Archive for January, 2009
Posted by rosshunter on January 31, 2009
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Posted by rosshunter on January 28, 2009
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David Rose on the neocon blame game | vanityfair.com
Tags: political
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Kenneth Adelman, a longtime neocon activist and Pentagon insider who has served on the Defense Policy Board, wrote a famous op-ed article in The Washington Post in February 2002, arguing, “I believe that demolishing Hussein’s military power and liberating Iraq would be a cakewalk.” Now he says, “I am extremely disappointed by the outcome in Iraq, because I just presumed that what I considered to be the most competent national-security team since Truman was indeed going to be competent. They turned out to be among the most incompetent teams in the postwar era. Not only did each of them, individually, have enormous flaws, but together they were deadly, dysfunctional.”
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The most damning assessment of all comes from David Frum: “I always believed as a speechwriter that if you could persuade the president to commit himself to certain words, he would feel himself committed to the ideas that underlay those words. And the big shock to me has been that, although the president said the words, he just did not absorb the ideas. And that is the root of, maybe, everything.”
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Foreign Policy: Warning: More Doom Ahead
Tags: economic
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But we are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst.
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A number of central banks will be close enough to setting interest rates of zero that their economies fall into a triple whammy: a liquidity trap, a deflation trap, and debt deflation. In a liquidity trap, the banks lose their ability to stimulate the economy because they cannot set nominal interest rates below zero. In a deflation trap, falling prices mean that real interest rates are relatively high, choking off consumption and investment. This leads to a vicious circle wherein incomes and jobs are falling, with demand dropping still further. Finally, in debt deflation, the real value of nominal debts rises as prices fall—bad news for countries such as the United States and Japan that have high ratios of debt to GDP.
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The credit excesses that created this disaster were global. There were many bubbles, and they extended beyond housing in many countries to commercial real estate mortgages and loans, to credit cards, auto loans, and student loans. There were bubbles for the securitized products that converted these loans and mortgages into complex, toxic, and destructive financial instruments. And there were still more bubbles for local government borrowing, leveraged buyouts, hedge funds, commercial and industrial loans, corporate bonds, commodities, and credit-default swaps—a dangerous unregulated market wherein up to $60 trillion of nominal protection was sold against an outstanding stock of corporate bonds of just $6 trillion.
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Taken together, these amounted to the biggest asset and credit bubble in human history; as it goes bust, the overall credit losses could reach as high as $2 trillion.
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Foreign Policy: Watch the Dollar
Tags: economic
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These days, it’s the impending bust of the dollar bubble that should be getting more attention.
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But once the financial situation begins to return to normal (which might not be in 2009), investors will be unhappy with the extremely low returns available from dollar assets. Their exodus will cause the dollar to resume the fall it began in 2002, but this time, its decline might be far more rapid. Other countries, most notably China, will be much less dependent on the U.S. market for their exports and will have less interest in propping up the dollar.
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For Americans, the effect of a sharp decline in the dollar will be considerably higher import prices and a reduced standard of living. If the U.S. Federal Reserve becomes concerned about the inflation resulting from higher import prices, it might raise interest rates, which could lead to another severe hit to the economy.
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Commercial real estate faces its own reckoning. When the housing market began to fade at the end of 2005, it kicked off a boom in nonresidential construction. In less than three years, this sector expanded more than 40 percent. There is now considerable excess capacity in retail space, office space, hotels, and other nonresidential sectors—leading to falling prices, plunging construction, and another major source of bad debts for banks.
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Geithner Limits Lobbying for Bailout Money – NYTimes.com
Tags: political
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The details of the rules — the text has not been completed — were not released. But in a news release, the Treasury Department outlined the Obama administration’s intent to prevent corporate and political lobbying to influence spending of the bailout program.
Among the changes will be rules to “combat lobbyist influence” over the bailout program, including restricting officials from “contacts with lobbyists in connection with applications for, or disbursements of” bailout funds, the department said.
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The New York Times reported on Saturday that at least a dozen firms that received billions from the bailout program lobbied the government about the program in the final three months of 2008, according to a review of disclosure forms.
