Economics as lame theology

Yes, the study economics is a spin-off of the subject of moral philosophy.  And Yes, religion often has a great deal to say about the subject of economics and social organization.  So to accuse economics of merely being a low-proof religion is to often state the obvious.  But here are some excellent examples.  The first refers to worshipping false gods.

9 Ways That Gold Is A Religion Masquerading As An Asset Class

Joe Weisenthal | Sep. 10, 2010 

Gold remains close to its all-time high, as fears over government money printing, solvency, and general economic fears make the shiny yellow metal more popular than ever.

Experts recommend that you have a substantial chunk of your investments in this asset class.

But gold is not an asset class.

It's a religion.

Here's why. more

And then there is the problem of following false prophets.  There are essentially two ways to understand the world.  1) Find a set of teachings that explain "everything" (religion, philosophy, etc.) that you really like and study the creed in detail.  2) Find a set of instructions that lets you constantly refine and update your worldview as new evidence rolls in--this approach includes the scientific method and Evolutionary Economics.

The problem with Kudlow is that he thinks like a classic group #1 guy.  He "knows" there is something wrong with folks like Keynes but he isn't sure why but folks he trusts dislike Keynes.  Of course, the real problem is that Keynes was a textbook example of a Group #2 guy and this is so far outside of Kudlow's thinking, it could well have been written in Sanskrit on Mars.

12 Keynesian Insights To Blow The Mind Of Larry Kudlow

Elliot Turner, Wall St. Cheat Sheet | Sep. 10, 2010

Recently Larry Kudlow has been outlining his 12 Step Plan to Free Market Prosperity and both implicitly and explicitly unleashing a tirade against Keynesianism, as if Keynesianism is the cause in fact of the problem. 

What makes this incredibly ironic is that in 2007, as the economy started cratering in dramatic fashion, Larry Kudlow was applauding the “free market” initiatives undertaken over the preceding decade, while naively proclaiming that:

The recession debate is over. It’s not gonna happen. Time to move on.

At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come.

It’s easy to misappropriate the blame for our present predicament having missed the trouble as it unfolded. Kudlow has a habit of asserting the Keynesian roots of the crisis, yet I think it’s clear that Kudlow has never read Keynes, much like some of the other “experts” out there who have made a living on deriding Keynesian economics (check out this on Richard Posner’s conversion from the Chicago School to Keynesianism, in which he admitted to never having read Keynes until the depths of the financial crisis). more

Austan Goolsbee--be very VERY afraid

Austan Goolsbee, the guy tapped to become Obama's new chief economic advisor, is just 41 years old.  If you believe, as I do, that the BIG sea-change in economic thought came in 1973 when an OPEC boycott triggered a huge recession in the west (and especially USA) that blew up the Keynesian consensus while the Pinochet-led coup in Chile provided an opening for a Chicago-style right-wing economic experiment, then it is interesting to note that he was only four years old when these events took place.  In other words, his whole life has been spent in a world where economics is some small variation on the themes developed at the University of Chicago.

Goolsbee is obviously an extremely bright guy who has been a star at every level.  I mean, just look at his CV!  Goolsbee wound up as a professor at the University of Chicago because that's where the stars go. (At least that is what the University of Chicago would have us all believe.)  That's where he met Barack Obama.  I think it is safe to assume that young Goolsbee is quite proud of a career track that led to the economics school in Chicago.

And you would be too except for one small problem--the University of Chicago is probably the MOST hated institution on earth.  The economics prescribed within her walls has led to widespread misery.  The cry that the "Chicago Boys are coming" literally strikes terror in the hearts of anyone who has been subjected to their ideas.  And it should strike terror in the hearts of the folks in USA if they know what's coming.

What We Learn When We Learn Economics

Is a little economics a dangerous thing?

By CHRISTOPHER HAYES

There’s a case to be made that the single most intellectually and politically influential neighborhood in the United States is Chicago’s Hyde Park. Integrated, affluent and quiet, the 1.6 square-mile enclave on the city’s south side is like a tiny company town, where the company happens to be the august, gothic, eminently serious University of Chicago. Students at the U. of C. sell T-shirts that read “Where Fun Goes To Die,” and the same could be said of the neighborhood, which until very recently had a bookstore-to-bar ratio of 5:2.

But the university is probably best known for the school of economic thought it has produced. When the Chicago School first emerged in the ’50s, its zealous support of free markets and critique of government intervention were considered reactionary and extreme. Among elites in economics and politics the consensus was, as John Maynard Keynes had argued, that capitalism could only function with regular and robust government management. Indeed, so total was this consensus that in 1971 Richard Nixon announced a plan to impose wage and price caps in order to curb inflation, declaring, “We are all Keynesians now.” Just 25 years later, however, Bill Clinton, the first Democratic president to be re-elected since FDR, announced that the “era of big government is over.” He might as well have said, “We are all Chicagoans now.”

Neoclassical economics, as the Chicago School of thought is now called, has become an international elite consensus, one that provides the foundation for the entire global political economy. In the United States, young members of the middle and upper-middle class first learn its precepts in the academy. Polls routinely show that economists and the general public have widely divergent views on the economy, but among the well-educated that gap is far narrower. A 2001 study published in the U. of C.’s Journal of Law and Economics showed that those with college degrees are more likely to subscribe to the views of neoclassical economists than the general public. This isn’t surprising. At elite colleges, economics is consistently one of the most popular majors (nearly a quarter of undergrads at the U. of C.), and across all schools, introductory economics, often a required course, has been one of the 10 most popular classes for the last 30 years. Graduate schools—from business to public policy to political science to, most notably, law—are now suffused with economic paradigms for understanding not only financial interactions but all human behavior. more

Naomi Klein has been following the trail of disasters left by the Chicago Boys for quite a while now, she wrote the following in 2008 for the Guardian.

Beware the Chicago boys

Obama's vow of love for free markets gives reason to fear a replay of Bill Clinton's 1993 U-turn

Naomi Klein, The Guardian, Saturday 14 June 2008

Barack Obama waited just three days after Hillary Clinton pulled out of the race to declare, on CNBC: "Look. I am a pro-growth, free-market guy. I love the market." Demonstrating that this is no mere spring fling, he has appointed the 37-year-old Jason Furman, one of Wal-Mart's most prominent defenders, to head his economic team. On the campaign trail, Obama blasted Clinton for sitting on the Wal-Mart board and pledged: "I won't shop there." For Furman, however, Wal-Mart's critics are the real threat: the "efforts to get Wal-Mart to raise its wages and benefits" are creating "collateral damage" that is "way too enormous and damaging to working people and the economy ... for me to sit by idly and sing Kum Ba Ya in the interests of progressive harmony".

Obama's love of markets and his desire for "change" are not inherently incompatible. "The market has gotten out of balance," he says, and it most certainly has. Many trace this profound imbalance to the ideas of Milton Friedman, who launched a counter-revolution against the New Deal from his perch at the University of Chicago. And here there are more problems, because Obama - who taught law at Chicago for a decade - is embedded in the mindset known as the Chicago School.

