Wednesday, December 31, 2008

Roller Coaster Year

From the heights of exuberant irrationality, to omens of the Great Depression, 2008 was a deal-breaking year. As long as the masses kowtowed to the gods of unfettered capitalism they were assured the majority would benefit. Ok, what the ruling class really meant was the majority representing the upper half of society. But still, many prospered: housing values spiked (against all reason, it should be added) providing the ownership class an easy ATM of lots of ready (unearned) cash; the stock market just kept going up keeping those 401k’s rising handsomely; hedge fund managers paid only 15% income tax on their spectacular megamillion dollar earnings – compared to the 35% rate paid by Average Joe Middle-Class - but that was the price of innovation, the ‘good greed’ that kept the money spigot going and exhibited the greatness of capitalism, American style.

But then a well worn quip comes to mind: If something can’t go on forever, it won’t. Think about the nature of a bubble: the bigger it gets, the thinner its walls and likeliness of bursting; when it does reach its limit it has a quick and exciting end and then disappears with hardly a trace.

It was a year of mind-boggling extremes. Crude oil is now barely more than 25% of its July high of $148. In mitigation, there were two special factors that contributed to that very high price. One was the drop in the value of the dollar of about 25% compared to the world’s other major currencies which would lop about $35 off that high price. Speculation was said to have caused another 30%. Minus those two factors the price would have been about $75 per barrel. Still, the speculation part only happened because demand was pushing up against supply.

In any case it was the world’s second oil price shock with a warning of future hard times implicitly included. The first, in 1973, came with a doubling of the price, long lines at the pump and stations running out in front of your very eyes – I was once the last to get filled up. It can’t be emphasized enough that the larger problem wasn’t the spike in prices, it was availability.

The breathtaking crash in oil prices should not lull one into thinking it’s time to rush down to the auto dealer for that giant dream machine. Even if demand remains low for years, the resource is finite and will be drawn down on a daily and yearly basis. Another spike, therefore, is inevitable.

To date, developed countries world wide have been rushing around frantically grasping at straws trying everything they can think of to revive the old economy; essentially to get people to return to their profligate, devil-may-care, heavily-indebted ways. Fortunately for the people the banks have taken their trillions of handouts and hoarded their cash; what little they have used has been expended doling out handsome salaries and bonuses.

This is good: the mindless consumerist ways of the past should die an ignoble death. Unfortunately, the old patterns won’t die easily. The leadership is hoping against hope that numbskull consumerism won’t be totally finished off; that at most it will only be held in abeyance temporarily until a new crop of buyers can be cajoled and manipulated into running up their 28% interest, credit cards to the max.

Ok, I’m being cynical; most people will recognize that is folly and instead get behind frugality and savings until some important change happens in the world. That being the case the one certainty surrounding the present economic crisis is that demand for goods and services will remain dismal, even abysmal. In that case, the only thing that makes sense is to shorten the work week to share what’s available and embrace the deflation that’s inevitable and necessary (and beneficial in the long run) if people are working and earning less.

What’s required is a total rethink of the purpose of economic life and the value of work. What’s needed is a transformation of the concept of Gross National Product (that we must see rise in perpetuity or we tear our hair out in panic) to an accounting of Gross National Health and Happiness.

To that end I propose a two month national holiday in which only emergency and necessary work takes place, which gives people the time to get together and discuss what they want their world to look like, not to mention lets inventories catch up with purchases. This would be organized on neighborhood and local levels with daily meetings and debates on desired futures. Everyone would be eligible for unemployment benefits for that period. All interest payments and accruing interest would drop to zero for that time and there would be a moratorium on foreclosures and credit defaults.

Time to take stock…

Not that I think any of this will happen, but the world still needs its dreamers.

Meanwhile on another topic: Israel is in massacre mode once again using the same tactics that have failed it time after time: Sweet Revenge, it seems clear, trumps all. Next on the blog: being Jewish and relating to Israel.

Friday, December 5, 2008

The Root Cause

What Should Obama Do? The above question, referring to the economic crisis, was posed to me by a friend who often comments, especially lately, on my commentaries. I would have a very difficult time answering that question because what Obama should do is radically different from what I would do.

Nonetheless, there are several areas in which I am in substantial agreement with the President. (My god, what a great relief it is to write about an American President without feeling compelled to be derisive, derogatory, caustic and spiteful.) For sure, massive investment in infrastructure, especially focusing on electric transportation, is something that cries out for happening regardless, so now’s a perfect time to tackle those needs. Increased unemployment benefits, food stamps, assistance to state and local government are obvious responses to the hardship that is/will be felt across a wide spectrum of society. Renegotiation of mortgage loans under foreclosure is another obvious no-brainer (though equally obviously, there can’t be many brains in Washington or it’d already be happening).

There’s an additional factor that desperately needs action that we might agree on, but for different reasons. That is America’s rotten health care system. While we both would concur on the social and ethical reasons for reform, there is an equally important economic reason, which we wouldn’t agree on; that is, the need for job flexibility and short work weeks.

Obama has totally bought into corporate-oriented conventional wisdom that requires manic pursuit of a return to growth by any means possible – bailouts, borrowing, income tax cuts, lower interest rates. Any straw in the wind is being grasped to try to rescue and reinvigorate that fundamentally destructive and bankrupt world view.

People are cutting back on consumption because they have less to spend based on declining wealth – falling asset values - or loss of employment or because they wisely understand the need to save for trying times ahead. Economic activity is thus declining sharply which is good for the world, bad for the old economy. If unemployment spikes as a result and you believe, as I do, that contraction is a good idea, then the only solution is sharing the available work. Stimulus packages will keep the economy from crumbling but won’t bring full employment.

Besides, people need to work less as a matter of principle – more leisure, more time for social life, less money for consumption. This can not happen as long as America has an employer-based health care system which encourages employers to work their staffs longer hours. Thus, single-payer health care is an absolute prerequisite for the purpose of slowing life down and improving its quality. A single-payer bill was submitted to Congress with 93 co-signers but hasn’t received a single hearing so don’t hold your breath; nobody in power wants to upset the insurance, pharmaceutical and health care industries.

The US is projected to have a trillion dollar budget deficit this year as a result of reduced revenues because of the downturn and the cost of stimulus packages and bailouts. The addition to the national debt as a result should not be taken lightly: these are perilous times to take on massive new debts. We are hearing a lot of talk lately of the renowned economist of the 30’s, John Maynard Keynes. In response to Hoover cutting back on government spending to reflect a downturn in revenues caused by the 1929 economic crash, he suggested that government should do the opposite and increase spending to get the economy moving again. He argued that deficits could be made up later on upon recovery.

The problem with invoking him now is that he advocated building up surpluses during good times to balance the deficits of the bad whereas we are beginning this economic meltdown after a string of massive deficits. It can be argued that those large government deficits, along with obscene levels of personal debt are what had kept the economy from stagnation since the start of the Bush disaster. America was essentially on a compulsive borrowing binge.

Therefore, I’m totally opposed to any form of tax breaks except those relating to the least fortunate members of society. The average doctor earns $265,000 per year, so that nearly half would receive a tax break under Obama’s tax cut plans for those earning less than $250,000. They undoubtedly have everything they truly need in life so whatever they would spend the money on would be bad for the world and should not be produced.

As I’ve ranted and railed about ad nauseum recently, the last thing we need to do is rescue the old economy of profligacy, waste and mindless debt-fueled consumption. To that end, the wealthy and corporations should absolutely be reined in.

While I wouldn’t advocate a return to the 91% personal income tax rate of the fifties and sixties, taxes on the wealthiest should be raised to at least 50 or 60%, not only to raise money but also to curb unnecessary consumption. Corporate tax rates should also return to rates of the past sufficient to restore the fifty-fifty ratio of income taxes once paid by corporations and individuals.

