Sunday, March 19, 2023

Week-end Wrap – Political Economy – March 19, 2023

Week-end Wrap – Political Economy – March 19, 2023

by Tony Wikrent


Global power shift

China Leads A Successful Middle East Summit

Ian Welsh, March 16, 2023

Something which has slipped past most people’s radar is that China recently acted as the intermediary for peace talks between Iran and Saudi Arabia. The two countries have been at each other’s throats for decades, funding and running operations and proxies against each other….

Now it’s obvious why the US couldn’t be involved: it hates Iran and doesn’t intend to change that any time soon. But that China was reached out to indicates that it has good relationships with Iran and Saudi Arabia and that it’s considered powerful and prestigious enough to be involved a region far from its core.

On the Saudi side this shows the continued movement away from being a US ally. It suggests continued movement towards China, and that the petro-dollar really is under significant threat.

For Iran, it suggests that the days of the US being able to coordinate sanctions over it are likely numbered. If the Sauds break out of the US bloc, one can expect the Gulf States to follow if Iran is also in the Chinese bloc: these are the regional and cultural great powers. As Chinese/Russian payments expand and with petrochemicals priced in Yuan or Rubles, and with the most important Middle Eastern powers friendly to China, the US is reduced to its core allies. 


The Key Factor in the Saudi-Iran Deal: Absolutely No U.S. Involvement 

Murtaza Hussain, March 15 2023 [The Intercept]

Ever since it pushed aside colonial Britain and France, the United States has prided itself on being the dominant outside power in the Middle East. That lofty image was shaken this past week by the surprise announcement that Saudi Arabia, a close U.S. partner, and Iran, a longtime enemy, had negotiated a normalization agreement on their own to restore diplomatic ties. The final meeting to conclude the agreement took place in the Chinese capital of Beijing.


Détente between Iran and Saudi Arabia raises hopes for steps towards peace in Yemen

[france24 3-16-2023]


China and Russia capitals connected on New Silk Road for first time

Chengfan Zhao [Rail Freight, via Mike Norman Economics 3-18-2023]

Linking Moscow and Beijing is of symbolic value, but the symbolism says a lot. The big news is that Sino-Russia trade is increasing and it is not just energy that formerly went to Europe heading East. China as "the factory of the world" is now supplying Russia directly with its output, further eroding the effect of sanctions. And the trade is being settled in RIB and CYN.


Bank crisis

US Officials Make Non-Bailout Bailout of Silicon Valley and Signature Bank and Continue Class Warfare

Yves Smith [Naked Capitalism 3-12-2023]

...It’s also not considered polite to point out that the activities of the Palo Alto ecosystem are in aggregate extractive. Start with the venture capital funds themselves. We’ve pointed out that private equity has not beaten the S&P 500 since 2006. The underperformance of VC is longer-standing, since the dot-com glory returns rolled off. And the positive side of that ledger came from a tiny number of companies delivering moonshot returns.

In a similar vein:

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Moody’s Downgrades Entire U.S. Banking System; Credit Suisse Plummets. Welcome to Banking Crisis 3.0

Pam Martens and Russ Martens, March 15, 2023 [Wall Street on Parade]


SVB’s Lobby Groups Fought Proposal To Bolster Deposit Insurance 

Julia Rock & David Sirota, March 12, 2023 [The Lever]

Last year, bank lobbying groups mobilized against the Federal Deposit Insurance Corporation’s (FDIC) proposal to raise banks’ insurance premiums to shore up that deposit fund’s reserves, which had fallen below the minimum required by law.

Lobbying groups representing Silicon Valley Bank, or SVB, argued that risk of bank failures is low and insisted that requiring banks to pay more into the fund would harm financial institutions’ bottom lines….

At the time, the Deposit Insurance Fund (DIF) had less than $126 billion to insure the nearly $10 trillion of insured deposits in America, meaning the reserve ratio was below the statutory 1.35 percent minimum.

Nonetheless, soon after the bank industry’s letter, a group of senior Republican House lawmakers — including some of the chamber’s top recipients of banking industry campaign cash — parroted the financial industry’s rhetoric in their own missive demanding that regulators back off.


How Congress—Including Way Too Many Democrats—Created This Banking Crisis

Timothy Noah, March 16, 2023 [The New Republic]

...in 2018 Congress weakened regulation of midsize banks under the 2010 Dodd-Frank law, the first major overhaul of banking regulations since the Depression.

The main thing the 2018 rollback did was to raise, from $50 billion to $250 billion, Dodd-Frank’s asset threshold for banks whose potential failure was deemed a threat to the whole banking system. These “systemically important” banks are subjected to stricter federal oversight. They must undergo annual “stress tests,” with the Federal Reserve assuming the role of cardiologist. They must keep more cash in reserve in the event that someone like, say, Peter Thiel should decide abruptly to pull all his money out. And they should prepare “resolution plans,” commonly referred to as a “living will,” in the event of bankruptcy.

If these Dodd-Frank provisions are worth a damn, and if President Donald Trump and Congress had left well enough alone in 2018, they would have kept Silicon Valley and Signature from making the well-documented mistakes that caused them to go belly-up. The Congressional Budget Office warned Congress that the rollback bill would “increase the likelihood that a large financial firm with assets of between $100 billion and $250 billion would fail.” So did Bernie Sanders and Elizabeth Warren. Congress passed the bill anyway, 67–31 in the Senate and 258–159 in the House. Note the lopsided nature of the votes.


