"We are in the age of globalization." It is the new paradigm. Global trade, global communication, global culture, global threats and global rewards, global environmental crisis.
Our planet's population is soaring. That population's demands on the global environment are exponentially expanding.
The hideous debris swept to sea by last Spring's tsunami in Japan is heading toward the Americas. The radiation emitted by the nuclear disaster caused by that tsunami probably hit our shores months ago. Workers toil under slavish conditions in China, India and other developing countries to supply North America and other "first world" nations with the wonders designed by Apple Computer, Microsoft and a myriad of other multinational corporations.
The ancient mountains and rich habitats of West Virginia and Kentucky are crushed into oblivion to feed our nation's hunger for cheap energy. The water supplies of continents are sacrificed to agribusiness, energy development and industrial waste to feed, shelter and indulge the hungry consumers of nations rich and poor.
Wars are waged to procure declining supplies of oil. Wars are waged to procure productive land and valuable mineral resources. Melting icecaps raise ocean levels and swamp low-lying land masses, displacing their occupants. Carbon emissions from every country on the globe spew into the already saturated atmosphere. Free market capitalism, the one true religion of the twenty-first century, demands ever increasing levels of consumption of the planet's finite resources for throw-away products that clog landfills and create continental-sized oceanic dead zones.
It's every country and man for himself out there as the human race rushes toward its terrifying confrontation with the inevitable results of debasing its environment on a global scale.
If we must have globalization, surely global regulation in our specie's self interest might be a good idea? Screw nationalistic jingoism if the price is survival.
Here's what I think...
Showing posts with label the economy. Show all posts
Showing posts with label the economy. Show all posts
Tuesday, January 31, 2012
Sunday, October 23, 2011
When the Banks Trump Governments
I hope I am wrong but my reading of the European Union debt crisis is that the banks are more powerful than governments. Not just individual governments of smaller nations like Iceland, Ireland and Greece, but the big guys - Germany, France, the United Kingdom and the United States.
How did these private institutions achieve supremacy over the governments whose purpose is to govern their societies? I am not sure. I suspect that the bank recapitalizations that occurred in 2008 and the failure to reform seriously flawed institutions were only the final phase of a long-term evolution into world-wide plutocracy. If the new world order resulted in economic and political stability, one might grudgingly accept it; however governments, flawed though they all are, are required to offer some degree of accountability to the governed. The corporations and private institutions now wielding the power do not share that burden - just ask the stockholders of News Corp, recently rebuffed in their attempts to hold the Murdock Family accountable.
The United States is not insulated from this phenomenon. When/if the EU collapses, our system will not be far behind. Why? Because our banks too are heavily leveraged in the EU crisis. Our economy is much weaker than Germany's.
For the immediate now, the international financial institutions are urging, no demanding, that the EU countries protect the banks from the bad debt of EU member nations. This protection can only be purchased by pouring trillions (yes, that is what I meant) into the black hole of an already debased system. The inevitable result will not be a resolution of the EU crisis. It will be the dragging down of the strong economies into the abyss in which the weak ones already reside.
The recipe being urged on the EU is a recipe for long-term disaster. That disaster will NOT stop at the Atlantic Ocean's eastern boundaries.
Thanks alot Margaret Thatcher, Ronald Reagan, Bill Clinton, George W. Bush, Nicholas Sarkozy, Tim Geitner, Larry Summers, Robert Rubin, Christopher Dodd, Dick Cheney, Alan Greenspan, Chief Justice John Roberts, Tony Blair, Dominque Strauss-Kahn for working so VERY closely with the new masters of the universe.
How did these private institutions achieve supremacy over the governments whose purpose is to govern their societies? I am not sure. I suspect that the bank recapitalizations that occurred in 2008 and the failure to reform seriously flawed institutions were only the final phase of a long-term evolution into world-wide plutocracy. If the new world order resulted in economic and political stability, one might grudgingly accept it; however governments, flawed though they all are, are required to offer some degree of accountability to the governed. The corporations and private institutions now wielding the power do not share that burden - just ask the stockholders of News Corp, recently rebuffed in their attempts to hold the Murdock Family accountable.
The United States is not insulated from this phenomenon. When/if the EU collapses, our system will not be far behind. Why? Because our banks too are heavily leveraged in the EU crisis. Our economy is much weaker than Germany's.
For the immediate now, the international financial institutions are urging, no demanding, that the EU countries protect the banks from the bad debt of EU member nations. This protection can only be purchased by pouring trillions (yes, that is what I meant) into the black hole of an already debased system. The inevitable result will not be a resolution of the EU crisis. It will be the dragging down of the strong economies into the abyss in which the weak ones already reside.
The recipe being urged on the EU is a recipe for long-term disaster. That disaster will NOT stop at the Atlantic Ocean's eastern boundaries.
Thanks alot Margaret Thatcher, Ronald Reagan, Bill Clinton, George W. Bush, Nicholas Sarkozy, Tim Geitner, Larry Summers, Robert Rubin, Christopher Dodd, Dick Cheney, Alan Greenspan, Chief Justice John Roberts, Tony Blair, Dominque Strauss-Kahn for working so VERY closely with the new masters of the universe.
Tuesday, October 4, 2011
Greek Austerity = Disaster
A bottomless pit is threatening the entire European Union and most particularly its wealthiest, most successful member, Germany.
Every time the European Union comes to the "rescue" of Greece, the situation worsens. The imposed austerity measures are destroying the Greek economy. With each passing month, tax revenues decline - way beyond predictions. As the economy staggers, so do revenues. At the same time interest rates on Greece's debt continue to escalate. Greece is stuck between a rock and a hard place: revenues to pay that interest are battered by the austerity measures required to secure the debt.
The resulting demand for the European Union (read France and Germany) to cover the spread is beginning the threaten the two strong economies in the union.
The prescription written to solve the crisis is the problem. It is treating the wrong disease! The time has come for the institutions that hold the debt and charge the ever increasing interest rates to actually experience the risk implied by those rates and take a haircut. In fact, all governments need to insist that devaluation of the debt is a prerequisite of any rescue package from here on out.