Corporations are creatures of the state and must be tightly supervised. For more than a century they have enjoyed the privileges of personhood with none of the responsibilities. When a person commits a crime they are taken out of circulation, when a corporation does, they are slapped with a small fine and thus encouraged to be on their merry thieving ways.

There are several ways the corporations have of controlling the American agenda. The most important and insidious is advertising; it is the root of corporate evil. It’s worth reiterating the stunning conclusion of a study done on the effects of advertising on pre-school 3 to 5-year-old kids. When served mcdonald’s burgers in plain and company wrappers, 80% said the burger in the corporate-logoed wrapper tasted better. America’s children are being educated for the corporate bottom line before their personal health. For the need for luxuries before the health of the planet. Americans are told it is their duty to buy things they don’t need and often can’t afford, thus building mountains of debt, for the sake of the economy.

I would remove advertising from deductible business expenses, except for a reasonable amount needed by a small local business, maybe $25,000 per year. People don’t need to be encouraged to consume, it’s already a natural response: old things wear out, new innovations come on the market. People will continue to consume without the encouragement of advertising, just not so much of the mindless sort. Let corporations compete based on producing quality instead of slick marketing.

Slowing consumption requires reining in credit. Even as Citigroup is showered with $320 billion in public welfare, it charges nearly 30% interest on credit card debt, for many people making it difficult to ever clear their debt. Thanks to a corporate funded Congress, bankruptcy laws were changed recently to make it harder to erase those debts, even putting credit cards on an equal footing with child support.

Credit has its importance; easy credit is a mistake. People need to be encouraged to save. I got turned off to credit with my first experience. I bought an article - don’t remember what, it was nearly 50 years ago – on a six month payment plan. After 2 months the article broke, but I had to keep paying on it and I thought, this is nuts. In the fifties, you could buy a car with 20% down and two years to pay. If you had to sell before the term was up, you had some equity in the vehicle. Today, with no down and 7 years to pay, you have to take large sums out of your pocket to sell within the first two years: that is crazy.

Tightening credit is a good idea. Let homebuyers bring a 20% down payment with them and let the government subsidize mortgages for the bottom half of society. Anybody with a solid history of work and responsibility should have access to their own home. In recent years they’ve been excluded from home ownership by artificially high prices. Prices which only could’ve risen with the help of ‘innovative’ subprime mortgages.

The Root Cause of the current economic meltdown is too much money in the hands of the wealthy and powerful. They have time on their hands, they are obsessed with making money and often have no scruples. With money to burn they have created an economic bubble, a Ponzi scheme of epic proportions; one that is bringing hardship to people all over the world.

Therefore, excessive wealth must be curbed and all forms of speculation taxed. Even a small stock transaction tax would discourage short term speculation. Let investment be for something more than pursuit of a quick buck; something that embodies lasting value. International currency transactions should be taxed and the proceeds used for development aid to the world’s poor.

Unfortunately, Obama’s picks for his economic team do not leave much room for confidence since they are uniformly on the corporate bailout side. They helped to create the deregulation that is responsible for the current crisis and most likely have no other idea how to fix the system than repeat the mistakes of the past.

Repeating the mistakes of the past will only dig the hole deeper with debt that will have to be paid eventually, and paid with even more pain than it would take to start to work it down now.

I realize my economic prescription involves a severe deflation with serious consequences, but, I would argue, no more serious than the impacts of propping up the old economy. At least, we would come out with a sustainable, well-being oriented lifestyle designed to benefit the majority who’ve been left out in these past decades of conservative trickle-down economic thinking.

Monday, December 1, 2008

Bailout Madness

I’ve been feeling the need to write about something besides the financial bailout – the strangulation of Gaza, the mass fascist coup attempt in Thailand, the carnage in Mumbai – but the bailout money has been flowing so fast and in such fantastical amounts, it’s almost beyond superlatives and comprehension.

I titled one of these commentaries, “Cure Worse Than Disease” way back when we were talking less than a trillion dollars. Now by one reckoning we are up to $4.2 trillion, by another nearly $8 trillion. In addition to the recent well publicized bails of Citigroup to the tune of $320 billion and another $800 billion to a wide array of corporations in need of a handout, there’s the small matter of $2+ trillion in loans made to financial institutions by the Fed whose recipients it is trying to keep secret, else, the thinking goes, precipitate runs that would break them. Bloomberg is suing under the Freedom of Information Act to try to force transparency.

Bailout protagonists, which include just about everybody in government, business and the punditocracy, will explain the money is all about restoring confidence and is in the form of equity and investments so when the economy gets back on track, i.e., people return to their primary role as consumers and head back to the auto dealers in droves to buy the latest model, honcho-sized SUV’s - amongst other hallmarks of the consumption economy - and the government will get its/our money back.

The first point to consider is that the Fed has printed up or borrowed trillions of dollars to help its friends totally on its own, with no oversight from any level of the US government. The second ponderable is when it will all end. What if the job needs another five or ten trillion? And what if, and this is the real corker, people don’t go back to their stupid, heavily-indebted mindless-consumerist ways?

We are assured that the consequences of not acting to stem this massive economic breakdown would be staggering, mind boggling, catastrophic - to that you can add your choice of another ten or so similar words expressing disaster of epic proportions.

However, the magnitude of the resources going into this corporate feeding frenzy at the public coffers is so overwhelming, we are entering a lose-lose situation. If the money does in fact does succeed in keeping the banking sector afloat, it’ll come at a nearly unbearable cost to society.

The third question, which is only being asked by the those of us on the radical fringe: Why do we want to prop up and save a rotten system; one that’s dedicated to consumption in a world being overtaxed by unconscious, unsustainable consumption?

In any case the old ways are finished. It’ll be years before people have the theoretical ability to return to their mania for consumption and by then, if the economy does start to pickup, resource depletion and rising prices will end forever the possibility of that numbskull lifestyle.

This actually is a perfect time for those of us who recognize the world’s desperate need for transformational times, for there truly is a crisis ahead of us that dwarfs the current economic one. We are talking climate change, of course. We have received a one-off reprieve in the form of the economic breakdown: The world desperately needs to reduce all forms of resource consumption to avoid the worst of global warming.

We should be delighting in the drop in consumption and using the vast resources that are now going into beating the dying horse of the old economy and using them instead to build the new. In the act of emptying the resource barrel to try to prop up the old we are precluding the new, a change to a sustainable economy of well-being.

Personally, I don’t take delight in calamity as it causes wrenching difficulties for the bewildered and innocent; nonetheless, I think we can all appreciate its cathartic and catalytic powers. Ok, maybe I do take a little delight, but not because I like to see people suffer, but rather the belief that macro political and social changes seldom happen without the force of great events.

It’s hard to say if we still have the opportunity to properly respond and adapt to this calamity: the door is closing fast.

Saturday, November 15, 2008

Fat Cats Belly Up to the Bailout Bar Again

Now it’s American Insurance Group, worlds largest insurance company, back at the Bailout Bar to knock down a few more for the road. Altogether, $150 billion will be ‘invested’ in another craven, irresponsible, corporate welfare cheat.

Just for a little perspective, $23 billion would end hunger in the world. We’re always too poor to lay out the bucks to rescue dispensable little people from hunger, the ultimate deprivation, but always have the wherewithal to help mendacious corporations in their hour of need.

I don’t know about anybody else out there but if I were going to shell out $150 billion dollars of my hard earned dough, I’d want to have a say in how that money was used. As of now there are, in effect, no hard-wired restrictions on how the bailout money is being spent. Some recipient banks are using their freebies to purchase other banks, others are buying treasury bills when the bailout money was supposed to go for loaning. A full 10% of the money will wind up going for the same immense bonuses to top execs as before they lined up for the government dole.