WATCH NOW: Meet The Champions Of Banking Deregulation. See who helped slash bank rules before Silicon Valley Bank’s collapse, what they said at the time, and what they’re saying now. (video)

[The Lever, March 16, 2023]

SV Bank and the Only Choice We Have: The super-rich will not walk away from power. How do we make them leave? 

Thomas Neuburger, March 15, 2023 [God’s Spies]

...It’s highly possible, one could even say likely, that those massive deposits — Roku alone kept almost half a billion dollars in a single account — were part of a corrupt set of practices by the bank itself and its big-dollar clients.


David Dayen, in an excellent, comprehensive piece, writes: “So you have depositors that either didn’t know the first thing about risk management, or were bribed by the bank into neglecting it.”

Keep in mind who these depositors are: the very very wealthy in the West Coast venture capital world. The corruption didn’t start just with the bank. The VCs often initiated it. As a friend and former Silicon Valley entrepreneur pointed out to me recently:

“SVB was a special case. VCs required the companies they funded to keep their cash there. So the companies (and their employees) really were victims, not incompetent at risk management. In exchange the VCs received various favors from the bank. This is how Silicon Valley works behind the scenes. I was in one deal where the lead VC for our funding required a secret kickback of a certain % of the company stock and that this arrangement be kept secret from the firm. This is typical.”

…. 

The second “where does that leave us?” leaves the financial realm and enters the political. If Saagar Enjeti is right (see the clip above), the rich decided that taking even a 10% loss (“haircut”) via the normal unwinding process was still too big an ask.

Meanwhile, in East Palestine OH where the working class makes its life, this went on: …. .

The point couldn’t be more simple. When the wealthy face losses, the government they control bails them out, within days if necessary.

When the rest of us face losses, we’re on our own. Neither the wealthy who caused the mess nor the government that represents “the people” will step up to the plate.

And it will be this way forever unless force is applied.


[Twitter, via Naked Capitalism Water Cooler 3-15-2023]

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Silicon Valley Bank Was a Wall Street IPO Pipeline in Drag as a Federally-Insured Bank; FHLB of San Francisco Was Quietly Bailing It Out

Pam Martens and Russ Martens, March 13, 2023 [Wall Street on Parade]


The Incredible Tantrum Venture Capitalists Threw Over Silicon Valley Bank

Edward Ongweso Jr., March 13, 2023 [Slate, via The Big Picture 3-18-2023]

Remind me why, exactly, these guys have so much control over technological innovation?

….For over a decade, low interest rates have allowed venture capitalists to accumulate huge funds to give increasingly unprofitable firms with unrealistic business models increasingly larger valuations—one 2021 analysis found that not only were 90 percent of U.S. startups that were valued over $1 billion unprofitable, but that most would remain so. Give me tens of billions of dollars and a $120 billion valuation and someday, somehow, I will replace every taxi driver with gig workers paid subminimum wages—or robot taxis paid no wages—while charging exorbitant fares for rides, increasing pollution, and adding to traffic. Or not, and I will sell off all the science-fiction projects I’ve promised, but still fail to make a profit.

Over the last year, rising interest rates to combat inflation have meant less free money for science-fiction projects, pressuring investors to change their entire approach and actually fund realistic ventures at realistic valuations with realistically sized funds and deals. Drops in valuations meant smaller checks, which meant smaller deposits at Silicon Valley Bank, and more and more withdrawals as startups ran out of cash themselves. It also meant the bonds SVB bought were now worth less than when purchased, so they’d have to be sold at a loss to generate some liquidity, so that clients could withdraw their deposits.

Magical Monetary Thinking at the Fed Killed SVB 

L. Randall Wray and Stephanie Kelton [The Lens, via Mike Norman Economics 3-18-2023]

...So what is to be done? 

We see two routes for long-term solutions:

1. Continue to embrace the free market. Reduce government-provided backstops. Continue to rely on monetary policy for aggregate demand management: raise rates to fight inflation, and then lower them to ease the damage of recession. Allow the bank failures that rate hikes inevitably generate. Learn to live with periodic financial crises. And expect a great depression every generation—which was the norm before the New Deal with its regulation of financial institutions and tremendous increase of the size of government.

2. Stabilize interest rates—stop using them for demand management and instead focus on financial stability. Regulate and supervise financial institutions. Retain backstops like deposit insurance and lender of last resort when necessary to stop crises from spreading. And restore a proper role for fiscal policy in managing aggregate demand.


Goldman Sachs Eyes a Big Payout from Silicon Valley Bank Deal 

[New York Times, via Naked Capitalism 3-16-2023]

The Wall Street giant is likely to be paid more than $100 million for its role in a bond purchase that ultimately failed to save the California bank from collapse.


The Silicon Valley Bank Contagion Is Just Beginning 

[Wired, via Naked Capitalism 3-14-2023]

The second- and third-order impacts of startups hitting financial trouble or just slowing down could be more pernicious. “When you say: ‘Oh, I don’t care about Silicon Valley,’ yes, that might sound fine. But the reality is very few of us are Luddites,” Kunst says. “Imagine you wake up and go to unlock your door, and because they’re a tech company banking with SVB who can no longer make payroll, your app isn’t working and you’re struggling to unlock your door.”