Ireland had a BUDGET SURPLUS before their banks failed and the EU pressured the country into rescuing the financial institutions. The result? Ireland's national debt spiraled out of control and the country's economy crashed and burned. A similar situation is occurring in Greece and threatens to spread to Spain, Portugal and Italy. There is ABSOLUTELY NO WAY that the European Union can rescue all these economies. The almost inevitable result is the imploding of the European Union, the Euro and disaster to the still-viable economies of France and Germany.
The time has come (actually it came 3 years ago) to herd rogue financial institutions into Chapter 11, restructure their balance sheets, write off their "toxic assets," break them up and reissue their stock. The debt would be written down, not increased, as solid assets are separated from the drecht and the drecht is valued at pennies on the dollar. Too big to fail must be sent into the history of failed economic initiatives. Control, supervision and separation of the speculative from the custodial roles of financial institutions reconstituted.
The alternative? A total, catastrophic meltdown of the global financial structure.
Every time the European Union comes to the "rescue" of Greece, the situation worsens. The imposed austerity measures are destroying the Greek economy. With each passing month, tax revenues decline - way beyond predictions. As the economy staggers, so do revenues. At the same time interest rates on Greece's debt continue to escalate. Greece is stuck between a rock and a hard place: revenues to pay that interest are battered by the austerity measures required to secure the debt.
The resulting demand for the European Union (read France and Germany) to cover the spread is beginning the threaten the two strong economies in the union.
The prescription written to solve the crisis is the problem. It is treating the wrong disease! The time has come for the institutions that hold the debt and charge the ever increasing interest rates to actually experience the risk implied by those rates and take a haircut. In fact, all governments need to insist that devaluation of the debt is a prerequisite of any rescue package from here on out.
Ireland had a BUDGET SURPLUS before their banks failed and the EU pressured the country into rescuing the financial institutions. The result? Ireland's national debt spiraled out of control and the country's economy crashed and burned. A similar situation is occurring in Greece and threatens to spread to Spain, Portugal and Italy. There is ABSOLUTELY NO WAY that the European Union can rescue all these economies. The almost inevitable result is the imploding of the European Union, the Euro and disaster to the still-viable economies of France and Germany.
The time has come (actually it came 3 years ago) to herd rogue financial institutions into Chapter 11, restructure their balance sheets, write off their "toxic assets," break them up and reissue their stock. The debt would be written down, not increased, as solid assets are separated from the drecht and the drecht is valued at pennies on the dollar. Too big to fail must be sent into the history of failed economic initiatives. Control, supervision and separation of the speculative from the custodial roles of financial institutions reconstituted.
The alternative? A total, catastrophic meltdown of the global financial structure.
Wednesday, September 7, 2011
Romney's Job Plan is Republican Rhetoric
If elected president, Mitt Romney will cure the U. S. job crisis. He has the magic bullet. Can you possible guess what it is?
According to NPR, Romney's plan is to cut taxes on companies, cut regulations, cut federal spending, curb the power of unions, increase exploitation of U. S. sources of fossil fuels (oil, coal and natural gas) and challenge China's currency policies. http://www.npr.org/templates/story/story.php?storyId=140205846&ft=1&f=
When are Republicans going to face the bitter truth that cutting taxes and spending, far from stimulating the economy and lowering the country's debt, exacerbate job losses, swell deficits as revenues fall further and increase societal instability? That's easy - they will not. Why is the more interesting question.
The party's stubborn adherence to magical thinking becomes suspect when a candidate like Romney, who unlike many of his Republican opponents is NOT an ideologue, jumps on board. It is not about improving the economy. It is not about limiting government. It is about dismantling the last vestiges of American democracy and making official the country's transformation into an oligarchy run by the rich and powerful and unrestrained by any vestige of leverage residing with the "small" people.
According to NPR, Romney's plan is to cut taxes on companies, cut regulations, cut federal spending, curb the power of unions, increase exploitation of U. S. sources of fossil fuels (oil, coal and natural gas) and challenge China's currency policies. http://www.npr.org/templates/story/story.php?storyId=140205846&ft=1&f=
When are Republicans going to face the bitter truth that cutting taxes and spending, far from stimulating the economy and lowering the country's debt, exacerbate job losses, swell deficits as revenues fall further and increase societal instability? That's easy - they will not. Why is the more interesting question.
The party's stubborn adherence to magical thinking becomes suspect when a candidate like Romney, who unlike many of his Republican opponents is NOT an ideologue, jumps on board. It is not about improving the economy. It is not about limiting government. It is about dismantling the last vestiges of American democracy and making official the country's transformation into an oligarchy run by the rich and powerful and unrestrained by any vestige of leverage residing with the "small" people.
Tuesday, September 6, 2011
The IMF urges U.S. and European Stimulus?
The International Monetary Fund (IMF), better known for its ruthless enforcement of stringent budget constrictions on borrower nations, is urging the world's economic leaders to spend themselves into further debt and temporarily abandon their austerity measures.
As seen in the Huffington Post link below, International Monetary Fund Chief, Christine Lagarde, is urging European countries and the United States to employ economic stimulus.
http://www.huffingtonpost.com/2011/09/04/imf-lagarde-stimulus-us-europe-economy_n_948407.html
It sounds like the IMF believes our only hope of stemming the tide of a collapsing global economy is its version of a Hail Mary Pass.
European politicians appear to be rejecting the call. Given its current political climate, U. S. response is unlikely to be more enthusiastic.
At least some global financial leaders are becoming concerned about the persistence of the Great Recession's impact on social stability. An Arab Spring is one thing. Huge demonstrations in Israel, the massive protests in Madison last winter and the riots in England something else again.
As seen in the Huffington Post link below, International Monetary Fund Chief, Christine Lagarde, is urging European countries and the United States to employ economic stimulus.
http://www.huffingtonpost.com/2011/09/04/imf-lagarde-stimulus-us-europe-economy_n_948407.html
It sounds like the IMF believes our only hope of stemming the tide of a collapsing global economy is its version of a Hail Mary Pass.
European politicians appear to be rejecting the call. Given its current political climate, U. S. response is unlikely to be more enthusiastic.
At least some global financial leaders are becoming concerned about the persistence of the Great Recession's impact on social stability. An Arab Spring is one thing. Huge demonstrations in Israel, the massive protests in Madison last winter and the riots in England something else again.
