Bizarre Twist

In the latest bizarre twist to the sordid saga of elite bankers slavering at the public coffers, the banks are planning to use the latest Obama/Geithner bailout money to repurchase the same toxic assets they are getting rid of. Well, maybe not the very same ones, but the same type for sure.

It’s not hard to understand why they might be doing that. Many of those assets are now close to worthless. The plan includes a competitive bidding process that supposedly would give a true value to the assets, but since nearly all losses will be socialized and gains privatized, they will tend to bid high. After they are bought back the former toxic trash will come with a government guarantee. How convenient.

Personally, before I gave the banks another trillion dollars I’d kind of like to know what they did with the trillions they’ve already gotten, but, seemingly, that’s too much to ask of them so we’ll just have to trust they’re doing the right thing. They’re really smart and they certainly have the best interests of the country at heart so why would we want to press them on where the money is going. Just because the US government is majority owner of those banks doesn’t mean it is clever enough to rescue them. No it’s only the idiot (oops, brilliant) bankers who understand how to make everything peachy-keen again.

And we certainly wouldn’t want to place restrictions on executive pay for bailout receivers, else they might not be willing to join the program. If they can’t get their exorbitant (oops, entirely justified) compensation they just might let their firms fail and then where would we be?

After repeated badgering by a pesky congressman, AIG finally opened up on where some of its $173 billion bailout went. What a mistake, better not to know that, for instance, six billion plus went to Societe General, France’s largest bank, another six billion plus went to Deutche Bank, Germany’s largest, and that billions more went to Barclay’s and UBS and other foreign institutions, not to mention a mountain of cash to America’s biggest banks. Knowing that would only get people angry and irate and that might lead to protests and demonstrations and result in those bailout funds being cut off and then we’d really be in trouble. No, better not to know, better to trust the smart guys.

While we might want to regulate hedge funds and derivatives and clamp down on tax havens we wouldn’t want to reinstitute the separation between retail banks where Average Sally keeps her checking account and investment banks which are purely speculative. Even though it worked mighty fine from the thirties until 1998 when the smart guys, including Geithner and Summers and others on Obama’s economic team, had the banking system deregulated, it’s not in Obama’s plans today.

Unfortunately, I can’t think of one glib, sarcastic thing to say about why the separation should not be reinstituted; but then maybe I’m not smart enough. Separation would preclude the banks buying back their toxic assets in guaranteed form as mentioned in the beginning of this rant. Maybe somebody out there has a handle on why that’s not included in Obama’s financial regulation plans. Beats me.

Israel Disowns Two-State Solution

Israel’s new Foreign Minister, Avigdor Lieberman of a far-right party, started his tenure by saying Israel wasn’t bound by the latest peace-process agreement.

Three years ago when the Palestinian people elected Hamas by a wide margin, not just in Gaza but the whole of the occupied territories, it was shunned; ostensibly for three reasons.

One was that Hamas had to accept all past agreements with Israel. Possibly they refused because past agreements had delivered exactly nothing to the Palestinians. Possibly because Israel had never abided by its past agreements to stop confiscating Palestinian land and stop building or expanding Jewish cities in the territories. Israel’s insulting final offer to the Palestinians in 2000, a West Bank divided into three Bantustans completely surrounded by Israeli territory, undoubtedly was also an important factor. Those reasons are, in fact, a large part of why Hamas won those elections.

Another was that it had to renounce violence. Kind of laughable in light of the violent nature of the Israeli nation to hold them to that standard. And that’s besides the fact that, in international law, an occupied people has the right to resist foreign domination. Why is Israel not required to renounce violence? The important point is that Hamas proposed a long term truce, and held to the short term truce, which Israel broke, prior to the Gaza assault.

Israel is worried that Hamas will use the time of a truce to become strong and 50 years in the future will come back and try to drive the Jews into the sea. (Don’t laugh, I actually read that by a reputable columnist.) It’s true that if Israel refuses over the next half century to come to a fair and equitable agreement with the Palestinians, there will continue to be hostility and strife. Look at the Tibetans and Kurds, for instance, they’ll never stop fighting for self-determination.