Obama chose as his chief economic adviser Austan Goolsbee, a University of Chicago economist on the left side of a spectrum that stops at the centre-right. Goolsbee, unlike his Friedmanite colleagues, sees inequality as a problem. His primary solution, however, is more education - a line you can also get from Alan Greenspan. Goolsbee has been eager to link Obama to the Chicago School. "The guy's got a healthy respect for markets," he told Chicago magazine. "It's in the ethos of the [University of Chicago], which is something different from saying he is laissez faire." more

Unfortunately, Goolsbee is a star of a profession that has been completely discredited and disgraced.

How Did Economists Get It So Wrong?

By PAUL KRUGMAN, Published: September 2, 2009

It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled “The State of Macro” (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.” And in the real world, economists believed they had things under control: the “central problem of depression-prevention has been solved,” declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making.

Last year, everything came apart.

Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable — indeed, thatstocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. Neither side was prepared to cope with an economy that went off the rails despite the Fed’s best efforts.

And in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever. Lucas says the Obama administration’s stimulus plans are “schlock economics,” and his Chicago colleague John Cochrane says they’re based on discredited “fairy tales.” In response, Brad DeLong of the University of California, Berkeley, writes of the “intellectual collapse” of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten.

What happened to the economics profession? more

Ok! So Goolsbee is this star who learned a lot of wrong things very well and wound up in that epicenter of ignorance and evil, the University of Chicago, maybe he personally is the man of genius the times require.

Probably not.  Start with Ezra Klein at the Washington Post telling us the seven most important things we should know about Goolsbee.

4) Goolsbee has a reputation as one of the liberal economists on the team, but that's more a byproduct of his populist rhetorical style than actual populism. He's a serious free-market guy, and his much-reported showdown with Larry Summers came because he wanted to let Chrysler fail, while others in the administration wanted the administration to intervene and save it.

5) His academic work was mostly -- though not exclusively -- on tax policy. Look for him to play a major role if the administration decides to pursue serious tax reform. He also wrote a bunch of columns for Slate. more

So let's look at Goolsbee's writings themselves.  Try this example on the subject of medical reform.

Michael Moore and the Beige Bomber

He's got the indictment of health care right, but not the fix. 

By Austan Goolsbee, Posted Sunday, July 1, 2007

Michael Moore's shtick cracks me up. As entertainment, most of his movies are great fun. In Sicko, though, he goes beyond his usual ranting. After spending the first half of the movie railing against the American health-care system, he actually puts forward a policy prescription. Moore thinks the United States should adopt a free, single-payer, national health system like Canada, the United Kingdom, France, or Cuba—socialized medicine, in the words of his critics.

So, how does the movie stand up on policy grounds? Moore is right in his indictment of the American health-care system but overhasty in his readiness to blow it up. more

There Goolsbee is in all his glory.  The USA has by FAR the most expensive medicine of earth.  And those budget-busting costs yield outcomes that are rarely in the top 10.  ONLY the USA has unfettered for-profit medicine--a fact that produces this absurd outcome.

But Moore is a joke who cracks Goolsbee up when he suggests we might want to join the rest of the world when it comes to organizing medical delivery.

Sounds like Goolsbee is just another tragic waste of brainpower.  We have medicine so expensive it is literally bankrupting the country but rational solutions to the problem cannot even be entertained because the religion of the University of Chicago prevents it.

This guy is going to be the Obama's chief economist?  Be afraid.  Be very VERY afraid!

Getting out of the Great Recession

In some interesting ways, history is repeating itself when comparing the current economic mess to the Great Depression.  Just like in the 1930s when Germany came out of the Great Depression first but Sweden was a close second, Germany's recent good economic quarter has been followed by Sweden's.

Borg: Strong economic recovery continues

Sweden appears to be making a spectacular recovery from the deep recession its export-reliant economy experienced during the global financial crisis.

"It's pretty fair to say that the sun is shining over the Swedish economy currently," Swedish Finance Minister Anders Borg told reporters after the latest figures were published.

Economic growth in the Scandinavian country accelerated in the second quarter by 4.6 percent on a 12-month comparison and by 1.9 percent compared to output in the previous quarter, according to revised numbers from the national statistics agency. more

Of course, it should not be so surprising that Sweden's economy tracks Germany's.  They are so similar in many ways and historical ties between the two nations extend back for hundreds of years.  Both are serious export nations.  And both have long histories of tackling major problems with coordinated public action.  For example, here's an in-depth examination of how Germany intends to tackle their energy problems.

Green Visions

Merkel's Masterplan for a German Energy Revolution

By Stefan Schultz

Giant windparks, insulated buildings, electric cars and a European supergrid: the German government on Monday unveiled an ambitious but vague blueprint to launch a new era of green energy for Europe's largest economy. SPIEGEL ONLINE has analyzed the plans.

The debate about the German government's energy policy has centered on the extension of nuclear reactor lifespans. Opposition parties, analysts and environmentalists have heaped criticism on the decision of the center-right coalition on Sunday to postpone the phase-out of the country's 17 nuclear power stations by 12 years on average beyond 2021, the date by which the last of the reactors had originally been due to close under legislation brought in by a previous center-left government in 2002.

It is true that the big power companies will profit from the lifespan extension. But the draft energy plan presented by Chancellor Angela Merkel on Monday isn't just about nuclear power. It also provides a blueprint of how Germany is to manage the transition to a new age of green energy. The nuclear reactors are only significant for one of three sectors of the energy economy -- power generation. They are irrelevant for the heating industry and transport. Besides, nuclear energy accounts for just a fifth of household energy needs -- coal-fired power generation still makes up half. Nuclear power correspondingly fills just one of the 39 pages of the energy plan.

On the remaining pages the government presents ideas and concepts for gigantic wind farms in the North Sea and Baltic and for the role of biofuels in future power and heat generation. It unveils proposals for motivating people to improve the insulation of their homes and encouraging industry to become more energy efficient. It also outlines planned incentives for buying and developing electric cars and a vision of a European super grid. more

The Chinese are employing similar methods and have gotten so serious about renewable energy, we are being told that they are breaking some "sacred" economic rules to get their green energy online.  Of course, the guardians of economic "morality" at the New York Times will do their best to keep the USA from ever instituting such a crash program.

On Clean Energy, China Skirts Rules

By KEITH BRADSHER

Published: September 8, 2010

CHANGSHA, China — Until very recently, Hunan Province was known mainly for lip-searing spicy food, smoggy cities and destitute pig farmers. Mao was born in a village on the outskirts of Changsha, the provincial capital here in south-central China.

Now, Changsha and two adjacent cities are emerging as a center of clean energy manufacturing. They are churning out solar panels for the American and European markets, developing new equipment to manufacture the panels and branching into turbines that generate electricity from wind. By contrast, clean energy companies in the United States and Europe are struggling. Some have started cutting jobs and moving operations to China in ventures with local partners.