Wednesday, August 31, 2011
Another Presidential Speech
President Obama plans to make a major jobs/debt speech after Labor Day. According to Huffington Post, progressives are urging the president to "go big." http://www.huffingtonpost.com/2011/08/30/barack-obama-jobs-plan-progressives_n_942533.html
I don't think "going big" in his speeches has ever been difficult for Obama. He usually talks a good game. My problem is I no longer have any faith at all in his will and stamina on the playing field. Time and again I have watched him stake out his position with flourish only to begin his retreat the minute the opposing team takes the field.
How about a "little less talk and a lot more action" Mr. President?
I don't think "going big" in his speeches has ever been difficult for Obama. He usually talks a good game. My problem is I no longer have any faith at all in his will and stamina on the playing field. Time and again I have watched him stake out his position with flourish only to begin his retreat the minute the opposing team takes the field.
How about a "little less talk and a lot more action" Mr. President?
Friday, August 19, 2011
Hanging Tough While Wall Street Tumbles
These are the times that try our patience, test our risk tolerance and tempt us to bail. The past two weeks have decimated my retirement plans. Yes, I knew a correction was overdue; that the economy was not recovering for most working folk; that the global outlook was starting to look grim.
Yes, I know economic cycles are cyclical (a little redundancy hurts no one). Yes, I have preached "being in the market for the long term" and "downturns offer buying opportunities," for many years.
Regardless, during these turbulent times, each day's opening bell makes my stomach churn, my heart pound and my fingers edge toward the "sell" button.
Hanging tough while Wall Street tumbles is hard to do.
Yes, I know economic cycles are cyclical (a little redundancy hurts no one). Yes, I have preached "being in the market for the long term" and "downturns offer buying opportunities," for many years.
Regardless, during these turbulent times, each day's opening bell makes my stomach churn, my heart pound and my fingers edge toward the "sell" button.
Hanging tough while Wall Street tumbles is hard to do.
Monday, August 8, 2011
Equities Plunge, Bonds Hang Tough
Pundits proclaim the devastation on Wall Street is rooted in S&P's U.S. debt downgrade. If they are correct, why are equities down and bonds stable or slightly up? Sounds a tad counter-intuitive to me.
A lot of cash was either stockpiled or invested in equities over the past several months as uncertainty grew over whether the U.S. would default on its debt or raise the debt ceiling. Now, a dim economic outlook and the raising of the debt ceiling is luring investors back into the seriously over-bought bond and gold markets. The European situation - developing fiscal crises in Spain, Portugal and Italy threatening to pile on top of the colossal problems of Greece and Ireland - almost guarantees U.S. bonds will hold steady or rise (higher prices = lower interest rates).
In the meantime, Bank of New York Mellon has decided to charge customers holding what it determines is "excessive" cash in their accounts. Yeah a lot of big players put cash on the sidelines in the build-up to August 2 as a defense against market volatility. I thought banks were supposed to pay depositors for the money they placed in the banks custody. But if banks don't lend that money, some penalties kick in from the Federal Reserve that cost those banks money. BNY Mellon would prefer to pass that cost onto their larger customers rather than actually lend it to serious borrowers. So... holding cash reserves cost money (in addition to the erosion of inflation), incentivizing well-heeled depositors to put their money somewhere. Their choice appears to be bonds or gold.
For myself, I am NOT buying equities yet. I don't want to catch a falling knife. I am staying alert to opportunities - good companies with solid earnings expectations and stable dividends. (At current prices I consider bonds carry a hefty risk of capital erosion.) If only a noisy part of my brain did not suspect the entire scenario is manipulated by the market's big players.
If it really is Armageddon, all the geese are cooked. If not, like Warren Buffett, I will carefully look for buying opportunities and reexamine asset allocations. On the other hand, I am NOT selling any gold jewelry I might have acquired over the past unnamed number of years.
A lot of cash was either stockpiled or invested in equities over the past several months as uncertainty grew over whether the U.S. would default on its debt or raise the debt ceiling. Now, a dim economic outlook and the raising of the debt ceiling is luring investors back into the seriously over-bought bond and gold markets. The European situation - developing fiscal crises in Spain, Portugal and Italy threatening to pile on top of the colossal problems of Greece and Ireland - almost guarantees U.S. bonds will hold steady or rise (higher prices = lower interest rates).
In the meantime, Bank of New York Mellon has decided to charge customers holding what it determines is "excessive" cash in their accounts. Yeah a lot of big players put cash on the sidelines in the build-up to August 2 as a defense against market volatility. I thought banks were supposed to pay depositors for the money they placed in the banks custody. But if banks don't lend that money, some penalties kick in from the Federal Reserve that cost those banks money. BNY Mellon would prefer to pass that cost onto their larger customers rather than actually lend it to serious borrowers. So... holding cash reserves cost money (in addition to the erosion of inflation), incentivizing well-heeled depositors to put their money somewhere. Their choice appears to be bonds or gold.
For myself, I am NOT buying equities yet. I don't want to catch a falling knife. I am staying alert to opportunities - good companies with solid earnings expectations and stable dividends. (At current prices I consider bonds carry a hefty risk of capital erosion.) If only a noisy part of my brain did not suspect the entire scenario is manipulated by the market's big players.
If it really is Armageddon, all the geese are cooked. If not, like Warren Buffett, I will carefully look for buying opportunities and reexamine asset allocations. On the other hand, I am NOT selling any gold jewelry I might have acquired over the past unnamed number of years.
Thursday, June 30, 2011
Stalemate on the Debt Ceiling
Neither side will budge. Neither side will compromise. Neither side will win. Ah, but who will lose?
Hard to say right now. Give it a few weeks.
Will the banks close? Money dry up and disappear?
Will government employees find themselves out of work and out of money? Will soldiers in Iraq and Afghanistan be logistically abandoned?
Will the battered remains of our 401k's, pensions and investments join the trash heap that took such a chunk of them in 2008? Will the trucks and trains that cross the country bringing us the very food we eat stop running?
Will the western wildfires wage un-fought? Will criminals take over our streets as furloughed policemen stay home?
Will oil producers stop sending oil to the U. S.?
How the hell should I know? Or Congress either for that matter?
Hard to say right now. Give it a few weeks.
Will the banks close? Money dry up and disappear?
Will government employees find themselves out of work and out of money? Will soldiers in Iraq and Afghanistan be logistically abandoned?
