How can so many Americans believe that we’re in a depression, when the stock market and commodity prices have been booming?
Read the Rest…
Sic transit America?
A Growing List Of One Term Presidents, A State of Distress, A Time To Repent, AIG and all that....., “the Greenspan doctrine”, Back to the basics, Collateral Damage, Coming Social Unrest, Commercial Real Estate Bust, Consumption Ran the Old Economy, Coup d'etat in America, Death of the Dollar, Deflation-Inflation-Stagflation, Devaluation, Dismal Science-Ignorant Scientists?, Even the Terminator Can't Help California, Federal Reserve-Discussion, Figures don't lie but Liars can figure, Integrity and Responsibility, Is The Market Rally Real?, It Is Nice To Be Part of the Elite!, It starts with a foundation, IT'S ALL ABOUT POWER AND MONEY, Monetary Policy - Discussion, Our phony middle class, Patience is a virtue...Delusion is a vice, Political Chaos, Politicians, Prostitutes and Pimps All Rhyme, Small Business-Bedrock of America, Sub-Prime anytime, TARP fruit loops, The Arrogance of Power, The Consequences of Greed, The Democrats Blew It Again, The End of American Capitalism As We Know It? - Discuss, The excellent adventures of Ben Bernanke, The Financial Elite, The Global Economy, The Habits of Hedge Funds, The Importance of Strategic Planning, The Inherent Disorder of Empires, The Intrusion of UNLAWFUL Authority, The Judeo-Christian Political Coalition, The New American Socialism, The Sorry State Of American Manufacturing, Time For A New Third Party, Truth In Charity, Unemployment Catastrophe, US Trade Imbalance, USA Is the New Japan, We Are All Cooked, We Are All Guilty, We Have Become Beggars To The World
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Jan 162010
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| Flagging: a US sailor stands on the flight deck of the aircraft carrier USS George Washington |
If a week is a long time in politics, a decade is starting to look like an age in geopolitics. Comparing the America that began the 21st century with the America of today is to witness a country that has in some ways quite radically altered its view of itself and its relationship to the world.
In short, the metallic rust of decline has crept into the American soul. “You could argue that the first decade of the 21st century was the last decade of the American century,” says David Rothkopf, a former Clinton administration official and student of US foreign policy. “We are now entering the multipolar century.”
Self-doubt tarnishes Brand America
Washington Post Crashed-and-Burned-and-Smoking Watch: …[The Washington Posts's] Fred Hiatt this morning:
Re-Stimulating. Unemployment is bad. More fiscal debt might be worse: At 9.8 percent, the unemployment rate is higher than it has been since it hit 10.1 percent in June 1983. Since the recession began 21 months ago, the economy has shed nearly 7 million jobs. Whole industries — cars, housing, finance — have been devastated and may never recover fully. Nevertheless, White House economists reported in September that “employment is estimated to be between 600,000 and 1.1 million higher than it would otherwise have been” because of the Obama administration’s stimulus plan and other government policies, especially the Fed’s monetary expansion. While no one can prove or disprove that — much less apportion credit between fiscal and monetary policy — basic economics suggests that things might have been even worse if the government had done nothing…
It does not necessarily follow, however, that the economy needs more stimulus now. Government has managed to blunt the recession, but at a cost — a higher national debt burden, which future Americans must pay off by working harder and saving more than they otherwise would have…
Ummm…
So far the stimulus spendout has been some $160 billion. The midpoint estimate by Christy Romer and company is that GDP is now 1% higher than it would have been otherwise. That higher level of production and employment than we would have seen otherwise is going to lead to the collection of an extra $80 billion in tax revenues. That means that the net effect of the $160 billion we have pushed out the door has been to raise the national debt by $80 billion. The Treasury can now borrow through its TIPS program for 20 years at an interest rate of 2% plus inflation. That means that taxes in the future have to be higher by $1.6 billion per year–by $5 per person per year.
Thus the stimulus package so far:
- Incur an extra forward-looking tax burden per person of 1.3 cents per day…
- Get an extra 800,000 people productively at work–and get all the stuff they make and do–this year…
That looks like a very good deal: buying an extra productive job for an American today at a cost of $2000 per year in higher taxes looking forward–particularly when you think that some of those extra jobs build up our productive capacity to make us richer in the future as well.
The stimulus arithmetic suggests we should be doing more of it. The benefit-cost ratio at current stimulus spending levels is very good…
But nobody on Fred Hiatt’s staff realized this. For nobody on Fred Hiatt’s staff thinks that doing any arithmetic is part of their job description. Indeed, nobody on Fred Hiatt’s staff is capable of doing any arithmetic at all.
