The Greek Drama keeps getting stranger by the day. Greece’s prime minister, George Papandreau, after acceding to the financial troika’s (IMF, European Central Bank, European Commission) demands to impose further harsh austerity measures in exchange for the latest in a long list of bailouts decided to put the measure to a referendum. Then he changed his mind; now he wants a unity government, I expect so the people’s wrath can be spread around to all the political parties. No matter what the citizenry actually wanted, all the parties were going to back the deal anyway, so why take the blame himself for his party only?
As part of the deal private Greek bond holders are going to take a 50% haircut; that is, lose half of their investment. The part owned by the big banks will then be covered by bailing them out. That is why there is such heavy pressure and urgency in getting Greece to take on the new debt; better the Greek people pay than France, Germany, etc., having to ‘recapitalize’ their banks with their own money.
In the end result, if everything works according to the troika’s optimistic projections, Greece’s debt to GDP ratio will fall to 120% in 2020. In other words, after eight years of wrenching and painful sacrifice, they will still be hopelessly mired in debt. Part of the problem, it seems to me, is that the leadership is conflating default with leaving the Euro. The two are not necessarily mutually exclusive, because even if Greece formally, technically ‘leaves’ the Eurozone and prints its own money, most transactions there will still be in Euros unless the government specifically prohibits their use, which would be absurd. Go to any European country outside the Eurozone and you can spend Euros as easily as the local currency, at least in the touristy or big city areas.
All the money now in circulation in Greece is Euros; tourism, the country’s number one industry will continue to bring in Euros and all contracts signed since Greece joined the Euro in 2001 are in Euros. The beneficiaries of those contracts will demand payment in Euros.
What’s to stop Greece from continuing to use the Euro after they’ve ‘left’ the Eurozone? For instance, I live in Cambodia in which the US Dollar makes up 80 to 90% of all transactions even though the country also has its own currency. There are no US coins here so everything priced less than a dollar is in riel, the local currency. Also all transactions with the government are made in riels. Cambodia, as well as the several other countries who use the dollar as their own never asked America for its permission to use the dollar.
As long as the Greek people are going to deal with hardship anyway they’re better off defaulting. That way it can be cathartic and the citizenry can come together in a national forum and decide where they want their country to go rather than be forced to accept the nasty, punitive, neo-con economic prescriptions/ultimatums of the elite whose primary goal is to protect their banks and by way of inference, their investments. As I’ve stated repeatedly, there’s too much money at the top. If the 1% aren’t willing to give some of it up in increased taxes they should at minimum lose out for their poor investment choices. If the top are cut down to size, everyone else will benefit.
While Greece, the small potatoes, is in turmoil, Italy, the big cahuna, is teetering on the brink. It’s that old contagion thing: If Greece is having problems, then maybe Italy will be next, so let’s jack up the interest Italy has to pay now. The bywords of the recent international summits is: Calm the Markets; that’s the primary goal of the bailouts and rescue funds. If the financial community, which brought down the world economy with its shenanigans, is the least bit ‘jittery’ then they’ll force up interest rates to the point where countries can no longer sustain them, so that Italy last paid 6.6% on its bonds. It cannot go on very long at that rate before it can no longer meet its obligations.
Italy’s debt is very large, 120% of GDP, but its annual deficit actually isn’t, so it’s not really in the same predicament as Greece which is running very large deficits on top of its extremely high national debt ratio. Nonetheless, because the Markets rule, they decide whether a country passes or fails. Without the ‘Greek effect’ few people would be noticing Italy’s problems, or at least not think they were all that important or imperative. High debt doesn’t matter as long as the lender thinks the loan will be repaid. Witness the US which is currently paying very low interest in spite of its massive debt.
To bail out Greece to the tune of a couple of hundred billion is one thing, but to come up with the trillion or so Italy would need… well, that would be a might more of a challenge, possibly even insurmountable.
Meanwhile in make-believe-land, aka, America, there is great wrangling and hand wringing over cutting the deficit by $400 billion a year - from $1.5 trillion to $1.1 trillion. Even after shafting people who depend on benefit programs - SS, Medicare, Medicaid, as Dumbocrats have proposed - there’s still a $1 trillion plus deficit. A healthy economy would reduce the deficit by $400 billion, but that’s nowhere on the horizon, especially since both parties are intent on taking money from commoners, who spend their money in the economy, rather than taxing the wealthy who hoard it or speculate, either way with no benefit to the society as a whole.
I know Obama has taken out his populist, election-is-approaching, talking points about taxing the wealthy, but it’s nearly all lip service since he’s proposing minute amounts from the very wealthiest; nothing that would remotely get the country’s books in order. Further, Congress’ most liberal members, cowed by the neo-con paradigm, are proposing a .25% financial transaction tax to yield $100 million per year when they should be demanding at least 1%. There’s no legitimate long-term investor who’d be put off by paying 1%.
When Greece’s debt to GDP ratio (under the present optimistic scenario) is down to 120% in 2020, the US’s ratio, without drastic attitude adjustments, will be up around 160%; where Greece stands today. Some argue the deficit is not a great problem, better to borrow to create jobs than be stuck with a faltering economy. I might agree if there weren’t such massive wealth reposited in the elite. If a single one time 8% wealth tax on those with more than a million dollars can cover an entire year’s deficit there’s no reason whatever for any cuts in benefit programs, and lots of economic, as well as moral, reasons to tap into those deep pockets.
The US is experiencing a deer-in-the-headlights moment. Crash and burn is coming but Congress is incapable of responding - except by digging in its heels, and challenging the gods of reality, as it were.
Tuesday, November 8, 2011
Saturday, October 22, 2011
It’s About Time
After getting mercilessly butt reamed over the past few years after getting royally shafted since Reagan’s time, the people are finally standing up and fighting. What began with a couple hundred hardy souls camping out near Wall Street mushroomed last weekend into 950 demonstrations in 80 countries.