Will the battered remains of our 401k's, pensions and investments join the trash heap that took such a chunk of them in 2008? Will the trucks and trains that cross the country bringing us the very food we eat stop running?
Will the western wildfires wage un-fought? Will criminals take over our streets as furloughed policemen stay home?
Will oil producers stop sending oil to the U. S.?
How the hell should I know? Or Congress either for that matter?
Saturday, June 4, 2011
Economic Dilemmas in Hard Times
My thoughts... .
1. Policymakers that put raising taxes off the table in deficit reduction negotiations are disingenuous about their agenda.
2. During tough economic times, those who are doing well need to pick up the slack to help those who are doing badly survive.
3. Defunding public education and laying off tens of thousands of teachers guarantees an unskilled underclass in a society.
4. A negative balance of payments of tens of billions of dollars a year renders budget balancing initiatives futile.
5. Unregulated corporations destroy democracy. Regulation is an indispensable component of free enterprise. Unregulated competition inevitably results in monopoly and oligopoly.
6. Private ownership of natural resources is dangerous to human welfare. Destruction of the environment to make a profit is criminal.
7. Contracts that harm the public good should be invalidated.
9. The same institutions that destroyed global economic stability now control the global economy. This is a BAD thing.
10. Corporations that are "too big to fail" need either to be broken up or nationalized.
11. Corporations are not citizens. They are NOT entitled to equal rights and MUST be subordinate to the public will. Any members of the Judiciary that rule otherwise have violated their oath of office and deserve impeachment.
Sunday, February 27, 2011
Americans Must Save for Retirement
Listening to NPR's Marketplace this morning, I heard Chris Farrell emphasize the need for Americans to save for their own retirement. Farrell said with pensions faltering and the 401Ks that were supposed to replace the pension system falling far short of expectations (and needs), Americans cannot rely on Social Security to be their safety net. He asserted we must save - at least 20 percent of our earnings.
Farrell did not discuss a few problems with saving.
Farrell did not discuss a few problems with saving.
- Current long-term CD rates hover between .09 and 1.99 percent at my local banks. Given inflation rates, this is a negative return.
- Unlike dividend income, every cent of interest on (non-IRA) savings is taxable.
- Wage earners need to pay for taxes, food, clothing, shelter and transportation first.
Investing is a form of saving, so perhaps that is the answer? I would have more confidence in it if Wall Street wasn't an insiders game in which traders constantly manipulate market prices for short-term gains (short-term as in daily/weekly rather than months).
Every form of savings and investment contains risk. Diversification of assets remains the best hedge against risk. But make no mistake - our failure to control the financial industry that continues to build on top of the fault lines in the system it created has increased risk across the board.
Yes, I will continue to save, to invest, to diversify. I just have a lot less faith than I used to have that my conscientious efforts will bring me financial security.
Perhaps the strongest financial tool available to us is to recognize that debt is a slave master and to avoid it like the plague. That includes credit card balances, home equity loans, student loans, installment debt, lines of credit attached to checking accounts.
Note: Marketplace reported Americans have decreased their credit card debt by 16 percent and raised their savings by 5 percent since the 2008 financial meltdown.
Wednesday, February 23, 2011
The Great Big Real Time Depression
The following are taken from two Facebook threads I started yesterday.
Out of the Closet
I am out of the closet. For some time I have thought of the current economic downturn as "The Great Big Real Time Depression." Yesterday I verbalized this thought for the first time. Now I am writing it. It is NOT any easy train of thought to turn off.
The experts can keep their analysis that GDP turned positive many months ago and the recession is over.
The manufacturing jobs are lost and not coming back. Hoping small business will pull us out of this one is delusional. Small business has little hope for survival in the current climate of supremacy of the multi-national global corporations. Those that do well either will be bought out by the big guys or their technologies will be stolen and they will be put out of business.
My friend Ann argued: "Maybe. Maybe not. I really considered starting my own small business but was too chicken. I think, and I have stated this on FB before, it's not politics or big business that is killing us. I think it's simple irresponsibility. It starts with individuals. We need to take personal responsibility and not expect a bailout when we screw up. Same goes for politicians and corporations. Take responsibility!"
My friend Chris contributed: "Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much higher consideration." -Abraham Lincoln.
I replied to Ann: "Tell it to the guys at AIG, Goldman Sachs, BOA, Lehman, Citibank. Not a perp walk for any of them. Tell it to the Congress and presidents that have spent like drunken sailors and fiddled while Rome burned for 10 years. Tell it to the corrupt state legislators that lined their own pockets, sold off their states' birthrights and now must pay the piper by dismantling our infrastructure."
The Disappearance of the Middle Class
Let's face it guys, a country that produces nothing but esoteric financial instruments no one understands cannot afford a middle class. Bye, bye education, transportation infrastructure, clean water, edible food, oversight of oil, gas and chemical companies, national parks.
If we do not have decent paying jobs, we cannot raise the taxes to pay for teachers, firemen, policemen, trash collectors, snow removal, environmental protection, on the job safety, unemployment insurance, Social Security, Medicare, Medicaid, decent housing. Cheer up, you can buy stuff made in China REAL CHEAP at Walmart and Target.
My friend Mary said: "I guess the most logical questions is: how have we allowed ourselves to become so complacent? How many red flags were raised over the years that were ignored by the general population...and more importantly, who can effectively guide us through the process of restoration?"
I replied: "I am very fired up because all the sacrifice is demanded from those who have less. NOTHING is asked of those that have the most. The folks I know are fair minded. They do not mind doing their share. They SHOULD NOT be asked to foot the entire bill.
Ann contributed: Has this ever been a fair and equitable country? Our founding fathers were mainly land owners, businessmen or slave owners. I certainly don't mind paying my fair share of taxes. It beats communism! However, the government workers used to get the big benefits because they weren't getting paid the same as commercial workers. That is no longer the case. City and state pension funds are going insolvent paying for medical and retirements. I think union workers and government workers need to start paying their fair share - yes the police officers who make 125K a year and the firemen who have second jobs and teachers who only work 9 months out of the year. Fair is fair."
I answered: "Ann, you're right. All the good private sector jobs for ordinary folks are gone. The government workers were the last bastion and the tax revenues that supported them disappeared with those private sector jobs. We can no longer afford to support the systems we as a society came to rely upon and take for granted. What comes next scares the s--t out of me.