Sic Transit Gloria America
A Growing List Of One Term Presidents, China and the Treasuries - A Dependency Relationship, Death of the Dollar, Dollar Musings, Even the Terminator Can't Help California, Global Trade, Insolvency, Our phony middle class, The China Dilemma, The Democrats Blew It Again, The End of American Capitalism As We Know It? - Discuss, The Global Economy, The Importance of Strategic Planning, The Sorry State Of American Manufacturing, US Trade Imbalance, Watch The China Market, We Are All Cooked, We Have Become Beggars To The World
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Aug 022009
As U.S. deficits increased, global investors edged away from the dollar into the German mark, the Japanese yen, the Swiss franc, the Euro, and more recently baskets of Asian currencies.
Which brings us to today. Only goodwill (defined both as an accounting term and as political deference to military might) now supports the U.S. dollar as a reserve currency, which is what allows the United States to issue dollar-denominated bonds in world money markets.
It is this borrowing capacity that allows the Obama administration to bailout the banking industry, offer to pay for universal health care, fight colonial wars in the Middle East, stimulate the economy, send billions to Egypt and Israel, buy out General Motors, and subsidize every windmill start-up company in Nancy Pelosi’s home district. (Madoff’s problem was that he failed to set himself up as a country. He otherwise understood deficit spending.) But the shell game requires full faith in the dollar.
For those riding out financial storms by “sitting on cash,” here is what’s under your seat: in recent months U.S. federal debt has grown to $11.3 trillion, almost equivalent to gross domestic production. About one quarter of this indebtedness, or $2.8 trillion, is held abroad, and China and Japan hold just under half of those assets (liabilities to Uncle Sam).
Elsewhere on the American balance sheet is another $11.4 trillion in household debt, an annual trade deficit of about $725 billion, and a federal budget deficit that is estimated in 2009 to be approaching $1.8 trillion. That’s if the economy grows at 3 percent.
Off-balance sheet risks, what accountants call contingent liabilities, include about $10 trillion in new bailout guarantees (Fannie Mae, Bear Stearns, Countrywide, and whatever the administration launches as its New Deal of the Day). None of the above includes the unfunded liabilities of Social Security ($41 trillion), which, by comparison, make the shares of Lehman Brothers and AIG look like Scottish bonds held for widows and orphans.
The geese laying the golden eggs of U.S. financial stability are the printing presses of the U.S. Treasury, and, for now, those collecting them in their Easter baskets include a number of countries and regions perhaps tiring of American arrogance, if not of the drop in the dollar’s value. Who would blame such popular targets of moral abuse as China, Russia, Switzerland, Arabia, or Latin America for dumping their dollar-denominated assets?
All that lies between the U.S. dollar and a financial Armageddon is the Faustian house of credit cards under which Asian economies invest their trade surpluses in U.S. Treasury instruments — to keep the dollar strong, their own currencies weak, and purchases brisk between the likes of Wal-Mart and the Asian Greater Co-Prosperity Sphere.
Sooner than we think, China and Japan, like all nervous creditors, may send the United States a letter, suggesting that, henceforward, if Washington needs to borrow money, the bonds be issued in renmimbi, yen, or a basket of Asian currencies (a Pacific Euro).
Wall Street bankers did the same to the farm interests in the late nineteenth century, when they insisted that debt be based on a gold standard, as opposed to “free silver.” President Obama may be as eloquent as William Jennings Bryan. But at that point he will need to use all his oratory for the business of selling junk bonds.
The Dollar: Running On Reserve – Matthew Stevenson, newgeography
Under the management of the flamboyant Austrian body builder / therapist, California began a rapid descent that ultimately ended in death. Some faulted Schwarzenegger’s unconventional therapeutic methods and prescription spending pills, including state pension steroids that some say were powerful enough to kill a Scandinavian industrial power. Schwarzenegger denied culpability, saying that his spending pills “help build de upper financial torso and lats, and deese other sings and so on.”
Despite the last minute financial maneuvers analysts say the state died penniless, owing creditors as much as $100 billion. Amid the swirling recriminations between California camp factions, fans chose to mark it’s passing quietly. Longtime California fan club president Iowa said that despite being the constant butt of the Golden State’s insults and jokes, it will remember the late superstar fondly.
“Let’s not remember California as a bloated, rotting freakshow corpse hanging above a filthy public pension toilet,” it said. “Let’s remember the good times. Like my six-day bender at the ‘91 Rose Bowl.”
“California’s pain is finally over, and I like to think that the whole state is going to a better place,” Iowa added. “Just look at all those U-Hauls headed to Oklahoma.”
Fans Flock to Mourn California, 1849-2009 – Iowahawk, Big Hollywood
Jul 082009
There are five suspects, from the governor to the constituents themselves.