However, just to try to make sure the demonstrators in the US understand that their quest for equity and fairness and a healthy economy for all is futile, the Congress, at the behest of President Obama, passed free trade legislation with Korea, Columbia and Panama. They wanted the people to know that it didn’t matter which party they voted for, they were going to get shafted nonetheless. While free trade areas do create certain types of jobs for Americans, many more are lost, that’s why a large majority of Americans are opposed to FTAs.
In addition, the worst, most egregious aspects of the pacts were left unchanged from NAFTA; that is, the rights given to corporations to sue for damages when environmental legislation, for instance, cuts into their profits. The most famous example was the Metalclad Company’s attempt to build a toxic waste dump in Mexico near the US border. When the local authorities refused a permit, the company sued and forced Mexican authorities to pay $25 million in compensation. What’s more, the trade courts that adjudicate those issues are made up totally of corporate hacks and their deliberations are in secret. While they do lately occasionally judge in favor of the environment, the first 48 cases were all in favor of the corporations and against the people.
Obama campaigned on the promise to renegotiate NAFTA to eliminate its worst aspects, instead, at the behest of corporations who own him and who have no interest in anything but their own profits, he’s carried them forward to taint the new pacts.
Or take the example of Greece. While it was the conservatives who were in power when the world economy started to meltdown, who used the deceitful and charlatanesque talents of Goldman Sachs to hide the true deficit, it’s the ‘Socialists’ who are now in power who are trying to ram austerity down the throats of the people. All mainstream political parties in the Western world, regardless of whether they call themselves conservative or liberal or socialist, have bought into the feed-the-rich, save-the-banks-at-all-costs, economic paradigm.
They say not feeding the banksters will result in catastrophe, but it’s already catastrophe for large numbers of people. In fact, the only people to really suffer in a banking meltdown would be the 1%, those who’ve been sucking on the government’s corporate welfare tit. The trillions of dollars spent to save the banks only went to protect the obscene salaries and bonuses of the banksters, the gifts to the banks did nothing for the economy or the citizenry in need. Much better to let the banks fail, pay off the small depositors, and use the vast sums now being spent to save bloodsucking monster banks to instead create new smaller community oriented banks. One trillion dollars would capitalize 1000 banks at $1 billion each, 10,000 banks at $100 million each, 100,000 banks at $10 mil each.
It would be good for the banks to fail and the 1% to take a big hit to their deep pockets because they are too rich and powerful, they need to be brought down. Those resources held by the few are not good for anyone or anything but themselves. Until they take a real hit, the world’s economy and politics can never be righted.
It’s not going to happen because the banks and the 1% own the government. With the exception of about 70 Democrats who call themselves progressives, there’s no movement in Congress to correct the wrongs of today’s economy and turn it into the right direction. 75% of the American people, including 55% of Republicans want taxes raised on the wealthy to bring down the deficit, but there isn’t a Republican in Congress who would vote for that, and not all that many Democrats either, and only a few Dems who would really fight for it.
We’ve been through this all before, I feel like I’m just repeating myself. I see no light at the end of the tunnel, no dawn on the horizon, no rainbow in a heavy, steely gray, overcast sky.
However, futile or otherwise, I’d love to be out there demonstrating. It’s cool, it’s fun, it’s solidarity, it’s comradeship, it’s a little bit of hope. And it’s about time.
Saturday, October 8, 2011
Steve Jobs and the American Way of Capitalism
Eulogies for Steve Jobs have been coming hard and heavy since his expected but untimely death recently. He is recognized by everyone as a great innovator. To his fans, rather his devotees, he’s a genius, almost a demigod.
The last time I used an Apple product, it was an Apple II, back in the 80s. At a certain point the place I went to to use a computer had Macs, but for some reason I resisted moving to the much better system, maybe I’m just stubborn and slow to change. Over the years I’ve frequently had Mac lovers recommend the Apple system over the PC.
No matter how much better the system might be, adopting it was always problematical for me. In the beginning were the issues of compatibility, access to software and ease of repair, which were especially important as I was in traveling mode starting in 1992. In America, those issues would’ve been minor, in Asia a real bother.
The other, even more decisive reason for shunning Macs is that they’re so damned expensive, double or triple the cost of an equivalent PC. Jobs’ economic philosophy involved doing products so likable that people would be willing to pay a premium for them. It worked out well for him as he left this world with $6 billion in the bank, but it also strictly limited the number of people who could enjoy his ‘great innovations’.
Not only did he make his loyal and dedicated customers pay a heavy price for his products he also subjected them to indignities and rip-offs, such as not allowing purchasers of itunes songs to copy them to use on their other computers, or not making iphone batteries replaceable except by a very expensive process at an Apple store. That’s the gratitude he showed them after they showered him with adoration and fabulous wealth.
So he left with $6 billion in assets. If he had departed with ‘only’ half as much - but still far more than any one person could ever possibly need or legitimately use in one lifetime - because he priced his products more competitively and didn’t seek to soak his customers at every opportunity, a lot more people could’ve enjoyed his products and I’d feel more kindly towards him. He actually might have made even more than six billion if he’d kept a smaller margin, but sold a lot more.
In fact I would’ve loved to have an alternative to Microsoft, since I detest Bill Gates with an unrelenting passion, but Jobs made it impossible for me.
He exemplified the capitalist way, which is to think of innovation and quality only in terms of profit and whatever good might be accomplished by your work as peripheral. He might’ve been a good guy but he was also a greedy bastard.
He had it all but still died young. He had it all in this life but it’s hard to say if his great good fortune will extend to the next as it takes more than fat bank accounts in this life to get through the Pearly Gates to the next.
Sunday, September 25, 2011
It’s the Bank’s Problem
There’s a saying about banks and borrowing: If I borrow $10,000 from the bank and subsequently default, it’s my problem. If I borrow $10 billion from the ban, and default, it’s the bank’s problem.
Greece is on the edge of default. All the money thrown at the country in recent times has been expended in the fervent hope that some miracle will happen to make the country’s debt sustainable. European and international financial institutions are in denial of the inevitable default so are merely delaying the day of reckoning.