Chris commented: "M, I doubt you are just discovering this now. We've been in a symbiotic dance with China for a generation. "Chimerica" as Niall Ferguson refers to it, only worked when we continued to buy what China continued to sell. Now that we've run out of money to buy, we have few options, but China can turn inwards and redirect the investment into their own infrastructure. Which is much easier in a state-run authoritarian culture. At least until they develop their own middle class who want to change things.
"More than anything else, our demographics doom us. Social Security and Medicare were created with a population demographic that had a lot of young working people paying into a pool used by a much smaller group who didn't live as long. Now we have the boomers turning that pyramid upside-down. A small pool is forced to support a larger group who live longer, and have many chronic illnesses that can be treated but are tremendously expensive. Without a dramatic paradigm shift, we will experience a dramatic reduction in the quality of life in the near future."
I answered: "Chris, and yet the Simpson/Bowles Report is widely attacked by both sides and we continue to do nothing."
Conclusion
I would like to thank my three Facebook friends for their contributions to these threads.
Out of the Closet
I am out of the closet. For some time I have thought of the current economic downturn as "The Great Big Real Time Depression." Yesterday I verbalized this thought for the first time. Now I am writing it. It is NOT any easy train of thought to turn off.
The experts can keep their analysis that GDP turned positive many months ago and the recession is over.
The manufacturing jobs are lost and not coming back. Hoping small business will pull us out of this one is delusional. Small business has little hope for survival in the current climate of supremacy of the multi-national global corporations. Those that do well either will be bought out by the big guys or their technologies will be stolen and they will be put out of business.
My friend Ann argued: "Maybe. Maybe not. I really considered starting my own small business but was too chicken. I think, and I have stated this on FB before, it's not politics or big business that is killing us. I think it's simple irresponsibility. It starts with individuals. We need to take personal responsibility and not expect a bailout when we screw up. Same goes for politicians and corporations. Take responsibility!"
My friend Chris contributed: "Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much higher consideration." -Abraham Lincoln.
I replied to Ann: "Tell it to the guys at AIG, Goldman Sachs, BOA, Lehman, Citibank. Not a perp walk for any of them. Tell it to the Congress and presidents that have spent like drunken sailors and fiddled while Rome burned for 10 years. Tell it to the corrupt state legislators that lined their own pockets, sold off their states' birthrights and now must pay the piper by dismantling our infrastructure."
The Disappearance of the Middle Class
Let's face it guys, a country that produces nothing but esoteric financial instruments no one understands cannot afford a middle class. Bye, bye education, transportation infrastructure, clean water, edible food, oversight of oil, gas and chemical companies, national parks.
If we do not have decent paying jobs, we cannot raise the taxes to pay for teachers, firemen, policemen, trash collectors, snow removal, environmental protection, on the job safety, unemployment insurance, Social Security, Medicare, Medicaid, decent housing. Cheer up, you can buy stuff made in China REAL CHEAP at Walmart and Target.
My friend Mary said: "I guess the most logical questions is: how have we allowed ourselves to become so complacent? How many red flags were raised over the years that were ignored by the general population...and more importantly, who can effectively guide us through the process of restoration?"
I replied: "I am very fired up because all the sacrifice is demanded from those who have less. NOTHING is asked of those that have the most. The folks I know are fair minded. They do not mind doing their share. They SHOULD NOT be asked to foot the entire bill.
Ann contributed: Has this ever been a fair and equitable country? Our founding fathers were mainly land owners, businessmen or slave owners. I certainly don't mind paying my fair share of taxes. It beats communism! However, the government workers used to get the big benefits because they weren't getting paid the same as commercial workers. That is no longer the case. City and state pension funds are going insolvent paying for medical and retirements. I think union workers and government workers need to start paying their fair share - yes the police officers who make 125K a year and the firemen who have second jobs and teachers who only work 9 months out of the year. Fair is fair."
I answered: "Ann, you're right. All the good private sector jobs for ordinary folks are gone. The government workers were the last bastion and the tax revenues that supported them disappeared with those private sector jobs. We can no longer afford to support the systems we as a society came to rely upon and take for granted. What comes next scares the s--t out of me.
Chris commented: "M, I doubt you are just discovering this now. We've been in a symbiotic dance with China for a generation. "Chimerica" as Niall Ferguson refers to it, only worked when we continued to buy what China continued to sell. Now that we've run out of money to buy, we have few options, but China can turn inwards and redirect the investment into their own infrastructure. Which is much easier in a state-run authoritarian culture. At least until they develop their own middle class who want to change things.
"More than anything else, our demographics doom us. Social Security and Medicare were created with a population demographic that had a lot of young working people paying into a pool used by a much smaller group who didn't live as long. Now we have the boomers turning that pyramid upside-down. A small pool is forced to support a larger group who live longer, and have many chronic illnesses that can be treated but are tremendously expensive. Without a dramatic paradigm shift, we will experience a dramatic reduction in the quality of life in the near future."
I answered: "Chris, and yet the Simpson/Bowles Report is widely attacked by both sides and we continue to do nothing."
Conclusion
I would like to thank my three Facebook friends for their contributions to these threads.
Thursday, February 17, 2011
Budget B-S
Any self-proclaimed fiscal conservative who loudly proclaims we must cut taxes is either disingenuous or far too stupid to hold a policy-making position.
The original intent of tax cuts was to "starve the beast." If government revenues were limited, the theory went, government size must shrink as government expenditures were decreased. An excellent concept that did not work for one reason. Government expenditures did not shrink - they increased - as revenues declined - and were put on the national credit card. This combination is destroying us.
The reluctance of fiscal conservatives to place more revenue in the hands of irresponsible officials is understandable. Will those revenues be used to attack the deficit or provide more excuses for excessive, unaffordable spending? If recent history is any indicator, the answer to that question is not reassuring.
The hard fact is that combination of the Great Recession's loss of millions of private-sector jobs and the Bush and Obama era tax cuts for those who have weathered the recession unscathed have accelerated the growth of the national debt.
Fiscal liberals proclaim that times of economic distress call for increased government spending to provide relief and prime the pump of economic expansion. They conveniently ignore the uncomfortable reality that the coffers are empty.