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The announcement on Tuesday represented the latest step by the Obama administration to make the bailout program more open and accountable as it moves to disburse the second $350 billion, following bipartisan criticism over the Bush administration’s handling of the first $350 billion of the bailout program.
The Obama administration has said it will step up monitoring of lending patterns by financial institutions that receive bailout money to make sure the money is being used to ease the credit squeeze. It also said it would seek to limit executive compensation at banks that receive future taxpayer help.
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During his Senate confirmation hearings last week, Mr. Geithner said that the bailout program needed “serious reform” and pledged that the Obama administration would impose “tough conditions to protect the taxpayer and the necessary transparency to allow the American people to see how and where their money is being spent and the results those investments are delivering.”
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Mercury Found In High Fructose Corn Syrup Used As Food Sweetener
Tags: planetary
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For decades, HFCS has been made using mercury-grade caustic soda produced in so-called “chlor-alkali” or industrial chlorine plants that use mercury
cells. The caustic soda, which can thus contain traces of mercury, is used to separate the corn starch (that goes to make the syrup) from the
kernel.
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The IATP said there are still four of the older chlor-alkali plants that use mercury cells in the US. In 2007, then Senator Barack Obama brought in
legislation to make these plants phase out mercury cell technology by 2012.
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Robert Reich’s Blog: How You and I Are Paying Wall Street to Lobby Congress to Go Easy on Wall Street
Tags: economic
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For years, Wall Street lobbyists have been among the most aggressive on Capitol Hill. They’re the ones who pushed Congress and the Clinton administration to tear down the wall that had separated commercial from investment banking — a wall erected in the 1930s, after the Great Crash and the Depression revealed how important it was to keep the two distinct. In subsequent years, as Wall Street created ever fancier derivatives, Wall Street lobbied against regulating the new instruments — and their arguments, backed by the campaign contributions they bundled and wielded, won the day. The Street lobbied against giving the Securities and Exchange Commission the power and resources needed to oversee what was going on. Again, they lobbyists won. They lobbied against raising taxes on hedge fund and private equity managers whose gigantic incomes, they said, were nothing but capital gains and therefore should be taxed at 15 percent — lower than the marginal rate paid by most Americans. Again, they won. They lobbied against better oversight of credit rating agencies, and against changing the way those agencies were paid. They said there was no fundamental conflict of interest when rating agencies were compensated by the very firms whose securities they were rating. Again, they won.
When all of this led, as many knew it would, to a speculative bubble of proportions never before seen — and as Wall Street traders and executives took home more money than anyone had ever before seen — a crash was all but inevitable.
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Media Matters – Conservative media figures falsely suggest that Reich proposed excluding white males from stimulus package
Tags: political
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Conservative media figures falsely suggest that Reich proposed excluding white males from stimulus package
Summary: Michelle Malkin, Rush Limbaugh, and Sean Hannity have falsely asserted or suggested that Robert Reich, speaking at a congressional forum, proposed that jobs created by the economic stimulus package should exclude white males. In fact, Reich has repeatedly stated that he favors a stimulus plan that “includ[es] women and minorities, and the long-term unemployed” in addition to skilled professionals and white male construction workers, not one that is solely limited to them.
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Plunder and Blunder: A Roundtable | The American Prospect
Tags: economic
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The basics of the housing bubble were straightforward. House prices began soaring in the mid-1990s, hugely outpacing the overall rate of inflation. This followed a 100-year-long trend in which nationwide house prices had just kept even with the rate of inflation.
There was no fundamentals-based explanation for the explosion of house prices on either the demand or supply side. Furthermore, there was no remotely comparable increase in rental prices. If the fundamentals of the housing market explained the run-up in house prices, then there should have been a comparable rise in rents. Instead, rents only slightly outpaced inflation in the 1990s, and inflation-adjusted rents actually fell slightly in this decade.
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It would have been hard even for someone without regulatory authority to fail to notice the explosion of these mortgages: sub-prime went from just 8 percent of the market at the beginning of the decade to 25 percent by 2005, but the Fed chair either didn’t see this increase or didn’t care. As a result, instead of attacking the bubble, those in positions of authority celebrated the rise in homeownership.
