Wednesday, February 13, 2008

Where is the Liberal Media?

President Bush boasted that his economic policies led to a record 52 months of consecutive job growth. The media reported the boast but didn't bother to point out that President Bush has the worst record on job growth of any post-war president.

Unemployment percentages:
Kennedy-Johnson 9%
Carter 3.0%
Reagan 2.1%
Bush I 0.6%
Clinton 2.4%
Bush II 0.6%

Meanwhile Project Lifeline, like the Patriot Act, is an oxymoron and a bailout to the lenders. And is only being considered as the old fashion notion of the bank actually holding the mortgage seems to be out of the question.

Let's make sure our politicians, in both parties, know that we understand all this:
Moodys, S&P and Fitch labeled RMBS, CDOs, CDS, as high quality AAA bonds. Our banks and brokers all sold these as AAA debt packages around the world. Now banks and brokers, along with countless private and state pension funds are caught holding this stuff and need to fire sale these securities to get them off their books as they cannot legally hold paper that is less than AAA, or faith based, marked to model!

The tax-cut policies shaped by Milton Friedman's theories and supply-side economists will only create more excesses in speculation. As will those who choose to interpret the current recession as the result of hesitant monetary policies. Which in plain language simply means that if you don't pay people enough money for their labor you will need to sell them cheap debt. The Fed's solution to all of this, supported by all who are currently running for office, is to continue reducing interest rates however they'll soon run out of bullets as you cannot go below 0 and we are already well below the real rate of inflation.

Wednesday, January 23, 2008

Is every economic problem a Nail?

Is every economic problem a nail to be solved with the hammer of tax cuts?

Record debt-to-income, stagnant wages, small job growth, all compounded by a generational boomer retirement and yet we continue to hear from our politicians that we can grow our way through problems with tax cuts. An idea which should have disappeared with the dot-com bubble but instead a debt inspired home mania was substituted and cheered on until it too popped.

So now that we have two back to back bubbles our politicians rush to assure us that all of our current credit problems will be solved if we just continue to spend, even in the face of a slowing economy. And please remember that even if you have a job; it doesn't necessarily follow that you'll continue making the same income in a recession. In a service based economy ask yourself how much the income of closing attorneys, builders, appraisers, home inspectors, title examiners, loan originators, misc supply salesman and trade contractors etc will drop?

I would think that the inflationary policies of deficit spending, which discouraged savings and special interest tax breaks which have given us the largest income disparity in recent history would have put a stop to all this faith based economics. If there is a single lesson to learn from the Great Depression surely it's John Kenneth Galbraith's observation that tax cuts do not necessarily spur investment by the super-wealthy, but rather fuel speculative gambling in risky assets.

Now we are once again assured that lower interest rates combined with lower taxes will yet again spur on our debt fed economy. I would have thought that in a age of TIVO we would have at least remembered that we already listened to such nonsense.

Saturday, September 29, 2007

Future Interrupted

Consider the following excerpt, "A Theology of Capitalism is sweeping the world."...the whole world has adopted the notion that market economy oriented policies are correct. In other words, there is a theology of capitalism that is sweeping the world, to borrow a phrase from British historian Eric Hobsbawm. There are 3.5 billion people from Eastern Europe to the Pacific and from the Indian Ocean to the Arctic that were living under socialism or communism, where it was not possible to trade and not possible for entrepreneurs to get rich and they have been transformed. -David Richards

Transformed with of course this caveat; unless people lose faith in this new theology of capitalism and establish either unions or press their governments to challenge social inequities. Even medical costs around the world are posed as a challenge to contemporary capitalism. These market oriented policies argue that an egalitarian approach to healthcare is unaffordable and export the notion that healthcare is a business and not a right. It seems listening to these ideologues, that their interpretation of original intent goes far beyond Supreme Court decisions. At the heart of their argument is an internationalist ideology at odds with any established global consensus. Of course, the true answer is a strong and healthy middle class that doesn't believe in underselling each other.

This ideology claimed you could lower interest rates to 40-year lows without concern for inflation and unload trillions of complex derivatives backed with Mac-house loans throughout the globe. Now that doubt has set in, spin-wizards, politicians and faith based capitalists are turning up the chorus to slash interest rates even further to hide the fact that trillions in illusionary wealth has vanished.

Is it safe?

Like many, I did some volunteer work during the last presidential election. I passed out campaign literature in a small neighborhood far away from ground zero. Each volunteer was given a list of registered democrats and told to only attach the flyer on the homes whose addresses were on the list. The neighborhood was much like the one I had grown up in and had the signs that outsourcing had not been kind to the lower middle class. Since it was a workday most were out. The people I met were all friendly and exchanged the brief remarks one might expect during a campaign. The flyer which I attached to the doors or handed to the occupants was, like the democratic candidate, overly wordy and a chore to explain.

About halfway through my list a truck appeared. It was a pick-up truck and several young teenagers sat on the open back on stacks of campaign flyers. As the truck stopped several of the volunteers jumped out and began to attach their flyers to the homes. Within a short time all the doors in the neighborhood had a flyer attached which read clearly from the sidewalks. "Keep your neighborhood safe. Re-elect George Bush". Well I thought, that was easy! Just why had they given me this list to follow and why was it so difficult to read the flyers I'd been passing out?

Even now I think about that day and all of the reasons that people of my generation had voted democratic. Clearly time had not been good to the homes which I visited. "Keep your neighborhood safe" well that surely covered a lot of ground. The small neighborhood had lost it's vitality, lawns not trimmed, potholes not filled and homes in need of fresh paint; all signs that bulldozers and shopping malls were in it's future. Ground zero was in a big city which I knew well, knew it had taken the hit on 9/11 yet would vote for the Democrat know matter the name. The last campaign brought back a democratic majority to America by carrying many small neighborhoods like the one I visited that day. Will the next democrat with presidential ambitions have a flyer that can be read from the sidewalks of that neighborhood?

Saturday, September 22, 2007

The Wonder-plane

"Imagine a wonder-plane subjected to an examination of the most elaborate kind, and it is established that, in the heart of the mechanism, there is a fault, almost impossible to detect, which absolutely guarantees that the plane will rise easily into the air, and then, once it is there, will, in the same moment, turn over and plunge earthwards, into a crash..."
- Wyndham Lewis

The fault at the heart of the wonder-plane excerpted above, from The Demon of Progress in the Arts, was that the airplane's designer had not a love of flying, but an insane hatred of flight. President Bush, with the aid of a republican congress, put into top positions people who, like the creator of the wonder-plane, had a record of despising the very government agency they'd been put in charge of administrating. This policy has been further encouraged by presidential candidates, many of whom have been in office themselves for years, persistently running on anti-government platforms.

Concerning the housing crisis, we are asked to believe that the underlying view held by those put in charge to regulate credit and lending, was that, "they were concerned that too much regulation would stifle credit for low-income families". Supply-siders and their faithful allies in 24/7 business news will soon promote a false populism and accuse, as economic elitists and credit snobs, those in the democratic congress investigating the lending policies promoted by this administration.

The demon in any future legislation may paradoxically be the notion of progress itself. Not that the devil is in the details, this we know, but that the engines which propel our economy are now far beyond our control. By the mid-90s the US government, in concert with central bankers could have squeezed out speculative excess leverage and perhaps avoided the dot-com blow-up, instead they voted for increased de-regulation. Charging that government regulations only hurt the very people they as pro-free marketers are trying to help, conservatives will most certainly turn this recent housing crisis into more of their usual antigovernment rhetoric, urging voters to put them into office to further dismantle government regulations or ignore their enforcement; regulations which were put into legislation for our safety.