Who Killed California’s Economy? Five Suspects – Joel Kotkin, Forbes
or at least a little less worse — about the budget crisis in Sacramento.
From the Wall Street Journal tonight:
Ten states were scrambling Monday to pass budgets before a Tuesday deadline, with a handful — including Arizona, Indiana and Mississippi — facing the possibility of partial shutdowns if their legislatures don’t act in time.
The number of statehouses where budget wrangling has gone down to the wire this year is unusually high, analysts said, and reflects the difficulty legislatures and governors are having coping with income- and sales-tax collections that continue to run far below already low forecasts.
All but four states begin their fiscal years on Wednesday, and all except Vermont require that their budgets be balanced. States without budgets in hand include California, Pennsylvania, North Carolina, Delaware, Illinois, Ohio and Connecticut, where Gov. Jodi Rell, a Republican, has said she will veto the budget passed by the Democrat-controlled Legislature.
Budget Battles Come Down to the Wire in Other States, Too – Money & Co.
Jun 042009
June 2 (Bloomberg) — Imagine a novel of more than a thousand pages, published half a century ago. The author doesn’t have a talk-radio show and has been dead for 27 years.
As for the storyline, it is beyond dated: Humorless executives fight with humorless public officials over an industry that is, today, almost irrelevant to the U.S. economy – - railroads. The prose itself is a disconcerting mixture of philosophy, industrial policy, and bodice-ripping: “The wind blew her hair to blend with his. She knew why he had wanted to walk through the mountains tonight.”
In short, you would think “Atlas Shrugged” might be long forgotten.
Instead, Ayn Rand’s novel is remembered more than ever. This year the book is selling at a faster rate than last year. Last year, sales were about 200,000, higher than any year before that, including 1957, when the book was published.
Some assumed the libertarian philosopher would fall from view when the Berlin Wall fell. Or that at least there would be a sense of mission accomplished. One Rand fan, former Federal Reserve Chairman Alan Greenspan, wrote in his memoir that he regretted Rand hadn’t lived until 1989 or 1990. She’d missed the collapse of communism that she had so often predicted.
But “Atlas Shrugged” is becoming a political “Harry Potter” because Rand shone a spotlight on a problem that still exists: Not pre-1989 Soviet communism, but 2009-style state capitalism. Rand depicted government and companies colluding in the name of economic rescue at the expense of the entrepreneur. That entrepreneur is like the titan Atlas who carries the rest of the world on his shoulders — until he doesn’t.
Back Ache
You get the feeling plenty of Atlases are shrugging these days, in part because their tax burden is getting heavier. It’s interesting to compare sales of “Atlas Shrugged,” provided by the Ayn Rand Institute, to Internal Revenue Service distribution tables.
In 1986, a year when “Atlas Shrugged” sold between 60,000 and 80,000 copies, the top 1 percent of earners paid 26 percent of the income tax. By 2000, that 1 percent was paying 37 percent, and “Atlas Shrugged” sales were at 120,000. By 2006, the top 1 percent carried 40 percent of the burden.
Yet President Barack Obama has made it clear he would like to see the rich pay a greater share. Anyone irked at that prospect can find consolation in Rand’s fantasy, in which the most valued professionals evaporate from the work place because of such demands.
Sounding Weird
The hard-money monologue of Rand’s copper king, Francisco d’Anconia, used to sound weird. Who even thought about gold in the early 1990s? Now, D’Anconia’s lecture on the unreliable dollar sounds like it could have been scripted by Zhou Xiaochuan, or some other furious Chinese central banker:
“Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’”
Other “Atlas Shrugged” characters are likewise relevant: Orren Boyle of Associated Steel, one of the corrupt businessmen, is so skilled at anticipating what government will do that he could have taught Jeff Immelt a few tricks. Wesley Mouch, the Washington fringe-character-turned-politician who unexpectedly makes his way to center stage, recalls Timothy Geithner at Treasury in his early days.
Game of Pretend
Rand knew that government tends to drive the most- productive economic figures away even as it pretends to utilize them. Today’s shortage of primary care doctors serves as an example. Various administrations, Democratic and Republican, have tried to nudge more medical students into primary care. Young doctors simply haven’t complied. That is in part because of the higher compensation of specialties. But it is also because the great charm of being a primary care doctor — autonomy to work in a range of areas — has been removed.
Rand foresaw this: “Let them discover the kind of doctors that their system will now produce,” says one of her characters. “It is not safe to place their lives in the hands of a man whose life they have throttled.”
Long before managed-care existed, Rand was describing doctors’ frustration with it.
Most compelling is Rand’s understanding of how politicians’ lack of imagination can kill economies. Of all American governors, Arnold Schwarzenegger of California is the one who most resembles Rand’s outsized characters.
