" for two straight hours at the GE protest.  "That's it?" was all I could think.  After all, GE made a lot of things that contribute to environmental ruin so the target was well chosen but I just could not imagine how there would ever be a link between this banshee and changing GE's product mix or manufacturing methods.  Beside, protests are expensive, uncomfortable, and usually very boring.  I had to find another way to affect change.

But the current street actions in New York are worth another look.  They are overdue—it has been clear for some time that political change in USA is virtually impossible so something else needs trying.  Moreover, because the financial community deals in so many forms of illusion, protests actually could be effective because puncturing the bullshit of those who invented credit default swaps should be vastly easier than, for example, getting GE to redesign its industrial processes to produce fewer toxic emissions.

First, to remind us that this is indeed a protest, we have this report from an earnest young man who wants us to know that this demo has all the manifestations of virtue covered.  This is so sweet.

Why manufacturing your own stuff is still a good idea

Thorstein Veblen's personal favorite of his 10 books was the Instinct of Workmanship first published in 1914.  What made it important was that it challenged long-held assumptions about the nature of work because he would claim that not only do people like to work, they are driven to do excellent work and become very frustrated when working conditions inhibit them from doing the excellent work they would rather do.

So here we see that the Harvard Business School has discovered one manifestation of the Instinct of Workmanship (the one that claims people are much more likely to value and care for things they have made themselves).  Of course, the conclusions they draw from their study are lame—but that's pretty much what you expect when you compare Veblen to Harvard.

Predators running / ruining the world

One should be a bit cautious about formal studies with small sample sizes.  The rule of thumb when I took statistics was that a study with a sample of 100 was interesting but probably needed further verification before folks got too excited about the results.  If you really wanted good results, the sample size should be around 1000.

So here we find a really interesting study that unfortunately has a sample size of 24 / 27.  This doesn't mean the conclusions are wrong—it's just that a statistical warning light should be flashing.

With that proviso, this study only confirms what my class analysis has predicted for years—Predators wreck things because that is all they really know how to do.  As the agrarian radicals liked to say about their "social betters" in the thieving classes, "Any jackass can kick down a barn."

Oh! this could get ugly!

Because math has this tendency to work, the question of whether or not the Greeks will default on a LOT of loans is not a matter of if but when.  Loans that cannot be repaid will not be repaid, etc.

So now the mad scramble starts over who is going to be stuck with the losses.  Of course, the first target is the Greek taxpayer, and then the German taxpayers, and the Finns, etc.  The banks literally cannot afford to take the haircut a write down of the debt would entail—they gave away their rainy-day fund in executive bonuses so a lot has disappeared into overpriced Manhattan condos, hookers, and blow.  So if Greece defaults, they are all legally bankrupt.  So they are mounting a campaign the reassure the rest of us that if they get into trouble again, we should be happy to bail them out once more.

Overheard a network money-honey explain that the job ahead was to convince the German voter to do the responsible thing and back the bailouts necessary to save the Euro.  I had my back to the teevee because I was cooking so I didn't get the reporter's name, but I am quite certain that a great deal of money will be spent (both legally and illegally) arms will be twisted, and a parade of whore economists will conjure up tales for why the average German should be given the bag with all the losses, so she was obviously spouting the current bankster line.

The ghost of John Calvin rides on

Today's economists using high-end math and powerful models would like us to forget that economics as an academic pursuit has it roots in theology, and more specifically, moral philosophy.  For those of us who were overwhelmed by religion as children, the links between economics and religion are just painfully obvious.  That is why this USA Today article last Tuesday is not so surprising at all.

Baylor Religion Survey reveals many see God steering economy
By Cathy Lynn Grossman, USA TODAY 09.20.11

The way you see God tells a lot about how you see the U.S. economy, a new national survey finds.
About one in five Americans combine a view of God as actively engaged in daily workings of the world with an economic conservative view that opposes government regulation and champions the free market as a matter of faith.

"They say the invisible hand of the free market is really God at work," says sociologist Paul Froese, co-author of the Baylor Religion Survey, released today by Baylor University in Waco, Texas.