They are deathly afraid that Greece’s default will drag several large European banks down with them, because that’ll mean ‘recapitalization’, in other words, another bailout. If they can stave off default by loaning the country lots of money (which it’s very unlikely to ever be able to pay back under any circumstances) then they won’t have to give away lots of money to their too-big-to-fail banks. Either way a lot of good money will be thrown after bad and the citizens of the more frugal northern countries called upon to bail Greece out will be just as irate as the Greeks who are being called on to make sacrifices.
There are three basic reasons why default is inevitable. First is that the country’s debt level is just too high. All of the austerity measures taken and demanded so far by the international financial institutions and Eurozone countries who are loaning the money are only reducing the annual deficit, not balancing the budget, so under the most optimistic scenario, Greece’s debt will continue to rise to even more stratospheric and unsustainable levels. Secondly, many, if not most of the measures undertaken to reduce the deficit are slowing the economy, thus raising unemployment, which then increases social costs and reduces revenue and so turns out to be counterproductive; the more austerity that’s enforced or attempted, the closer the country comes to default.
Finally, the people won’t stand for additional austerity regardless of any consequences that might befall the country. Maybe they truly do not understand the seriousness of the situation or maybe they do, but either way they are fighting back to the point where the government will be powerless to act. Maybe the Greek people think default will be better than trying to meet the country’s crushing debt obligations or maybe not, but either way it won’t be pretty. At least under default the slate will be wiped clean, or at least reduced to a manageable level.
Greece’s economic problems, along with those of Ireland, Portugal, Spain, Italy, UK, US and many more countries, goes back to the fundamental ethos of neo-liberal economics that’s held sway in the financial world since Reagan and Thatcher.
Neo-liberalism has three basic tenets. First is the obsession with growth in all situations regardless of the existential circumstances of each country. Second is the insistence on low taxes on corporations and the wealthy. Third is the demand that the actions of the economic establishment be unregulated.
Japan provides the best example of the absurdity and idiocy of the all-growth-all-the-time paradigm. Economists the world over have lamented Japan’s ‘lost decades’ of stagnant economic growth. But Japan is already a wealthy country and it not only has a declining population but also an aging one. If population as a whole is declining and the proportion of the elderly, who typically have less need or desire to consume, is growing then the economy should be declining, not growing. Moreover, if the economy is ‘stagnant’(I prefer the word, stable) in a declining population then its per capita income is actually growing: shouldn’t that be enough? And yet, in a frantic and ultimately futile attempt to adhere to neo-liberal economics the country has amassed the world’s highest debt to GDP ratio - 220% - building lots of bridges to nowhere. If they hadn’t accepted the obsessive growth paradigm they could’ve shared the available work and taken lots of vacations instead of continuing to work the longest hours of any industrial society. They could’ve rested on their laurels, been content with their already wealthy status and started to enjoy life.
The insistence on low taxes for corporations and the wealthy has two major impacts. One is the excessive and destructive speculation that arises from the wealthy having too much money on their hands. The other is the debt that governments accumulate because tax receipts are insufficient when the fat cats are lightly taxed.
Finally, the demand that the activities of society’s economic controllers be unregulated combined with them having more money than they know what to do with brings wild economic swings with inevitable and debilitating busts coming after giddy and unsustainable booms. It doesn’t have to be that disastrous for an economy or a people. Germany experienced a downturn equal to America’s but its unemployment rate grew only minimally. They accomplished that by setting up a program that encouraged companies to put people on short hours with the government making up the difference.
If we were going for sustainability, the good life, spiritual growth instead of blind, mindless consumerism, there’d be neither booms, nor busts. There’d be neither high unemployment, nor widespread poverty. It wouldn’t take much in the way of income redistribution to insure that no American needed to be hungry or homeless. Meanwhile, the poor and middle classes are called upon to sacrifice so that the wealthy can have more tax breaks. And the Repuglicans call it class warfare when the masses object.
Every tax law is a political statement; one way or another somebody is going to have to pay. Since nobody likes taxes and governments are therefore reluctant to levy them, they’ve relied on huge levels of borrowing to make up the difference in the fervent hope that economies will grow enough to make the additional debt payments tolerable. That works until the burdens get too large for governments to sustain and/or inevitable downturns happen because of deregulation and speculation. Either way you’re in a pickle.
Now Obama, our very own Manchurian candidate, is starting to talk tough about raising taxes on the wealthy. Ah, yes, the campaign is beginning and since raising taxes on the wealthy is supported by more than 70% of the American people, it sure won’t hurt his chances for reelection to throw a little red meat to the angry electorate. However, he also made sure to keep his overseers happy by agreeing to cuts in Medicare and Medicaid, saying he wouldn’t accept cuts in those programs without (minimal) tax rises for the wealthy. In other words, slash away wingnut congress, your dream of starting the evisceration hated social programs has been answered.
The world is slouching towards economic disaster because nothing has changed since the 2008 blowout to rein in out-of-control banksters. Witness a ‘rogue’ trader at Swiss bank UBS losing the bank more than $2 billion. You’d think they’d be watching a little more closely or investing a little more conservatively. The certainty of another crash is also indicated by a recent news announcement from the UK that retail banks, where people have their checking accounts, etc., were going to be separated from investment banking, which is no more or less than speculation, a.k.a., gambling. Separation is an absolutely essential change if future bailouts are to be avoided. The problem is that the UK’s new rule is not programmed to take effect until 2019, giving the banksters all the time they need to create another, even multiple, banking meltdowns. Why 2019? Why not 2050? Sure wouldn’t want to unnecessarily rush the banks, would we?
Anyway, there’s always more money in the coffers for bankster welfare… until there isn’t. There will be until the people rise up and say, No more!, regardless of the consequences.
Greece is on the edge of default. All the money thrown at the country in recent times has been expended in the fervent hope that some miracle will happen to make the country’s debt sustainable. European and international financial institutions are in denial of the inevitable default so are merely delaying the day of reckoning.