Now General Motors is taking its turn showing up at congress with its begging bowl. If any corporation were allowed to fail it should be GM. Car manufacturing in America should continue but GM should be left to an ignominious death. Not saying Ford and Chrysler are that much better, but GM especially deserves the axe for the burial of its electric car, the EV1. I won’t repeat the whole sordid story; suffice to say that GM went through great lengths to get the few electric cars it did produce – by California government mandate – off the road, including refusing money from leaseholders who, at the end of the leases, begged GM to let them buy them.

Along with the other car companies, the labor unions and members of congress from auto producing states, they lobbied hard to prevent increased mileage standards. As a result, vehicles kept getting bigger and more destructive of the earth in the process. They ignored more efficient hybrid technologies for as long as they could, while concentrating on designing new gas-guzzling behemoths. They blew off trying to build better quality, longer lasting cars so they could concentrate on bigger profits and ever more insane compensation levels for top management.

Why is it a Japanese car will still be going strong at 200,000 miles while an American car is ready for the scrap heap at 150,000? Is it because American CEO’s are paid so much more than their Japanese counterparts? Japanese CEO’s earn about 11 times the average pay of their workers while American CEO’s earn upwards of 400 times.

Without a change in corporate culture and governance, the bailout babies will revert to the same stupid, greedy focus on immediate profits that caused them to falter in the first place. At the present time, corporations are forbidden to take the needs of society into account. They are literally prohibited from being good corporate citizens if that action impacts on shareholder value.

Take the case of Ben and Jerry’s. The two entrepreneurs wanted to earn a profit and manufacture a quality product as most firms would, but they also felt strongly about creating a healthy workplace for their employees and a cooperative atmosphere with their suppliers: one happy family. As a private company this was no problem, Ben and Jerry could run it as they saw fit.

But then grow or die reared its ugly head. You know, the idea, which totally defies logic, that a company that isn’t growing must be dying. What is so hard to comprehend about a company earning the same healthy profit year after year? But B and J got caught up in the growth mantra and decided becoming a public company would allow them to expand their products and good ideas to a wider sphere.

Big mistake. Once you have stockholders their well-being is the only consideration you are allowed: it’s not written into law, you’ll just get sued if you don’t put them first. Once B and J was public a multinational pounced with an offer to buy the company that could not be refused on any altruistic grounds else the certainty of that aforementioned suit.

The lamest of all presidential ducks has now taken to defending capitalism itself, pleading with the world not to try to regulate too much. Somehow the regurgitant coming out of his mouth is sounding a little hollow. If unbridled capitalism is so great, why not follow its own precepts and let poorly run companies die?

The big three automakers should be allowed to go bankrupt.

The hard assets could then be purchased by the government for creating new companies with the common good written into their charters. Once back on their feet, shares could be sold to the public but the government should keep a controlling interest. Capitalist purists will tell you that the government can’t effectively run a giant corporation, but what could possibly be worse than what current management has done?

It is sickening and disheartening seeing trillions of dollars spent feeding the wealthy and superwealthy while there is so much dire need in the world; it is truly painful to watch. Worse yet is knowing that money will not meet its objectives. The world economy is going down regardless; all that those trillions will do is let the fat cats breathe a little easier in the knowledge that their exorbitant compensation packages are intact.

Ultimately, it makes no sense whatever to provide that largesse to the very same people following the same economic beliefs that caused the problem in the first place.

Saturday, November 8, 2008

Bush Nightmare Almost Over

Though his misunderestimated legacy will live on to haunt the American polity for a painfully long time and we’ll no longer find grim humor in his stupendous ineptitude and mendacity, his Reign of Error is thankfully nearly over.

Our man Obama has triumphed. The popular vote was closer than I expected but the electoral vote was so lopsided no amount of Repug voter suppression or thievery could’ve changed the outcome.

And history was made with America electing its first multi-racial president. I phrased it that way since in fact, he’s not really black anymore than he’s white. Being any part black is considered a taint, which goes to show how far there still is to go regarding race. If you contrast American blacks with Africans, it’s clear that the vast majority of African-Americans have a good deal of white, or other races, mixed in.

As someone who picketed Woolworth’s in 1960 because of its segregated southern lunch counters, to see a person of color in the White House is breathtaking. Maybe it should now be painted a nice shade of tan and called the Off White House.

Interestingly, in Thailand, which is about 15% Chinese, people of mixed heritage refer to themselves as Chinese as a matter of preference.

At any rate, our man of the moment will have his work cut out for him. His biggest challenge will be to keep people from losing their faith when things don’t magically turn around overnight. FDR brought hope to America, not to mention make-work jobs and food on the table, but the economy remained in the doldrums for years.

A president with heart can keep people going through extremely difficult times, hopefully transformational times, but will not be able to resurrect the endless growth paradigm. No amount of fiscal stimulus, whether in tax cuts, infrastructure investment or corporate welfare, is going to bring back the old free wheeling economy. (By the time it might be theoretically possible again, four or five years down the line, the world will be entering resource scarcity mode.)

Nor should it. Starting back in the 1950’s and ‘60’s when mechanization of industry – then called automation – was allowing businesses to increase production with fewer workers, there was talk of people working less and having more time for family, community, life. That did not sit well with the business community since it meant workers would also have less income and reduced ability to consume.

Instead of a more social world where people worked less and had more time for leisure, working hours lengthened to the point where Americans recently were working 200 more hours per year than back in the ‘70’s. This movement came partly as a result of trickle down economic policy. As mentioned recently, putting a lot of money in the hands of the wealthy results in the bidding up of prices for many necessities, especially housing. As costs rise, average Joe’s are forced to work more to get by. In the midst of all the recent booms, large numbers of people were forced to work more than one job just to survive and most families had to have multiple wage earners.

Of course, it wasn’t just survival; we also entered consumption mode, later to intensify into hyper-consumption. Much of the extra work went for four dollar lattes, 60 inch TV’s and the many other accouterments of the ‘good life’. If you didn’t have the ready cash for all those good things, you could always borrow it on your credit card (at very high interest rates). With the people at the top having so much surplus money to ‘invest’, they made it easy for people to get into debt.

Rather than engaging in frantic and futile efforts to resuscitate the old economy - and engendering huge amounts of new debt in the process - we need to create a new economy. We will need to spend heavily to insure that necessities are provided for - homes to live in, food to eat - but well-being needs to replace consumption as the primary goal. To that end, the work week needs to be shortened to spread scarce jobs, as well as provide the leisure time that Americans have been so sorely lacking. Europeans, in contrast, are guaranteed four weeks paid vacation per year with many countries mandating more.

That change would be impossible without universal health care that is provided outside the current employer-based system. The current system encourages the opposite - fewer employees working increased hours. With the government taking health care costs out of the equation, people and jobs would both be more flexible. Americans could go on about working to live rather than living to work.

Of course, I’m being unbelievably, unrealistically utopian. Have you ever heard a Dem, let alone a Repug, speak of building a stable, sustainable, light-on-the-earth economy? Of shrinking the economic sphere so people could work less and enjoy life more? Unthinkable. Yet, it’s the only way that makes sense.

One of the greatest times of my life came when I had the least money. I did the authentic hippie commune thing back in the early ‘70’s. At one point I calculated that 35 of us were living on about $600 per month, in total. We had no electricity or flush toilets, very limited piped water, all cooking and heating was from wood we had gathered. We bought 50 lb. sacks of rice, kerosene by the barrel for our lamps: We lived simply.

Yet it was also one of the healthiest, happiest, easiest and most enriching times of my life. We never went hungry, though often didn’t have all the variety we would’ve wanted. Meanwhile, our diet was probably a lot healthier than one we would’ve preferred: you know, brown rice and veggies most of the time.