Remarkably, even now, economists and policy analysts still seem determined to make housing and financial policy as though the bubble is not there. They talk about stabilizing housing prices without distinguishing between markets where the bubble is still deflating and those markets in which house prices are consistent with fundamentals.
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Foreign Policy: Good Luck, Barack
Tags: economic
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“The size of the financial markets … has become so monstrously huge, there is no other means of maintaining stability than to establish a psychology of confidence. The governments themselves can only project to the markets a sense they know what they’re doing.” – David M. Smick, March 2008
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The bill for all this debt will likely come due before 2012. Mortgage interest rates quickly rose after the U.S. Treasury introduced its bailout plan, and the Federal Reserve’s balance sheet liabilities have jumped 100 percent. Financial markets are essentially projecting that three to four years from now, the world’s central banks, after a period of disinflation, will be forced to confront this massive increase in debt.
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The one silver lining is that the world does not lack capital. It’s simply sitting on the sidelines, including $6 trillion in global money market funds alone. The faster Obama and his global counterparts can fashion credible financial reforms that enhance transparency while preserving capital and trade flows, the sooner that sidelined capital will reengage. In the end, markets crave certainty—in this case, certainty that our leaders have a credible game plan. That plan is not yet in place.
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Foreign Policy: A Lethal Shakeout
Tags: economic
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Indeed, I suspect that 2009 will go down in history as the first truly global recession of the modern economy.
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Yes, it began in the United States in the summer of 2007 with the so-called subprime crisis. But there were bubble-dependent growth models in a surprisingly large number of countries—all now bursting.
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In effect, they were driven by export bubbles, which, in turn, were a levered play on the U.S. consumption bubble. Asia was also aided and abetted by sharply undervalued currencies. And to keep their currencies cheap, countries such as China had to recycle massive amounts of foreign exchange reserves into dollar-based assets—suppressing U.S. interest rates and sustaining the very asset and credit bubbles that fueled a bubble-dependent U.S. economy. That virtuous circle has now been broken. And because Asian economies lack vigorous support from internal private consumption, regional growth risks have tipped decisively to the downside.
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A similar verdict is likely for the commodity-producing regions of the world—not just the oil-dependent Middle East, but also the resource-intensive economies of Australia, Canada, Brazil, Russia, and Africa. As global growth slows, so does the demand for economically sensitive commodities—resulting in a sharp correction in the bubble-distorted commodity prices and growth rates of the major commodity producers.
A second megaforce at work is globalization—the cross-border linkages that during the past decade have increasingly taken the form of trade flows, capital flows, information flows, and labor flows. The credit crisis itself is essentially a powerful cross-product contagion—a virus that began with subprime mortgages but then quickly spread to asset-backed commercial paper, mortgage-backed and auction-rate securities, and other instruments throughout the credit markets. But because financial engineers were so adept at distributing the complex products they created, there is a critical cross-border dimension to this crisis as well. Little wonder this is the worst financial crisis in 75 years.
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Foreign Policy: Are We There Yet?
Tags: economic
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As asset prices now decline, markets might overshoot. Some indicators show that we are already approaching pre-bubble price levels. The price-to-earnings ratio in the U.S. stock market is about at its long-run average. Housing prices are probably more than halfway back down to their late-1990s level, when the bubble began. In some U.S. cities, they are almost completely back down.
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History tells us there is some precedent for a protracted, weak housing market. After the last housing boom in the United States peaked in 1989, it took a typical city five years to hit bottom. This time, prices have only been going down for two years. We might look with caution to Japan, where urban land prices fell for 15 consecutive years, from 1991 to 2006.
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So far, the measures we’ve taken to resolve this crisis have thrown the rational principles of finance out the window. We are going on a crash diet—contradicting mortgage contracts on an ad hoc basis and giving away handfuls of money—when we should be coming up with an eating regime we can live on indefinitely. Instead of making whatever short-term patches seem necessary, we might take a more systemic, market-based approach, such as stipulating that mortgage values always be linked to housing prices and adjusted each month.
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Speculative excesses are an endemic problem of the market system, but capitalism also provides its own self-correcting mechanisms.