"They think the economy works because God wants it to work. It's a new religious economic idealism," with politicians "invoking God while chanting 'less government,'" he says.

"When Rick Perry or Michele Bachmann say 'God blesses us, God watches us, God helps us,' religious conservatives get the shorthand. They see 'government' as a profane object — a word that is used to signal working against God's plan for the United States. To argue against this is to argue with their religion."

Most (81%) political conservatives say there is one "ultimate truth in the world, and new economic information of cost-benefit analysis is not going to change their mind about how the economy should work," Froese says.

At the opposite pole, another one in five Americans don't see God stepping in to their daily lives and favor reducing wealth and inequality through taxation.

"So they're less likely to see God controlling the economy. Liberal economic perspectives are synonymous with the belief that there is no one 'ultimate truth,'" Froese says.

This is a distinctly American cultural finding and specific to this point in history. It was different in the past, it might be different in the future and it's different now in Western Europe, Froese says. more

This is an article that just screams for historical context.  Start with the assertion in paragraph #1.

About one in five Americans combine a view of God as actively engaged in daily workings of the world with an economic conservative view that opposes government regulation and champions the free market as a matter of faith.

1 in 5 is 20%.  In the world of political science, 20% is the number most would consider the irreducible minimum—as in "No matter how preposterous, every position taken by a major party in USA will be supported by at least 20% of the voters."  So the beliefs in this article are only subscribed to by the nutcase minimum.  Even so, it is interesting to examine where someone might actually come up with this "Jesus wants you to be a capitalist swine" argument.

Christianity comes is a wide assortment of flavors so making sweeping generalizations is probably a bad idea but since this practice constitutes the vast majority of folks in USA, some broad outlines are helpful.  Catholicism is the oldest mainstream Christian practice and millions still attend their devout observances but for much of our history, Protestants ran things.

The Protestant Reformation may have started in Martin Luther's Germany, but the reformist impulse would not stop there.  Luther had one especially radical notion—that everyone could through the tools of literacy and study come to an understanding of his or her relationship to God.  With this idea, the authoritarian relationship of the church was destroyed.  The Protestant Reformation shattered Christianity into thousands of sects large and small.  Yet out of this cacophony would emerge dominant themes.

In political terms, the center would be occupied by Luther and his followers.  On one hand, his teachings about the worth of the lowliest among us would inspire the Peasant's Revolt of 1524-25.  On the other, he would encourage the secular authorities to brutally suppress the uprising.  Lutherans would run the governments of the Nordic countries for hundreds of years and were a part of feudalism, yet there were plenty good Lutherans in those countries who could find reasons to explain why Jesus and Luther would have loved cooperatives and become Social Democrats.  Lutherans have more or less put themselves out of business as a religion but their cultural heritage still makes it true that if a social welfare system works anywhere, there's a good chance it is happening where Lutherans once roamed the earth.

The Reformation's left would be occupied by the followers of Menno Simons—the Frisian Anabaptist.  Now it may be pretty hard to imagine the very culturally conservative Mennonites and Amish as lefties but consider this—Christianity had managed to keep silent or encourage the practices of human slavery for over 15 centuries before Mennonites wrote principled objections to it in 1683.  They are SERIOUS about staying out of wars and have been since their founding.  Their economic beliefs encourage sharing and community, and because they are so honest, a lot of the expensive apparatus of contracts is avoided.  Not surprisingly, they are usually very prosperous.  You can think of them as hippies going back to the land! man—only with skills and excellent work habits.

And then we come to the right.  John Calvin was a Frenchman living in Geneva who would literally set Christianity on its head.  For example, usury had been considered the mortal sin for over 1000 years.  Now Calvin would teach that Jesus did not mind moneychangers so much—he just didn't want them setting up shop in the temples.  For most of history, Christians were the poor, the folks with the shit jobs, the slaves.  Now Calvin would teach that God made people rich to show that he loved them.