Finally they needed to recognize Israel’s right to exist. As I understand it they want to wait until they too are recognized as a nation. Makes sense to me.

Netanyahu, Israel’s new prime minister, is for peace, so he says, but not a two-state solution. He wants to improve Palestinian life economically, but maintain the Bantustan concept that allows total control of everything that goes in or out of Palestinian territory. Maybe he thinks they will be so thrilled with their new prosperity they’ll submit happily to foreign domination: even as they see their land continue to be confiscated and given to Jews. Both Netanyahu and Lieberman are in favor of increased settlement construction.

For those of you unfamiliar with the Bantustan concept, it was a device tried by apartheid South Africa to put all of its blacks in their own ‘sovereign’ countries (there were ten, I believe) but all completely surrounded by South African territory. Needless to say, the minority whites retained the greater part of the land and resources and total control over the blacks in that scenario. Nobody outside South Africa recognized them.

Is Obama going to accede to this new dynamic lying down or will he finally force concessions from Israel? World boycotts helped to kill South African apartheid. All the US has to do is cut off Israel’s totally unwarranted foreign aid (the largest recipient though it is a rich country) and the settlement building stops and the Israelis become a lot more adaptable. If they can no longer use US aid to subsidize colonization and the military forces necessary to protect what are essentially outposts in hostile territory they will cease their illegal activity or make a real sacrifice to continue.

Obama’s Problem

I finally figured out what Obama’s economic policy problem is: He actually believes Treasury Secretary Geithner’s harebrained, cockamamie, welfare-for-wealthy-bankers scheme is going to work; is going to fix the economy, get America growing again.

In simplest terms (partly because I’m no professional economist) the banks made a lot of bad bets so now they feel really poor and don’t want to lend money. What we’ll do is take those pesky debts off of their hands and they’ll feel rich again (you would too if somebody threw tens of billions of dollars at you) and start to lend money again… just in case anybody actually wants to borrow it.

What we’ll do is ask the hedge fund guys (who, by the way, pay income taxes at the same rate, thanks to their good friends in government, as average Sam the roofer) to help us in these hard times. If they will so kindly put up their money to buy those toxic assets we’ll guarantee them against almost all losses. We taxpayers will also let them leverage their generous assistance and equal their paltry 6% investment.

In simplest terms, they put up small money for toxic assets, which actually do have some value (but it’s hard to tell exactly how much since they’re so complicated). If all goes according to theory and the economy turns around those assets will be worth a bundle. If it doesn’t, well then the US taxpayer takes the hit. Very convenient… for bankers.

Here’s an interesting scenario. The banks, even while they’ve been getting showered with public money, have been raising credit card interest rates, in some cases up to 40%; rates of nearly 30% are common. The ‘exotic financial instruments’ that’re giving the banks such big headaches don’t just include subprime mortgages, they also typically include credit card and other types of consumer debt.

So the bank raises credit card interest so high that a lot of people default on their payments. It then goes hat in hand to the government pleading poverty since so many of its credit card customers are in default. The government then, needless to mention, graciously and gratefully covers their losses. Very cool, if you’re a banker.

There are a couple reasons why this nutcase scheme is not likely to work. Firstly, the amount of toxic debt out there in financial netherland is far greater than the US government’s ability to cover.

Secondly, if it actually did work in the short run, the debt burden undertaken combined with a surge in commodity prices that would come with a strong recovery would cause far worse economic calamity than just letting the banks fail and starting from scratch with new banks.

If we did want to get the economy back on track and believed the blockage was based on lack of credit, then a small part of the $10,000,000,000,000 (trillion) the government has already spent or committed or guaranteed on the part of banks too big to fail could create a lot of new banks untainted by the greed and stupidity of the past. With ‘only’ $1 trillion we could capitalize 1000 new banks with 1 billion dollars each, or 10,000 new banks with $100 million each – still a substantial amount of money.

The only reason to pursue the present course is to save the asses of craven bankers. Individual depositors are already covered, it’s only the fat cats that stand to lose if the banks are allowed to fail.