We had no electricity for stereos or TV’s so we had to make our own music. We conversed, meditated, communed with nature to fill our time. I was apprehensive about living without modern conveniences before going to live there. The realization of how unimportant those things are was almost instantaneous upon arrival.

We lived in a beautiful spot. It wasn’t special compared to a lot of places, but we did have forests, gardens, clean fresh air, a mountain view, a swimming hole with clear, clean mountain water for those hot summer days; really, all one could ask for.

We had work to do - but not jobs, except for occasional off site work like fire fighting and brush clearing - and lots of leisure time. It took very little actual work to keep the community going, no more than 10 or 15 hours per week per adult.

I’m not saying everyone should go primitive as we did. Only that living on a lot less doesn’t necessarily mean living less. Truly, no amount of money could’ve bought a healthier, more enlightened lifestyle.

Our goal needs to be well-being, not to get the economy back on track. Growth is not what we want unless it’s intellectual, social, spiritual. The more money spent trying to prime the old economy for a renewed growth cycle, the harder and longer the transition will be to the new way of life.

Sunday, November 2, 2008

Political Climate Change

Conventional Wisdom will insist that launching universal health care in America is out of the question in light of the financial meltdown. On the contrary, this is not only a good time to do it but society will literally have no choice.

Fifteen percent of Americans currently lack health insurance, another 30% are underinsured - large numbers of people who’ve been declaring bankruptcy for medical reasons actually had insurance but were buried in co-pays. A friend who came down with breast cancer who had reasonably good insurance had to come up $18,000 in co-pays for her treatments.

When large numbers of people become unemployed they will also lose their medical coverage. Concurrently, many employers, taking drastic measures to try to cut costs and remain in business, will reduce or eliminate insurance.

The current system will begin to go on life support, leading to a total breakdown. Government rescue will be imperative; action will also be essential from the standpoint of needing to cut costs on a systemwide basis. In spite of the many uninsured and underinsured in the states, per capita medical costs are consistently higher than in Europe; nearly double that of the UK. The current system will simply become unaffordable.

Change will also come from falling property prices: after the dust settles from the financial crash, that will turn out to be blessing for the bottom half of society. Once people have eaten their losses, both imaginary – when a way overpriced property goes down to a rational level it feels like a loss to the individual involved but it’s really just a reality check - and real – people are loosing their homes - housing will become much more affordable. In the process of throwing money at the wealthy - the economic imperative of the last 30 years - prices of many things have gone up, but especially in housing. Many Americans have been struggling to pay the rent for years; falling prices will provide some respite.

It was recently said that housing is still 10 to 15% overpriced, but that was based on the heady levels of artificially inflated neo-con economic irrationality. Thought of in the context of very high unemployment and general economic hardship, prices have to go down a lot more than that.

The punditry talks about the inevitability of boom and bust cycles: They are not inevitable. Ups and downs can not be avoided, but booms and busts are only part of the picture because of warped economic paradigms. Were subprime mortgages inevitable? Only because public policy made them so. If prevailing economic wisdom dictates that a government must do all in its power to maintain growth then there will certainly be extreme ups and downs.

The more frantically a government tries to push the economy upward, the more likely a serious crash on the downside, even though it may take a while. And it’s not like there’s no financial or monetary consequence when vast sums of money are expended on (ultimately futile) rescue and stimulus plans.

On the other hand, if the goal is long term stability and sustainability in a context of minimum income disparity (and no superwealthy) where every citizen has work to do and a home to live in, then there’ll never be another crash. The problem revolves around manic desire for growth.

Take Japan and Europe, for instance: There is constant lament over the very low growth rates they’ve been experiencing for a long time. But look more closely and you see mature and aging societies with stable or sometimes even declining populations.

Those kinds of societies have no reason to grow. Older people need and consume less with the exception of medical care. There’s no need to build a lot of new residential, commercial or government buildings in a stable population, only upkeep and a small amount of replacement is necessary. Infrastructure is largely in place, only maintenance is needed.

There is absolutely no reason for them to grow unless that growth involves societal advancements like renewable energy and conservation, more efficient transport, better educational and cultural opportunities; things that actually improve life and the environment. America needs some growth to provide for increasing population - entirely the result of immigration - and possibly to correct for extreme disparity in wealth, but to borrow and spend, to consume for its own sake - like building giant houses in the exurbs and manufacturing monster SUV’s to access those far flung mcmansions - is totally unnecessary, destructive and stupid.

Most important of all, now is not the time to pull back on tackling climate change because we somehow now can’t afford to. The extremely modest goals the world has set for itself will already have no impact whatever on the problem. They are only a start on a change of consciousness that will hopefully evolve into real progress on the matter; a change in thinking that might actually someday save the planet. The work that needs to be done to tackle the problem of global warming is the only kind of growth that makes sense.

The world cannot continue to increase its population and consumption and still survive. Fixation on growth must change. It is a theoretical impossibility that is nonetheless embraced by nearly all Serious thinkers and Important people.

The worldwide economic crash provides the opportunity to settle into a new, sustainable, lightly-living lifestyle; however, I am not optimistic. No matter how badly the Establishment has fucked up the world, they will insist that their way is the only way to right it; obviously a ridiculously inane conclusion.

Many people over the world are going to suffer tremendously from this man-made disaster, we can only hope against hope it isn’t totally in vain.

It may even be possible that the poor, who have not existed in American political discourse since Reagan, will actually have their needs considered again. If that does happen it’ll only be because a lot of formerly middle class people find themselves heading towards the bottom.

Meanwhile we can try to suspend our disbelief that the feckless, spineless, close to worthless Democratic Party will somehow find the will to do at least some permanent good – like universal health care, regulation of the financial sector and building of sorely needed infrastructure. The Dems haven’t had a leader with the guts to stand for anything for a long time. Will Obama stand up to the plate, play that role, come through for America and the world?

Sunday, October 26, 2008

Economic Meltdown Next

Alan Greenspan now says nobody could’ve predicted the scale of the current banking meltdown. Meanwhile, the Maestro, as he once was called, who guided the economy with a “magic touch” during his long tenure blithely ignored every indicator that trouble was brewing. He is correct, of course; nothing like this has happened since 1929, and moreover, probably wouldn’t have happened if the banking reforms put into place in response to that calamity hadn’t been eviscerated ten years ago under Clinton’s watch.

For certain, everybody who didn’t have a personal vested interest in being optimistic, was pointing out extreme imbalances and deficiencies in the economy that were likely to have serious, if not necessarily catastrophic, consequences. People involved in reporting on and opining about the business news invariably own stocks and are totally sold into the conventional wisdom so unconsciously project optimism in their reporting. You know: “All we need is a few trillion dollars to bail out the banks and they’ll start trusting each other and then they’ll start lending as before and people will be borrowing just as in the past and in a couple of quarters the world economy will be back on track.”

They also assure us that we can’t have another Great Depression because we ‘responded’ quickly with huge bailouts and because there are now programs in place to protect individuals from the extreme deprivations of the thirties. As to the latter: Thank God for small miracles; people will at least have something, small as it may be – I get $600 month in Social Security; how far will that get you in America? - to help negotiate the hard times.

The bailout may have led bankers to feel a lot better about themselves and the security of their exorbitant pay, but even if it was enough to get them loaning money again, not many will want to borrow.

Let’s face it, anybody with half a working brain cell who isn’t part of the wealthy elite, is hoarding their resources, saving for a rainy day, learning how to get by on less (if not yet, then soon). That being the case, industrial production will plummet, housing construction will grind to a halt, any business that depends on discretionary spending - restaurants, etc – will see their profit margins reduced to the bone, governments will be starved for revenue and be forced to cut back on services… you get the picture.