They are deathly afraid that Greece’s default will drag several large European banks down with them, because that’ll mean ‘recapitalization’, in other words, another bailout. If they can stave off default by loaning the country lots of money (which it’s very unlikely to ever be able to pay back under any circumstances) then they won’t have to give away lots of money to their too-big-to-fail banks. Either way a lot of good money will be thrown after bad and the citizens of the more frugal northern countries called upon to bail Greece out will be just as irate as the Greeks who are being called on to make sacrifices.
There are three basic reasons why default is inevitable. First is that the country’s debt level is just too high. All of the austerity measures taken and demanded so far by the international financial institutions and Eurozone countries who are loaning the money are only reducing the annual deficit, not balancing the budget, so under the most optimistic scenario, Greece’s debt will continue to rise to even more stratospheric and unsustainable levels. Secondly, many, if not most of the measures undertaken to reduce the deficit are slowing the economy, thus raising unemployment, which then increases social costs and reduces revenue and so turns out to be counterproductive; the more austerity that’s enforced or attempted, the closer the country comes to default.
Finally, the people won’t stand for additional austerity regardless of any consequences that might befall the country. Maybe they truly do not understand the seriousness of the situation or maybe they do, but either way they are fighting back to the point where the government will be powerless to act. Maybe the Greek people think default will be better than trying to meet the country’s crushing debt obligations or maybe not, but either way it won’t be pretty. At least under default the slate will be wiped clean, or at least reduced to a manageable level.
Greece’s economic problems, along with those of Ireland, Portugal, Spain, Italy, UK, US and many more countries, goes back to the fundamental ethos of neo-liberal economics that’s held sway in the financial world since Reagan and Thatcher.
Neo-liberalism has three basic tenets. First is the obsession with growth in all situations regardless of the existential circumstances of each country. Second is the insistence on low taxes on corporations and the wealthy. Third is the demand that the actions of the economic establishment be unregulated.
Japan provides the best example of the absurdity and idiocy of the all-growth-all-the-time paradigm. Economists the world over have lamented Japan’s ‘lost decades’ of stagnant economic growth. But Japan is already a wealthy country and it not only has a declining population but also an aging one. If population as a whole is declining and the proportion of the elderly, who typically have less need or desire to consume, is growing then the economy should be declining, not growing. Moreover, if the economy is ‘stagnant’(I prefer the word, stable) in a declining population then its per capita income is actually growing: shouldn’t that be enough? And yet, in a frantic and ultimately futile attempt to adhere to neo-liberal economics the country has amassed the world’s highest debt to GDP ratio - 220% - building lots of bridges to nowhere. If they hadn’t accepted the obsessive growth paradigm they could’ve shared the available work and taken lots of vacations instead of continuing to work the longest hours of any industrial society. They could’ve rested on their laurels, been content with their already wealthy status and started to enjoy life.
The insistence on low taxes for corporations and the wealthy has two major impacts. One is the excessive and destructive speculation that arises from the wealthy having too much money on their hands. The other is the debt that governments accumulate because tax receipts are insufficient when the fat cats are lightly taxed.
Finally, the demand that the activities of society’s economic controllers be unregulated combined with them having more money than they know what to do with brings wild economic swings with inevitable and debilitating busts coming after giddy and unsustainable booms. It doesn’t have to be that disastrous for an economy or a people. Germany experienced a downturn equal to America’s but its unemployment rate grew only minimally. They accomplished that by setting up a program that encouraged companies to put people on short hours with the government making up the difference.
If we were going for sustainability, the good life, spiritual growth instead of blind, mindless consumerism, there’d be neither booms, nor busts. There’d be neither high unemployment, nor widespread poverty. It wouldn’t take much in the way of income redistribution to insure that no American needed to be hungry or homeless. Meanwhile, the poor and middle classes are called upon to sacrifice so that the wealthy can have more tax breaks. And the Repuglicans call it class warfare when the masses object.
Every tax law is a political statement; one way or another somebody is going to have to pay. Since nobody likes taxes and governments are therefore reluctant to levy them, they’ve relied on huge levels of borrowing to make up the difference in the fervent hope that economies will grow enough to make the additional debt payments tolerable. That works until the burdens get too large for governments to sustain and/or inevitable downturns happen because of deregulation and speculation. Either way you’re in a pickle.
Now Obama, our very own Manchurian candidate, is starting to talk tough about raising taxes on the wealthy. Ah, yes, the campaign is beginning and since raising taxes on the wealthy is supported by more than 70% of the American people, it sure won’t hurt his chances for reelection to throw a little red meat to the angry electorate. However, he also made sure to keep his overseers happy by agreeing to cuts in Medicare and Medicaid, saying he wouldn’t accept cuts in those programs without (minimal) tax rises for the wealthy. In other words, slash away wingnut congress, your dream of starting the evisceration hated social programs has been answered.
The world is slouching towards economic disaster because nothing has changed since the 2008 blowout to rein in out-of-control banksters. Witness a ‘rogue’ trader at Swiss bank UBS losing the bank more than $2 billion. You’d think they’d be watching a little more closely or investing a little more conservatively. The certainty of another crash is also indicated by a recent news announcement from the UK that retail banks, where people have their checking accounts, etc., were going to be separated from investment banking, which is no more or less than speculation, a.k.a., gambling. Separation is an absolutely essential change if future bailouts are to be avoided. The problem is that the UK’s new rule is not programmed to take effect until 2019, giving the banksters all the time they need to create another, even multiple, banking meltdowns. Why 2019? Why not 2050? Sure wouldn’t want to unnecessarily rush the banks, would we?
Anyway, there’s always more money in the coffers for bankster welfare… until there isn’t. There will be until the people rise up and say, No more!, regardless of the consequences.
Monday, September 19, 2011
Uncle Tom + Manchurian Candidate = Obama
I can’t help thinking Obama is a melding of Harriet Beecher Stowe’s, Uncle Tom with the seminal movie, The Manchurian Candidate. Uncle Tom is the good ‘Negro’ who always cautions patience, compromise and deference towards society’s masters. Speak softly, don’t make waves, never challenge the powers that be. Obama always starts his negotiating from a compromise position and then gives away the store to the opposition. That’s because he’s really the Manchurian Candidate, a plant; the perfect foil sent by the enemy to further their own goals. He’s ideal for the task: he’s a totally likable fellow who’s got the rhetoric of progressivism down even when his policies are exactly opposite. He’s got all the right credentials and background and being of half African descent, nobody would ever guess he’s been programmed to work for the other side.