If we really care about stimulating the economy then put money in the hands of the millions of unemployed people who are not eligible for unemployment benefits. Increase social security payments since many recipients are living in or on the edge of poverty. Reform welfare ‘as we know it’ so millions aren’t left hungry and homeless. Put money into keeping people from having their homes foreclosed. Cap usurious credit card rates so debtors can have more money for their survival instead of giving a large part of their income to the banks.

Start universal health care now: that would allow employers to put more workers on short weeks to share the work and let the government cover the loss of income. That’s what Germany does. Employers can put workers on half time with the government covering two/thirds of their income loss.

There are any number of better things that can be done with ten trillion dollars than spoon feeding wealthy bankers.

While we’re at it we should place heavy taxes on the corporations and wealthy. As I’ve been saying for years they have too much money to play with. That is the root of today’s economic problems: too much of the country and world’s resources going into non-productive financial chicanery, not enough into the things needed for healthy lifestyles. Besides, that tax revenue is needed: huge deficits can bring huge unintended consequences.

A Trillion Here, A Trillion There…

And pretty soon you are talking about real money. What I’m concerned about is an economic reinforcing feedback loop similar to the climate change loop that is accelerating warming. For instance, as warming melts ice and snow which reflects the sun, dark colored earth or sea, which absorb more heat, become exposed, thus intensifying the cycle.

Now we have the figurative printing presses of the fed and treasury running full speed making more than two trillion dollars of new money. Part of it is being used to buy treasury bonds with the purpose of increasing liquidity; that is, there’ll be more cash to lend in case anybody wants to borrow it. The other half will be used to exchange good (though somewhat depreciated) cash for toxic trash investments. The purpose of that is to relieve the banks of responsibility for stupid decisions and incidentally give them a lot more leeway to reward fantastic bonuses for spectacular failure. Without their ‘best and brightest’ where would the banks be today?

By the way, the US government, which owns 80% of AIG stock through $170 billion of bailout cash, considers AIG’s contracts to pay bonuses to its execs inviolable, but required GM’s employees to forego their contract benefits in order for GM to get only $14 billion. Do I see a double standard here?

The money press run immediately caused the dollar to slide 4% against the Yen and Euro. When the value of the dollar goes down, the cost of imported commodities - food, industrials – goes up to compensate. This also causes the trade deficit to go up requiring the US to borrow (print?) more money. The US already needs to borrow nearly two trillion dollars to pay for this year’s budget deficit. This will essentially flood the market, further cheapening the dollar and causing interest rates to rise. Rising interest rates means higher cost for servicing America’s ten trillion dollar debt.

Either way, printing money or borrowing, inflation will be the result. Inflation combined with today’s very low interest rates are bad for savers: saving needs to replace borrowing and spending if the US economy is ever to right itself.

While it’s true that some people understand the severity of the present downturn as equal to the Great Depression, the general feel for tackling the problem relies on thinking of it as just one more recession, albeit a grave one. That thinking allows the pundits, including some I have a lot of respect for, to use statistics like debt as a percentage of GDP to justify these great public expenditures, saying the US debt was much worse, for instance, right after WWII.

Yes, but the population of the US was less than half what it is today and the population of the world an even smaller percentage of today’s. Yes, but natural resources then were virtually, or seemingly, unlimited and thus very cheap; and besides people lived in much smaller houses and lived a much simpler, less acquisitive life. Yes, but there was no consciousness of climate change, no need to consider water shortages or fret over the world approaching - with the impacts of climate change factored in - the limits of food production.

Yes, but the US owes its senior citizens nearly three trillion dollars because it’s been borrowing from the Social Security Trust Fund for the past 25 years, using the excess received from payroll taxes to pad its general budget; funding, for instance, it’s wars and tax cuts for the wealthy. Very soon the extra 200 billion dollars a year from payroll taxes it has had access to will reverse and the government will have to start paying that back further stressing the budget.