Lambert Strether, as usual, posted a comment that cuts to the heart of the matter: “See, there’s your problem. These people — the tiny, incestuous in-group of 37,466 deposit customers at SVB — think you should need an app to open your front door. Worse, they think anybody who doesn’t buy into that “innovation” is a Luddite. And they think they’re entitled to an endless flow of stupid money. It’s froth. It’s deranged.”


What’s Going on with First Republic Bank? 

Adam Levitin [via Naked Capitalism 3-16-2023]


ANHD Statement on Signature Bank’s Closure 

[The Association for Neighborhood and Housing Development’ via Naked Capitalism 3-16-2023]

Signature Bank’s collapse comes as no surprise to the Association for Neighborhood & Housing Development (ANHD), who has long called out their faulty business model, which relied on predatory and speculative activities in New York City. Signature paved the way for thousands of tenants to suffer living in unsafe conditions, the victims of harassment, or displaced from their homes and communities. ANHD applauds the New York Department of Financial Services (DFS) for taking the significant and necessary steps of closing Signature Bank — marking the third largest bank failure in US History, with nearly $200 billion in assets and deposits in 2022.


“Barney Frank’s Signature Bank Compensation”

[The Rational Walk, via Naked Capitalism Water Cooler 3-14-2023]

“The disclosures reveal that Mr. Frank was granted a total of 15,857 shares worth $2.36 million on the date of the grants (including dividend reinvestments). Through a series of sales, Mr. Frank received cash of $1.56 million for 10,324 shares…. To be clear, there is no indication that Mr. Frank or the Signature Bank board of directors did anything illegal, and I am not alleging that they did. I am expressing the opinion that this entire arrangement was highly corrupt and utterly shameful. It’s unfortunate that we live in a society where shame is almost entirely absent.”


Crypto’s bedrock bank implodes 

Felix Salmon [Axios, via Naked Capitalism 3-12-2023]

The implosion of Silvergate Bank is an existential event for what remains of the crypto ecosystem. Silvergate underpinned almost every American crypto company; without it, it's hard to see how the industry can possibly thrive.


20 banks that are sitting on huge potential securities losses—as was SVB

[MarketWatch, via Naked Capitalism 3-13-2023]


I Was an S.V.B. Client. I Blame the Venture Capitalists 

[New York Times, via Naked Capitalism 3-17-2023]

I’ll keep my S.V.B. debit card as a souvenir, partly because the giant arrow logo points in the opposite direction that it’s supposed to go into a card reader — an example of a design that obviously went through no user testing. It’s also a reminder that successful people aren’t always the best decision makers.


“‘Meme stock in reverse’: SVB collapse portends new era of viral bank runs”

[Banking Dive, via Naked Capitalism Water Cooler 3-16-2023]

“‘We are entering a new era of a social media-driven run on banks,’ Solomon Lax, a former investment banker and venture capitalist who is now CEO of online lender Revenued, told Banking Dive in an email. “This is a meme stock in reverse.’ While SVB had been facing liquidity strains for the past year, the bank’s disclosure last week that it was raising capital after it had lost nearly $1.8 billion in the sale of long-term bonds, panicked the VC community. ‘I’ve seen a lot of emails floating around from large VC funds telling their portfolio companies to deposit their money in large banks,” said Rohit Arora, CEO of small-business financing fintech Biz2Credit.’ Prominent venture capital firms, including Peter Thiel’s Founders Fund, instructed their portfolio companies to pull cash from SVB, according to Bloomberg. Venture firms Coatue Management, Union Square Ventures and Founder Collective also advised startups to withdraw funds, the wire service reported. Founders and investors likely shared their concerns over the bank in private chat groups before word spread to social media, Jason Goldman, Twitter’s former head of product, told The Wall Street Journal. The bank’s situation was amplified by Twitter users with large followings, such as entrepreneur and internet personality Kim Dotcom and startup investor Jason Calacanis…. Meanwhile, the hashtag #BankCrash trended on Twitter throughout the weekend…. ‘It’s dangerous,’ [ Rohit Arora, CEO of small-business financing fintech Biz2Credit] said. ‘Everybody has a smartphone, everybody can just put anything on social media, there’s no filters, no authentication checks. And then everybody can go online today and withdraw the money.’… [T]he SVB’s accelerated collapse last week stunned the banking industry. ‘I was amazed to see how a bank of this size and pedigree failed in 36 hours,’ Arora said. ‘Even in 2008, it took quite a bit of time for these banks to go down.'”


“‘They will learn nothing from this’: Tech leaders remain staggeringly oblivious to the true lessons of Silicon Valley Bank”

[Business Insider, via Naked Capitalism Water Cooler 3-16-2023]