After three years on the job, governing from the center right, how could it be otherwise. The only thing that distinguishes his impact from that of a theoretical ‘Moderate Republican’ is his federal court picks, on every other score, it’s clear he’s doing the work of society’s controllers. He’s even been offering up cuts in ‘entitlements’ as ways to cut the deficit before the Repugs even demanded it. He’s given up the one best campaign issue for Dumbocrats, the one factor that has always distinguished the party from the opposition. Is he doing it because he believes he’s truly representing the will of the American people?
Not if you believe polling has any legitimacy since more than 80% of Americans say no cuts to Social Security and nearly 80% say no cuts to Medicare. Neither are really ‘entitlements’ since both are totally self-funded programs: to receive benefits requires having put money in. Medicaid, which is an entitlement because low-income people are entitled to benefits based solely on their citizenship, is supported by nearly 70%.
He consistently chooses the worst possible people for his economic team, like Jeffery Imelt, CEO of General Electric, to lead his Commission on Jobs and Competitiveness. GE has created a lot of jobs recently but they’re all outside the US. GE made $14 billion in profits last year but not only didn’t pay taxes on it but received a $3 billion refund. There are half a dozen progressive economists I could name offhand who would actually represent the American people rather than the elite, and do a far better job on jobs and competitiveness than Imelt. That’s Obama’s Uncle Tom coming out; he wants to be one of the guys, to be liked and respected by the bigtimers.
When his base, the people who worked and campaigned for him, try to push a progressive agenda he slams and slanders them as unrealistic, pie-in-the-sky, radical, professional leftists. According to Mr. O, the more than 60% of Americans and 90% of self-identified Democrats who want single-payer health care, the same single-payer he advocated as a candidate, are asking for the impossible. It is much better in his mind to make the despised insurance industry central to his health plan, thus his Manchurian Candidate side. He doesn’t want to upset or incur the wrathful opposition of the big guys so he’s happy to settle for a half-assed plan.
Problem is, you don’t inspire your constituency with half-assism. He’s made it very clear that he thinks insulting his base improves his electoral chances with independents; after all, if you’re a progressive, who’re you going to vote for, Rick Perry? That may be true, except you don’t work for or campaign for someone who shits on you while kowtowing to right wing nuttery. You don’t show any enthusiasm for a leader who stops at nothing to protect and coddle thieving banksters while watching obliviously as millions of Americans are kicked out of their homes by those same heartless fat cats. Okay, he’s not totally oblivious to the plight of average Americans; he does mention them in passing now and then while he’s haplessly, fecklessly betraying them. Anyway, if 80% of Americans are opposed to cuts in Social Security and Medicare, who are the independents he’s trying to appeal to?
His latest jobs plan is another in a long line of policy farces. Sixty percent of the plan goes to tax breaks which will have very minimal effect on jobs. If you give the average American a tax break today, they will most likely pay down debt or buy something made in China; how does that create jobs? And since he has no fight in him, he’ll get the tax breaks because the Repugs like that part and give up the actual job creation part because they don’t.
He’s doing the job his enemy controllers sent him to do, and most American readers of this post will hold their noses and vote for him; but not me, as long as the results are essentially the same then it’s better to have a village-idiot Repug in the job than an enemy plant who talks the talk of empathy and caring while stabbing you in the back.
After three years on the job, governing from the center right, how could it be otherwise. The only thing that distinguishes his impact from that of a theoretical ‘Moderate Republican’ is his federal court picks, on every other score, it’s clear he’s doing the work of society’s controllers. He’s even been offering up cuts in ‘entitlements’ as ways to cut the deficit before the Repugs even demanded it. He’s given up the one best campaign issue for Dumbocrats, the one factor that has always distinguished the party from the opposition. Is he doing it because he believes he’s truly representing the will of the American people?
Not if you believe polling has any legitimacy since more than 80% of Americans say no cuts to Social Security and nearly 80% say no cuts to Medicare. Neither are really ‘entitlements’ since both are totally self-funded programs: to receive benefits requires having put money in. Medicaid, which is an entitlement because low-income people are entitled to benefits based solely on their citizenship, is supported by nearly 70%.
He consistently chooses the worst possible people for his economic team, like Jeffery Imelt, CEO of General Electric, to lead his Commission on Jobs and Competitiveness. GE has created a lot of jobs recently but they’re all outside the US. GE made $14 billion in profits last year but not only didn’t pay taxes on it but received a $3 billion refund. There are half a dozen progressive economists I could name offhand who would actually represent the American people rather than the elite, and do a far better job on jobs and competitiveness than Imelt. That’s Obama’s Uncle Tom coming out; he wants to be one of the guys, to be liked and respected by the bigtimers.
When his base, the people who worked and campaigned for him, try to push a progressive agenda he slams and slanders them as unrealistic, pie-in-the-sky, radical, professional leftists. According to Mr. O, the more than 60% of Americans and 90% of self-identified Democrats who want single-payer health care, the same single-payer he advocated as a candidate, are asking for the impossible. It is much better in his mind to make the despised insurance industry central to his health plan, thus his Manchurian Candidate side. He doesn’t want to upset or incur the wrathful opposition of the big guys so he’s happy to settle for a half-assed plan.
Problem is, you don’t inspire your constituency with half-assism. He’s made it very clear that he thinks insulting his base improves his electoral chances with independents; after all, if you’re a progressive, who’re you going to vote for, Rick Perry? That may be true, except you don’t work for or campaign for someone who shits on you while kowtowing to right wing nuttery. You don’t show any enthusiasm for a leader who stops at nothing to protect and coddle thieving banksters while watching obliviously as millions of Americans are kicked out of their homes by those same heartless fat cats. Okay, he’s not totally oblivious to the plight of average Americans; he does mention them in passing now and then while he’s haplessly, fecklessly betraying them. Anyway, if 80% of Americans are opposed to cuts in Social Security and Medicare, who are the independents he’s trying to appeal to?