Calvinism would migrate to USA in many forms but the dominant one was through the Puritans who came to Massachusetts.  These folks would organize our most prestigious schools like Harvard and Yale.  When people talk about WASPs, they are talking about worship-the-rich Calvinists.  But the Calvinists are not limited to the snooty set.  Oh no, no, no.  Find some mouth-breather that denies evolution or climate change and thinks Jesus rode a dinosaur to church and in USA, the chances are about 99% you are talking to a Calvinist.  Calvinism so defines the American culture that one is not wrong to think that when someone calls themselves a Christian and is not Catholic, that person is an off-shoot of the Calvinist impulse.

As someone who grew up in a Lutheran parsonage and was educated K-6 by the Mennonites, I find it pretty hard to appreciate the Calvinists.  So I take some pleasure in noting that the belief in the paragraph above (which I consider purest Calvinism) is only supported by the irreducible nutball minimum.  Notice how a professor from a Calvinist fortress like Baylor University in Waco Texas spins it so this goofy minority sounds larger and more influential than it obviously is.  And I thought honesty was a Protestant virtue (tsk, tsk).

The economics of fools and thieves

I know I harp on this a lot, but there is just no getting around the fact that allowing Predators to run a technologically fragile economy is a prescription for disaster.

And while high commodity prices are usually a good thing for Producers like farmers and mine operators, they are bad for manufacturers and a host of others who have absolutely nothing to gain from the run-up in prices of things like food and energy.  So with few exceptions, commodity price speculation only benefits the speculators.

The economy's terrible toll

As the global economy staggers from one self-inflicted disaster to another, it becomes increasingly difficult to determine which groups suffer the most.  And without meaning the slightest disrespect for the problems faced by the 2-3 billion folks trying to scrape by on a couple of dollars a day, my sympathies tend towards the problems faced by the world's young.

Remember when you were in your early 20s?  The idealism.  The driving ambition to be part of something significant.  The crazy levels of sexual energy and the dreams of settling into the mating process.  And because there is no hope of even getting a job that pays enough to obtain entry into the society of responsible adults, all that energy and ambition is reduced to the dull throb of having nothing to do and nowhere to go.  Seemingly forever.

A look at energy from Asia

Well, Klare in the Asian Times.

Don't look after your energy needs and bad things happen.  How could it be otherwise—energy is one of the necessary supports for life itself.  To believe otherwise is to be delusional.  Klare wants to discuss things in some sort of end-of-empire generalities but he is essentially correct—the end of the Age of Petroleum means the end of a USA designed to run on petroleum.  How that manifests itself is anyone's guess but Klare has at least tried.  He does wander off into the tall grass, however, when he suggests that lower supplies of oil will somehow make oil less important.

Learning the right lessons from the Solyndra failure

The folks who claim that public intervention in the energy markets is not only bad policy, but possibly immoral and certainly should be illegal, are having a field day with the collapse of Solyndra. This is MOST unfortunate because any meaningful response to the end of The Age of Petroleum requires that thousands of Solyndras actually succeed.

The worst possible response to the Solyndra failure is, of course, political. Politicians are almost by definition technological imbeciles. These are people who amaze themselves if they can make a Powerpoint presentation work. Getting them involved with technology policy-making is almost a sure-fire recipe for bungling. Of course, the reverse is also true—there is possibly no group more inept at political discussion than a bunch of engineers.

And so the process of securing effective public funding for a technological mega-project like a conversion from living on our energy capital to living on our energy income seems institutionally hopeless. And using conventional political processes, it probably IS hopeless. Fortunately, we have plenty examples of what works both here in USA and in the rest of the world when societies decide to tackle large complex projects. As we in USA keep reminding ourselves, we once went to the moon for fun.

So the idea is to reduce a start-up funding problem such as represented by Solyndra to a repeatable formula. The venture capital mechanisms that bankrolled the dot-com boom are simply too small to handle a nationwide energy hardware upgrade. We are talking about the moon-landing times at least 10,000 here. Even the titans of Wall Street seem inadequate. After all, their BIG idea for the first decade of the 21st century was to involve themselves in petty real estate speculation.

