dailygenre

Where is the Liberal Media?

2008-02-13T04:23:00.000-08:00

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.

Is every economic problem a Nail?

2008-01-23T08:51:00.000-08:00

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.

We Fight them Over There...

2007-10-07T04:06:00.000-07:00

Future Interrupted

2007-09-29T15:40:00.000-07:00

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?

2007-09-29T10:46:00.000-07:00

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?

2007-09-29T10:14:00.000-07:00

The Wonder-plane

2007-09-22T05:10:00.000-07:00

"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.

Boom Simulacra, Boom Simulacra

2007-09-22T05:05:00.000-07:00

"There is no obvious reason why the desired saving rate in the United States should have fallen precipitously over the 1996-2004 period." -Ben Bernanke

Okay we all know that Ben isn't stupid, so is he lying? For years the Fed continuously held interest rates so low that there was little incentive to save. The foolish or greedy were sold on the idea that asset prices were going up a one way street so why even bother to save! The worst of all this is that both parties know this, but one is crazy, yes that would be the republicans. While the other party only has a borrowed car called the market and no ideological key to drive it. Yes it's true, we've built mountains of debt not to create a new society but simply to maintain a purposeless consumptionism. So if Ben is lying what makes you think the presidential candidates aren't?

Once returning to view the area in which I grew up, I was surprised at the small size of both the homes and streets. Walking past the now almost deserted and run down homes I thought about those documentaries where the actual Troy and not it's myth, were small brick ruins no larger than the city blocks of my old neighborhood. It seems that personal memories are inflated, like myths, to capture the spirit and not the actual facts of our past. I also recalled, for no apparent reason, the time I'd watched the inauguration of President Kennedy on a small black & white TV, and my father remarked that hat makers would not like to see John Kennedy appearing hatless on television. True, most do not wear hats today, but mainly I remembered the remark because it was the first time I'd heard it expressed that something we watched on TV might indirectly influence us, beyond the stated purpose of the program.

It's worth keeping in mind that much of the data we receive from the media is assiduously repainted by people who have sold their allegiances to special interests. The current myth being circulated is that subprime mortgages have been good for the U.S. consumer. Many people now believe that subprime mortgage lending helped low-income and minority families become homeowners, and increased the overall home ownership... this is false. It's true that homeownership increased from 65 percent in 1995 to 69 percent in 2006, but the 3 million net new homeowners purchased their homes with conventional, FHA and VA mortgages and not subprime.

The truth is, there's no such thing as a subprime neighborhood. The majority of subprime mortgages were home equity loans made to people who already owned a home, the reasons are varied. Many homeowners wanted to borrow cash to pay off credit card balances or sustain a lifestyle beyond their income level and no doubt some borrowed to pay off medical or education bills. The Tax Reform Act of 1986 had eliminated the tax deductibility of interest, except for mortgages and encouraged decades of reliance on writing off credit card debt by obtaining mortgage refinancing loans. The subprime mortgage market was in fact, created to finance a huge consumer credit binge and was predicated on the continued inflation of home prices.

So, if the subprime debacle spreads to other consumer loans, shouldn't our congress be asking, why did so many people need loans? We're told by this administration that the economy has never been better, that home equity is savings and that a low savings rate is an indication that consumers are confident that they have job security. Whew! All this while not since before the 1929 Depression have the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Fact is, Bush tax cuts formed the housing bubble when an artificial credit policy was created to mask the reality that tax cuts had failed to sustain growth. Free market economists deliberately promoted debt by referring to equity as savings in order to create the impression that the economy was growing.

To make matters worse both NPR and Corporate sponsored news discuss the economy with terms borrowed from this administration's press releases. We never hear the word trade mentioned without free as it's prefix. Though initially I thought this prefixed wording was simply a concession to a media environment where serious discussions are often reduced to nanoseconds, now I think it's likely that by adopting the prefix, free, any challenges to trade policies appear unpatriotic.

We were told that the cause of the Great Depression was the Smoot-Hawley Tariff Act and the free trade agreements were needed to avoid returning to the Great Depression. I have even heard free market economists claim that government imposed higher wages had prolonged the Great Depression. If there is a single lesson to learn from the Great Depression, 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.

By the market crash in 1929, the upper 5% of wealthiest American's controlled 22% of America's wealth, we've past that percentage today. I suppose that Fairy-tales are a little like myths, we often hear the economy described as a Goldilocks economy, not too much inflation and not too much recession. Considering how often we're told to clap our hands and believe in supply-side economics, I suggest we call it the Tinkerbell economy.

The Faux Decade

2007-08-06T05:05:00.000-07:00

Also listed in: Artists For Democratic Progress

I made the last payment on the house today and there'll be nobody home.
- Death of a Salesman, Arthur Miller

faux - adjective: fake, false, faux, imitation, simulated not genuine or real; being an imitation of the genuine article.

Some have titled our decade the Millennial which I suppose makes us all Minnenailists. The Minnenailists sounds a bit too Michael Crichton for my taste, also it doesn't convey the intents of our decade which seems important. I offer the Faux decade, I know it's french but consider it, we've had faux celebrities, faux mansions, faux wealth, faux war and now it seems we had faux financial security.