“The end of a financial mania is, in essence, a crisis of trust. As the tech bubble has popped over the past year, that crisis has been visible all over the industry. Workers no longer trust that their employer is looking out for them, companies stopped trusting that employees were pulling their weight, and investors no longer trust that companies will deliver explosive returns. In this environment of suspicion, the very financial institution that facilitated the tech industry’s exuberance became unreliable. A few whispers from powerful VCs, like the leaders of Peter Thiel’s hyperinfluential Founders Fund, and the run was on. If there is a better real-life illustration for that utter collapse of confidence than a bank run, I don’t know what it is. ‘VCs rely on gossip as facts,’ one founder connected to the much-vaunted startup incubator Y Combinator told me. “They like to say they’re empirically minded — ‘Occam’s razor’ and ‘first principles’ — but when it comes down to it the greatest weapon and greatest tool they have is gossip. And last week was a brilliant case in which it went awry. Grown people with advanced degrees using gossip as gospel.’ Once the spark was lit, Silicon Valley’s hype machine took it from there. The faithless VCs ended up freaking out the founders of companies they were invested in, leading to startups yanking all of their cash as quickly as possible. One founder with 12 years of experience in the tech industry who was at the South by Southwest festival in Austin, Texas, told me some of the horror stories: Startup CEOs with tens of millions of dollars sitting in SVB scrambling to get some money out, fearful they would get only a fraction of it back. The VCs had told them to put their money in the bank, so they did — and now the same VCs were warning of an ‘extinction-level event.’ Or as the economic historian Adam Tooze put it in a recent newsletter: ‘This was not so much a classic large-scale bank run in which mass psychology played its part on a grand scale, but a bitchy high-school playground in which the cool thing to do was to bank with SVB until it no longer was.'”


Climate and environmental crises

Global Fresh Water Demand Will Outstrip Supply By 40% by 2030, Say Experts 

[Guardian, via Naked Capitalism 3-18-2023]

The world is facing an imminent water crisis, with demand expected to outstrip the supply of fresh water by 40% by the end of this decade, experts have said on the eve of a crucial UN water summit.

Governments must urgently stop subsidising the extraction and overuse of water through misdirected agricultural subsidies, and industries from mining to manufacturing must be made to overhaul their wasteful practices, according to a landmark report on the economics of water….

The report marks the first time the global water system has been scrutinised comprehensively and its value to countries – and the risks to their prosperity if water is neglected – laid out in clear terms.


The What, Why and How of the World Water Crisis: Global Commission on the Economics of Water Phase 1 Review and Findings (pdf)

[Global Commission on the Economics of Water, OECD Environment Directorate
Climate, Biodiversity And Water Division]


The carnage of mainstream neoliberal economics

A dog day afternoon in French politics as Macron uses ‘nuclear option’ to raise retirement age 

[France24, via Naked Capitalism 3-17-2023]


The Central Bank of Nigeria Just Paused Its Demonetisation Program After Visiting Untold Damage on Nigeria’s Economy

Nick Corbishley, March 17, 2023 [Naked Capitalism]

...Nigeria is the world’s first largish economy to launch a nationwide central bank digital currency, the so-called eNaira. So far, it has been a complete flop. One year in, just 0.5% of Nigerians had downloaded the eNaira app. Of those, only 8% were actually using it, according to the IMF’s 2022 staff report. So, the government and central bank doubled down on their strategy. In October, they unveiled plans to replace all high-denomination cash bills in the economy as well as restrict cash withdrawals. That, too, has been an unmitigated disaster.

This week, the Central Bank of Nigeria (CBN) finally postponed its demonetisation program, more than a week after the country’s Supreme Court ruled the program unconstitutional and more than a month after the Supreme Court called for it to be postponed due to the amount of chaos and hardship it was causing. In an editorial last Saturday, the online newspaper Premium Times called for the arrest of prosecution of CBN’s Governor Godwin Emefiele, arguing that the cash withdrawal limit imposed by the central bank is an infringement on the rights of the people….

The CBN began calling in old 200-, 500- and 1,000-naira notes in mid-December in a bid to mop up excess cash, rein in inflation, combat rising insecurity, curb vote buying and further “entrench” a cashless economy. But the central bank failed to print nearly enough new high-denomination notes to replace the old ones, leading to an acute shortage of cash in a still heavily cash-based economy. The result has been unnecessary hardship for millions of Nigerian citizens, countless business closures and significant all-round damage to the country’s already weak economy.

Nigeria’s nominal GDP could decline by as much as 7.6% in the first quarter, according to KPMG Nigeria Chief Economist Yemi Kale, the nation’s former statistician-general.


Fire the Fed 

Matt Stoller, BIG, via Naked Capitalism 3-17-2023]


The Austerity Train Wreck 

James K. Galbraith [Defend Democracy, via Naked Capitalism 3-15-2023]


A perfect storm of food-stamp cuts and low tax refunds is looming — and discount chains like Dollar General and Big Lots could feel the pain 

[Business Insider, via Naked Capitalism 3-18-2023]

At value chain Big Lots, where nearly 80% of shoppers have a household income under $100,000, "customers are pinched," CEO Bruce Thorn said during a recent investor call.

"At this point, 30% of that lower household income customer, their expenses today are greater than their income coming in. And 70% of them have curbed spending as a result of that," he said.

Thorn estimated that the tax refunds, though arriving earlier this year, are about 10% to 15% lower than last year, and when combined with the reduced SNAP benefits, it "further deteriorates lower household income spend." Those shoppers, he said, are "going through a tough time right now."