The booming Chinese clean energy sector, now more than a million jobs strong, is quickly coming to dominate the production of technologies essential to slowing global warming and other forms of air pollution. Such technologies are needed to assure adequate energy as the world’s population grows by nearly a third, to nine billion people by the middle of the century, while oil and coal reserves dwindle.

But much of China’s clean energy success lies in aggressive government policies that help this crucial export industry in ways most other governments do not. These measures risk breaking international rules to which China and almost all other nations subscribe, according to some trade experts interviewed by The New York Times. more

Meanwhile, back in USA where centralized industrial planning is still considered an evil Commie plot, where multibillion dollar trade deficits are considered acceptable, and our economic debates are controlled by the same fools who crashed the economy, the outlook does not look so hot.

The Recovery is Dead

The Backward Slide Into Recession

By MIKE WHITNEY  August 31, 2010

The economy is sliding backwards into recession. Ongoing deleveraging has slowed personal consumption and trimmed 2nd quarter GDP to a revised 1.6 per cent. As Obama's fiscal stimulus dries up and the private sector slashes spending, demand will continue to collapse pushing more businesses and households into default. The economy is now caught in a reinforcing downward cycle in which dwindling fiscal and monetary support is shrinking the money supply triggering a slowdown in activity in the broader economy.

Far right policymakers have shrugged off increasingly ominous economic data, choosing to pursue their political aims through obstructionism. Their goal is to block countercyclical measures that will boost activity, lower unemployment and narrow the output gap. By torpedoing the recovery, GOP leaders hope to take advantage of anti-incumbent sentiment and engineer a landslide victory in the midterm elections. But the timing could not be worse. The economy is in greater peril than most realize and badly in need of government intervention. As the current account deficit continues to widen, the global system inches closer to a major currency crisis. Ballooning trade imbalances signal that a disorderly unwinding of the dollar is becoming more probable. If the dollar drops precipitously, US demand for foreign exports will fall and the world will plunge into another deep slump. more

So why aren't we coming out of our economic mess.  One obviously valid answer--crazy economists.

Being an Economist Means Never Having to Say "Whoops"

Incompetents at the IMF

By DEAN BAKER

The IMF has a new set of studies out that warn the United States and other developed countries about their deficits and growing debt burdens. This raises the obvious question of why on earth do IMF economists still have jobs?

Just to remind everyone, the reason that we have 9.5 percent unemployment and the reason that the United States and other wealthy countries are running large deficits is that we had a huge housing bubble that burst and sank the economy. The boys and girls at the IMF somehow could not see this $8 trillion housing bubble. They thought everything was just fine back in 2002-2007.

This was not a minor mistake. It was an act of astounding incompetence with disastrous results.

This history raises the obvious question, if the IMF totally missed it in seeing the crisis coming, why would think they have any more clue on dealing with its consequences? Have they instituted better quality control for their economic analysis? Did they have a house cleaning in which all the incompetent economists who missed the bubble were sent packing?

No, nothing has changed at the IMF. So, we have the same group of people who could not an $8 trillion housing bubble giving us advice on our debt and deficit -- telling us to cut our Social Security program. more

And over here in the corner we find the unsinkable Ellen Brown suggesting that things are so bad we need SERIOUS monetary reform because even IF we decide to build our way out of the mess we find ourselves in, we still need a way to pay for things.

How to Reverse a Deflation

It's Time for Helicopter Ben to Drop Some Money on Main Street

By ELLEN BROWN

In 2002, in a speech that earned him the nickname “Helicopter Ben,” then-Fed Governor Bernanke famously said that the government could easily reverse a deflation, just by printing money and dropping it from helicopters. “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent),” he said, “that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Later in the speech he discussed “a money-financed tax cut,” which he said was “essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” You could cure a deflation, said Professor Friedman, simply by dropping money from helicopters.

It seems logical enough. If there is insufficient money in the money supply (deflation), the solution is to put more money into it. But if deflation is so easy to fix, then why has the Fed’s massive attempts to date failed to do the job? At the Federal Reserve’s Jackson Hole summit on August 27, Chairman Bernanke said he would fight deflation with his whole arsenal, including “quantitative easing” (QE) – purchasing longterm securities with money created on a computer. Yet since 2008, the Fed has added more than $1.2 trillion to “base money” doing just that, and the economy is still in a serious deflationary spiral. In the first quarter of this year, the money supply actually shrank at a record annual rate of 9.6%. more

Japan's moon shot

Because of the terms of the Japanese surrender in 1945, they no longer have a real aerospace industry.  So Japan's rocket scientists work for their car companies. The Lexus LFA is their version of a moon shot.  If you think the comparison is overdrawn, consider the following.

Like the moon shot, this car is wildly impractical.  Lexus will only make 500 of them because they are probably losing $1 million for each car sold even though the selling price is around $400,000.  There is no need for a car that can rocket to over 200 mph (325 kph) yet still idle gracefully in a traffic jam.

The ONLY way such a car could be built is if it could be justified as an engineering exercise.  And what an exercise!

• This car required ten years to build.  The Japanese are not known for sitting around so obviously a LOT has been accomplished.
• The 4.8 liter, 550 hp engine has a 9000 rpm redline--that's 150 revolutions per second so each cylinder must fill and fire 75 times per second.  In a ten-cylinder engine, that's 750 explosions per second without a misfire.  (Good lord!)
• This car only weighs 3500 pounds (1600 kg) and is still outfitted as a Lexus--nav system, premium stereo, and an air conditioner that works, etc.  This could only be accomplished by inventing new ways to fabricate parts from carbon fiber.  Toyota MAY have finally solved the problem of reliably mass-producing parts with this wonderful but very difficult material.

But what impresses me most is the subtle aerodynamics.  One look at the view the car presents to the wind and I was immediately impressed with what Toyota's  aero guys have accomplished.  Keep in mind that they had to solve two difficult problems.  1) They had to keep the car planted on the road at speeds that exceed the take-off speed of a 747, and 2) They had to supply a 550 hp engine with the massive amounts of air it needs to run and cool it.

There are many nuances in the aero package but let me point out one.  There is a distinct aero fence that starts at the lower bumper, follows across the hood, passes across the top of the door, and winds up in a scoop (red line).  In between are the rearview mirrors that have small aero fences to redirect the air that spills off the windshield.  If you want to see what a thousand hours of wind-tunnel tweaking will produce, this is an example.

And here's this picture without my mark-ups.  I have been using it as my computer's desktop for several weeks and still marvel at the sheer genius it demonstrates.

I am not worried that Toyota has been off wasting a lot of money and genius on a vanity project.  Because here's the payoff.  Aerodynamics is a very big deal when it comes to producing a fuel-efficient car.  Lexus is about to launch a car as serious as the LFA is frivolous.  It's called the CT 200h and is designed to carry four people in maximum comfort yet be small enough to maneuver in crowded European or Asian cities.  Oh yes, it should also get superb gas mileage.  So it absolutely MUST have a great aero package.