The rich blame the poor for the fiscal mess in which we find ourselves. The poor blame the rich. The middle class blame both. The blame game works well during an election season. Unfortunately blame does not produce solutions. If anything, it inhibits constructive action.
Special interest groups fight tooth and nail to protect their turf. The more well-heeled they are and the more members they can claim, the more powerful their input into the process.
How did we get to a point in this country where no one seems willing to carry their share of the burden and everyone wants someone else to tote the load?
The original intent of tax cuts was to "starve the beast." If government revenues were limited, the theory went, government size must shrink as government expenditures were decreased. An excellent concept that did not work for one reason. Government expenditures did not shrink - they increased - as revenues declined - and were put on the national credit card. This combination is destroying us.
The reluctance of fiscal conservatives to place more revenue in the hands of irresponsible officials is understandable. Will those revenues be used to attack the deficit or provide more excuses for excessive, unaffordable spending? If recent history is any indicator, the answer to that question is not reassuring.
The hard fact is that combination of the Great Recession's loss of millions of private-sector jobs and the Bush and Obama era tax cuts for those who have weathered the recession unscathed have accelerated the growth of the national debt.
Fiscal liberals proclaim that times of economic distress call for increased government spending to provide relief and prime the pump of economic expansion. They conveniently ignore the uncomfortable reality that the coffers are empty.
The rich blame the poor for the fiscal mess in which we find ourselves. The poor blame the rich. The middle class blame both. The blame game works well during an election season. Unfortunately blame does not produce solutions. If anything, it inhibits constructive action.
Special interest groups fight tooth and nail to protect their turf. The more well-heeled they are and the more members they can claim, the more powerful their input into the process.
How did we get to a point in this country where no one seems willing to carry their share of the burden and everyone wants someone else to tote the load?
Wednesday, February 2, 2011
State Bankruptcies?
I hear and read more and more chatter about enabling states to declare bankruptcy. If this happens, I have a pretty good idea who will be hurt, but am trying to figure out who will benefit.
State Pension Funds
We are discovering that many states ignored their constitutional requirement to fund their pension funds. I guess they thought tax revenues would just keep going up and up while expenses remained static - oops. To make matters worse they used smoke and mirrors to balance their budgets - selling off income-producing assets for one-time cash injections. Now pundits and politicians are proclaiming that hugely expensive, underfunded pension programs are responsible for the states' financial meltdowns.
Because of their government-funded pension plans, unless they moonlight in private-sector jobs, public-sector workers do not pay Social Security taxes and are not vested in the Social Security system.
If states are allowed to declare bankruptcy, they will want to shed their pension liabilities. Retired state workers could be confronted with the loss or devaluation of their pensions and no fall-back position. Who will be affected? Teachers, firemen, policemen, garbage collectors, highway workers, the folks who worked for motor vehicles, tax collection, licensing, the courts, among others.
Bond Holders
States issue bonds to finance infrastructure. Many states have relied heavily on bond issues to keep current expenditures within budget. As a result, they now carry huge debt loads. Bankruptcy would enable them to unload a good portion of that debt. Bonds have been an important part of many folks savings and investment strategies. The modest returns were offset by their supposed safety. The pain of defaults would be widespread and crippling to the general economy.
Vendors
One of the ways states have remained "cash flow positive" has been by dragging out their Accounts Payable. This is a ploy that works best with local governments, school districts and small businesses. The big guys (corporations like GE, Exxon, Verizon and AT&T) are far less likely to tolerate it and have much greater bargaining clout. While waiting months for payment, vendors are forced to drag out their own payables and to borrow to maintain operations and pay current expenses. In bankruptcy reorganization many of these debts would be abandoned with a rippling effect all the way down the line.
Conclusion
It is easy to see who would be hurt by state bankruptcies. The growing "chatter" about making it available to the states really makes me wonder - who will benefit? Taxpayers is an obvious answer but is it the correct one? Won't the inevitable financial disruption, loss of vital services and accelerated infrastructure decay be far more damaging than any hypothetical tax relief such action brings?
State Pension Funds
We are discovering that many states ignored their constitutional requirement to fund their pension funds. I guess they thought tax revenues would just keep going up and up while expenses remained static - oops. To make matters worse they used smoke and mirrors to balance their budgets - selling off income-producing assets for one-time cash injections. Now pundits and politicians are proclaiming that hugely expensive, underfunded pension programs are responsible for the states' financial meltdowns.
Because of their government-funded pension plans, unless they moonlight in private-sector jobs, public-sector workers do not pay Social Security taxes and are not vested in the Social Security system.
If states are allowed to declare bankruptcy, they will want to shed their pension liabilities. Retired state workers could be confronted with the loss or devaluation of their pensions and no fall-back position. Who will be affected? Teachers, firemen, policemen, garbage collectors, highway workers, the folks who worked for motor vehicles, tax collection, licensing, the courts, among others.
Bond Holders
States issue bonds to finance infrastructure. Many states have relied heavily on bond issues to keep current expenditures within budget. As a result, they now carry huge debt loads. Bankruptcy would enable them to unload a good portion of that debt. Bonds have been an important part of many folks savings and investment strategies. The modest returns were offset by their supposed safety. The pain of defaults would be widespread and crippling to the general economy.
Vendors
One of the ways states have remained "cash flow positive" has been by dragging out their Accounts Payable. This is a ploy that works best with local governments, school districts and small businesses. The big guys (corporations like GE, Exxon, Verizon and AT&T) are far less likely to tolerate it and have much greater bargaining clout. While waiting months for payment, vendors are forced to drag out their own payables and to borrow to maintain operations and pay current expenses. In bankruptcy reorganization many of these debts would be abandoned with a rippling effect all the way down the line.
Conclusion
It is easy to see who would be hurt by state bankruptcies. The growing "chatter" about making it available to the states really makes me wonder - who will benefit? Taxpayers is an obvious answer but is it the correct one? Won't the inevitable financial disruption, loss of vital services and accelerated infrastructure decay be far more damaging than any hypothetical tax relief such action brings?
Thursday, November 11, 2010
A Bitter Pill - Simpson and Bowles Unveil Deficit Reduction Plan
Click on the post title for my source material - a New York Times article.