There’s no going back to bubble-like days of prosperity predicated on figmentary money created out of whole cloth or based on borrowing from the future. Recent precipitous falls on world stock markets show that investors are catching on that this is not a temporary detour on a strong upward economic path; a mere glitch in the endless growth paradigm.

This is going to hurt, as well it should. Americans, amongst all the world’s rich peoples, have been living beyond their means and the ability of the earth to provide for their insatiable appetites. It had to come to an end. For sure, it would’ve been a lot smarter and easier and more sensible to gradually transition to a more stable, sustainable lifestyle, but there’s nothing in the world, that is, no amount of reason or logic, that could’ve stopped this juggernaut from destroying itself in an orgy of excessiveness and exuberant irrationality.

Thankfully the entire neo-con, unfettered free market, trickle down economic regime is crashing and burning after a long and bruising binge… while also leaving a hangover that has created a monumental headache for the world.

Europe is closer to getting the message than the US. When the former bought stakes in tottering banks they took voting power, in some cases, voting control of the institutions. America purposely took no voting rights: I guess that would be too much like socialism to take control over institutions that you’ve just showered with Joe Sixpack’s money. Bush and the Democratic Congress wanted to preserve the ‘Free Market’.

The American economy is going to languish in the doldrums for a long time. I’m hoping against hope it’ll emerge in an entirely new and sustainable context. With oil prices hitting rock bottom this is our last chance to convert at a reasonable cost. Petroleum won’t stay cheap for long. World population is growing along with their aspirations. If China’s growth slows to half last year’s pace there’ll still be millions of new cars on their roads every year. Electricity demand in lowly Cambodia, currently supplied 90% by fossil fuel, is growing at 25% a year in spite of 80% of its people not even being connected yet.

There’ll need to be massive New Deal type public works programs and welfare – that dirty word - for the destitute and people simply experiencing hard times. There’ll need to be a sharing of available private-sector jobs else unemployment really will approach Depression era levels. There’ll need to be publicly financed mortgages for low income people. And there’ll need to be higher taxes on everyone but the poorest else public debt become an unsustainable burden and public works be impossible to finance. Let’s not forget that America experienced some of its most prosperous times during the fifties and sixties when income tax rates on the wealthy stood at 91%.

As most of you reading this I’m hopeful that Obama will rise to the occasion. That he will bring the country together in a way that takes the hardest edge off of hardscrabble times. In no manner will it be easy, but at least he won’t emulate Hoover saying giving food to hungry Americans will hurt their self-reliance.

For certain, dynamic and fascinating times are ahead.

Wednesday, October 15, 2008

Slavering at the Public Coffers

In the latest twist to the sordid saga of hat-in-hand bankers slavering at the public coffers, central banks in England, France and Germany, for starters, are now guaranteeing loans between banks. According to conventional economic wisdom - the very same ‘wisdom’ that got us into this mess, I might add – if banks can’t lend to each other, they won’t have the money to lend to Average Joe, or his corner candy store, so he and small business, will, in turn, suffer.

There’s good reason they won’t lend to each other; they’re deathly afraid of not getting paid back since they know how many of their compatriots are teetering at the brink of the chasm. If that’s the case, and we undoubtedly know it is, then the governments involved may be liable for immense losses. This also may encourage the banks - not noted for being prudent or responsible - to borrow recklessly, knowing Joe will foot the bill in case of default.

This all brings me back to the question: Then what the hell are they doing with my deposits? That isn’t money to lend? Well, best I can make of it, econ 101 style, is that to maximize profits money has to be constantly in use; no idle times are allowed. As a result, capital needs are calculated down to the minute, so they essentially need emergency loans the get through many a day. They may also have more business than they have capital for so borrow from other banks to maximize their portfolios.

So what if they can’t lend to each other. That will not have any impact on their solvency, only their profitability. They simply won’t have as much to lend and people will have to wait a bit or defer their borrowing. All of which brings this down to the second question: What’s the big deal if Joe has to save the money to buy that 60” digital TV? Or wait till he has a substantial down payment before he can buy a new car? Is that suffering? He’s already drowning in tidal waves of high interest, credit card debt. And it does, after all, cost a lot more when bought on credit.

As for small business, banks are not the only source of working capital. It would seem to me that anyone with a viable company ought to be able to get private short-term money to tide them over cash flow problems. If they have to cut back temporarily, well, nearly everybody will so no great hardship.

The endless growth machine is not going to be jump-started or even restarted and besides, it is long past time for a paradigm shift. The world is drowning in pollution from excessive consumption. It wouldn’t hurt a bit for Americans, for only one nation of many, to retrench and start saving for the things they want.

Ah but the frantic scrambling on the part of governments to bail the banks is also designed to “calm” and “provide stability” to the markets. Now that a majority of Americans, when Investment Retirement Accounts are included, own stocks, it becomes a government priority to prop up the stock markets.

But stock markets, however much we hope and pray and cross our fingers that they will always go up, are not supposed to be propped up. They are supposed to represent true value. In an overpriced market we should be applauding, and playing happy music when markets go down, not when they go up.

Latest word is the US treasury is going to take stakes in nine major US banks including the likes of Citibank and Bank of America. The list also includes Morgan Stanley, et al, latter day Mom and Pop banks which in their previous incarnation were investment banks designed exclusively to help the wealthy play with their money. Once they realized how bankrupt they were they begged the Fed to make them just like your average, corner, small town bank and thus be able to join the banker bread line when the public money started to flow.

It should be mentioned that banks were not allowed to cross state borders as late as the sixties. Moreover, banks in Manhattan were not even allowed in other parts of New York state. It was a mistake to let banks expand so exponentially and become so large. Local banks will survive this crisis in far better shape than their multinational counterparts. Maybe once those giant banks are nationalized they should be broken up into smaller units; in this case, able to serve the real needs of the economy rather than concentrate on lascivious speculation.

Once you go down the path of nationalizing banks you also own the bank’s bad debts. In this case, we could be talking about liabilities of catastrophic proportions. As mentioned previously, while the total housing market totals about 10 trillion dollars, the market in derivatives based on that market is 45 trillion dollars. Derivates have no direct connection to the real world they are based on, they are simply bets on what the real world will do. And housing is only a small part of the derivatives market.

Liabilities to the public could be nation bankrupting, as is happening in Iceland, whose banks brought in large amounts of money from around the world to bet on these toxic and inscrutable financial instruments.

There is one good that can come of public ownership of the banks: The public can dictate lending policy. If it deems low income housing important, it’ll get built. Today that money may well go to financing sweat shops in China.

The silver lining, however, will come at a very high price.

Monday, October 13, 2008

The Financial World is Going to Shit Before Our Very Eyes

And it’s all happening so fast. A spark ignited in the US has turned into a world-engulfing wildfire. I was surprised at the ferocity at which it attacked European banks, who I assumed were less insanely greedy while subject to greater public restraint, but it seems they either bought into America’s toxic assets directly or copied the same shenanigans. They’ve also been hit with declining property markets – 16 of the world’s developed nations still have overvalued real estate – resulting in far less equity than they had assumed and the need to hoard resources.

Rising property values create a lot of ready cash. Until the financial system recently began to unravel, largely from declining real estate values, Americans kept their economy humming by borrowing vast amounts of cash against their properties – many of which now have mortgages greater than their house’s value. It would seem totally legitimate to borrow against equity in order to make long-lasting improvements to the house, but a lot of people essentially took out 30 year mortgages for purchases like luxury vehicles that they expected to have a less than a decade lifespan. About five percent of all property changes hands each year so a lot of money is also created simply through a rising market.

Well now, that money spigot has completely dried up. And you can bet that even when the mortgage money does starts to flow again, borrowers will have to come up with hefty down payments; which is exactly as it should be. Obviously, it has ominous portents for the real economy, since Americans will have to live within their means and actually save to be able to consume. While some will say this retrenchment couldn’t come at a worse time, it’s never fun to pay off old debts or cut back on the “Good Life”.