Notice the similarities between the noses on LFA and CT 200h.  Veblen pointed out the the nearest thing to the Instinct of Workmanship was the Instinct of Idle Curiosity.  Sometimes it is a good thing for Producers to stretch their imaginations by doing things that are wildly impractical.  It's good for the soul and it raises the bar for more ordinary tasks.

Producers having fun

Toyota's Lexus division is just a little over 20 years old.  To call Lexus a screaming success would be, at best, an understatement.  Here is a car line that challenged the world's best and triumphed.  It is now almost impossible to find any customer who doesn't just love their Lexus.

classic Swedish snickarglädje

My Swedish tribe has a word snickarglädje which translates into "carpenter's joy."  The concept is that after the hard work of building a house, the best carpenters are assigned to install the gingerbread that decorates the house.  The idea that the best Producers are to be rewarded with installing the most beautiful and intricate parts of the house, and that this is the most joyous part of the construction job, has been institutionalized in the language.

There is absolutely NOTHING about the new Lexus commercial with the drums (at the end of the video below) that indicates ANYTHING about the car in question.  ANY car can be driven in a straight line over a set of triggers that play a drum riff.  No, this is just a Japanese version of snickarglädje.  I wonder if they have a word for it.

This YouTube movie can be view in 1080p high-def.  If you have the computer and the connection to enjoy such things, I highly recommend it.

More on the Producer / Predator conflict

While it is economically obvious that those persons who are not Producers simply must fasten themselves on the backs of the Producers through force and fraud in order to survive, very little is written about how Predators also use cultural conflict to achieve the same economic ends.

But there is an occasional effort to write about those culture wars out on the "left."  The one below rings especially true because I was there when it happened.  I remember an intense discussion I had one night in 1970 with a guy who was convinced that the Students for a Democratic Society were the future of the "left" in the USA, and that their founding document, the Port Huron Statement, was a work of pure genius.  SDS pretty much defined the "new left" in the 60s.

I had actually read the Port Huron Statement and I found it infantile horse shit for one overwhelming reason.  Like any bunch of Marxist wannabees, the SDS simply had to engage in some class analysis and as one would expect from such overprivileged pretentious twits, they came to the conclusion that "youth is a class."

The idea that I shared anything with this crowd socially or economically simply because I was roughly the same age was beyond preposterous.  I was the son of a dirt-poor Lutheran clergyman who was a New Deal Democrat and grew up in desolate places like northwest North Dakota where agrarian radicalism was as common as worrying about the weather.  Yes indeed, I am quite certain there were no Swedish Lutheran, Non-Partisan League-style left Populists in Port Huron when the SDS gathered.

Needless to say, we did NOT become friendly debating partners.

When blue-collar pride became identity politics

Remembering how the white working class got left out of the New Left, and why we're all paying for it today

BY JOAN WALSH  MONDAY, SEP 6, 2010 11:01 ET

The great political failure of the 1960s was the New Left's inability to bring the labor movement into its great liberationist tent. There were lots of reasons for that, one of them being that most big union leaders didn't want to be in that stinky tent with a lot of hippies, feminists, dashiki-wearing black militants and "fags." (That last comes from AFL-CIO leader George Meany's description of the New York delegation to the disastrous 1972 Democratic convention: "They've got six open fags and only three AFL-CIO representatives!") Also, not a small matter: The New Left opposed the Vietnam War; again, most labor leaders supported it.

Still, the inability to forge a political movement that was as much about class as race and gender rights haunts the United States today. We saw the shadows of that struggle even in the 2008 presidential campaign, as supporters of Hillary Clinton and Barack Obama traded charges of "racism" and "sexism," but few paid attention to the increasing openness of white working-class voters, especially men, to pick a Democrat again in a time of profound economic crisis. We see it today in the hostility of many Democrats, and the resistance of the Obama administration, to backing aggressive government action to address the continuing unemployment disaster. The decline of the labor movement hobbled the Democratic Party, and so far nothing has come along to replace it, to represent the great majority of Americans who are disadvantaged by the ever-increasing power of corporate America and the wealthy.

If you want to understand how we got here -- how the Democrats' New Deal coalition shattered in the 1970s, and why progressives are still picking the shrapnel out of their political hides -- you must read Jefferson Cowie's "Stayin' Alive: The 1970s and the Last Days of the Working Class." more

$50 billion of economic stimulation is PATHETIC

$50 billion (the size of Obama's economic stimulus package) is not even a small down payment on the necessary work that needs doing and even if this money were divided up equally into $50,000 per year jobs (which has almost no chance of happening) that's only one million jobs which ain't much compared to the eight million jobs lost in this economic calamity.

AMERICA OUT OF WORK

For many unemployed workers, jobs aren't coming back

The U.S. unemployment rate will remain elevated for years, experts say, a grim prospect for Americans who have exhausted their benefits.

The U.S. economy will eventually rebound from the Great Recession. Millions of American workers will not.

What some economists now project — and policymakers are loath to admit — is that the U.S. unemployment rate, which stood at 9.6% in August, could remain elevated for years to come.

The nation's job deficit is so deep that even a powerful recovery would leave large numbers of Americans out of work for years, experts say. And with growth now weakening, analysts are doubtful that companies will boost payrolls significantly any time soon. Unemployment, long considered a temporary, transitional condition in the United States, appears to be settling in for a lengthy run. more

Of course, there is no valid reason for why we should choose such a ridiculous public policy...

FDR and Labor: Earning Our Way Out of the Great Recession 

Monday, 09/6/2010 - 11:29 am by David Woolner  

Roosevelt historian David Woolner shines a light on today’s issues with lessons from the past.

In a recent editorial in the New York Times, former Labor Secretary, Robert Reich, writes that this Labor Day promises to be one of the worst in decades. Organized labor, he notes, is down to a mere seven per cent of the private work force; unemployment remains high; and the prospects for a further recovery of the economy remain uncertain at best. Professor Reich goes on to argue that this dismal state of affairs is unlikely to improve until we address the deep structural flaws in our economy; flaws which have made it impossible for the American consumer — i.e. the middle class American worker — to sustain the level of spending needed to keep our economy going.

He rightly blames this state of affairs on the steady decline in working wages that has occurred in the past three decades as US companies brought in new labor-saving technologies or shipped jobs to non-unionized low wage areas overseas. He also correctly points out that much of the economic growth that the US has experienced since the early 1990s — growth that occurred in spite of the fall in wages — was fueled by three basic phenomenon: the vast increase of women in the work force; an increase in the number of hours people worked to make up for lower wages; and the massive use of consumer debt, fueled in part by the housing bubble.