His latest jobs plan is another in a long line of policy farces. Sixty percent of the plan goes to tax breaks which will have very minimal effect on jobs. If you give the average American a tax break today, they will most likely pay down debt or buy something made in China; how does that create jobs? And since he has no fight in him, he’ll get the tax breaks because the Repugs like that part and give up the actual job creation part because they don’t.
He’s doing the job his enemy controllers sent him to do, and most American readers of this post will hold their noses and vote for him; but not me, as long as the results are essentially the same then it’s better to have a village-idiot Repug in the job than an enemy plant who talks the talk of empathy and caring while stabbing you in the back.
Wednesday, August 17, 2011
3rd Grade Antics
Thanks to the Repugs’ take-no-prisoners approach to governing, and Standard and Poor’s subsequent downgrade of the US’s credit rating, people over the world think America’s in financial trouble and may not be able to meet its commitments. While America’s financial problems are real enough - actually very serious, in my opinion - the real problem is political.
S & P’s report detailing its reasons for the downgrade made very clear that the Repugs intransigence regarding raising taxes was key to its decision (bet you didn’t hear that in the corporate media). The fact that they got the mortgage backed securities debacle totally wrong, giving top rating to every toxic security that came its way, detracts but ultimately doesn’t change the impact of the downgrade. In addition to the need to raise taxes, S & P said $3 trillion in cuts over 10 years wasn’t enough, it should be $4 trillion. However, when you consider this year’s deficit is $1.5 trillion neither $3 nor $4 trillion over 10 years is taking the problem seriously.
Looking at it realistically, considering 40% of the US budget comes from borrowing, there’s no way to bring it into balance only with spending cuts. There’d need to be significant tax rises or a booming economy in addition to the cutbacks to balance the budget. Since neither is on the horizon the situation can only go from serious but tenable to total wipeout. At this point the debt is so large, it’s not enough to reduce the deficit by 25%, the budget has to balanced, and soon, because there’s no longer very much leeway for any significant deficit spending.
If you want to get a close look at the US budget and debt figures there’s a fascinating website called http://usdebtclock.org which gives a running count of debt, income, etc. The total budget is $3.4 t, the deficit is $1.5 t, the top three budget items are Medicare/Medicaid at $800 b, Social Security at about $725 b, and defense at $700 b, so you’d have to totally eliminate two of three to balance the budget without new taxes.
More than 70% of Americans think taxes should be raised on incomes over $250,000 - 3% of the total - and large majorities are against any cuts to Social Security, Medicare and Medicaid, but since neither Obama nor the Congress seek any longer to represent the American people, the only way forward for them, though not enough to actually make a difference to the deficit, are cuts to programs that impact everybody but the rich.
Meanwhile, US corporations are sitting on $1.9 trillion dollars of capital reserves, enough to cover the deficit with $400 billion to spare. As mentioned in an earlier post a one time 10% wealth tax on assets over $1 million would also completely cover the
deficit. The wealthy are untouchable but their greed is going to bring the system down. Tom Toles, political cartoonist for the Washington Post had a great cartoon a while back. It showed a fat cat standing in front of an imposing edifice overflowing with money labeled ‘Corporate Cash Reserves’. He’s talking to the peonage saying, We’ll start hiring again when you find the money to buy stuff. There’s no money to buy stuff because the wealthy are hoarding the resources, or collecting on the massive personal debts owed by the commoners.
Our proverbial fat cat is a ‘job creator’ according to the Repugs, and shouldn’t have to pay any additional taxes or he won’t create jobs… but clearly he’s not interested in creating jobs. If he did care to invest his $1.9 trillion of loose cash in America, the economy would be booming, a lot more people would be paying taxes and the deficit would decrease sharply.
The US debt to GDP ratio now stands at about 97%. Next year it’ll be about 107% even with the cuts now in the pipeline. In five years, it’ll be up between 140 and 150% of GDP. As long as investors are still willing to buy US Government bonds at current interest rates of 3% or less, servicing the debt will not be a great challenge. Japan has the worst debt to GDP of any country - 220% - but since its people are willing to lend it money at rates of 1% or less, the country can carry on racking up debt for at least some years in the future though certainly not indefinitely.
With the world racked with financial insecurity, many investors see safety in US bonds, but with the US government going all out to weaken the dollar with very high deficits and debt, 0% interest giveaways to the banks and large scale money printing, that cannot last. At some point the tide will turn and interest rates will shoot up. That could happen from investors looking at America’s internal problems or it could be triggered by steep inflation in commodities. Either way, the US will be where Greece is today, with the exception that the US can print money to no end. However in that case the cure would be worse than the disease.
Europe’s in trouble again because those investors that governments love to coddle are demanding high interest on sovereign debt issued by Italy and Spain. Neither country would be in serious trouble if not for those high interest rates. Both, like the US, definitely need to get their financial houses in order, but like the US, their problems are political. Deficit spending boosts economies and since growth is the all consuming quest of nearly all countries, and the wealthy are flush with ready cash they need to invest, borrowing has been very easy, too easy.
Several countries, including Spain and Italy have temporarily banned short selling of their debt. A short seller is betting on value going down and when enough short sellers get in the act it becomes a surge which is hard to control. This brings up the subject of Credit Default Swaps (CDS’s) one of those Financial Instruments of Mass Destruction. A CDS is basically an insurance policy on your bond purchase. If the bond issuer defaults, you get paid. This does make a bit of sense, except as we saw in the case of AIG, which sold mountains of toxic CDS’s, when they all went bad at once, AIG couldn’t pay and so the government stepped in with $180 billion of free money to protect the profits of the banks and other biggies who bought the CDS’s.
There’s also something called naked CDS’s. That’s where a third party buys a CDS to bet on the bond defaulting. This is problematical because the naked CDS buyer has a stake in the bond going bust and will act accordingly, trying to cause default through rumors, whatever. This is equivalent to me buying an insurance policy on your life: I have an incentive to see you offed so I can collect.