A perfect storm is brewing for the US economy and society. Meanwhile, Europe seems relatively unconcerned. American policymakers have been pushing Europe hard to spend more money on stimulus packages to little avail. The answer can be found in Europe’s generous social safety nets. In America, barely half the unemployed are eligible for unemployment benefits, meaning the potential of widespread destitution when jobs vanish. Across the Atlantic, in contrast, all are generously covered so there is no great push to run massive budget deficits to ‘jump start’ the economy. People don’t lose their health care when they are no longer working. All in all, the crisis is seen in much less stark terms. They will not face the same crushing debts.

Prevailing wisdom says don’t worry about the debt, all we have to do is get the economy back on track and tax revenues will increase to cover it. But what if the economy isn’t resusitatable? What if it stays in the doldrums and then food prices spike? There are a lot of conditions that could bring that about. What happens if commodities like oil rise again? It’s still a limited resource and we’re still using it up at a fast pace, even if not as fast as during boom times.

I fear Obama, as smart and well-intentioned as a president can be, is making all the wrong moves. The only consolation is that everyone else who might’ve occupied that office in his stead would’ve reacted at least as poorly. Still, not much consolation when the perfect storm hits.

A Bottomless Pit

American Insurance Group has now been showered with a total of $180 billion of public money, supposedly because it’s too big to fail. If a natural course were taken; that is, if AIG, which is basically insolvent, were allowed to go bankrupt we are told there will be terrible consequences for the economy. It’s hard to know for sure because, though it’s public money that has kept it alive, the public is not privy to where the money is going. And while the public’s investment is far greater than the value of the company, the public seemingly has no control over its actions. Or understanding of how deeply it’s sunk in the mire.

Moreover, the mere fact that it has come back, begging bowl in hand, four times in just six months seems a clear indicator that it really has no idea how badly off it is, or what it will take to right it.

There’s no doubt it will be dire, but mostly for the bankers, investors and all-around scammers who, through their unbridled greed and concurrent belief in the tooth fairy, or its equivalent, that property values never go down, have helped to bring the world economy to its knees.

AIG’s ordinary insurance business is not in trouble. The problem is the insurance, aka, credit default swaps, it sold on (now toxic) mortgage backed securities and other ‘exotic’ investment vehicles. What do I care or you care if the high-rollers who bought insurance on their wild speculative purchases don’t have their asses covered by AIG?

The biggest problem is that many of those investments were highly leveraged; that is, as little as $3 was put up to purchase $100 worth of securities. That is how the value of exotic securities out there got to be such an astronomical number. As mentioned previously, while the total US mortgage market is (or was until recently) around $10 trillion, the derivative market based on mortgages was $45 trillion. Eighty percent of that money was imaginary, created from thin air. They gambled on derivatives and then gambled that AIG would cover them in case of loss. Fine, sometimes gamblers loose: so be it.

It’s a bottomless pit. Instead of trying to fill it with public dollars it should be filled with the bodies of the ‘financial wizards’ who created the mess. AIG’s traditional insurance function should be separated out and the remaining stakeholders let loose to fight over the remains. There’s no way the US government can make good on all those bad bets, and no reason to reward those who made them by continuing to gift them with such ungodly amounts of money.

In any other context 180 billion dollars would seem immense: for instance, it would buy an extensive new light rail system for 30 to 40 mid-sized American cities.

And what is the motivation behind not letting them fail? Otherwise, we are led to believe, we won’t be able to regenerate the old system of prosperity based on borrowing and spending.

On the contrary, we should be giving the reckless and profligate past a decent burial, not trying to bring it back from the dead. Especially since every additional billion thrown into the abyss will reduce the resources we have to create a new economy, one based on sustainability, community and a healthy environment.

The consumerism of the past was never a good idea, no matter how much seeming prosperity it engendered. It was based on trying to get people to buy things they didn’t need; to shop as an end in itself. I came across an amazing statistic recently; that there is six times as much retail space per capita in America than in Europe. Vast retail areas will become redundant, and should.

Just in the past few weeks I’ve come across predictions, supposedly from those in the know, that recovery could be right around the corner… by the end of the year, 2010 at the latest. Only one more bailout and we’re over the hump. This one will work for sure. If we only show that we are acting, tackling the problem with gusto, confidence will return and we’ll be back on track.