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Climate Progress » Blog Archive » Is Larry Summers a voodoo economist on climate and does it matter?
Tags: economic
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Larry Summers is widely regarded as a very brilliant economist. I can’t dispute that.
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He appears to remain firmly in the camp of most MEOWs (Mainstream Economists who Opine on Weather) in that he
- Doesn’t understand climate science enough to realize how dire the situation is
- Doesn’t propose remedies that would avert the irreversible catastrophe we face.
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Second, it is odd economics to described an “energy efficiency” program as being driven by price, when high carbon prices primarily drive fuel switching. You would need incredibly high CO2 prices to drive efficiency in transportation (see “
Why a carbon cap won’t solve our oil addiction“), something Summers has never endorsed as far as I’ve seen. Also, even his new boss knows a gas tax is a politically dubious strategy for pushing efficiency (see
Obama is right: Higher gasoline taxes to boost efficiency would be “a mistake”). Fortunately, his boss also understands that smart regulations make more sense in the transportation sector (see “
Obama to push for California waiver that mandates cut in auto CO2 emissions“).
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During 1997, I helped oversee a study by five U.S. national laboratories that examined what an aggressive technology-based strategy built around energy efficiency and renewable energy could achieve in terms of emissions reductions. That “Five Lab Study” concluded that the United States could meet the most aggressive Kyoto target being considered without raising the nation’s overall energy bill.
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Yes, Summers hated the Five Lab Study. He had junior economists in the Administrations trash it openly and behind the scenes. In the one principals meeting I was allowed to attend on climate in a mostly be-seen-but-not-heard mode — I was a lowly acting assistant secretary while he of course was a Deputy Secretary and never the twain shall meet — he disparaged the notion that an aggressive technology strategy was a game changer in terms of overall mitigation costs. In retrospect, this is actually kind of funny/sad since, like most MEOWs, he strongly endorses a big R&D program, but simply doesn’t believe existing or near-term technology matter. Like President Bush and indeed most conservatives, it is only nonexistent technology that MEOWs believe in, not existing technology.
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Moreover, Browner is every bit the coequal of Summers in this Administration — and more than coequal on climate. She was chosen to run the energy and climate issue from the White House. Summers is just one voice among many principals, no more important than the likes of Chu, Holdren, Jackson, Biden, and Clinton. And Obama himself makes clear every passing day just how serious he is about climate
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Obama’s Cabinet has been called a team of rivals, but in fact it is a team of the unrivaled — unrivaled in its knowledge of climate science, clean energy climate solutions and experience in getting things done.
I never imagined anyone would have the confidence and commitment to assemble such a group. Every one of these individuals understands that the future of the nation, the world and their place in history rests squarely on whether we prevent a climate catastrophe, whether the biggest polluting nations replace their entire energy systems in a few decades. I honestly don’t know if it is politically possible to preserve a livable climate — but if it is, these are the people to make it happen.
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I agree with Barry’s point, which I extend to mean that over time the rights and wrongs of sound policy will become visible, and probably it will first take heavyweights like Summers to bet on some losing hands. But it’s good for this to happen in real policy, rather than theory.
JR your quote of Lincoln was useful, and remember that in the Civil War he felt he had to defer to his generals for a long time, watching them fail one after another, eventually reading tactics himself, gradually sounding out his common-sense instincts against military theory, and instantly recognizing Grant as a player who could produce.
Even in pure economics Summers may not be the right player for this meltdown. I’ve watched Pelosi explain how they canvassed all the economists, across the whole spectrum, and thus, “this stimulus will work, must work, everyone agrees.” Point is, what’s clear is that she doesn’t know Economics, and neither does Obama, and all the policymakers are forced to rely on people practicing a voodoo they can’t quite evaluate in advance. But over time, as the hands get dealt and folded, Obama will learn the theory to match his instincts, same as Lincoln with war.
In a similar way, we’ll learn the sound policies of changing the global economy to a sustainable one. I think that climate and economics are inseparable, and the two disciplines are destined to marry in a very robust union.
So I especially appreciate your treatments of the economics of the solutions.