In an eerie parallel to the 1920s, he observes that thanks to this real decline in income, even a return to near full employment will not be enough on its own to get us out of this mess. Why? Because as it stands today the “vast middle class still wouldn’t have enough money to buy what the economy is capable of producing.” Nor, he says, should we look to the rich to stimulate demand, since the rich — who now take in nearly 25% of the nation’s total income as opposed to 9% in the late 1970s — spend a much smaller portion of their incomes than the rest of us. more

Only we have a problem.  The economics profession doesn't know how to do fiscal stimulus anymore.

Economists Haven't Got a Clue

Death By Globalism

By PAUL CRAIG ROBERTS

Have economists made themselves irrelevant? If you have any doubts, have a look at the current issue of the magazine, International Economy, a slick publication endorsed by former Federal Reserve chairmen Paul Volcker and Alan Greenspan, by Jean-Claude Trichet, president of the European Central Bank, by former Secretary of State George Shultz, and by the New York Times and Washington Post, both of which declare the magazine to be “ahead of the curve.”

The main feature of the current issue is “The Great Stimulus Debate.” Is the Obama fiscal stimulus helping the economy or hindering it? 

Princeton economics professor and New York Times columnist Paul Krugman and Moody’s Analytics chief economist Mark Zandi represent the Keynesian view that government deficit spending is needed to lift the economy out of recession. Zandi declares that thanks to the fiscal stimulus, “The economy has made enormous progress since early 2009,” an opinion shared by the President’s Council of Economic Advisors and the Congressional Budget Office. 

The opposite view, associated with Harvard economics professor Robert Barro and with European economists, such as Francesco Giavazzi and Marco Pagano and the European Central Bank, is that government budget surpluses achieved by cutting government spending spur the economy by reducing the ratio of debt to Gross Domestic Product. This is the “let them eat cake school of economics.”

Barro says that fiscal stimulus has no effect, because people anticipate the future tax increases implied by government deficits and increase their personal savings to offset the added government debt. Giavazzi and Pagano reason that since fiscal stimulus does not expand the economy, fiscal austerity consisting of higher taxes and reduced government spending could be the cure for unemployment.

If one overlooks the real world and the need of life for sustenance, one can become engrossed in this debate. However, the minute one looks out the window upon the world, one realizes that cutting Social Security, Medicare, Medicaid, food stamps, and housing subsidies when 15 million Americans have lost jobs, medical coverage, and homes is a certain path to death by starvation, curable diseases, and exposure, and the loss of the productive labor inputs from 15 million people. Although some proponents of this anti-Keynesian policy deny that it results in social upheaval, Gerald Celente’s observation is closer to the mark: “When people have nothing left to lose, they lose it.”

The Krugman Keynesian school is just as deluded. Neither side in “The Great Stimulus Debate” has a clue that the problem for the U.S. is that a large chunk of U.S. GDP and the jobs, incomes, and careers associated with it, have been moved offshore and given to Chinese, Indians, and others with low wage rates. Profits have soared on Wall Street, while job prospects for the middle class have been eliminated. more

On Labor Day and its importance

I happen to like Producers as people.  I like watching what they can do which is often beyond amazing.  And considering how shabbily Producers have been treated throughout history, I seriously believe every damn one of them should be in a union--no matter how high their economic or social status.

They are not, of course, and the lack of Producer political skills has contributed to what Robert Reich has called the Worst Labor Day In History.

Welcome to the worst Labor Day in the memory of most Americans. Organized labor is down to about 7 percent of the private work force. Members of non-organized labor — most of the rest of us — are unemployed, underemployed or underwater.

Want to know how bad it is?  According to Steve Rattner, the government guy in charge of the bailouts of Chrysler and GM, Rahm Emmanuel expressed his official opinion of unions during the negotiations.

Rahm Emanuel: "F**k the UAW"

Rahm Emanuel, former Democratic congressman and President Obama's chief of staff, gave the UAW the Gettelfinger during the GM and Chrysler rescue debate, according to former auto czar Steve Rattner's new book. This could get messy. Especially because there's more.

Huffington Post says Rattner's book "The Overhaul" will offer some unstinting takes on Obama's inner circle during the time of the bailouts.

In addition to Emanuel's expression of the usually never-stated, but readily-shared opinion by many Democratic politicians of the usually Democratic-leaning union, the other early highlights include:

- Emanuel's spout about the UAW came during early debate on whether the administration should even try to rescue GM and Chrysler.

— In his first post-election talk with advisors about GM and Chrysler, Obama asked "Why can't they make a Corolla?"

Of course, the "White House" AND the UAW is denying that anyone ever said anything so unstintingly evil for a party that has claimed over the years to represent the workingman and woman.  But this is nonsense, the wildly anti-union Democratic Leadership Council brags about how influential they are in the Obama administration.  Emanuel is one of their guys.

DLC bragging

One of my favorite economic writers, John Kenneth Galbraith, claimed over the years that the sensible way for a government to economically coordinate the actions of its most powerful actors was to help balance their power.  For example, if a country has big business, it should also have big unions.  He called it "countervailing" forces.

If you believe like Galbraith that economic prosperity is a function of an economic balance of power, then labor unions are economically necessary.  Its a damn shame the senior members of the Democratic Party don't understand this anymore.  Of course, it is precisely because they no longer understand the economic ideas of the Great Prosperity--like countervailing power--that they suck so badly at running the economy.

Happy Labor Day!  Up with the Producer Classes!  And here's to folks who still remember just why unions are economically necessary to prosperity.

The Ongoing Conspiracy to Roll Back the New Deal

In his commentary The Billionaires Bankrolling the Tea Party last week on Jane Mayer’s important New Yorker article on how the Koch brothers and their monstrous business enterprises have financed the conservative movement and libertarianism in the United States, Frank Rich, mentioned a new book by Kim Phillips-Fein, Invisible Hands: The Businessmen's Crusade Against the New Deal.

I have not yet obtained a copy of the book, let alone read it, but there are some readers’ reviews on Amazon.com that are extraordinarily useful and informative in and of themselves.

Reviewer Nelson A. Smith:

While liberals of my generation have been fretting over gay marriage, deconstruction, and identity politics, the state has been completely retaken from the New Deal compromise in decisive class warfare waged from above. . . . By concerted effort and planning, as this book details, a relatively small cadre of blueblood patroons, capitalist absolutists, Hayek disciples, and Chamber of Commerce hacks have succeeded in reversing the New Deal, which they regarded as criminal collectivism, and returning us right back where we started, back in the Great Depression, briefly interrupted.

Reviewer William R. Neil:

No deep appreciation of the dynamics of the American political economy in 2009-2010 is possible without understanding the importance of economists Friedrich von Hayek and Ludwig von Mises, as well as religious fundamentalists Jerry Falwell and Pat Robertson. Throw in some fascinating background on George Gilder, the politics of the past two years begin to make much more sense, and we have Kim Phillips-Fein to thank for that. And for pointing out what American Progressives probably don't want to hear, but need to: that "the most striking and lasting victories of the right have come in the realm of political economy rather than that of culture."