“Waking Up From the American Dream”

[Kirkus Review, via Naked Capitalism Water Cooler 3-16-2023]

“Two March books address the situation, poking holes in the flawed assumption that if you just work hard, you will succeed financially. In Bootstrapped: Liberating Ourselves From the American Dream (Ecco/HarperCollins, March 14), journalist Alissa Quart explodes the myth of ‘bootstrapping,’ which she describes as the ‘every-man-for-themselves individualism’ that underpins the free market system. This significant follow-up to Squeezed: Why Our Families Can’t Afford America, our reviewer says, delivers a forceful ‘contrarian rebuttal of the notion that wealthy Americans deserve everything they have and that the ‘poor are responsible for their own poverty.” In our late-stage capitalist democracy, too many people live paycheck to paycheck, often working multiple jobs while rent, food, and other expenses surpass wage increases. Quart ‘proposes a more meaningful safety net of cooperative work and mutual aid, whereby workers pool their capabilities and time to produce needed and sustainable things while being their own bosses,’ delivering an urgent ‘repudiation of gig-economy capitalism that proposes utopian rather than dystopian solutions.’ Any examination of wealth inequality in the U.S. would be incomplete without input from Matthew Desmond, the Pulitzer Prize–winning author of Evicted. His latest, Poverty, by America (Crown, March 21), is a dissection of the many dimensions of poverty in America, which differs from that in many parts of the world. In the U.S., it’s ‘not for lack of resources,’ the author notes, but rather what our reviewer describes as a lack of ‘compassion’ but also the lack of ‘a social system that insists that everyone pull their weight—and that includes the corporations and wealthy individuals who, the IRS estimates, get away without paying upward of $1 trillion per year.'”


“The U.S. Is Choosing Child Labor Over More Immigration”

Eric Levitz [New York Magazine, via Naked Capitalism Water Cooler 3-16-2023]

“In one part of the western hemisphere, there are too many well-paying jobs and too few workers. In another, there are too many workers and few good jobs. As a result, people in Central America are eager to seek work internationally…. On paper, this does not look like a difficult policy problem to solve…. There is no “skills” mismatch between economically desperate Central Americans and open U.S. positions. The U.S.’s labor shortage is concentrated in fields that do not require an extensive education. The U.S. needs more kitchen staff, construction workers, and delivery drivers. Central America is home to a large number of people with the interest in and capacity to perform those roles. Opportunities for ‘win-win’ policy-making are rarely so clear-cut. Yet U.S. policy-makers refuse to take the win. Instead, their answer to the twin problems of a U.S. labor shortage and Central American poverty crisis is, effectively, as follows: To close the gap between job openings and available workers, the Federal Reserve will simply raise interest rates until a critical mass of Americans become too poor to afford discretionary purchases, demand for labor drops, and, in all probability, the U.S. enters a recession. Meanwhile, to mitigate the poverty of those to our south, the U.S. has been allowing Central American children to enter our country, work illegally at brutal jobs, then send remittances home to their adult family members. Specifically, we have decided to let Central American kids do this if — and only if — they embark on a roughly 2,000-mile journey to the U.S. border without a parent or guardian.


U.S. Maternal Mortality Hits Highest Level Since 1965 

[Wall Street Journal, via Naked Capitalism 3-16-2023]


‘Net worth of median household is basically nothing,’ says Carl Icahn. 

[MarketWatch, via Naked Capitalism 3-16-2023]


February marks 23rd straight month of real wages decline for US workers 

[WSWS, via Naked Capitalism 3-16-2023]


They’re not capitalists — they’re predatory criminals

“Wealthy Executives Make Millions Trading Competitors’ Stock With Remarkable Timing”

[Pro Publica, via Naked Capitalism Water Cooler 3-16-2023]

“[D]ozens of top executives who have traded shares of either competitors or other companies with close connections to their own. A Gulf of Mexico oil executive invested in one partner company the day before it announced good news about some of its wells. A paper-industry executive made a 37% return in less than a week by buying shares of a competitor just before it was acquired by another company. And a toy magnate traded hundreds of millions of dollars in stock and options of his main rival, conducting transactions on at least 295 days. He made an 11% return over a recent five-year period, even as the rival’s shares fell by 57%. These transactions are captured in a vast IRS dataset of stock trades made by the country’s wealthiest people, part of a trove of tax data leaked to ProPublica. ProPublica analyzed millions of those trades, isolated those by corporate executives trading in companies related to their own, then identified transactions that were anomalous — either because of the size of the bets or because individuals were trading a particular stock for the first time or using high-risk, high-return options for the first time. The records give no indication as to why executives made particular trades or what information they possessed; they may have simply been relying on years of broad industry knowledge to make astute bets at fortuitous moments. Still, the records show many instances where the executives bought and sold with exquisite timing.”


“‘What Happens If I Just Don’t Pay My Taxes?'”

[New York Magazine, via Naked Capitalism Water Cooler 3-16-2023]

News you can use! ‘There are a couple of things to remember about the IRS. First of all, they’re stretched thin. Secondly, they just want you to pay your taxes, and something is always better than nothing. ‘They’re like a really nice mafia,’ says Rus Garofalo, the founder of Brass Taxes, a tax-preparation service that caters to artists and small-business owners. ‘They need their cut, but they don’t want to have to chase you, mostly because they don’t have the resources.’ One final piece of advice for the tax-averse: A lot of people — particularly freelancers — delay filing their taxes because they’re afraid they can’t afford them. But the penalty of late tax filing is actually much higher than the penalty for late payments, says Willets. ‘So even if you fall behind on payments, make sure to file on time,’ she says. In case you haven’t gotten the message by now, the IRS is just like anyone — it just doesn’t want to be ignored! A little bit of acknowledgment goes a long way.” 