Posted from Diigo. The rest of blogread group favorite links are here.
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Posted by rosshunter on January 27, 2009
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Climate Progress » Blog Archive » Antarctica has warmed significantly over past 50 years, revisited
Tags: planetary
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The rest of the media is finally catching up to my post from last month (see “Another AGU stunner: Evidence that Antarctica has warmed significantly over past 50 years“).
That’s because Nature published the peer-reviewed paper that was first reported at the American Geophysical Union meeting and Nature’s own blog (!), “Warming of the Antarctic ice-sheet surface since the 1957 International Geophysical Year” (subs req’d, abstract below).
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It is really only the warming of the West Antarctic Ice Sheet (WAIS) that you should worry about (at least for this century) because it’s going to disintegrate long before the East Antarctic Ice Sheet does — since WAIS appears to be melting from underneath (i.e. the water is warming, too), and since, as I wrote in the “high water” part of
my book, the WAIS is inherently less stable:
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So notwithstanding the amateur meteorologist-deniers who sometimes comment on this blog and elsewhere about how cold it is outside right now, the whole damn planet is warming and melting — even in places that are much, much colder than anywhere in the continental United States.
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Access : Warming of the Antarctic ice-sheet surface since the 1957 International Geophysical Year : Nature
Tags: planetary
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Assessments of Antarctic temperature change have emphasized the contrast between strong warming of the Antarctic Peninsula and slight cooling of the Antarctic continental interior in recent decades
1. This pattern of temperature change has been attributed to the increased strength of the circumpolar westerlies, largely in response to changes in stratospheric ozone
2. This picture, however, is substantially incomplete owing to the sparseness and short duration of the observations. Here we show that significant warming extends well beyond the Antarctic Peninsula to cover most of West Antarctica, an area of warming much larger than previously reported. West Antarctic warming exceeds 0.1 °C per decade over the past 50 years, and is strongest in winter and spring. Although this is partly offset by autumn cooling in East Antarctica, the continent-wide average near-surface temperature trend is positive. Simulations using a general circulation model reproduce the essential features of the spatial pattern and the long-term trend, and we suggest that neither can be attributed directly to increases in the strength of the westerlies. Instead, regional changes in atmospheric circulation and associated changes in sea surface temperature and sea ice are required to explain the enhanced warming in West Antarctica.
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Leo Strauss, George Bush, and the philosophy of mass deception – Earl Shorris, Harpers’ Magazine, June 2004
neocons
Tags: political
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Posted by rosshunter on January 26, 2009
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The White House – Blog Post – President Barack Obama’s Inaugural Address
Tags: political
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the time has come to set aside childish things.
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the force of our example
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President Obama delivered his Inaugural Address, calling for a “new era of responsibility.” Watch the video here:
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Obama swiftly lays Bush era to rest
Tags: political
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But in the brief time he’s been in the White House, analysts say, Obama has issued a series of orders, statements and speeches that convey a single message to America and the world: The Bush administration is over.
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At the same time, Obama signaled his own foreign policy approach in an extraordinary appearance at the State Department alongside Vice President Joe Biden and newly confirmed Secretary of State Hillary Rodham Clinton. There, Clinton announced – and Obama congratulated – two new envoys to the Middle East and to Afghanistan and Pakistan, both skilled negotiators.
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“They understand that the American people’s level of trust in the American government is at an all-time low. An important part of that is a sense that government has been neither ‘of the people, by the people or for the people’ but has been to some extent hijacked.”
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He is rejecting the premise that the president has the power to act unilaterally and without oversight, but has proposed a very challenging agenda that will require enormous political muscle to advance. But the steps he has taken to signal change can also help him build political capital to further his new agenda.
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The question to ask at the end of Obama’s first week, Galston said, may not be what he has accomplished so far – but whether he is right about who the American people are, and what they ultimately want their president to achieve.
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RealClearPolitics – Articles – Obama’s Announces New Envoys
check the video next up
Tags: political
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CLINTON: Thank you. Thank you very much. And welcome to the State Department. Please be seated.