The first is Hayek's admission, in his famous Road To Serfdom, that "at times modern man would feel subordinated to the market and would chafe against economic forces that he could not control. But he argued that submission to the marketplace was infinitely preferable to deference to a ruler. `Unless this complex society is to be destroyed, the only alternative to submission to the impersonal and seemingly irrational forces of the market is submission to an equally uncontrollable and therefore arbitrary power of other men.'"(Page 37.) Now that's what I call "market fundamentalism," with not much room left for the politics of democracy (freedom in his view, comes from The Market), much less Social Democracy with its mixed economy and deep and open involvement in a fully recognized "political economy."

SNIP

Building the Conservative Coalition
As Kim Phillips-Fein lays out for us in Invisible Hands, political conservatives, especially business conservatives, were lamenting their lack of a grass-roots movement to counteract the power of labor which grew out of the organizing successes of the 1930's and the legal sanction bestowed by the New Deal. Protestant churches were the logical place to turn, but the climate in their pulpits, in the wake of the New Deal, and indeed, ever since the rise of the Social Gospel in the late nineteenth century and early twentieth century Progressive Era, was not very receptive. "The basic argument was that Christianity had too long been associated with altruism, selflessness, and a devotion to helping the poor - principles that might lead good Christians to advocate government intervention in the economy. To counter this idea, Spiritual Mobilization insisted that Christianity was rightly associated with shrinking the welfare state." (Page 74). Spiritual Mobilization was, among other things, an attempted collaboration between J.Howard Pew's Sun Oil-generated money and the religious organizing genius of James Fifield, a dynamic Congregational minister with a huge parish in Los Angles, who had originally founded Mobilization in the 1930's. And one of the first outreach efforts is to mail out free copies of Hayek's The Road to Serfdom in an attempt to gauge the mood amongst the ministers. Although it faltered in the 1950's, Spiritual Mobilization foreshadowed the framework for the conservative alliance in the 1980's.

Reviewer Giordano Bruno:

. . . a very disturbing tale is documented in this book: of deception and hypocricy; of corruption of the electoral, judicial, and legislative processes; of the ruthless use of power and money; of indifference to the welfare of ordinary people; of ideological fanaticism; of the exploitation of dangerous social divisions for political advantage; of skillfully camouflaged Class Warfare against the `lower' classes and their champions; of plutocracy in the saddle.

William Baroody? Lemuel Boulware? Ralph Cordiner, Pierre du Pont, Clarence Manion, Leonard Read, Richard Viguerie, F. Clinton White? How many of these names are familiar to most of us, and yet they were all movers and shakers of American politics without ever holding office or confronting an election.

ACU? American Conservative Union! AEA, later AEI? American Enterprise Institute! American Liberty League, Business Roundtable, Cato Institute, Committee for Economic Development, Foundation for Economic Education, Hoover Institution, J. Howard Pew Freedom Trust, Manion Forum of Opinion, Mont Pelerin Society, NAIB, NAM, NCAC, NICB, NRWC, Olin Foundation, Ripon Society, and oh yeah, the John Birch Society, let's not forget! These and many others, of transient or permanent influence, were the frontline agencies of the capitalists' crusade against New Deal liberalism.

The failure of President Obama’s view of political economy was fully foreshadowed by his failure as a community organizer on the South Side of Chicago to realize the futility of trying to stop the national and international policies implemented as part of this anti-New Deal conspiracy by trying to organize locally against the symptoms created by those policies. If you’re going to organize locally—and indeed you must—you need to organize against the national and international policies openly, directly, and by name. (Of course, if you do this organizing effectively, expect the elites to come after you with every dirty trick imaginable.) Obama, and almost all other community organizers failed miserably to stop the economic destruction wrought by deregulation, financialization, globalization, and free trade. This defeat of the left in the 1970s and 1980s was so thorough and so crushing, that today labor unions deflect their attacks on free trade with pure bullshit about “fair trade.”

The attack on the New Deal is still in full swing. What Jane Mayer reported is but one aspect. In a recent post on his blog, conservative David Frum hypothesized that recent departures from the Koch-created and Koch-funded Cato Institute (The Purge at Cato) were retribution for lack of enthusiastic support for

a new book by American Enterprise Institute president, Arthur Brooks. Brooks had provided an intellectual manifesto for the Tea Party, arguing that the United States now faced a culture-dividing battle over the continued existence of the free enterprise system.

Sinners in the Hands of an Angry Market

One of the great sermons of American colonial puritanism is Jonathan Edwards' 1741 classic Sinners in the Hands of an Angry God. American Christians are loathe to admit it, but the wrong-wing's unceasing effort to roll back the New Deal has led America into obeisance and worship of a new deity: The Market. William Neil, of the Campaign for America's Future, delivered a new classic this past January: Sinners in the Hands of an Angry Market, a very, very long article based on a review of anthropologist Karen Ho's clinical study of the Masters of the Universe, Liquidated: An Ethnography of Wall Street. If you ever doubted my assertion that the republic can only be saved by totally obliterating the political and economic power of Wall Street, you will be made extremely uncomfortable by Neal's hard-hitting review. If you had more than a two-day holiday this weekend, you owe it to America's laborers to take the time to read it, in its entirety.

Sinners in the Hands of an Angry Market

Today's theme is "getting it wrong!"

One of the (many) problems with thinking you are #1 and hence always right, is that you tend to misread the situation in other lands.

Let's start out with how wildly Germany's recent good economic numbers are being misinterpreted.

Why Fiscal Tightening Will Hurt Spain's Economy

Drawing the Wrong Lessons From Germany's Recovery

By MARK WEISBROT

Germany’s economic recovery has gathered steam lately and is being used – in both the European and the U.S. press – to promote the view that Germany “had the formula right all along” and “made the short-term sacrifices necessary for long-term success.” The formula, it is argued, is one that includes the austerity policies now being shoved down the throats of countries such as Spain and Greece.

Germany certainly has gotten some things right, but their formula has not included pro-cyclical policies – fiscal tightening when the economy is contracting or barely growing – as the European authorities and IMF are requiring of Spain. In fact, the latest budget figures released this week show that Germany’s budget deficit for the first half of this year has doubled as compared to one year ago. At 3.5 percent of GDP, it is still lower than that of many other European countries. But the Germans certainly did not cut their budget deficit during recession, as Spain is doing.

The policy that Germany has gotten most right is the one that has kept its unemployment rate (currently 7.0 percent) at or below pre-recession levels despite a steeper decline in output (4.6 percent) for 2009 than the U.S. experienced. This is the policy of subsidizing employers to keep workers on the job at reduced hours, instead of laying them off. This has saved hundreds of thousands of jobs in Germany and could save millions in the United States, if only we had some political leadership with the courage to take these modest but obvious steps.

Ironically, however, the reforms that Spain is being pressured to adopt are in the opposite direction – the European authorities want Spain to make it easier for employers to get rid of workers. more

And then there is China which is still working on its definitions of what should be public and what private.  Actually, I believe we are in a piss-poor position to be handing out economic advice to anyone, but then, I don't work for the New York Times.  An example of how we still patronize the "other" follows.