One way or another recession, or the scary “d” word, depression is inevitable. The capitalists are manically, frantically rushing around trying to save their asses with public money, but while they may stave off paralysis or bankruptcy in the banking system, nothing is going to change the fundamentals: the old economy is screwed and finished.

The credit system is currently frozen, banks aren’t lending to each other because they don’t trust each other, they’re afraid they won’t be paid back. However, after six months maybe a year, the money will start to move again and a new economy created from the ashes of the old. Certainly, there’s no way it can ever be the same, at least not for generations.

Thankfully, the US Treasury is moving toward purchasing stakes in troubled banks, as the UK is planning to do, rather than carelessly throwing money at them. As long as they are in some way nationalized people will not fear for their deposits. That should keep most from going under which in the end would cost a lot more than keeping them alive.

Every day it seems a new rescue plan is announced which is supposed to restore confidence in the markets. Each one is touted as the magic bullet that will bring stability and the speedy return of growth and prosperity. Forget it: pure wishful thinking.

The one thing, above all, that needs to change is the endless growth mindset. The entire world economic system is in thrall to a theoretical impossibility. It is unadulterated fantasy which cannot possibly outlive reality. By any sustainable standard, people in the developed world, but especially Americans, have been consuming far too much. Now’s the perfect opportunity to give the planet a rest, to develop an economic philosophy capable of providing a comfortable, if much less profligate, lifestyle.

While I applaud this calamitous economic correction, I don’t in any way wish to downplay its significance for the lower rungs of society: this is going to hurt. But the poor have always suffered, so they will take it in their stride. They haven’t even had more than the barest representation in government for a long time: What politician would ever propose a War on Poverty today? Yet that will be their biggest challenge in the coming years. Increased unemployment benefits, food stamps, general welfare, make work programs: the new New Deal is inevitable.

Meanwhile, even according to a former community organizer, soon to be our next president, the middle class now goes all the way up to $250,000 per year – and need a tax cut in the midst of spectacular deficits. They won’t suffer in the same way but they sure will have their dreams and aspirations severely truncated, not to mention have difficulty supporting their mcmansions and long distance gas-guzzler commutes.

Falling energy prices will provide a little respite but not for long. Within a year or two, China, India and other developing world economies, which will continue to barrel ahead, albeit a bit more slowly, will replace the demand that’s currently dropping in the developed economies. It’s still a finite resource in an expanding world; a world in which growth-forever economics will remain the Gospel.

All in all, it’ll be fun to watch.

Thursday, October 2, 2008

Repugs Save the Day

I thought they were good for nothing, but here they’ve saved the Dems from their congenitally capitulative need to worship at the feet of the Bush.

Leading Democrat David Obey, in reference to the Repugs failure to back the bailout, summed up the problem thusly, “these guys would rather lose an economy than lose an election”. Within that little statement is a grand assumption – that the $700 billion will actually do the job – and a slap at Democracy – signifying how far the Dems have gotten from the real world.

Legislators are receiving mail against the giveaway in a ratio of 200:1 and higher. They could try to justify their vote against the wishes of their constituents by saying they are just citizens and really don’t know what’s good for them. They might also try to pass off their vote in favor by saying that Wall Street knows best what’s good for Wall Street: absolutely true and the very reason why the people are so solidly and vociferously against this plan.

The plan, after all, comes from Henry Paulson, former CEO of Goldman Sachs who earned hundreds of millions during his tenure there. Of course he would look at the health of Wall Street first. Where has he been while millions have been losing their homes? Or the Dems for that matter? The most they could come up with was a mortgage relief plan limited to helping a mere 5% of people facing foreclosure.

Ah but this is different, this is an emergency, a calamity waiting to happen and a bill must be passed ipso facto or the economy will grind to a halt and the taxpayer will suffer. Speaker of the House Nancy Pelosi tried to make it sound like the bill was designed to protect the taxpayer. Now I know that politics is all about spin and hype and bluster but that was risible: Borrowing $700 billion from the Chinese to give to the same fat cats who created this mess in the first place is all about Joe Taxpayer.

As far as saving the economy, the bailout is a total crap shoot, a Hail Mary pass with no grounding in reality. The $700 billion number was pulled out of a hat. They didn’t want to ask for anything less because it would have had a negligible effect. They couldn’t ask for a trillion, that would’ve boggled the mind.

If the legislation does pass it will be good money after bad: the toxic assets causing the problem are far in excess of the bailout number. Consider, while the total housing mortgage market is about $10 trillion, the derivative market based on housing is $45 trillion. How can that be? you ask. Well, it can’t, not in the real world, not in a financial system that actually made sense.

I’m not going to try to get into a long winded explanation of what derivatives are, except to say that they represent pure speculation: ultimately no different than casino gambling. To society they have no redeeming value. They are a means for high flying banks and hedge funds to play with money - the spectacular amount of money that’s been thrown at them through 30 years of neo-con policies of feed the rich.

The bigger problem than saving Wall Street’s ass is fixing the property market. If it isn’t stabilized first, the value of those assets is going to continue to tumble. And continue to bring down the system. If we take care of the little people then the banking system can begin to repair itself. If it seizes up, it won’t stay that way for long. If credit rules are tightened up as a result, then it’s about time. For a generation the American economy has been based on compulsive consumption by borrowing from the future. Any Econ 101 student will tell you that is not sustainable.

The Senate has just approved a tweaked version of the bailout rejected by the House. It includes raising deposit insurance from $100,000 to $250,000. I don’t know how stupid you can get to have more than $100,000 in one institution, but if you’ve got money in the bank then you deserve to get protection for your stupidity. On the other hand, if you are being kicked out of your house, whether through your own stupidity or the mendacity of mortgage lenders, well, in a free market there are winners and losers.

The revised bill also includes tax breaks for small business and the middle class. Great. We’re adding a trillion dollars to the national debt, so what we need is tax breaks for people who are already doing well, or at least well enough. How about a small transaction tax to help pay for the bailout and curb the rampant speculation that got us into this fix in the first place? Not a chance, Wall Street wouldn’t like that. How about a ban on derivatives, short selling and other market gambling, or at a minimum, a firm statement to the effect that institutions that indulge in such speculation are absolutely excluded from future government help?

No way. This is about feeding the rich, a easy purpose to accomplish. As for saving the economy, ostensibly the reason for this corporate welfare plan, if it does pass the House, look for a temporary uptick in the stock market and a bit less fear and panic, but don’t imagine that it’s actually going to solve any fundamental dysfunction in the system. At most, it’ll be a temporary respite in a long downward slide.

It took 25 years after the 1929 crash for the stock market to return to its former level. That’s what it’s going to take to fix the American economy and bring personal and public debt down to reasonable levels.

Saturday, September 27, 2008

Cure Worse Than Disease

Now Bush is evoking the 72-hour, mushroom-cloud specter if Congress doesn’t immediately borrow seven hundred billion dollars to give free money to rich and craven bankers. According to Mister 27%, it’s the only action standing between economic catastrophe and a rosy American future.

Refusal to enact this legislation may well bring economic meltdown, but mostly to the bankers who caused this mess. Meanwhile, when talking $700 billion there are a lot of scenarios one might pursue to save the economy that don’t involve throwing money at the fat cats.

If millions lose their jobs, well, $700 billion will buy a lot of unemployment insurance, not to mention welfare for those who really need it as opposed to this bailout of the rich. That money will also pay to keep a lot of people in their homes, and with affordable mortgages. In the process of rewriting a lot of real estate loans, the banks would get a lot of money to shore up their finances and large numbers of paid off mortgages would clear a lot of bad and/or deteriorating debt. It would also make it more possible to actually put a value on those toxic mortgage-backed assets that are weighing down the system.