A prolonged policy of artificially low interest rates to stimulate our economy has, combined with poorly considered debt instruments, created a series of debt financed bubbles, housing being only the latest. So is it really a surprise that wage earners at the bottom and increasingly the middle are struggling to keep their debt afloat. It would be helpful, before considering passage of the proposed aid package on defaulting loan obligations, to ask Senate Banking Committee Chairman, Christopher Dodd, and others a policy question. Is the aid for the 2.2 million sub-prime mortgage borrowers at risk, or the banks who structured the debt obligation. Perhaps Congressman Barney Frank might ask Ben Bernanke in an open committee if he still thinks of home equity as savings.

If attention is to be paid to the tragedy which now affects millions of families suffering because they've bought homes in an overpriced housing bubble with mortgages that they can't afford, it also must be remembered that a bail-out might allow some to keep their home for awhile, but their future equity will be worthless. A faux solution which will only prolong and possibly increase their indebtedness. A government policy of favoring debt over savings cannot continue. Faux laissez faire economics combined with lazy market driven journalists lull the public with a false sense of security, but the contagion sparked by debt induced growth will continue to spread from residential credit risk to manufacturing and into the larger economy.

You can trace the roots of housing debt back to the Tax Reform Act of 1986. This legislation eliminated the tax deductibility of interest except for mortgages. While it increased homeownership for a time, essentially it rolled credit card debt into a tax-sheltered home equity debt. Debt which is coming home because income growth is not keeping up with the growth in debt. Few households can support their debt on one payroll, something common only a few decades back.

Presidential contenders might tell us if it will be the policy of their administration to bail-out bungled packaging in some future collateral debt obligation; particularly if held in a privatized personal medical or retirement plan by the saving-less and debt-burdened consumer. Or reject faux financing and return us to a policy of financial sense... debt is debt, not equity, savings is cash and stocks are, or should be, carefully considered investments; not savings. Policies which would if followed, guarantee that future generations will again live in a home; not a debt laden ATM without FDIC insurance.

Kocking on Housing's Door

2007-08-06T04:53:00.000-07:00

Recently Allen Greenspan supported increased high tech immigration, opining that upper wage immigration would in effect cap high wage earner's salaries by duplicating, within our borders the current trade policy of aligning our low wage worker's income by increasing the availability of a lower cost global workforce. How aligning, i.e. lowering the current wages of Americans, dove-tails with Maestro Greenspan's comment that if home prices go up 10 percent, the subprime mortgage problem will disappear, I will leave to those better versed in Heuristics. But I also recall that former Fed Chairman Alan Greenspan urged homeowners to shift from fixed to floating rate mortgages only months prior to raising interest rates. However, I give Greenspan credit for his candor. Those who blithely inform us that an engineer or medical diagnostician displaced at fifty will learn new careers. As quickly as Tom Friedman might Google the facts for his next book, The World Is Bumpy, are simply avoiding the fact that trade bills they supported had the consequence of lowering wages. Any commitment to debt financing from congress will only further erode upward mobility.

The Maestro's successor, Ben Bernanke, hasn't been very encouraging either. We still hear that wages, a lagging indicator, are targeted by the Federal Reserve as inflationary, that tax-cuts are always good, despite no broad revival in the private sector and the elimination of pay-go, a provision which helped to curb unfunded spending, has increased the federal deficit. The next candidate had better come clean and admit that wages are falling because of a deliberate trade policy of global re-alignment. If Flatlanders like Thomas Friedman were correct and globalization was a win win, ask yourself why were low and no-interest loans needed? If increased education at the higher wage level explains wage disparity, why seek to cap upper income wages thru high tech immigration?  

 Historically, insofar as one wanted to force our politicians into expressing an opinion, those in government will paint just the opposite picture from that which one who follows politics from an ideological position might assume. In an odd reversal of roles, conservatives will excuse the questionable economic behavior of individuals offering that government made them do it; a line of reasoning they so often criticize in liberalism as an evasion of individual responsibility. While liberals, who support the use of government to promote good civil behavior, will seek to guarantee government loans to the very private capital investors who's risky behavior undermined the responsible citizenship that liberals seek to foster. In truth, both government policies and greed are to blame. Congress appropriates hundreds of billions of dollars more than it takes in, doing so, it encourages speculation in risky assets as a hedge against future currency deflation.  All politicians need to do more than make vague promises of better management or mouth slogans like investing in technology is investing in America's future. Education and investing in technology are good things. As May West said; if something is good, more of it is better. But is it really a surprise that many in our society wish we could turn back from free trade. The trade agreements sold to the American people should have had a warning, fasten your seat-belts. Instead free trade was sold as a smooth ride. No one in either party bothered to mention that American wages and currency would need to be re-calibrated. 

 Our economy will continuously be realigned thru free-trade, but does it necessarily follow that it was previously out of alignment? The main reason behind the competitiveness of imported products and increasingly services lies in the mass availability of a lower salaried global work force and the differentials across currencies. Currency traders know that until assets are aligned globally, something which will never happen, some will win and some will lose. Halliburton shows us that tariffs are no longer a problem for the corporations, the next outsourcing will be the corporate multinationals themselves. Bribed in the form of lower or no corporate taxes some of these multi-nationals might make promises to stay in America, but only after a new round of corporate welfare is sold by our politicians as job creation.