Health care crisis

In nursing homes, impoverished live final days on pennies 

[Associated Press, via Naked Capitalism 3-16-2023]

Across the U.S., hundreds of thousands of nursing home residents are locked in a wretched bind: Driven into poverty, forced to hand over all income and left to live on a stipend as low as $30 a month….

Nearly two-thirds of American nursing home residents have their care paid for by Medicaid and, in exchange, all Social Security, pension and other income they would receive is instead rerouted to go toward their bill. The personal needs allowance is meant to pay for anything not provided by the home, from a phone to clothes and shoes to a birthday present for a grandchild….

Medicaid was created in 1965 as part of the Great Society programs of Lyndon B. Johnson. A 1972 amendment established the personal needs allowance, set at a minimum of $25 monthly. Unlike other benefits like Social Security, cost-of-living increases were not built into personal needs allowance rules.

Had it been linked to inflation, it would be about $180 today. But Congress has raised the minimum rate only once, to $30, in 1987. It has remained there ever since.


“Operators of upscale L.A. care facility charged in 14 COVID deaths”

[Los Angeles Times, via Naked Capitalism Water Cooler 3-15-2023]

“The employee and residents died during the outbreak, in which 45 employees and 60 residents were infected, according to the Los Angeles County district attorney’s office…. The facility was meant to be closed to visitors, prosecutors said, when it admitted a patient from a New York psychiatric unit. Silverado Beverly Place’s own protocols required it to not admit anyone from a high-risk area like New York City, which was considered an epicenter of COVID-19 at the time…. Prosecutors say the patient was not tested for the coronavirus when they were admitted and showed symptoms the next morning. But after they tested positive, they were not quarantined, according to the criminal charges. Management at the facility did not block visitors who traveled domestically or internationally within 14 days to areas where COVID-19 cases were confirmed, prosecutors allege.”

Lambert Strether: “Meanwhile, Andrew Cuomo is still on the street. I guess his victims weren’t “upscale”?”

Strategic Political Economy

Remembering Who The Nazis Killed First

Ian Welsh, March 14, 2023

It seems all we talk about is the tragedy of the Jews, but notice they weren’t killed first. First it was the socialists, then it was trade unionists.

This is because the Nazis first killed those who were an actual threat, then went on to kill those they hated (and who money they could steal without upsetting the majority of the population.)

Liberals always make deals with fascists or reactionaries who take over their countries. They generally do quite well out of them, corporate officers saw their incomes soar under Hitler. The argument between liberal and fascist is an argument over brothers about who should rule their father’s house: fascists treat capitalists and business well, they just need to know their place.

The left can’t make deals, because they are in fundamental opposition. This is true of fascists, who kill left-wingers, but it is also true of making deals with liberals. As Corbyn and Lula recently proved, even the mildest of leftists can’t cut a deal with liberals, because liberals don’t see the left as legitimate.


“The Era of Urban Supremacy Is Over” 

[New York Times, via Naked Capitalism Water Cooler 3-17-2023]

“Most of the nation’s major cities face a daunting future as middle-class taxpayers join an exodus to the suburbs, opting to work remotely as they exit downtowns marred by empty offices, vacant retail space and a deteriorating tax base. The most recent census data ‘show almost unprecedented declines or slow growth especially in larger cities,’ William Frey, a demographer and senior fellow at Brookings, emailed in response to my query. From July 1, 2020 to July 1, 2021, ‘New census data shows a huge spike in movement out of big metro areas during the pandemic,” Frey argues in an April 2022 paper, including ‘an absolute decline in the aggregate size of the nation’s 56 major metropolitan areas (those with populations exceeding 1 million).’ This is the first time, Frey continues, ‘that the nation’s major metro areas registered an annual negative growth rate since at least 1990.’ The beneficiaries of urban population decline are the suburbs. Even more damaging to the finances of major cities is the fact that the men and women most likely to move to the suburbs are among the highest paid, key sources of income and property tax revenues: workers with six-figure salaries in technology, finance, real estate and entertainment. Those least likely to move, in turn, are much less well paid, working in service industries, health care, hospitality and food sales.”


Henry C Carey: A Study in American Economic Thought (1931) Excerpts, Part 1

Tony Wikrent [RealEconomics]

For about a century now, a faction of the USA elite -- which may be characterized as the financial rentier faction (or as Michael Hudson and Kevin Phillips have identified it, the Finance, Insurance and Real Estate (FIRE) sector -- has assiduously financed and promoted an academic falsification of USA economic history. This falsification  insists on the primacy of British classical economists, and the marginalization and deliberate disregard for the alternative, which actually guided USA's industrial development and struggle to suppress the legacy of slavery. In an October 2011 article, Hudson explained how this "American School" of political economy was targeted using the example of the fight between neoclassical economist John Bates Clark and "American School" progressive economist Simon Patten. The excerpts presented here are intended to help revive the "American School" of political economy and liberate us from the shackles of classical / neoclassical economics which has led us deeper and deeper into the morass of deindustrialization, financial depredation, worsening inequality, and political instability.