Former Senator Alan K. Simpson and Erskine B. Bowles, who was President Clinton's White House Chief of Staff, sent a shot across the bow of Washington policy makers November 10 when they revealed an austere deficit reduction plan composed of deep spending cuts and significant tax increases.
The proposal has something guaranteed to offend every side of the political spectrum:
Former Senator Alan K. Simpson and Erskine B. Bowles, who was President Clinton's White House Chief of Staff, sent a shot across the bow of Washington policy makers November 10 when they revealed an austere deficit reduction plan composed of deep spending cuts and significant tax increases.
The proposal has something guaranteed to offend every side of the political spectrum:
- Sharp tax increases, including a 15-cent a gallon federal gasoline tax increase, the elimination of the mortgage interest deduction, tax credits targeting low income wage earners and federal tax deductions for state and local tax payments.
- Across the board cuts in federal spending, including military spending, Medicare and Social Security.
The proposal projects a roughly $4 trillion reduction in the federal deficit by 2020. It recommends a 2-1 ratio of spending cuts to revenue increases.
This plan deserves serious study and consideration. One of my greatest concerns is whether it, or any ultimate plan, weighs more heavily on the lower economic sectors and more lightly on the wealthiest sectors.
The bleak truth is that meaningful deficit reduction will be painful, unpopular and extremely difficult to implement. Unless it is evenly spread across the economic landscape, it will be disastrous.
Friday, November 5, 2010
Can the Fed save the economy?
I am posting the following link because I believe Reich's analysis of the Fed's attempts to improve the economy is spot on: http://www.huffingtonpost.com/robert-reich/the-republican-recipe-for_b_779121.html
1. Lower the value of the dollar against other currencies: theoretically this action will decrease the cost of our debt and make our exports more competitive. Unintended consequences: other countries respond with attempts to devalue their currencies and neutralize the impact of the Fed's action on their imports and exports; the real cost of our debt is camouflaged by artificially maintained low interest rates.
2. Increase the money supply so banks will lend to business and individuals. Unintended consequence: inflation first of bond prices as investors seek a "safe haven" and then of stock prices as investors seek decent returns on their dollars no longer available in the over-bought bond market. Businesses won't borrow if their revenues are stagnant. Individuals cannot borrow when their incomes have decreased and their debt loads are high.
Evidently I am not the only investor that has opted back into stocks, particularly those with attractive dividends, as bond prices have risen and bond interest rates become anemic. When bond prices finally pull back (and they will) and their interest rates rise, debtor nations like ours are in for a very unpleasant surprise. The cost of debt will soar.
One peculiar side effect of the Fed's recent currency policies is we appear to be teetering on a tightrope between runaway inflation and devastating deflation - a neat trick that does not imply equilibrium.
At this point, the attempts of the Fed to "tweak" the economy back to solid growth could well be doing more harm than good.
Disclaimer: It is far easier to see problems than to provide their solutions. That is one reason I want policy makers and elected officials to be smarter than I am.
1. Lower the value of the dollar against other currencies: theoretically this action will decrease the cost of our debt and make our exports more competitive. Unintended consequences: other countries respond with attempts to devalue their currencies and neutralize the impact of the Fed's action on their imports and exports; the real cost of our debt is camouflaged by artificially maintained low interest rates.
2. Increase the money supply so banks will lend to business and individuals. Unintended consequence: inflation first of bond prices as investors seek a "safe haven" and then of stock prices as investors seek decent returns on their dollars no longer available in the over-bought bond market. Businesses won't borrow if their revenues are stagnant. Individuals cannot borrow when their incomes have decreased and their debt loads are high.
Evidently I am not the only investor that has opted back into stocks, particularly those with attractive dividends, as bond prices have risen and bond interest rates become anemic. When bond prices finally pull back (and they will) and their interest rates rise, debtor nations like ours are in for a very unpleasant surprise. The cost of debt will soar.
One peculiar side effect of the Fed's recent currency policies is we appear to be teetering on a tightrope between runaway inflation and devastating deflation - a neat trick that does not imply equilibrium.
At this point, the attempts of the Fed to "tweak" the economy back to solid growth could well be doing more harm than good.
Disclaimer: It is far easier to see problems than to provide their solutions. That is one reason I want policy makers and elected officials to be smarter than I am.
Wednesday, November 3, 2010
Cut Taxes Again?
Sooo, the plan is to cut taxes, cut discretionary spending and return the U. S. Government to solvency?
Cut taxes again? At a time when the country's debt soars into the stratosphere? Oh yes, the spending cuts will keep our balance sheet healthy.
What is included in discretionary spending?
Education? Transportation (what about all those structurally unsound bridges)? Disaster relief (FEMA)? Food and Drug Administration? Security and Exchange Commission? The Interior (perhaps we can sell off our national parks)? Agriculture? Commerce? Justice? Treasury? Environmental Protection Agency? Housing and Urban Development? Nuclear Regulatory Agency? State Department? Minerals and Mines Management? Forestry? Student loans? Foreign Aid to places like Pakistan? Veterans' Affairs? The repeal of Health Care?
According to one just elected representative last night, discretionary does NOT include Defense or Homeland Security. What about Medicaid, Medicare and Social Security? What about Congressional staffs?
Without revenue, it will be moot. Without revenue every last item in the budget will be on the table.
Cut taxes again? At a time when the country's debt soars into the stratosphere? Oh yes, the spending cuts will keep our balance sheet healthy.
What is included in discretionary spending?
Education? Transportation (what about all those structurally unsound bridges)? Disaster relief (FEMA)? Food and Drug Administration? Security and Exchange Commission? The Interior (perhaps we can sell off our national parks)? Agriculture? Commerce? Justice? Treasury? Environmental Protection Agency? Housing and Urban Development? Nuclear Regulatory Agency? State Department? Minerals and Mines Management? Forestry? Student loans? Foreign Aid to places like Pakistan? Veterans' Affairs? The repeal of Health Care?
According to one just elected representative last night, discretionary does NOT include Defense or Homeland Security. What about Medicaid, Medicare and Social Security? What about Congressional staffs?
Without revenue, it will be moot. Without revenue every last item in the budget will be on the table.
Monday, November 1, 2010
Death and Taxes
Someone (Ben Franklin?) once said "Nothing in life is certain but death and taxes."