Missing Gene
Yet Schwarzenegger seems to be missing the Rand gene. His policies are all pain and no growth. As the Randerati have been quick to note, California’s uncompetitive treatment of film production is driving Hollywood out of California. Yet Schwarzenegger moved disappointingly late to sign legislation that would even begin to address that problem.
Rand’s persistent heroine Dagny Taggart lectures a public official, but substitute Schwarzenegger for the official and the dialogue still makes sense:
Dagny: “Start decontrolling.”
Schwarzenegger: “Huh?”
Dagny: “Start lifting taxes and removing controls.”
Schwarzenegger: “Oh no, no, no, that’s out of the question.”
Dagny: “Out of whose question?”
In short, it’s time for all of us in policy land to tip our collective hat — though she detested collective anythings — to Ayn Rand. Politics today is proving dramatic enough to change even literary tastes.
(Amity Shlaes, senior fellow at the Council on Foreign Relations, is a Bloomberg News columnist. The opinions expressed are her own.)
Rand’s Atlas Is Shrugging With a Growing Load – Amity Shlaes, Bloomberg
You live, you learn. Right?
Well, not in America. Here we live, screw up and then go back to doing the same stupid things we did before.
Apparently, it is just too hard for us to make the tough, necessary choices.
Look at the sorry state of our sorriest state, California. It may be the sixth or eighth largest economy in the world, but it isn’t just broke, it’s broken.
California is “broken” due in large part to its inability to make “tough necessary choices.” (Deal Journal)
The Committee to Defraud the World
To say now that ‘No one knew’ or ‘I was mistaken’ or ‘I was just doing as I was told’ is another in a series of lies and deceptions that have supported one of the greatest frauds in the history of the world.
But this is not history. This episode of fraud is still playing itself out now. And to fail to understand the depth and breadth of this madness is to place oneself in peril, and in the power of those who are twisting the Western economic and political system even now to satisfy their lust for wealth and power. You are only successful if you can keep what you kill.
Glass-Steagall fell after a decade long campaign involving hundreds of millions in lobbyist money spread lavishly around the Congress, led by Sanford Weil of Citibank, supported by key banking and political figures in the Congress and at the Fed. It involved Senator Phil Gramm, who helped to put a stake in the heart of the financial regulatory process under the Reagan free markets banner, and who recently said the problem is that the middle class were a bunch of whiners. As did his wife Wendy, who as the chairperson of the CFTC had exempted Enron from regulatory oversight, and then left to take a position there on its board of directors.
Like the Mortgage Backed Securities scandal it involved surprisingly few principal players, like Alan Greenspan and Robert Rubin, who used their power and influence to silence and ostracize critics, and promote a climate of reckless disregard for the public trust under the meme of ‘efficient markets’ and deregulation. This might have been an innocent policy error if it did not involve premeditated theft on a massive scale, followed by cover ups, denials, and a control fraud that exists even today.
But it also involved literally thousands of collaborators and enablers, from mainstream media people, economists, analysts, and other thought leaders to politicians and regulators who saw that it was to their advantage to at least passively support this scheme which they knew very well was a fairy tale, a fraud, class warfare by a new name, but were able to hide their own guilty consciences behind self-serving rationalization and the shield of plausible deniability.
History, and hopefully the justice system, will sort this all out. It is difficult, even now, to get one’s mind around the enormity of it. This is its most powerful weapon. Who could be such monsters, so amoral, so destructively sociopathic? Future generations will regard it as an episode of madness, driven by a few people in a tight circle of self-reinforcing thought, people with remarkably similar cultural and educational backgrounds, driven by a consuming lust for power, that were able to dupe and delude an entire nation made vulnerable by propaganda, a co-opted press, and apathy.
In the meanwhile all the great mass of people can do is to watch, and wait, and seek to protect themselves from these ravening wolves grown increasingly desperate, as their arrogance comes to a tragic fall. They can vote out incumbents, but the parties choose the candidates, and too often they resemble competing crime families of special interests more than pillars of a representative government, saying one thing to get elected and doing another thing once in office.
This is the approach of trouble when hubris is at its height, and the few feel they have everything to gain and nothing to lose, if only they can gain more power, and necessarily become more ruthless. They are trapped in a cycle of fear and greed. The fear provokes the lies and the cover ups, but the greed promotes the extension of the fraud and the theft, requiring even more lies and cover ups. The operative word is ‘over reach,’ in a classic late stage Ponzi scheme. This will undoubtedly add to the confusion as the truth is assaulted by the big lie.
The last vestiges of polite society are often shed as the downfall reaches it final conclusion, at the end, when all is revealed, at last. And so there will be great danger.
Jesse’ s Cafe http://jessescrossroadscafe.blogspot.com/2010/07/committee-to-defraud-world.html