The trick is to get governments involved with these sorts of mega-projects without having the process dragged down by pinheads like Michele Bachmann. The free-marketeers say it cannot be done and point to examples like Solyndra. I say it must be done because our very survival depends on it.

The government as customer vs venture capitalist

One of the persistent problems the economics profession is the crackpot idea that will not die.  And at the head of this list of crazy ideas is one attributed to Jean-Baptiste Say who supposedly taught "Supply creates its own demand".

Now supposedly Say didn't actually say this.  A defender describes Say's position:

In economics, Say’s Law or Say’s Law of Markets is a principle attributed to French businessman and economist Jean-Baptiste Say (1767-1832) stating that there can be no demand without supply. A central element of Say's Law is that recession does not occur because of failure in demand or lack of money.  

The more goods (for which there is demand) that are produced, the more those goods (supply) can constitute a demand for other goods. For this reason, prosperity should be increased by stimulating production, not consumption.

Of course, anyone who actually experiments with Say's "law" by going into business will quickly discover that you can produce exquisite products and superb services and still go broke because you cannot find enough customers.  And on the trip to the bankruptcy court you will notice that almost everyone who makes anything is likewise saddled with staggering amounts of unused productive capacity.  In some ways, Say's "law" is just a Producer Class wet dream.  "Don't worry where you will find customers," claim the Say popularizers, "just make a quality product and folks with beat a path to your door."

If you build it, they will come

It turns out that the worst line in movie history is actually a misquote.  The Field of Dreams trivia specialists claim the line was "If you build it, he will come" as if that was some huge improvement of a mad voice instructing a farmer to turn a cornfield into anther baseball diamond.  After all, the movie's tagline is: If you believe the impossible, the incredible can come true.  And so after a decade of calamity for the real economy, 1989 would feature a movie that claimed everything would turn out just fine because Say's Law wasn't really dead after all.

If only a bad Kevin Costner movie could sink the foolishness of Say because that bogus "law" was now associated with mad folks who acted on voices in their heads.  No such luck.  "If you build it, they will come" became the covering rationale for a million projects since then that include a Rock and Roll Hall of Fame in Cleveland and aquariums in every city the size of Duluth and up.

In some ways, the recent failure of solar panel manufacturer Solyndra is just another example of bastardized Say's "law" gone bad.  Thin-film solar panels show a great deal of promise and there is NO reason why someone shouldn't try to fill that niche.  But Solyndra thought they needed to build a $500 million-dollar fab plant and hire 1000 employees to create production to meet a demand that they could not prove existed.  You've got to sell an awful lot of solar panels to pay for a $500 mil fab plant.  If you build it, they will come, indeed.

If instead of guaranteeing a loan for a $500 mil fab plant, the government stimulation was a promise that if Solyndra actually produced panels that met certain specifications, the government would buy the first $500 million worth of production at a fair price to solarize the millions of government buildings that really NEED an energy upgrade, Solyndra could have taken this promise to a thousands banks for financing of their fab plant.  Kind of reverse Say—if there are customers, production will rush in to fill the demand.

The latest attempt to drive a stake through the heart of Say / supply-side foolishness is brought to you by the chairman of Google.  I find it telling that the main thing successful entrepreneurs have in common is their respect for the importance of consumers with money to spend.

Energy is still the most important economic issue

I have been convinced since 1970 that nothing explains more economically than the price of energy.  Not only does energy feed us and keep us warm, the whole modern lifestyle is made possible by the easy consumption of energy—especially the fossil fuels.  Energy is also the driving force behind most of what we consider social progress because most of the work formerly done by slaves and others in hideously exploitive arrangements is now assigned to our machines.  If you don't consider energy critical, try to imagine all of our automobiles replaced by sedan chairs carried by slaves.

The energy questions are essentially divided into two subgroups—availability and price.  Of course, these issues are closely related so dividing them is mostly a matter of convenience.

Up first, a link to an extremely well-done slide show explaining why we have probably already reached Peak Oil and what this means.