Taxes again, I know. No one wants to pay them. But David Stockman, who advised Ronald Reagan in the early 1980s, has some strong reasoning behind his position we need to raise them. http://www.cbsnews.com/8301-504803_162-20021193-10391709.html
When the medicine comes in the form of a VERY bitter pill, that is NOT a good reason not to take it.
It could well be that only by cutting core programs (the military and entitlements) and raising taxes, will the U. S. economy be able to drag, pull and shove its way back to economic health.
Percentage wise, the wealthiest will have to pay the most. The poorest the least. Why? Because it is a very bad idea to tax citizens into starvation and homelessness. The middle class will probably suffer the most. They are dwindling in numbers, but still have some disposable income.
None of the choices are easy or pleasant. But Keynesian economics calls for increased spending in times of economic hardship, you argue? True, but Keynes also said spending and debt should be trimmed in times of prosperity. This we did NOT do. The unhappy result is staring us in the face - massive public debt, massive public need for stimulus and far less than nothing in the piggy bank.
Across this country states are facing bankruptcy. Most of the current job losses are in the public sector as teachers, firemen, policemen, highway workers, water and sewage workers, trash collectors, regulators are being laid off. These cuts are slicing through the heart of our infrastructure, whether we acknowledge that or not. Public assets are being sold for one-time cash boosts. Any old Yankee would tell you, NEVER unload your capital, but that is what state and local governments across the country are doing.
If someone out there has a better idea, one that actually has a solid chance of working, now is the time to express it.
The money has to come from somewhere. Of course, we could emulate the Roman Empire and try conquer our way back to wealth. Not sure how well that would work.
Taxes again, I know. No one wants to pay them. But David Stockman, who advised Ronald Reagan in the early 1980s, has some strong reasoning behind his position we need to raise them. http://www.cbsnews.com/8301-504803_162-20021193-10391709.html
When the medicine comes in the form of a VERY bitter pill, that is NOT a good reason not to take it.
It could well be that only by cutting core programs (the military and entitlements) and raising taxes, will the U. S. economy be able to drag, pull and shove its way back to economic health.
Percentage wise, the wealthiest will have to pay the most. The poorest the least. Why? Because it is a very bad idea to tax citizens into starvation and homelessness. The middle class will probably suffer the most. They are dwindling in numbers, but still have some disposable income.
None of the choices are easy or pleasant. But Keynesian economics calls for increased spending in times of economic hardship, you argue? True, but Keynes also said spending and debt should be trimmed in times of prosperity. This we did NOT do. The unhappy result is staring us in the face - massive public debt, massive public need for stimulus and far less than nothing in the piggy bank.
Across this country states are facing bankruptcy. Most of the current job losses are in the public sector as teachers, firemen, policemen, highway workers, water and sewage workers, trash collectors, regulators are being laid off. These cuts are slicing through the heart of our infrastructure, whether we acknowledge that or not. Public assets are being sold for one-time cash boosts. Any old Yankee would tell you, NEVER unload your capital, but that is what state and local governments across the country are doing.
If someone out there has a better idea, one that actually has a solid chance of working, now is the time to express it.
The money has to come from somewhere. Of course, we could emulate the Roman Empire and try conquer our way back to wealth. Not sure how well that would work.
Saturday, October 16, 2010
Foreclosure Moratorium Bad?
I hear the reasonable, soft-spoken voices of experts voice concern that a moratorium on foreclosures will prolong the housing crisis and delay the eventual recovery of the real estate market. They fear it will put the mortgage lenders in a difficult position. (Click on this post's title for a Wall Street Journal article on the subject.)
Just because these lenders forged paperwork when they could not locate the mortgage documents. Just because they attempted to streamline the foreclosure process with a tiny bit of perjury and skipping over a few minor details, like providing proof they owned the mortgages, surely is no reason for Draconian measures?
We all know they own these mortgages, right? Didn't they tell us so? Why should the lenders seeking foreclosures be tied up in red tape just to protect a few million homeowners and property titles for any new purchasers?
Ah, but wait. Wasn't it the mortgage lenders who tied up those mortgages in all that red tape to begin with?
Just because these lenders forged paperwork when they could not locate the mortgage documents. Just because they attempted to streamline the foreclosure process with a tiny bit of perjury and skipping over a few minor details, like providing proof they owned the mortgages, surely is no reason for Draconian measures?
We all know they own these mortgages, right? Didn't they tell us so? Why should the lenders seeking foreclosures be tied up in red tape just to protect a few million homeowners and property titles for any new purchasers?
Ah, but wait. Wasn't it the mortgage lenders who tied up those mortgages in all that red tape to begin with?
Tuesday, October 5, 2010
Fraudulent Foreclosures
Click on the post title for the New York Times article.
Financing giants JPMorgan Chase and GMAC "robo-signed" thousands of foreclosure documents without personal knowledge of the facts. This calls into question the legality of many previous foreclosures and clouds the titles on subsequently purchased foreclosed properties.
Surprise, surprise. The esoteric financial instruments into which mortgages were bundled and sold and rebundled and resold makes finding the mortgage paperwork almost impossible. This is probably the reason so many lenders have adamantly refused to renegotiate mortgages that are in danger of foreclosure. They have no idea how to proceed! This has not, however, deterred them from initiating foreclosure proceedings, which they confidently processed without doing the arduous homework.
Ugly, ugly example how today's super-corporations conduct business. Make no mistake, to them we are not considered customers, we are "marks."
Perhaps it's not perjury unless you get caught?
Financing giants JPMorgan Chase and GMAC "robo-signed" thousands of foreclosure documents without personal knowledge of the facts. This calls into question the legality of many previous foreclosures and clouds the titles on subsequently purchased foreclosed properties.
Surprise, surprise. The esoteric financial instruments into which mortgages were bundled and sold and rebundled and resold makes finding the mortgage paperwork almost impossible. This is probably the reason so many lenders have adamantly refused to renegotiate mortgages that are in danger of foreclosure. They have no idea how to proceed! This has not, however, deterred them from initiating foreclosure proceedings, which they confidently processed without doing the arduous homework.
Ugly, ugly example how today's super-corporations conduct business. Make no mistake, to them we are not considered customers, we are "marks."
Perhaps it's not perjury unless you get caught?
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