Restoring balance to the economy

Labor Developments in the Rust Belt: Michigan is one step closer to repealing right to work

Jarod Facundo, March 17, 2023 [The American Prospect]


“How one medical school became remarkably diverse — without considering race in admissions”

[STAT, via Naked Capitalism Water Cooler 3-14-2023]

“[O]ne school in California — the state with the country’s longest-standing ban on using race in admissions — has defied the odds. The University of California, Davis runs the country’s most diverse medical school after Howard, a historically Black university, and Florida International, a Hispanic-serving research university. What Davis, and its remarkably diverse class of 2026 demonstrates, is an alternative future for a post-affirmative action world, one where diversity might be achieved despite the many obstacles that stand in the way. The student body has gone from predominantly white and male in the years before California adopted its affirmative action ban in 1996 to one in which nearly half the current class comes from Black, Hispanic, and Indigenous populations — people who have been historically underrepresented in medicine, and sometimes mistreated by its practitioners… He started by diversifying the admissions committee and staff. ‘The reason things stay the same is because everyone involved is the usual suspects,’ he said. Because Davis had to use a race-neutral approach to admissions, Henderson focused on economics. ‘I’d call it class-based affirmative action,” he said. “Class struggles have a huge overlap with race — that’s how we skirted the issue.’ Applicants were given high marks if they had a ‘socioeconomic disadvantage score,’ shifting admissions criteria away, he said, from MCAT scores and GPAs to characteristics like grit, resilience, and perseverance.”


Climate and environmental crises

Farm Bureau Finds 2022 Weather Disasters Amounted to $21 Billion in Crop Losses 

[Daily Scoop, via Naked Capitalism 3-12-2023]


France’s groundwater situation is alarming, official report shows 

[Andalu Agency, via Naked Capitalism 3-14-2023]

Information age dystopia

The Role of Default Settings in Online Searches: Challenging Google Dominance

Francesco Decarolis, Muxin Li, and Filippo Paternollo. [VoxEU, via Naked Capitalism 3-14-2023]

This column measures the quantitative effects of a series of interventions aiming to curb Google’s dominance as a search engine by limiting its use as the default option on mobile phones. By exploiting the timing of interventions across Russia, Turkey, and the European Economic Area, the authors find significant variation in their effectiveness depending on the presence of a viable competitor, nuances in intervention design, user preferences, and the specific characteristics of local markets….

In Turkey, the intervention to limit the default role of Google was different. Rather than rely on choice screens, the Turkish Competition Authority (TCA) focused on relevant features of the contracts that Google offered to the mobile phone manufacturers (i.e. the original equipment manufacturers, or OEMs). In particular, the TCA required Google to remove any provision providing Google privileged access to the device’s search access points. The new contracts were designed to guarantee that the OEM would be free to set competing search engines on their devices, possibly selecting different search engines as the default for different search access points.

In FBI Case, the First Amendment Takes Another Bizarre Hit 

Matt Taibbi [Racket News, via Naked Capitalism 3-14-2023] The conclusion:

The style of the new anti-speech Democrat is clear: define all government critics as lacking standing to criticize, impugn their prior opinions and associations, imply that all their beliefs are conspiracy theory, define their lack of faith in the FBI’s judgment as treasonous, and declare their motivation to be financial. Lastly, when they invoke common constitutional rights, make a note that their activities exist in an uncovered carve-out.

This is the playbook, and we all better get used to it.


Ransomware Attacks Have Entered a Heinous New Phase 

[ars technica, via Naked Capitalism 3-15-2023]


Conservative / Libertarian Drive to Civil War

The Federalist Society Isn’t Quite Sure About Democracy Anymore 

[Politico, via Naked Capitalism Water Cooler 3-17-2023]

...To those who have followed the Federalist Society closely since its triumphs at the Supreme Court last year, the symposium’s focus on law and democracy may hardly seem incidental. Since its founding in 1982, the Federalist Society has championed “judicial restraint,” the notion that judges should limit their roles to interpreting the law as written, leaving the actual business of lawmaking to democratically elected legislatures.

That approach made sense for conservatives when they still saw the federal judiciary as a liberal force dragging the country to the left. But now that conservatives have secured a solid majority on the Supreme Court — and voters in several red states have soundlyrejected hard-line positions on abortion — a spirited debate is underway within the Federalist Society about the wisdom of deferring to democratic majorities as a matter of principle….

When I spoke with Blackman, the South Texas college of law professor, he noted that that tension was neatly captured in two of the headline-making decisions that went conservatives’ way in the last Supreme Court term. In the Dobbs ruling, the conservative majority returned the abortion question to state legislatures, limiting federal judges’ role in determining the extent of reproductive rights. Meanwhile, in New York State Rifle & Pistol Association, Inc. v. Bruen —  which struck down a New York law that set the requirements for individuals to receive a concealed carry permit for handguns — the Court trumped the decision of a state legislature in favor of conservatives’ preferred reading of the Second Amendment.

But Blackman’s assessment of the direction of the intellectual current within the Federalist Society was even more candid than Meyer’s.

“The norm that judges be restrained and moderate — that ship has sailed,” he said….

“Democracy is what philosophers call an ‘essentially contested concept,’” said Daniel Lowenstein, a professor of law emeritus at UCLA and an expert in election law, during a panel on Friday evening. “Differences that seem on their surface to concern the meaning of the word ‘democracy’,” he added, are actually struggles to advance particular and controversial political ideas.”

What democracy does not mean, Lowenstein argued, was “plebiscitary democracy,” or simple rule by democratic majorities. Citing the Federalist Papers — the namesake of the Federalist Society — Lowenstein suggested that governance based on simple mathematical majorities would enable “tyrannical domination of the minority by the majority.”

Behind me, somebody whispered, “We’re a republic, not a democracy” — a tongue-in-cheek slogan that some conservatives have adopted as a way to slyly signal their approval of minority rule.