China Has Picked The Wrong Time To End Its Love Affair With Capitalism

Patrick Chovanec | Aug. 30, 2010, 12:36 PM 

Michael Wines has an excellent report in today’s New York Times, about the rising dominance of China’s state-owned enterprises, at the expense of the once-vibrant private sector. Although partly an unanticipated consequence of China’s big stimulus push, he notes, the trend may — to some degree — reflect a more profound shift in philosophy:

Once eager to learn from the United States, China’s leaders during the financial crisis have reaffirmed their faith in their own more statist approach to economic management, in which private capitalism plays only a supporting role.

“The socialist system’s advantages,” Prime Minister Wen Jiabao said in a March address, “enable us to make decisions efficiently, organize effectively and concentrate resources to accomplish large undertakings.”

The trend has given rise to a catch-phrase among Chinese entrepreneurs: “guo jin, min tui,” or “the state advances, the private sector retreats.” (The rough ambiguity of the characters could also suggest “the nation advances, but the people fall behind”). Or as one official quoted in the article colorfully puts it, the new policy amounts to “leaving the private sector drinking the soup while the state enterprises are eating the meat.” more

Spend the freaking money!!

Well, the new infrastructure report for 2010 is out and USA gets an overall grade of D.  I personally never liked the idea of getting a D so I never got one.  Furthermore, I believe folks who abuse their machinery are on the same moral level as folks who abuse their pets so obviously I don't approve of the current infrastructure mess.

2009 Grades

Aviation D

Bridges C

Dams D

Drinking Water D-

Energy D+

Hazardous Waste D

Inland Waterways D-

Levees D-

Public Parks and Recreation C-

Rail C-

Roads D-

Schools D

Solid Waste C+

Transit D

Wastewater D-

America's Infrastructure GPA: D

Estimated 5 Year Investment Need: $2.2 Trillion

In an August 30 post, I made the argument that a $1 TRILLION per year stimulation package is the sort of thing necessary to get the economy moving again.  When folks ask me what I would spend this money on, I reply that according to our Civil Engineers, JUST bringing our infrastructure up to standards would require about 1/2 that money in the next five years.

On taking peak oil seriously

I think I take the subject of energy more seriously than most because of where I live.  Minnesota gets cold enough so there are times when human survival is literally measured in minutes without an external source of heat.  I had a friend in college who ran out of gas on a rural road on a sub-zero January night.  His toasty steel cocoon was below freezing in less than five minutes.  He was VERY lucky someone willing to stop came along in time.  I still remember how scared he was and how cautious the whole experience made him.

And yet, when you think about it, our whole civilization would very quickly collapse if we were to run out of gas.  Maybe not in minutes, but certainly in days.

There is an institution that understands energy as a life-and-death matter along the lines of my friend.  The German Army.  If you Google "oil" and the "German army" you will find out that by FAR their biggest problem in World War II was securing reliable petroleum supplies.  I don't know this for a fact, but I would not be surprised if this significant historical example means that there are several persons in today's Bundeswehr who do nothing but study the global supplies of oil.  In fact, we now know some of their names.

'Peak Oil' and the German Government

Military Study Warns of a Potentially Drastic Oil Crisis

By Stefan Schultz

Suppose it runs out? Mishaps in oil and gas exploration are almost routine, and governments have now started to wonder about a future with dwindling fossil fuel.

A study by a German military think tank has analyzed how "peak oil" might change the global economy. The internal draft document -- leaked on the Internet -- shows for the first time how carefully the German government has considered a potential energy crisis.

The term "peak oil" is used by energy experts to refer to a point in time when global oil reserves pass their zenith and production gradually begins to decline. This would result in a permanent supply crisis -- and fear of it can trigger turbulence in commodity markets and on stock exchanges.

The issue is so politically explosive that it's remarkable when an institution like the Bundeswehr, the German military, uses the term "peak oil" at all. But a military study currently circulating on the German blogosphere goes even further.

The study is a product of the Future Analysis department of the Bundeswehr Transformation Center, a think tank tasked with fixing a direction for the German military. The team of authors, led by Lieutenant Colonel Thomas Will, uses sometimes-dramatic language to depict the consequences of an irreversible depletion of raw materials. It warns of shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the "total collapse of the markets" and of serious political and economic crises. more

The logic behind the old fiscal arguments

People forget the Keynes and Keynesianism was actually the right wing / banker position on monetary and fiscal debates that had been around at least since Lincoln and probably before.  So here we see some folks basically re-inventing the "wheel" (logic) that gave us the New Deal.

The Real Lesson from the Great Depression: Fiscal Policy Works! 

Monday, 08/30/2010 - 10:34 am by Marshall Auerback 

New Attacks on FDR’s New Deal Fueled by Old - and Discredited - Ideology

If the US government had a dollar every time someone proclaimed to learn the lessons of the Great Depression, we probably wouldn’t have a budget deficit. Usually, these debates turn on the question of fiscal policy and whether in fact, FDR’s New Deal had a discernable role in generating recovery. “Fiscal austerians” have done much to dismiss the economic achievements of the New Deal, some even suggesting that FDR’s fiscal policies worsened the crisis.

For a brief period during 2008, the views of neo-liberals like Alan Greenspan and Robert Rubin were shunted aside. But the FDR revisionists, who disapprove of fiscal policy measures of any kind, have come back. Now they’re brandishing the old arguments that “excessive” government spending risks “crowding out” private spending, making it impossible for the US government to deal with the recession (because it has run out of money) and hindering the capacity of the private sector to recover because of too much government interference in the “free market”. These complaints are usually accompanied by a wave of rhetoric condemning the “business un-friendly” policies of the current Administration, along with dire warnings of a “national solvency” crisis. After all, fiscal austerians are nothing, if not fully predictable. more

What If We Ditched Quantitative Easing and Just Printed (And Distributed) Cash?

Charles Hugh Smith, Of Two Minds | Aug. 31, 2010, 1:42 PM  

Actually doing what everyone fears as horribly inflationary--printing and dropping cash into households--might not be as terrible an idea as many assume.

Just as a thought experiment: what if the Federal Reserve and the U.S. Treasury ditched the failed policy of Quantitative Easing (QE) and instead printed cash and "helicopter dropped" it into households' accounts?

Many people think QE is a "helicopter drop" of cash; it is not. It is simply a way of expanding credit and encouraging more borrowing.

What if the Federal Reserve and U.S. Treasury stopped trying to stimulate the economy by encouraging more borrowing with "quantitative easing" and instead "dropped money from helicopters" into households' accounts?

The core of quantitative easing is this: by expanding bank credit and lowering interest rates, a central bank (in the U.S., the Federal Reserve) stimulates more borrowing and thus more spending by businesses and households.