If only. This is a wreck of a fast train in a tsunami of historic proportions in the core of a category five storm. The economy is not going to look tidy for a long time. No amount of wishful thinking is going to change that imperative.

The only way to ease the increasing hardship of the next few years is to share available work. Slow down, work less, spend less, enjoy life more. Whatever resources the government possesses should be used to keep people from destitution and prop up education and the social part of life. If a lot of people lose their fortunes, well, tough luck. Let the chips fall where they may. We’ll pick up the pieces and start over. Meanwhile we’ll be consuming less and giving the planet a welcome breather.

Ever additional attempt to protect the fat cats will only make the transition that much more difficult by burdening the people of the future with massive and unnecessary debt.

Obama’s Learning Curve

The president received a rude awakening on the bipartisan, sometimes called postpartisan front. In a similar fashion to the loading up of his government with Republicans and, in general, rightist oriented thinkers and ignoring progressives, he thought all he had to do was make nice with the opposition and Republicans and Democrats could then be all one happy family. So he stuffed the stimulus bill with idiotic tax breaks to please the Repugs and they responded by farting in his face with an almost unanimous no vote.

The Dems, true to form, still think they are helpless without approval from the Repugs, who, all they have to do is think filibuster, and the Dems instantly go flat on their back in submission mode. Why not let them make fools of themselves going all out in opposition to bills desired by the vast majority of Americans? It doesn’t take a master strategist to know that that is just good politics. Why can’t the Dems for once be known for standing up for something and not abject capitulation? Their job isn’t to boost the opposition, it’s to crush them, trample them, shame them and then toss the wreckage in the waste bin. Simple politics.

I’m not saying it has to be anything like the purely obstructionist, underhanded and mean spirited neo-con way of doing things: It can be totally honest, straightforward and fair minded. All they have to do is speak to the heart of Americans’ concerns and follow through. For instance, the vast majority of Americans favor universal health care and a clear majority do so even if it means increased taxes. Everybody knows that the insurance companies are a large part of the problem and yet they are part of all current thinking on the matter.

Former Senator and Majority Leader Tom Daschle, Obama’s first cabinet pick to deal with the problem has been deeply tied to the health care industry for a long time and was thus a terrible choice for the office. I especially despise the fellow for his embrace of Bush in his 2004 campaign ads. I was thrilled that he lost. How about picking someone with some new ideas, someone who actually believes in change?

And how about hiring people for his economic team who weren’t the ones who helped to cause the problem in the first place? An ungodly amount of money has been spent trying to beat dead banks back to life. It’s been common knowledge amongst all but those who created the mess that the big banks are insolvent and have been for a quite a while. Their liabilities are far greater than their assets. Their stock prices reflect hoped for bailout money, otherwise zero is their effective worth.

I imagine Obama thought he could placate the fat cats, soothe their nerves, by putting their own in charge, while he would maintain the final word. It may well work in theory but, by listening to the stupid ones and ignoring progressives, precious time, not to mention trillions of dollars, has been lost trying to avoid the inevitable need to nationalize the banks. Government, we’re told is not good at managing banks, but could the government possibly do worse than the bankers have?

It makes a difference who he takes advice from: there are any number of progressive voices that could‘ve provided alternative and far less costly visions.

The numbers involved in these bailouts are so great that the people, evidently including the president, are no longer able to grasp their significance. Forty billion dollars of aid to the states, who are in dire financial straits, was stripped from the stimulus bill to placate the Repugs while Citibank has already received $45 billion in a direct cash handout and hundreds of billions more has been committed in the form of guarantees to keep it afloat and it’s still insolvent. Meanwhile Citi’s capital value is $10 billion… does any of that make sense?

The president’s plan to halve the deficit is based largely on fantasy as it presumes a growth rate of more than 2% in 2010. Ain’t gonna happen folks: the trajectory is down, down, down; at best treading water. There is so much garbage in the financial system and economic insecurity on the part of the citizenry, it will take years to work it out. And that’s beside the point that we don’t want to get the country moving again, we want it to slow down, take stock and look for a genuinely new kind of economy; one that’s sustainable and easy on the earth.