Essentially nothing has changed since the great meltdown of 2007, except the too-big-to-fail banks are even bigger. They still are on shaky footing and ready to crumble and are only kept afloat by massive subsidies from the Federal Reserve. Only minor tweaking was done, in response to the crash, to the regulatory structure that could prevent a repeat.
You’ve been hearing for two years that the Great Recession is over, that the US has been growing, albeit slowly. What you probably didn’t hear is that 88% of the growth of the past two years has gone to the corporations and the very top of the income earners. The American economy is top heavy, its foundations are weak. Without heavy taxes on the top to bring the economic ship of state into balance, it’s bound to fall of its own weight. With the combination of Obama’s fecklessness (and the bought-out status of most Dumbos in general) and the Repugs mania for protecting the wealth of the upper classes at all costs, nothing is going to change the trajectory of disaster.
Friday, June 24, 2011
Default
Default
The third topic of thunderous geopolitical import I’ve needed lately to write about after Fukushima, which keeps getting worse, and the regression of American politics, which probably can’t get any worse, is the Eurozone debt crisis which will later, if not sooner, see Greece, as the first of several countries, default on its debts or at minimum force a restructuring of its debt.
The IMF and European Central Bank think they are bending over backwards to help Greece avoid default. In the event, their prescriptions for recovery and the onerous conditions placed on their ‘generosity’, only delay the inevitable. By the time the latest bailout is added to their debt, it’ll equal more than 160% of GDP and debt service an unsustainable 6% plus of GDP. In contrast, US debt is about 100% of GDP and debt service about 1.2%. If the US were paying debt service equivalent to Greece’s that would come to about $1 trillion a year. The total US budget is now about $3.4 trillion.
Part of the problem is the high interest rates – 5.5% - the monetary agencies are charging Greece. The money made available to the ECB and IMF to help countries in distress should be doled out at low interest rates, they are, after all, not commercial banks looking for profits, but public entities financed with public money established for the public good. Why then would the IMF want to make money from a country that is dealing with social unrest, political upheaval and imminent default? Their mindset is so far from humanitarian they don’t even know they’re being assholes and helping to bring the country down instead of saving it.
That is combined with required austerity measures which, ostensibly, are to rein in excess government, but in reality add greatly to unemployment, and thus reduce tax revenue. Since affluent Greeks are adept at avoiding taxes it’s only the commoners that pay and only when they are working. Moreover, with the economy going downhill those who do have jobs aren’t spending in fear they might join the ranks of the unemployed. The finance community is participating in bringing the country down and making it impossible for Greece to ever pay its debt.
When an individual reaches an equivalent level of debt and it’s clear that they’ll never have the ability to pay, they declare bankruptcy. Their remaining assets are divvied up amongst creditors and they start over. Once you’ve gone that route, you’re on your own, you’ve no choice but to live within your means since borrowing is no longer an option.
The head of the ECB said Greek default is unthinkable because that would mean recapitalizing the big banks that have invested in Greek bonds. When the masses face unemployment and poverty, they’re told to buck up and tough it out. When banks and investors stand to lose out because they gambled (that’s what investing is) on the wrong investments, they get money thrown at them. Germans are widely opposed to bailing out Greece, but if they don’t, they’ll be bailing out their banks.
Greek prime minister Georges Papandreou has warned default will be catastrophic. Very true, but sometimes that’s exactly what’s needed to right the ship of state. For the Greek people who’ve been let down by their government and in some ways their culture, whether they go down by way of default or unsustainable debt, it’ll be catastrophe either way. They were let down by their government (the previous conservative administration) because it used Goldman Sachs’ expertise in deceit and underhandedness to hide the amount of debt they were accumulating. Let down by their culture because of a bloated civil service and widespread tax avoidance where doctors are able to claim annual incomes of $25,000 because they’ve bribed the tax authorities to look the other way.
It’s important to note that the Greek government could’ve continued on its merry profligate debtor’s way if the financial crisis of 2008 hadn’t intervened to throw a lightening bolt into the endless growth bubble. That’s why you’re supposed to save for a rainy day, make hay while the sun shines, bury your acorns in fall to get through the tough times of winter. Most people are aware of the half of Keynesian economics which says countries should deficit spend in times of recession to keep their economies going, but few remember the other half where he said they should put money aside during good times to have available during hard times.
The problem of excessive sovereign debt has arisen because dominant bankster economic philosophy over the past few decades requires that taxes on the wealthy and corporations be low which serves to starve government of revenues and simultaneously make it easy for governments to borrow because those with money have a lot of it laying around needing to do something with it. As mentioned previously, it’s a lot easier to use borrowing to make an economy look good than actually raise the necessary money through taxation. The borrowing is justified by assuming that a growing economy will make it easy to service the debt, and to a certain point, it will… until it stops growing, which inevitably must happen since nothing can grow indefinitely.
If world financial institutions actually wanted to help the people of Greece, they’d provide low or no interest loans to consolidate debt and an equivalent amount to finance infrastructure improvements and sustainable energy production to put people to work. They’d also force creditors to restructure their loans by extending their payback dates and lowering interest rates. Instead they are punishing the people with pay cuts, worsening working conditions, very high unemployment and increased taxes, all while the country’s elite continue to shirk their responsibility to help fund government. They are forcing a debt death spiral.
Ironically, default will change Greece in just the manner prescribed by the bankster community. The difference is that a lot of rich people will also share the pain and get hits in their deep pockets. Wouldn’t that be nice. And isn’t it about time. The banking system will be in crisis and lots of investors will get haircuts… well great, there’s too much money at the top, time to cut the elite down to a fairer, more equitable size.
The workers and salarymen and women will get hit hard, but they’ll also be able to start fresh and create a new society. Think about it: If a country is getting 40% of its budget from borrowing and suddenly that money is no longer available (that’s the percentage for America, I don’t know the exact figure for Greece) it will be a formidable challenge to keep the country afloat. The outsized civil service will be pared drastically. All government functions will be sliced to the bare bones. With the public sector starved for cash, the tax collectors will be, or should be, out doing their jobs with a vengeance. At least they won’t be spending a huge portion of their income on debt service.