[TW: Yes, “We’re a republic, not a democracy,” but I understand a republic as being hostile to concentrations of wealth as well as concentrated political power. Conservatives and libertarians believe that concentrations of wealth are the result of natural processes, and thus they can never correctly understand what a republic is supposed to be. Liberals and progressives, thus far (despite my, aargh, best efforts, remain oblivious to this issue.]


The New Anarchy: America faces a type of extremist violence it does not know how to stop

Adrienne LaFrance, March 6, 2023 [The Atlantic]

Openly white-supremacist activity rose more than twelvefold from 2017 to 2021. Political aggression today is often expressed in the violent rhetoric of war. People build their political identities not around shared values but around a hatred for their foes, a phenomenon known as “negative partisanship.” A growing number of elected officials face harassment and death threats, causing many to leave politics. By nearly every measure, political violence is seen as more acceptable today than it was five years ago. A 2022 UC Davis poll found that one in five Americans believes political violence would be “at least sometimes” justified, and one in 10 believes it would be justified if it meant returning Trump to the presidency. Officials at the highest levels of the military and in the White House believe that the United States will see an increase in violent attacks as the 2024 presidential election draws nearer….

For the past three years, I’ve been preoccupied with a question: How can America survive a period of mass delusion, deep division, and political violence without seeing the permanent dissolution of the ties that bind us? I went looking for moments in history, in the United States and elsewhere, when society has found itself on the brink—or already in the abyss. I learned how cultures have managed to endure sustained political violence, and how they ultimately emerged with democracy still intact.

Some lessons are unhappy ones. Societies tend to ignore the obvious warning signs of endemic political violence until the situation is beyond containment, and violence takes on a life of its own. Government can respond to political violence in brutal ways that undermine democratic values. Worst of all: National leaders, as we see today in an entire political party, can become complicit in political violence and seek to harness it for their own ends….

What happened in Portland, like what happened in Washington, D.C., on January 6, 2021, was a concentrated manifestation of the political violence that is all around us now. By political violence, I mean acts of violence intended to achieve political goals, whether driven by ideological vision or by delusions and hatred. More Americans are bringing weapons to political protests. Openly white-supremacist activity rose more than twelvefold from 2017 to 2021. Political aggression today is often expressed in the violent rhetoric of war. People build their political identities not around shared values but around a hatred for their foes, a phenomenon known as “negative partisanship.” A growing number of elected officials face harassment and death threats, causing many to leave politics. By nearly every measure, political violence is seen as more acceptable today than it was five years ago. A 2022 UC Davis poll found that one in five Americans believes political violence would be “at least sometimes” justified, and one in 10 believes it would be justified if it meant returning Trump to the presidency. Officials at the highest levels of the military and in the White House believe that the United States will see an increase in violent attacks as the 2024 presidential election draws nearer….

No one can say precisely what alchemy of experience, temperament, and circumstance leads a person to choose political violence. But being part of a group alters a person’s moral calculations and sense of identity, not always for the good. Martin Luther King Jr., citing the theologian Reinhold Niebuhr, wrote in his “Letter From Birmingham Jail” that “groups tend to be more immoral than individuals.” People commit acts together that they’d never contemplate alone.


“Inside the Trump world-organized retreat to plot out Biden oversight”

[Politico, via Naked Capitalism Water Cooler 3-16-2023]

“A group closely aligned with former President Donald Trump helped organize a “bootcamp” for GOP congressional staff this past February, training them on how to conduct aggressive oversight of the Biden administration, according to new disclosure forms filed with the U.S. House clerk’s office. The sponsor, the Conservative Partnership Institute, counts Trump’s former chief of staff Mark Meadows among its leaders and has been described as the “nerve center” for the MAGA movement and MAGA-aligned lawmakers. It was one of three organizations to host the gathering. The two-day event, which took place on Maryland’s Eastern shore, illustrates how Trump-allied activists are quietly shaping House Republicans’ investigations of the Biden administration right as Trump himself mounts another White House bid. Topics discussed at the bootcamp included tutorials on obtaining records and deposing and interviewing witnesses, according to a flier in the filings. Among those who briefed the congressional aides was a former Trump administration official, an energy lobbyist and a reporter from Epoch Times, a nonprofit media company tied to the Falun Gong Chinese spiritual community and known for its conspiratorial, pro-Trump views.”


A Palantir Co-Founder Is Pushing Laws to Criminalize Homeless Encampments Nationwide 

[Vice, via Naked Capitalism 3-14-2023]


“Virginia judge uses slavery-era law to argue human embryos can be considered property” 

[FOX, via Naked Capitalism Water Cooler 3-14-2023]

“A Virginia judge determined that frozen human embryos are legally considered property, using a 19th century law regarding the treatment of slaves as the legal reasoning for his decision…. The law at the heart of the case governs how to divide ‘goods and chattels.’ The judge ruled that because embryos could not be bought or sold, they couldn’t be considered as such and therefore Honeyhline had no recourse under that law to claim custody of them. But after the ex-wife’s lawyer, Adam Kronfeld, asked the judge to reconsider, Gardiner conducted a deep dive into the history of the law. He found that before the Civil War, it also applied to slaves. The judge then researched old rulings that governed custody disputes involving slaves, and said he found parallels that forced him to reconsider whether the law should apply to embryos.”

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