We are delighted to be joined this afternoon by President Obama and Vice President Biden for this very important announcement, but it
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The inheritance of our young century demands a new era of American leadership. We must recognize that America’s strength comes not just from the might of our arms or the scale of our wealth, but from our enduring values. And for the sake of our national security and the common aspirations of people around the globe, this era has to begin now.
This morning, I signed three executive orders. First, I can say without exception or equivocation that the United States will not torture.
(APPLAUSE)
Second, we will close the Guantanamo Bay detention camp and determine how to deal with those who have been held there.
And, third, we will immediately undertake a comprehensive review to determine how to hold and try terrorism suspects to best protect our nation and the rule of law.
The world needs to understand that America will be unyielding in its defense of its security and relentless in its pursuit of those who would carry out terrorism or threaten the United States. And that’s why, in this twilight struggle, we need a durable framework.
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YouTube – Obama, Biden, Clinton Announce Diplomatic Staff
transcript in previous
Tags: political
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YouTube – Biden Jokes About Roberts’ Oath Gaffe
Tags: political
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YouTube – Obama Speaks at the State Department PT1
see the transcript highlighted
Tags: political
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RealClearPolitics – Articles – Obama Announces New Pay, Ethics Rules
video next up
Tags: political
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From our vantage point yesterday you couldn’t help but be inspired by the sight of Americans as far as the eye could see. They were there because they believe this is a moment of great change in America, a time for reinvigorating our democracy and remaking our country. They’ve entrusted all of us with a great responsibility. And so today I’d like to talk with you about our responsibility to keep that trust.
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However long we are keepers of the public trust we should never forget that we are here as public servants and public service is a privilege. It’s not about advantaging yourself. It’s not about advancing your friends or your corporate clients. It’s not about advancing an ideological agenda or the special interests of any organization. Public service is, simply and absolutely, about advancing the interests of Americans.
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Now, the new rules on lobbying alone, no matter how tough, are not enough to fix a broken system in Washington. That’s why I’m also setting new rules that govern not just lobbyists, but all those who have been selected to serve in my administration.
If you are enlisting in government service, you will have to commit in writing to rules limiting your role for two years in matters involving people you used to work with, and barring you from any attempt to influence your former government colleagues for two years after you leave. And you will receive an ethics briefing on what is required of you to make sure that our government is serving the people’s interests, and nobody else’s — a briefing, I’m proud to say, I was the first member of this administration to receive last week.
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The way to make government responsible is to hold it accountable.
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Let me say it as simply as I can: Transparency and the rule of law will be the touchstones of this presidency.
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YouTube – Barack Obama’s First Press Conference as President
transcript precedes this
Tags: political
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Posted by rosshunter on January 24, 2009
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Climate Progress » Blog Archive » Energy efficiency, Part 4: How does California do it so consistently and cost-effectively?
see the next piece on the stimulus requirements for decoupling
Tags: economic
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Environment Blamed in Western Tree Deaths – NYTimes.com
Tags: planetary
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Rising temperatures and the resulting drought are causing trees in the West to die at more than twice the pace they did a few decades ago, a new study has found.
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The scientists, who analyzed tree census data collected in 1955 and in later years, found that the mortality of trees increased in 87 percent of the 76 forest plots studied. In some plots, the die-off rate doubled in as little as 17 years; in others, it doubled after 29 years, the study found.
“Summers are getting longer,” said Nathan L. Stephenson, of the United States Geological Survey, a leader of the study with Phillip van Mantgem, also of the geological survey. “Trees are under more drought stress.”
The study will appear in Friday’s issue of the journal Science.
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The higher mortality rates held regardless of tree size or type or elevation at which it grew. The fact that birth rates remained unchanged among the nearly 60,000 pines, firs, hemlocks and other trees in the study indicates that forests are losing trees faster than they are replacing them, the authors noted.
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In a report last year, the Department of Agriculture said that climate change had “very likely” increased the size and number of fires, insect infestations and overall tree die-offs in forests in the West, the Southwest and Alaska, and that the damage would accelerate in the future.
The authors of the new study said in a teleconference that if tree mortality rates continued to rise, the average size of trees could fall because trees would die at younger ages. Smaller trees cannot store as much carbon dioxide as large ones.