That would be far more likely to stabilize the real estate market than Bush’s giveaway. Bush’s plan, moreover, allows the money to be used to buy all kinds of bad debt from all kinds of institutions, so in the end result might not do much for the property market. Worse, $700 billion is actually a small part of the finance system’s true imbalance. What happens when the first tranche doesn’t work? Throw in another trillion or so?

If credit dries up, well Americans are already up to their necks. They’ve borrowed to excess. What better time to start retiring some of that debt? In the process the banks will have more cash. Bank deposits are insured up to $100,000, so everybody small is covered. If the insurance fund runs out of money, well, there’s always a piece of that $700 billion. If a bunch of banks go under, who cares, others will eventually come to take their place.

Property values may go down, but they are still too high by historical standards and harmful for society as a whole. Better for real estate to be cheaper so that a larger percentage of the population can afford to own.

So what if there is a recession. Americans have been working too hard for years; spending too much money buying too many things; maybe it’s time to slow down and take stock. Unwind, start from scratch, rebuild a smarter, more responsible economy. If people are out of work hire them to upgrade the country’s infrastructure and get cracking on sustainability and restoration of the environment. It’s called shock therapy, the very same wrenching changes the US has forced on many smaller countries that experienced financial problems.

Eighty percent think the country is going in the wrong direction so why put out all that dough only to further the same rotten system that is at the heart of the crisis. Let it sink. Wall Street had its fun, many of its denizens are fabulously wealthy, who cares if it goes under. Many of the activities of the financial institutions who’d be queuing up for the dole are purely speculative and singularly destructive: they are pure gambling and have no redeeming value. This is no different than bailing out a gambler who loses his shirt at the casinos.

It’s a good thing that many Repugs are also questioning Bush’s plan, otherwise the Dems would’ve felt compelled to prostate themselves once again before the worst president in history. They would’ve rushed to comply with his wishes else they take the blame for the doomsday sure to result. Even now there seems to be a certainty (in the punditry) that the bill will pass, after a bit of grumbling, with a bit of tweaking here and there, more or less in the president’s emergency timetable.

Big mistake, but I wouldn’t be a tiny bit surprised.

Tuesday, September 23, 2008

Too Big To Fail

Too Big To Fail

… first part written just before the latest bailout plan was floated…

A few days after sending Lehman Bros Investment Bank to the dustbin in order to uphold the concept of moral hazard the US government reversed itself and stepped up to the plate with $85 billion in public money for AIG, the country’s largest insurance company. Lehman with a mere $200 billion in assets wasn’t too big, but AIG with a trillion evidently was - possibly because it sold a lot of insurance on those down and dirty mortgage bonds that are now tanking big time.

This all came on top of the $200 billion of capital infused into quasi-government agencies Fanny Mae and Freddie Mac, $35 billion for the Bear Stearns bail last March and at least $200 billion before that that involved the treasury exchanging, to an array of banks, solid-as-the-US Government bonds for subprime assets possibly worth pennies on the dollar; hard to say, nobody knows for sure what they are worth.

Moreover, the money already expended on Freddie and Fanny may only be a small part of what the US may ultimately be liable for on their account. All told, even without the frightening possibility of additional trillions in liability, we’re probably talking a trillion dollars coming out of the public trough. By any standard a chunk of change; easy enough to imagine the good works that could come of that much dough.

The manipulators made out like jewel thieves packaging and trading their purposely inscrutable financial instruments, but now that their tomfoolery has turned calamitous, it’s Joe Sixpack to the rescue. Fanny and Freddie were once government agencies with strict rules to work to but in the mania for privatization that’s gripped the country in the past few decades they were turned into a hybrid where profits are privatized while losses, as we now see, are socialized.

Moral hazard is the idea that business people will make greedy and foolish decisions if they know that the government will bail them out; that they won’t have to pay for their transgressions. In the case of Freddie and Fanny, the US is obligated to rescue them no matter how crassly and stupidly they were run and regardless of the idiocy of privatizing them in the first place.

Now AIG has been rescued because it’s too big to fail; it’s demise would be catastrophic, we’re told. This however brings up a question that is somehow not part of the debate: If it’s too big to fail then maybe it should never have been allowed to get that big in the first place. Furthermore, investment banks are being sold at bargain prices to other banks so large they too will be too big to go under if/when they hit hard times.

Breaking News… The Congress is preparing legislation to purchase at least $700 hundred billion of additional subprime based, mortgaged-backed, toxic (in Wall Street lingo) securities from tanking banks. In exchange for securities of unknown value, the banks will get real money. That way they can get right back to creating the next financial meltdown. And why not? It’s fun making tons of money and until it all goes bust again they can do really well. They made the money while the getting was good, now the rest of us suckers can bail them out.

So now we’re talking around a trillion and a half dollars (just for perspective that’s $1,500,000,000,000; equal to 10% of GNP) with the possibility that the number could go higher. To be fair, the government may eventually get some value for its money. Once again, impossible to say how much, real estate values are still going down.

On the other hand, it’s not certain that the bailout will do the trick. It may not solve the fundamental problems in the industry. It may be only one more stopgap measure in a cascade of calamities.

When developing countries experience economic or financial meltdowns, we insist that shock therapy is the only proper response and they should just tough it out. Especially, bailing out the little guy is severely discouraged.

When it came to helping people facing foreclosure Congress could only manage a program designed to come to the aid of but 10% of those in trouble. Now at the insistence of the bushman they are racing to the rescue of the fat cats.

With news of the massive bailout, stock markets soared. Knowing the government was coming to the rescue clearly allowed the investor class to breathe a sigh of relief.

There’s one good that will hopefully come of this fiasco: Neo-con economic ideas – deregulation, unfettered free markets - will be totally discredited. They will be as toxic and repulsive as the obscure financial instruments created in the wake of the deregulation mania of the recent past that are the crux of this crisis.

Even if the multiple bailouts are successful - if that’s the proper term - it’ll still take a decade or more for the US economy to recover from the fiasco. And because the money being thrown at the problem will all be borrowed, it’ll take at least a generation to pay it off. All in all a sordid state of affairs that’ll leave its bitter aftertaste for a long time.

Last word is that Congress may actually demand some input into the bailout plan. Well now, that would be a first: Congress asserting itself on behalf of the American people. Hard to imagine, hard to believe, but miracles do happen so stay tuned.

Saturday, September 20, 2008

Tobacco No - Ganja Yes

Tobacco No - Ganja Yes

A new law in The Netherlands banning tobacco smoking indoors means that cannabis smokers can no longer mix tobacco with their weed in the city’s cannabis cafes. Makes perfect sense to me. While everybody is aware of the long term danger of tobacco, most people are under the false impression, stoked by governmental misinformation campaigns, that cannabis involves similar negatives. On the contrary, when you go to the statistics you will not see a single death attributed to the smoking of ganja.

Some years ago a friend who was a medical researcher related the results of a study of cannabis his facility had undertaken. They provided unlimited amounts of power weed to the study population and told them to smoke their brains out. As the study progressed the researchers became concerned for the health of their subjects because cannabis tars were clogging up their lungs and throat. The study was ended prematurely because of their fears. Subsequently they kept a close watch and discovered that the effects of the cannabis smoke completely disappeared within about three months.

Any kind of smoke is going to irritate your respiratory system and being as cannabis is a stimulant, whatever it gives you is going to come out of your body’s capabilities. Whenever I smoke too much my cough goes from intermittent to persistent and I tend to get sick from overextention.

My friend then explained that, in contrast to marijuana, tobacco impacts the small passages in the lungs, the cilia, in a way that scars them and causes permanent damage. Your lungs will improve markedly after you quit smoking but will never return to your previous state.