Negotiating monetary policy in public

So the who's-who of European finance met in Wroclaw Poland on Friday to figure out how to "solve" the unsolvable Greek dilemmas.  It wasn't bad enough that the task is essentially hopeless, they invited Little Timmeh Geithner to add his confusion and foolishness to the mix.  Not surprisingly, nothing was accomplished.

Casino capitalism one more time

Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. The measure of success attained by Wall Street, regarded as an institution of which the proper social purpose is to direct new investment into the most profitable channels in terms of future yield, cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism—which is not surprising, if I am right in thinking that the best brains of Wall Street have been in fact directed towards a different object.

John Maynard Keynes  (ch. 12 of the General Theory)

The $2 Billion UBS Incident: 'Rogue Trader' My Ass
Matt Taibbi  POSTED: SEPTEMBER 15, 8:39 AM ET

Planning for climate change

After the music of Bach, the part of German culture I admire most is their love of organization.  I grew up around a lot of Germans and nothing, not corn planting nor women's softball games or anything in between, was ever marred by lack of planning.  Someone always showed up with the bag of bats, or made the coffee, or printed up the meeting's agenda.  And because most of the folks I knew were self-employed in agriculture or were helping out a volunteer organization, virtually all of these necessary little tasks were self-assigned.

So there is something a little distressing about the following article because it features Germans actually wondering how they are going to plan a task.  On one hand, it is reassuring to know that serious people are honest about the difficulties of organizing for a large social change.  At least SOMEONE is thinking about the problems.  On the other hand, I have this worry that if the Krauts can't figure this out, the rest of us are certainly doomed.

It's WAY harder than it looks

One of the things that got edited out of Elegant Technology was my calculation that a conversion to a truly sustainable USA would take at least 50 years and cost at least 100 TRILLION dollars.  My editor argued that such a wild guesstimate would be too hard to support and be needlessly distracting.  So while frivolous books that proclaimed there were 50 easy ways to save the planet became best sellers, my book was stripped of one of the facts that were meant to demonstrate that environmental renewal meant nothing less than the completion of the Industrial Revolution—and this would be VERY difficult and very, VERY expensive.

As the years have gone by, the evidence has mounted that if anything, my scary estimates had been optimistic.

So now we have a new cautionary tale (Solyndra) brought on by the collapse of what the Obama administration hoped would be a poster child for the seriousness in converting to renewables.  So what will we learn?

• Going green will require huge amounts of investment.  A LOT of this will be lost funding projects that don't work out.  Why? Because we don't know what we are doing and even honest people with sound intentions may simply be wrong.
• Compared to what the crazy banksters have cost us, $500 million is pocket change.  And the examples of costly technology failures are positively common in the defense industry.  In light of this, picking on a green failure seems, at best, an example of Predator Class hypocrisy.
• Because we have wasted so much time in USA, the green technology train may have already left the station.  Solyndra may have been developing some promising technology but since you can already buy fully-developed solar panels at Costco, getting a Solyndra's products into a developed market would require import-substitution strategies—something the USA hasn't practiced in nearly a century.

The days of reckoning are coming soon for the moneychangers

All the crazy assumptions of bankster finance capitalism are coming back to haunt those who claimed they had found a magic way to create riches without work.  Veblen's Leisure Classes are about to be confronted by the fact that their world was built on fairy tales.  And all it would really take to crash their world is for the Industrial Classes to tell them they are not going to play their evil games anymore.

60 Minutes explains derivatives

This story is little changed since it was first aired in 2008.  The transcript has been around for awhile but now CBS finally released the video.  Pretty good stuff!

We NEED regular reminders of the crazy fools who have done structural damage to the real economy by turning credit markets into corrupt casinos.  The MOST obvious reform of the New Deal was to outlaw bucket shops yet in the spirit of deregulation, Congress let those folks reopen their businesses in 2000.  Lucky us.

What does the "right" have against energy efficiency?