It’ll be chaos and turmoil in the beginning with mass unemployment and poverty. In two or three years they’ll be back to some semblance of normality. In seven to ten years they’ll be going strong, starting from a much stronger, more equitable base. And it’ll be a warning to other countries to keep their books in order – including the US. And a warning to banksters and investors that they won’t always get bailed out.
The third topic of thunderous geopolitical import I’ve needed lately to write about after Fukushima, which keeps getting worse, and the regression of American politics, which probably can’t get any worse, is the Eurozone debt crisis which will later, if not sooner, see Greece, as the first of several countries, default on its debts or at minimum force a restructuring of its debt.
The IMF and European Central Bank think they are bending over backwards to help Greece avoid default. In the event, their prescriptions for recovery and the onerous conditions placed on their ‘generosity’, only delay the inevitable. By the time the latest bailout is added to their debt, it’ll equal more than 160% of GDP and debt service an unsustainable 6% plus of GDP. In contrast, US debt is about 100% of GDP and debt service about 1.2%. If the US were paying debt service equivalent to Greece’s that would come to about $1 trillion a year. The total US budget is now about $3.4 trillion.
Part of the problem is the high interest rates – 5.5% - the monetary agencies are charging Greece. The money made available to the ECB and IMF to help countries in distress should be doled out at low interest rates, they are, after all, not commercial banks looking for profits, but public entities financed with public money established for the public good. Why then would the IMF want to make money from a country that is dealing with social unrest, political upheaval and imminent default? Their mindset is so far from humanitarian they don’t even know they’re being assholes and helping to bring the country down instead of saving it.
That is combined with required austerity measures which, ostensibly, are to rein in excess government, but in reality add greatly to unemployment, and thus reduce tax revenue. Since affluent Greeks are adept at avoiding taxes it’s only the commoners that pay and only when they are working. Moreover, with the economy going downhill those who do have jobs aren’t spending in fear they might join the ranks of the unemployed. The finance community is participating in bringing the country down and making it impossible for Greece to ever pay its debt.
When an individual reaches an equivalent level of debt and it’s clear that they’ll never have the ability to pay, they declare bankruptcy. Their remaining assets are divvied up amongst creditors and they start over. Once you’ve gone that route, you’re on your own, you’ve no choice but to live within your means since borrowing is no longer an option.
The head of the ECB said Greek default is unthinkable because that would mean recapitalizing the big banks that have invested in Greek bonds. When the masses face unemployment and poverty, they’re told to buck up and tough it out. When banks and investors stand to lose out because they gambled (that’s what investing is) on the wrong investments, they get money thrown at them. Germans are widely opposed to bailing out Greece, but if they don’t, they’ll be bailing out their banks.
Greek prime minister Georges Papandreou has warned default will be catastrophic. Very true, but sometimes that’s exactly what’s needed to right the ship of state. For the Greek people who’ve been let down by their government and in some ways their culture, whether they go down by way of default or unsustainable debt, it’ll be catastrophe either way. They were let down by their government (the previous conservative administration) because it used Goldman Sachs’ expertise in deceit and underhandedness to hide the amount of debt they were accumulating. Let down by their culture because of a bloated civil service and widespread tax avoidance where doctors are able to claim annual incomes of $25,000 because they’ve bribed the tax authorities to look the other way.
It’s important to note that the Greek government could’ve continued on its merry profligate debtor’s way if the financial crisis of 2008 hadn’t intervened to throw a lightening bolt into the endless growth bubble. That’s why you’re supposed to save for a rainy day, make hay while the sun shines, bury your acorns in fall to get through the tough times of winter. Most people are aware of the half of Keynesian economics which says countries should deficit spend in times of recession to keep their economies going, but few remember the other half where he said they should put money aside during good times to have available during hard times.
The problem of excessive sovereign debt has arisen because dominant bankster economic philosophy over the past few decades requires that taxes on the wealthy and corporations be low which serves to starve government of revenues and simultaneously make it easy for governments to borrow because those with money have a lot of it laying around needing to do something with it. As mentioned previously, it’s a lot easier to use borrowing to make an economy look good than actually raise the necessary money through taxation. The borrowing is justified by assuming that a growing economy will make it easy to service the debt, and to a certain point, it will… until it stops growing, which inevitably must happen since nothing can grow indefinitely.
If world financial institutions actually wanted to help the people of Greece, they’d provide low or no interest loans to consolidate debt and an equivalent amount to finance infrastructure improvements and sustainable energy production to put people to work. They’d also force creditors to restructure their loans by extending their payback dates and lowering interest rates. Instead they are punishing the people with pay cuts, worsening working conditions, very high unemployment and increased taxes, all while the country’s elite continue to shirk their responsibility to help fund government. They are forcing a debt death spiral.
Ironically, default will change Greece in just the manner prescribed by the bankster community. The difference is that a lot of rich people will also share the pain and get hits in their deep pockets. Wouldn’t that be nice. And isn’t it about time. The banking system will be in crisis and lots of investors will get haircuts… well great, there’s too much money at the top, time to cut the elite down to a fairer, more equitable size.
The workers and salarymen and women will get hit hard, but they’ll also be able to start fresh and create a new society. Think about it: If a country is getting 40% of its budget from borrowing and suddenly that money is no longer available (that’s the percentage for America, I don’t know the exact figure for Greece) it will be a formidable challenge to keep the country afloat. The outsized civil service will be pared drastically. All government functions will be sliced to the bare bones. With the public sector starved for cash, the tax collectors will be, or should be, out doing their jobs with a vengeance. At least they won’t be spending a huge portion of their income on debt service.
It’ll be chaos and turmoil in the beginning with mass unemployment and poverty. In two or three years they’ll be back to some semblance of normality. In seven to ten years they’ll be going strong, starting from a much stronger, more equitable base. And it’ll be a warning to other countries to keep their books in order – including the US. And a warning to banksters and investors that they won’t always get bailed out.
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