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Climate Progress » Blog Archive » Wow! Waxman puts utility decoupling in the stimulus
Tags: economic, planetary
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Utilities are the most effective delivery channels for making homes, commercial buildings, and industry more energy-efficient, but the vast majority operate under a regulatory regime that penalizes utilities for promoting efficiency. Indeed, those regulations actually motivate utilities to encourage their customers to overuse electricity, because not only do they make more profits then, but if demand rises enough, they can get the Public Utility Commission (PUC) to approve a new power plant and higher rates — and thus more profits.
I have been assuming that Democrats would wait until the mother of all energy bills later this year to make their big push toward decoupling. But it turns out that Dems have decided to make it one of the conditions for the multi-billion-dollar energy efficiency block grants in the stimulus (see “Details of Obama’s green stimulus plan released“).
That is an outstanding idea.
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Posted by rosshunter on January 23, 2009
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EzraKlein Archive | The American Prospect
Tags: economic
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One of the problems with the health care debate in this country is that it’s called “the health care debate.” But it’s not. It’s the “health spending” debate. It’s an economic issue. Successful health reform would do less to reduce illness than to reduce medical bankruptcy. Which is why it would be nice to cleave the debate in two. Continue health spending reform. That’s urgent. Without it our national finances go the way of Citibank’s balance sheet. But also have a health policy.
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Part of the reason our health care is so expensive is that we tend to think health is the sort of thing that happens inside a doctor’s office. But it’s not. It happens when you breathe the air outside, when you decide whether to walk or drive, when you figure out how many friends you have, when you choose what to eat for dinner. What happens in the hospital is not health care, it’s disease response. It’s what happens when something has gone wrong in the other spheres of your life that make up your health. And the cheapest health reform of all would be the one that keeps us out of the health care system entirely.
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EzraKlein Archive | The American Prospect
See the USDA release for more collateral to this
Tags: political
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The problem is what the USDA’s new guidelines say about, well, the USDA. These guidelines are a simple act of collusion with the marketing teams in the livestock industry. When a consumer sees “naturally raised,” they almost certainly don’t say to themselves, “Terrific! This chicken was raised entirely without growth promotants, antibiotics (except for ionophores used as coccidiostats for parasite control), and has never been fed animal by-products!” The implication of “naturally raised” is that the chicken lived the natural life of a chicken, not the life of a widget. But USDA has defined it as living the life of a widget, just not a particularly heavily medicated widget. And why have naturally raised” at all? The shrinkwrap enclosing a chicken breast has room for “No growth hormones or antibiotics!” They’re using “naturally raised” because it’s more efficiently misleading to consumers who want to do good by eating well, and the USDA is just gave its seal of approval to the practice.
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Agricultural Marketing Service – USDA Establishes Naturally Raised Marketing Claim Standard
Tags: political
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The segment of the marketplace that includes specific animal raising claims has experienced exponential growth in the past five years. Use of a naturally raised marketing claim standard has the potential to increase the available supply of U.S. meat products eligible for niche marketing programs in the United States, the European Union, and other export markets that require livestock to be raised without the administration of growth promotants.
USDA’s Agricultural Marketing Service (AMS) works with industry representatives, academia, and other interested parties to establish or revise U.S. standards for nearly 240 agricultural products. Industry uses standards in the marketplace to specify the quality of commodities. Standards facilitate commerce by providing a common language for trade and a means of measuring value in the marketing of agricultural products. Increasingly, livestock and meat producers are using production or processing claims to distinguish their products in the marketplace.
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Posted by rosshunter on January 22, 2009
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Wonk Room
Tags: economic
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But while Paulson spent his tenure at Treasury consistently maintaining that the U.S. financial system was “
safe and sound,” Geithner has been behind the scenes, warning that financial innovation and a weak housing market were threatening to topple the U.S. economy. The Wonk Room has assembled a timeline pitting Geithner’s cautionary statements against Paulson’s public insistence that everything was fine.
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Bailout Is a No-Strings Windfall to Bankers, if Not to Borrowers – NYTimes.com
Tags: economic
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At the Palm Beach Ritz-Carlton last November, John C. Hope III, the chairman of Whitney National Bank in New Orleans, stood before a ballroom full of Wall Street analysts and explained how his bank intended to use its $300 million in federal bailout money.