Meanwhile, trillions of dollars will be added to the debt since he has no plans to raise taxes on the wealthy until Bush’s tax cut expires in 2011. That money is needed now. It does the economy very little good in rich people’s hands: far more important in reducing the deficit.

Besides, the economy will not be what we want it to be until income disparity is reduced to more ethical and moral levels. Also, to call $250,000 per year middle class and think everybody under that needs a tax break is ludicrous. People living on that amount are using way too much of the earth: it is absolutely impossible to build a sustainable economy when large numbers of people are living that high. At a minimum, everybody over $100,000 per year ought to see a stiff tax increase; to reduce the deficit now and later pay for a more intelligently designed and community oriented nation.

Personally, regarding the deficit, though I’m no professional economist, I wonder where all the money will come from to finance it. Considering countries all over the world are engaging in deficit spending, they will be competing for limited resources.

With stock markets halved, property prices plummeting and banks insolvent it will have to come from outside. But countries all over the world are in their own downward spirals. Japan, for instance, which traditionally has enjoyed huge trade surpluses and bought lots of US treasury notes, is now running deficits so will be pulling back its dollars. The US will have to borrow $1.3 trillion dollars next year, which hat will it be pulled out of?

But Obama is a fast learner and I believe his head and heart are in the right place, so he may well change the government’s tack before the burden of losses is too great. At best, the people will be saddled with huge debts for decades.

The Middle East will be an equal challenge. In many ways the election of Netanyahu as Israel’s next prime minister will serve to clarify the situation. Based solely on a short clip of a TV interview I saw him give about twenty years ago, I consider him a slimy creature. His words were so full of lies, he couldn’t bring himself to look at the camera.

Notwithstanding the fact that Tzipi Livni of the Kadima party and Ehud Barak of Labor speak in favor of a two-state solution, their actions belie their words. Since the beginning of the occupation, every government of Israel has continued the theft and colonization of Palestinian land. Settlement building was even accelerated under Labor, supposedly the party most committed to peace. Livni, who campaigned for a deal with the Palestinians, famously said during the recent Gaza carnage that Israel goes wild when put upon.

Therefore, much better to have someone in power who pays no lip service to policies he has no intention of implementing in a way that would satisfy the Palestinians. Makes things so much clearer. But also much harder for Obama who, in spite of obligatory obeisance to right-wing Jewish lobbies, has used words like fair and evenhanded in relationship to what needs to happen there.

Israel’s war machine and colonization program are a gift from the American people. Though it is by any standard a wealthy developed country, Israel gets more US development aid than any other recipient. While it’s possible they could carry on their dastardly policies towards the Palestinians without US largesse, it would require a real sacrifice on their part. now, with America’s help they can easily subsidize settlement housing to encourage people to move there.

So what will Obama’s response be when Netanyahu, who thought the Gaza attack didn’t go far enough, takes Israel on another rampage? Will he continue US policy of blaming the oppressed for resisting their subjugation? Or will he take the high road and explain to Netanyahu that America is no longer interested in subsidizing the theft and colonization of Arab land? Now that Israel has a leader who is not interested in a two-state solution - the conventional wisdom solution to the problem - there can be no pretense that lack of an agreement is solely the fault of the Palestinians.

Besides, with half million Jews now living on Palestinian land, the two-state solution is unthinkable. A unitary secular state where all are equal is equally unimaginable, so, Mr. President, welcome to the Middle East.

As for Afghanistan, it’s going to change its name to Afquagmirestan.

Within political correct, conventional wisdom, Obama is making all the right moves and has a large majority of the country behind him; but conventional answers are not going to work this time. The only question is how long it takes him to learn that hard lesson.

Jump Start, Stimulus or ?

Is it merely a frantic and futile, all-out and spare-no-expense attempt at resuscitating an economy that should have enjoyed an undignified death decades ago?