The only tobacco I’ve smoked in the past 27 years was when I’ve mistakenly taken a hit off of a joint rolled by a European where the practice of mixing it with ganja is common. I invariably cough my brains out in response. If I knew it was coming I could smoke it differently and possibly avoid the same level of coughing fit, but then again if I knew the joint was adulterated with tobacco I’d absolutely never touch the stuff. It’s beyond me why anybody would want to take pure sweet ganja - cannabis grown outdoors requires no pesticides or herbicides - and mix it with diabolically manufactured tobacco containing all manner of nasty chemical additives. Additionally, I’ve read recently that one of the reasons that tobacco is so cancerous is the chemicals used in growing it act to increase its toxicity.

It took a monumental effort to rid myself of the ugly habit years ago and today it conjures up only disgust and abhorrence. (There’s nothing like a reformed tobacco smoker when it comes to harassing and looking down on those who are currently addicted.)

I was coughing with increasing frequency and intensity and knew I was doing serious damage to my respiratory system. It got to the point where my friends were fearing for my health. I had quit and restarted several times but knew that the state of my dependency was such that drastic measures would need to be taken; will power was not going to do the trick. Previously I had stopped temporarily a few times when I had gotten so sick that smoking was impossible. As a result I used immersion therapy, aka, overdoing it, and purposely smoked myself into a serious illness. It wasn’t that difficult since I was already halfway there. I had been smoking cheap roll-your-own tobacco, pretty harsh under the best circumstances, and started chain smoking. After the pouch was finished I started rolling butts, and then butts of butts and began coughing continuously and righteously and before too long I felt so bad that even one more drag was inconceivable.

I’m in pretty good shape considering I started smoking a pack a day at 12, went through coughing fits as early as 15 and continued for a total of 28 years. I can do a lot in the physical realm but my lung capacity is under par and I run out of breath easily. We referred to cigarettes as coffin nails in the fifties so we were under no illusions in spite of advertising, including on TV, which featured doctors endorsing their favorite brands.

Personally, I see no redeeming value in tobacco as it’s currently used except that it keeps the hands of nervous people occupied. The habit is especially pernicious considering the chemicals added to keep it burning, resulting in many home fires over the years, and the extra nicotine added to increase chemical dependency.

In contrast, smoking a hand-rolled cigarette of clean organic tobacco once or twice a day would seem to me to be quite benign. It’d be hard to imagine smoking enough under those circumstances to bring on emphysema or cancer. If I hadn’t nearly destroyed myself with tobacco in the past, I might do it myself. I’m too far gone; today it would be impossible. Even regular smokers would be better off hand rolling clean tobacco; they would smoke less and reduce their chances of contracting disease.

Many smokers have the attitude, which I shared back in my teens, that it’s worth cutting a life short if you can derive immediate pleasure. When reminded as a teenager that I was causing harm I’d retort that I was enjoying myself and didn’t care about the future… “As long as I live to the year 2000 (at age 59) I’ll be happy”. Well now, y2k has come and long gone and I would’ve sorely missed these last eight years and I’m still going strong. Moreover, what’s missing from the ‘enjoy now, die early’ attitude is that it’s not a pretty death. You don’t just have a great time and then suddenly pop off: no, it’s a nasty, horrible death of pain, debility and suffering.

As far as I’m concerned all packaging, marketing and advertising of tobacco should be banned. It is insane that society allows corporations to make profits off of such a destructive substance. When money is involved they will have no qualms about bending the truth to make an extra buck, and large numbers of people will die premature and awful deaths as a result.

In many public markets in Cambodia one can find fresh locally grown tobacco sold in bulk. That’s the only way it should be sold. That applies as well to ganja. I believe everybody has a right to their own poison and government’s only role is in education and research.

Prohibition sucks on almost every level. To begin with, drug wars are really culture wars and cultural norms change over time. It wasn’t that long ago historically when marijuana was legal in America while alcohol was not. There is no logic or science whatever that justifies prohibition of cannabis other than the desire to repress dissident cultures; people who don’t wish to conform to society’s changing quirks.

Secondly, prohibition is futile in any society that allows its citizens even a semblance of freedom. Unless repression is near total, people will do what they want to. I was offered ganja in Singapore and Malaysia where possession of a mere 200 grams nets a mandatory death sentence. And yet both places derive large tax revenues from alcohol sales even though no dispassionate, reality-based assessment of cannabis compared to alcohol could possibly consider the weed worse than the drink.

Prosecution of offenders – police, courts, prisons - is extremely costly to society as a whole and to the individuals whose lives are disrupted. Most of all prohibition increases the cost of contraband to extreme levels making it a lucrative business for criminal elements. South American cocaine cartels literally have billions of dollars at their disposal which they use to corrupt governments and murder public officials trying to enforce the law. Mexico has seen 400 police, including several of very high rank, murdered recently by drug traffickers. All in all a sordid state of affairs.

Cambodia’s lax attitude towards drugs, combined with general police indifference and/or ineptitude is one of the reasons I’ve chosen to live here. Cambodia cannot emulate The Netherlands in terms of drug policy because it’s too dependent on the international community for assistance, but that’s too bad because it is uniquely predisposed towards tolerance of all lifestyles.

It was as recent as 1992 when you could get a shopping bag of pot for one dollar at local public markets. Cambodians used to flavor their soups with it and smoke it when they couldn’t afford to buy tobacco. And in spite of all the hullabaloo about drugs we have our “happy” pizza restaurants where you can still, I believe, get a sprinkle of pot added to your pepperoni.

Cannabis is different from other drugs in the sheer idiocy and unfairness of prohibition. Even if a pot smoker doesn’t consider it totally harmless they would never think it a serious danger. That is actually an example of a beneficial side effect of prohibition. Inquisitive, open-minded individuals learn a healthy dose of skepticism towards government and its attempts at social control and that fosters the creation of counterculture… After a lifetime of being told something is the height of evil you meet someone you like and trust who tells you differently. You try it and immediately know the truth. You’ve been liberated.

The hard drugs are of a different category, though still not worthy of prohibition. Cocaine, meth, heroin can be dangerous on an OD level and on an addiction level. Still, if you asked me if a person is better off being a alcoholic or a heroin junky I’d say the latter. You won’t get any diseases, for sure, or do debilitating harm to your body. On the other hand, you also won’t be inclined to accomplish much, though probably more than being a latter-stage lush. That judgement, however, would only hold true if you had the same easy access to both. If you had to steal to get your fix, you’d be better off drinking.

Here’s an anecdote which aptly describes the feeling, though in this instance the drug was opium from which heroin is derived. A friend related his experience in India smoking the black tar. He and a buddy settled into comfortable chairs and proceeded to smoke themselves into a blissful oblivion. Unfortunately, just before that he had set up his cassette player with an Eagles album and it was set up to reverse itself and play continuously. They listened to the entire album eight times before either could rouse himself from sweet languor and get up and change it.

Cocaine will make you feel strong and invincible and not affect your functioning or productivity at all. However, if you’re not flush with money and you really need a line, you’ll rob a bank, or some such, to get it. On the other hand, I tend to think that chewing the leaves, which have 500 times less potency than powder cocaine, would be quite benign, like coffee.

Meth is heavy shit that can turn you into a washed out freak, so highly not recommended, though even there I’ve known long time meth users who never lost their essential good personalities.

To sum up, what I do to my body is my business: government interference is costly, futile, counterproductive, unfair and stupid.

As for Cambodia, it should strenuously resist the international community’s push for stronger enforcement and criminalization of things people want to do and will do regardless. Let it be like The Netherlands and treat people like adults with minds of their own. Certainly let them spend all they want on education about drugs (hopefully education that’s reasoned and intelligent) and rehab for those who need it but leave the police and justice system out of it.