Of all the no-brainers ever, the desire to become more energy efficient certainly tops any meaningful list.  Economically, the equation is simple--when you buy energy, you know for a fact that you are going to consume it and the overwhelming majority of it will end up as unusable waste heat.  There is a scientific law that covers these things: The second law of thermodynamics.  With energy, you buy it, you use it, and with rare exceptions, it's now gone.  So the less you need to use, the less you need to buy.  The less energy you need to buy, the more money you have for other things—including things you don't want to burn up.

Because I grew up around Mennonites, I discovered early that folks can have perfectly irrational discussions about technology and how much they would allow into their lives—for religious reasons.  For example, when I was a child, there were small groups of Mennonites for whom the telephone was a sign of sin—it encouraged gossip, it demonstrated pride, etc.  Not long ago, I was near where these people lived and discovered they have now decided that CELLphones are just fine.  So apparently, what they really objected to was land lines and telephone poles.  Or whatever.  I didn't ask.  I heard too many discussions about these matters as a child and they now creep me out.

But at least the Mennonites TRY to make sense.  The Tea Party objections to energy efficient light bulbs or Rush Limbaugh's demented rant against Motor Trend awarding its Car of the Year award to the Chevy Volt are just crazy.  With light bulbs, the math is overwhelming and swapping out a lightbulb is so easy, the task has inspired a 1000 jokes.  With the Volt, GM has demonstrated a formula for actually making the transition to post-petroleum transportation.  Motor Trend called this demonstration project ground-breaking and they are probably right—because the Volt is an idea that can be built in dozens of configurations, it is precisely the sort of thing the automakers and their customers just love.

The rest of the automotive press seems enchanted:

Do I detect a shift?

The arrival of the austerity ghouls was pretty dramatic and obvious.  Suddenly, all the governments were being told that they must cut their spending.  This triggered riots from London to Greece, the fall of dozens of governments, and good Wisconsin cheeseheads standing in the winter cold to protest the assault on collective bargaining.  It looked like the ghouls were reading from the same script probably because they WERE reading from the same script.

But suddenly, it seems like there is a tiny amount of evidence that the script has been changed.  I started noticing glimmers of a new script with the more-rapturous-than-expected reception to Obama's speech on jobs last Thursday night.  And several interesting examples follow below.  The interesting question is: why now?

Calling off the ghouls may have happened because the greedheads do not see a way for the debtors to tighten their belts further.  Maybe someone did the simple math and realized that a failure of debtors means a failure of lenders, and that debts that cannot be repaid will not be repaid.  Banksters may be rediscovering their oldest rule of thumb still holds, "NEVER bankrupt your borrower."  The austerity ghouls were obviously making things worse.  Is it possible to believe even THEY have gotten this reality through their thick skulls?

First up we read that the Fed president of Chicago, who is probably too young to remember how or why the laws were passed, has discovered that they are legally mandated to reduce unemployment, and more interesting, making note of that fact in an important speech.

Remembering the victims

Amidst all the ugly facts about the mismanagement of the global economy by crooks and fools, we sometimes forget what life has become for those who are being destroyed by neoliberalism and all the other assorted foolishness believed by the ruling classes and their idiot lackeys.

So today, here are a couple of links to stories of how folks on the bottom of the socio-economic scale are trying to survive.

THE GREAT RECESSION: Here Are Some Photos They'll Be Looking At In 50 Years

THE GREAT RECESSION: Life In "Tent City" In Lakewood New Jersey

And winter is coming.

Jean-Claude Trichet's a real piece of work

Central bankers tend to have a lot in common—smug, arrogant, self-righteous, and narrowly focused.  The current head of the European Central Bank merely takes these occupational characteristics to extremes.  Think about it, the bank he manages and the currency he issues are on the verge of going out of business.  Germany, the most prosperous member of the European Union is making serious noises about returning to their precious Deutschmark.  The southern Euro nations are  on the verge of sovereign default.  There is so much youth unemployment in Europe that serious commentators are talking about a lost generation.  And Trichet actually talks about his Bank and its policies as a success!