The problem with this policy is that none of the funds goes directly into consumers' accounts. If consumers are tapped out or wary of taking on more debt, then bank credit can be expanded to the moon and households will not borrow more money. more

The economics profession really REALLY sucks

Yesterday, Christina Romer--one of the supposedly enlightened members of Obama's economic team--gave a speech to the National Press Club.  In it, she basically admitted the Obama team had (has) NO idea the depth of the economic problems facing the nation.

The question becomes, WHY can't this nation get better advice from its highly-educated and paid economists?  My answer is that they have been taught utter nonsense but I am willing to listen to other hypothesis.

Outgoing Obama Aide Admits: Stimulus Failed Because We Didn't Understand The Recession

Joe Weisenthal | Sep. 1, 2010, 8:29 PM 

As she prepares to leave The White House, outgoing economic advisor Christina Romer has delivered something of a valedictory speech to the National Press Club. The title: Not My Father's Recession.

For Romer, her Father's recession was the one in the early 80s, when unemployment surged above 10%, and Romer's own father got laid off.

But the title basically tells you what you need to know: It's different this time -- this recession was not anything like the Fed-induced recession of her father -- and the old recovery playbook could not possibly go as anticipated. more

Putting the Brakes on Neoliberal Economics

Race to the Bottom

By ISMAEL HOSSEIN-ZADEH

While the harrowing economic hardship that started in late 2007 and early 2008 rages on, and countless people in the United States, Europe and other parts of the world are losing their jobs, their homes and their sources of livelihood, policy-makers in the advanced capitalist countries of the West are standing idly by without lifting a finger to alleviate the onerous burden of the crushing recession. On the contrary, they have embarked on an orchestrated series of cruel belt-tightening austerity policies that have, indeed, contributed to the worsening of the recession.

The question is why? How can the policy makers’ callous indifference to the plight of the people, or their pathetic inability to carry out effective policies of economic recovery, be explained?

The official explanation for not investing in the revival of the economy is that, due to the already huge debt and deficit, additional public spending would be “fiscal irresponsibility.” In light of the fact that governments in the US, EU and other debt-ridden countries have showered the powerful international banksters and other financial moguls with trillions of dollars, this explanation falls miserably short of credibility; indeed, it can more appropriately be called an excuse than an explanation. more

Going on up to Edgar

Spent part of the weekend near Edgar Wisconsin with Tony at his book stand.  If you ever want to know how he comes to know so much about the history of USA industrialization, just remember he works at events where folks gather to celebrate their industrial artifacts.  This is what some of the Producer Class does for fun!

The Age of Steam may seem romantic in retrospect but up close, these machines are incredibly noisy, dangerous, extremely labor-intensive, and don't get very much useful work out of the energy they consume.  On the other hand, it is very unlikely that humanity would have figured out much about the internal combustion engine if it hadn't first gone through the stage of the external combustion (steam) engines.

The weather cooperated unlike last year when it rained on my attempt to get some video of this machinery.

A coup d'état of the banksters

We are soon going to find out if the concept of democracy has any meaning at all in USA or are the self-appointed financial Masters of the Universe going to continue to run things (badly).

Obama Must Assert Democratic Control Over Economic Forces

Michael Sandel, Political Philosopher, Harvard University

Posted: August 30, 2010 07:14 PM

From the Spring Democracy: A Journal of Ideas symposium, "What Happened?": Obama can still redefine liberalism, but he must bring economic power to heel.

Imagine a president, or a presidential candidate, taking on Wall Street in blunt language such as this: "We have been dreading all along the time when the combined power of high finance would be greater than the power of the government. Have we come to a time when the president of the United States or any man who wishes to be the president must doff his cap in the presence of this high finance, and say, 'You are our inevitable master, but we will see how we can make the best of it'?"

Or this: "The supreme political task of our day is to drive the special interests out of our public life."

Or this: "Through new uses of corporations, banks, and securities," a privileged economic elite has "reached out for control over government itself," rendering political equality "meaningless in the face of economic inequality. A small group [has] concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labor -- other people's lives."

Today, mainstream commentators and editorial writers would disparage such talk as irresponsible populist rhetoric. But American political leaders have not always been as deferential toward economic power as they are expected to be today. The statements quoted above were not made by far-out radicals, but by Woodrow Wilson (1912), Theodore Roosevelt (1910), and Franklin D. Roosevelt (1936).

It is striking to notice the difference between their liberalism and ours. For these icons of twentieth-century liberalism, the first question of politics was how to subject economic power to democratic control. more

Coup d'Etat: Standard & Poor's Is Now Giving Orders to Congress ... and the American People

Richard (RJ) Eskow, Consultant, Writer, Senior Fellow with The Campaign for America's Future

Posted: August 30, 2010 03:05 PM

There's been a lot of talk recently about the enormous power that's been given to the Deficit Commission, which is co-chaired by Alan "Social Security recipients are milking it" Simpson and dominated by people who have advocated cuts to Social Security and Medicare. But here's an aspect of the story that's gone unremarked: Standard & Poor's, the credit rating agency whose reputation should rightfully have been shattered by the economic crisis, is now dictating policy to the United States government. S&P just put our elected officials on notice: Submit to the proclamations of the Deficit Commission or we'll downgrade our rating of government debt.

That's blackmail, plain and simple. This threat comes from a privately-owned company whose rating process is riddled with conflicts, and which has gotten virtually every critical assessment of recent years spectacularly wrong. Enron? Lehman? Subprime mortgages? They were zero for three. Yet rather than reining back their penchant for reckless proclamations, the chairman of S&P's "sovereign rating committee" said that our elected officials' response to the Deficit Commission would be crucial to its analysis of US debt. John Chambers said last week: "It is very important for the credit standing of the United States that the Congress considers very carefully what the fiscal commission proposes." Just in case his intent wasn't clear enough, he added: "It is very important for Congress to take the required steps." more

The Revenge of Main Street 

by gjohnsit  Mon Aug 30, 2010 at 11:48:24 AM CDT

"You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time." - Abraham Lincoln

Wall Street has a problem.

You see Wall Street functions much like Las Vegas. Their immense wealth depends on the continuing myth that their games aren't rigged, and the willful denial of reality by the suckers. 

Just like Vegas, no one wants to talk about the money they lost playing the stock market. Instead, all you here about is how everyone is getting rich at the blackjack table. If you aren't getting obscenely wealthy betting on interest rate spreads then there must be something wrong with you. 

In reality, the reason why you lost money is because the game is rigged. The House always wins in the end. The suckers are the ones who think there are rules. Like Wall Street, Vegas exists to separate you from your money.

Wall Street may seem all powerful, but like Vegas it has an Achilles Heel - if the people don't feed the beast it will starve. 

If the greed of The House gets too extreme, and the rigging of the games becomes too obvious to ignore, people will stop gambling at the casinos and in the stock market. The House goes broke.

That tipping point, where the willful denial of Main Street starts to break down because the game rigging is so blatant, may have finally been reached. more