Frantic? Even common sense, cool head Obama indulged in hyperbole saying if the stimulus package wasn’t passed quickly a whole generation might be lost. Is this like the $700 billion Bush bank bailout that had to be passed within a weekend or the world would come to an end? In fact, there’s nothing of a stimulating sort that will have much effect at all in 2009.

The part that will have an immediate impact is the money allocated to food stamps, unemployment and other welfare programs designed to alleviate widespread destitution but that’s not stimulation, only treading water. Grants to cities and states is also important but in essence will not stimulate, but rather merely reduce the number of civil servants they will have to lay off and the severity of cuts in education and social programs they will have to make.

Futile because nothing short of time - a good long time, maybe five to ten years - is going to see a thriving economy again. Moreover, the more effort, and money, that is expended to revive the old economy, the longer it will take to create a new economy.

Futile because a good part of the “stimulus” is in the form of tax cuts which will have almost no positive effect but merely add to the nation’s debt load, which is approaching staggering dimensions. This is not only mortgaging the future but also will inevitably have a devastating effect on the value of the dollar. Taking on massive new debt in order to solve the problem of massive old debt is only something bankers, economists, politicians and pundits can get their heads around. For normal people it’s like the guy stuck in a pit who doesn’t know without coaxing to stop digging.

Debt isn’t all bad. Going into debt for infrastructure makes perfect sense, since it’ll be around for a long time. However, spending a lot of money on roads is almost counterproductive considering the need to get away from autos as a primary form of travel. Railroads, on the other hand, seem to have low priority in the package though they are the most efficient form of transportation. Three rail oriented improvements could be made that would quickly get the stimulus money in the system.

First is double tracking. Most lines in the West, for instance, have a single track. That means when two train’s path’s cross, one has to stop in a siding and wait for the other to pass. The train will sometimes have to wait for 15 or 20 minutes. One time on Amtrak in southern California our train got stuck behind a freight that couldn’t make it up a steep grade on one try. We had to stand idle in frustration for an hour till the freight’s engines cooled down and it could make another stab at it. Double tracking would thus allow for a significant reduction in travel time, and thus efficiency, as well as frustration level. Since most of the right-of-way is already in the hands of the railroads, work could begin within a couple months.

The second is electrification. Electric trains are superior to diesel in every way. They are faster, cheaper, cleaner and quieter and the engines last longer and require less maintenance. This work could also get started on a very short timetable. Their only drawback is the need for additional infrastructure, but since it would pay off for a long time, an ideal use for borrowed money.

Manufacturing modern, efficient, lightweight new rolling stock would also be a good investment that would put people to work very quickly. Amtrak’s trains are heavy lumbering beasts. They are very smooth and comfortable, but they were built at a time when fossil fuels were cheap and ‘inexhaustible’, and they pay no heed to conservation. Amtrak has been mercilessly emasculated over the past decades, so merely reestablishing previous routes would put people to work almost immediately.

Every penny of the stimulus devoted to conservation and green energy will be well spent, but that’s only a small part of the total.

Well spent or ill spent, it’s not going to jump-start the economy. Obama talks of creating 2 million jobs in two years, but the country lost 1.9 million in just the last quarter of 2008, and those losses are just the beginning. The most it will do, therefore, is provide necessary safety nets and keep the situation from getting worse. Problem is, in the longer view the increased debt will definitely make things worse.

What needs to happen is a total rethink, a movement towards a different kind of economy, one based on quality of life rather than quantity of possessions. One designed with sufficient leisure time so people can pursue the arts and humanities. What America, as well as much of the developed world, needs is shorter work weeks and a lower cost of living which can only come with deflation, a word that puts fear in the hearts of all those in power.

Obama is a quick study. In a very short time he will find his stimulus has been very unstimulating and be forced to seek alternatives. So far he’s gotten most of his advice from the very people who created the problem in the first place.

One policy change he must recognize pretty quickly is the need to raise tax revenue. The only place those taxes can be found is in the wealthy and corporations and taxing them is a good in itself. They’ve had too much power and privilege and must be reined in if any kind of new economy can be brought into play.

Meanwhile hold on to your hats, this is likely to be a wild ride.