Of course, since Trichet is one of the least original men on planet earth, his defense of his bank's performance is straight out of the central banker's playbook 101.  He prides himself on the bank's "fierce independence" which is bankster code for treating elected officials with utter contempt.  And then he brags about how the ECB has delivered "impeccable price stability."  Of course, this claim is utter bullshit—the price of food, housing, and energy has skyrocketed under his watch. In fact, there was a recent housing bubble that got so far out of hand, collapsing it threatens the very existence of some of the biggest banks on earth.

But even if Trichet's claims for price stability were not brazen lies, the more interesting question would be, "Why does he consider this an accomplishment so important, he is willing to lie about it?"  And trust me on this—he does.  Price stability is essentially the only real assignment Trichet has—everything else about the man including the world-class arrogance are just style points.  And herein lies the fatal flaw of the ECB as it is currently organized—its singular focus on price stability to the exclusion of all other considerations has triggered a global economic crises.  These hard-money strategies always do.

Just to prove their paper is worth something

The last few days, we have been caring for a small (50 sq. ft.—4.65 sq. meter) deck that sticks out from the back of our kitchen.  For reasons unknown, the surface of the deck does not come under the homeowner's association maintenance agreement.  It is made from pressure-treated wood which lasts a LOT longer than untreated but after 7 winters, it was covered in a grunge of assorted mosses and molds.  It needed to be re-stained but first, it needed a thorough cleaning.  By me!

before and after
cleaned and prepped for stain on the right--click on image to enlarge

Around here, I get to prep such projects because I am really pretty awful with a paint brush.  I got some foaming, oxygen-bleach based cleaner, read the directions, got the hose with the best nozzle I had up on the deck, and went at it with as much gusto as this old guy can still muster.  The cleaner worked amazingly well but since I didn't have a pressure washer, it required three applications to get the wood as clean as I (and my painter partner) wanted.

So while I was proving to myself that I still have the old "instinct of workmanship," I thought about the nature of housing as an "investment."  When you are wearing big rubber gloves so you can scrub a mold stain from a mostly decorative piece of decking, the very idea that homes appreciate in value by themselves is beyond absurd.  Because the quality of a home is pretty much a function of the quality of the inhabitant, vacant homes owned by banksters will miss their deck scrubbings and rot will set in.  Multiply this tiny example by other missed maintenance, and it is clear that much of the paper created during the housing boom is now worth literally less than nothing because vacant housing depreciates—and pretty fast, too.

So what do you do when you have boxes full of paper worth nothing?  Why you sue someone who you think will be able to make your worthless paper worth something again.

Trained incapacity (update)

Although Thorstein Veblen has been categorized as many things—sociologist, cultural anthropologist, etc.—he is still mainly considered a political economist.  Therefore, it is probably wisest to leave the expression "trained incapacity" with the field of economics.

So yesterday, we had this little blast from Paul Krugman who notes that the economics profession is FAR more to blame than the general public when it comes to the economic catastrophes the world finds itself in.  It would be very difficult to better explain this huge gap except with with one of Veblen's better (and funnier) expressions.

Scrambling to contain the bankster's mess

When the math shows that the big banks are in massive trouble (again) it should come as no surprise that the scramble to save their sorry butts becomes increasingly desperate (and amusing if one is into train wrecks).

First some housecleaning.  Recently, I posted an article describing the problems the Swiss Producers are having because the Franc has soared so high.  Because the Swiss have never stopped bragging about their powerful currency during my lifetime, I wasn't at all sure that they would do anything about the current situation because bankers tend to throw Producers under the bus all the time.  Well, surprise, surprise, surprise.  The Swiss are actually trying to devalue the Franc and the traditional economic pundits are reacting with the sort of horror normally reserved for a small-town preacher deciding to open a brothel.

A very sad Labor Day

Labor Day was never a day of joy and anticipation in my life.  Mostly, it meant that school was about to start and even though (or maybe because) I have loved learning all my life, this was an event that filled me with dread.  And once school started, could the cold of winter be far behind?

Then there was this problem that even though I grew up in a family that had a powerful labor history—especially on my mother's side—we now lived in small farming towns where unions were mostly considered a part of organized crime.  The Mennonites who ran my school taught that joining a union was a sin covered under the Bible verse, "Be ye not unequally yoked together with unbelievers: for what fellowship hath righteousness with unrighteousness?" (2 Corinthians 6:14).

By the time I got to college, unions were considered these backward organizations that supported the Vietnam War (and beat up on antiwar protestors) or hated environmentalists.  The "Left" had abandoned the very idea that workers were supposed to be the "vanguard of the revolution" because in truth, Marxism appealed to very few workers.  The Students for a Democratic Society even wrote a plank into their Port Huron Statement that "youth" now was a class that would replace workers as the lost vanguard.

Because I had to work my way through school, I had jobs like taxi driver that involved being forced to join a union that did almost nothing for the drivers and quite a bit about enriching some corrupt local thugs.  That was always the built-in flaw of unions—they were organizations of Producers run by Predators.  The idea was that Producers needed their own Predators to counter the predations of management but in fact, what usually happened is that union wolves and management wolves discovered that as wolves, they had a LOT in common.

Kinda makes me wonder how I came to believe that unions are absolutely necessary for the operation of a well-run economy.  But I do.  Not only did I learn my grandfather's beliefs that there are issues worth organizing (and perhaps dying) for, I learned John Kenneth Galbraith's theories that progress only came when the economic countervailing forces were roughly equal.  Only honest unions could accomplish that.

So here's to organized labor—it is as necessary as oxygen for the successful operation of a complex society.

How ugly will it get?

As someone who believes in the primary social and economic importance of the Producers, I tend not to worry all that much about civil disorder.  The reason not to worry about civil disorder is that virtually all of the important economic activity continues on because it is in too many people's interests to keep going to work—food is grown, merchandise is distributed, meals are cooked and eaten, etc.  (Of course, if the Producers were the ones creating the civil disorder, then there would be something to worry about because Producers tend to get things done.  But most scenarios concentrate on the possibilities of angry unemployed youth confronting our over-militarized police forces and as with the recent riots in London, this really only affects those close enough to the action to hear and smell it.)

Because this is true, the petty vandalism the robocops are trained to stop is a minor annoyance compared to the real threats to the economy—running out of specified fuels, screwing with the atmosphere so it no longer provides the conditions for growing food, etc.—the stuff this blog is about.

But even if I am not losing sleep over the possibilities of civil strife, I am sure there are people who are.  There is an awful lot of raw material for unrest--billions on the verge of malnourishment if not outright starvation, hundreds of millions of young unemployed seething in frustration and anger, and the very real sense that the institutions that are supposed to deal with such problems are some combination of trained incapacity and rapacious corruption.  So folks predicting trouble are not crazy.

The problem of high-priced currencies

To listen to the average economics commenter, having your currency increase in value is an unalloyed good while having to decrease the value of your money is THE ultimate economic failure.

Well, it is not so simple.  Anyone who tries to make a living producing something pretty quickly discovers that a high-priced currency is quite hazardous to their economic health.  Witness the problems of the Swiss Producers these days.

Peak food gets ugly

The security arrangements at the Chicago Board of Trade are about as intimidating as one might expect at the CIA headquarters.  Oh, there is a display area where visitors can learn some mostly irrelevant basics about futures trading. But the viewing gallery has been closed for a long time and to get past the front desk, you not only have to know someone who works for CBOT but is willing to come down to sign for you.

The official paranoia is probably justified.  Considering the misery the greedheads who work at CBOT cause for billions of people in the course of a working day, the idea that some of those immiserated might just want to get even is not exactly a crazy thought.  Those who make millions from the grief of others probably DO need protection.

The glories of fractional banking

There is nothing like the astonished look that comes to the faces of people when they first discover that a mortgage they must pay on for 30 years was created by a few keystrokes down at the bank.  I remember when I first had the reason bankers own everything explained to me.  I didn't believe a single word of it and argued at almost every sentence.  As John K. Galbraith once said, "The workings of the banking system are so simple the mind is repelled."

This YouTube video explains why banks get so rich in about three minutes.  But depending how much conventional wisdom one has absorbed, this little lesson can take quite a while to sink in.