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“Make more loans?” Mr. Hope said. “We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”
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Congress approved the
$700 billion rescue plan with the idea that banks would help struggling borrowers and increase lending to stimulate the economy, and many lawmakers want to know how the first half of that money has been spent before approving the second half.
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The Obama administration could be forced early on to come up with a systemic solution, getting bad loans off balance sheets as a way to encourage banks to begin lending, which most economists say is essential to get businesses and consumers spending again.
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Most of the banks that received the money are far smaller than behemoths like Citigroup or Bank of America. A review of investor presentations and conference calls by executives of some two dozen banks around the country found that few cited lending as a priority. An overwhelming majority saw the bailout program as a no-strings-attached windfall that could be used to pay down debt, acquire other businesses or invest for the future.
Speaking at the FBR Capital Markets conference in New York in December, Walter M. Pressey, president of Boston Private Wealth Management, a healthy bank with a mostly affluent clientele, said there were no immediate plans to do much with the $154 million it received from the Treasury.
“With that capital in hand, not only do we feel comfortable that we can ride out the recession,” he said, “but we also feel that we’ll be in a position to take advantage of opportunities that present themselves once this recession is sorted out.”
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The loose requirements in the original plan have contributed to confusion over what the Treasury intended when it abruptly shelved its first proposal — to buy up bad mortgages — in favor of making direct investments in individual banks in return for preferred shares of stock.
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But a Congressional oversight panel reported on Jan. 9 that it found no evidence the bailout program had been used to prevent foreclosures, raising questions about whether the Treasury has complied with the law’s requirement that it develop a “plan that seeks to maximize assistance for homeowners.”
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For City National Bank in Los Angeles, the Treasury money “really doesn’t change our perspective about doing things,” said Christopher J. Carey, the bank’s chief financial officer, addressing the BancAnalysts Association of Boston Conference in November. He said that his bank would like to use it for lending and acquisitions but that the decision would depend on the economy.
“Adding $400 million in capital gives us a chance to really have a totally fortressed balance sheet in case things get a lot worse than we think,” Mr. Carey said. “And if they don’t, we may end up just paying it back a little bit earlier.”
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None of the bankers who appeared before recent investor conferences offered specific details about their intentions, but recurring themes emerged in their presentations. Two of the most often cited priorities were hanging on to the money as insurance against a prolonged recession and using it for mergers.
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“We see TARP as an insurance policy,” he said. “That when all this stuff is finally over, no matter how bad it gets, we’re going to be one of the remaining banks.”
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CEPR – Report Shows Increased U.S. Military Spending Slows Economy
Tags: economic
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For Immediate Release: May 1, 2007
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Washington, DC: The Center for Economic and Policy Research released a report today estimating the economic impact of increased U.S. military spending comparable to the spending on the Iraq war. The report, presenting the results of a simulation from the economic forecasting company Global Insight, shows the increased level of military spending leads to fewer jobs and slower economic growth.
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“It is often believed that wars and military spending increases are good for the economy,” said Baker. “In fact, most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment.”
The report recommends that Congress request the Congressional Budget Office produce its own projections of the economic impact of a sustained increase in defense spending.
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Posted by rosshunter on January 21, 2009
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Posted by rosshunter on January 20, 2009
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Beat the Press Archive | The American Prospect
Tags: economic
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The credit system is undoubtedly facing considerable stress because so many banks are effectively bankrupt, but the economy is not in a downturn because banks aren’t lending. It is in a downturn because we have just lost $6 trillion in housing wealth and $8 trillion in stock wealth. The expected effects of this loss of wealth is the huge falloff in consumption that is driving the downturn. The condition of the banks is very much a secondary issue.
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Fair Game – The End of Banking as We Know It – NYTimes.com
Tags: economic
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The first death notice came on Tuesday, when Citigroup, Exhibit A for the failure of the soup-to-nuts business model, said it was dismantling. Just over a decade after the deal-maker Sanford I. Weill tried to meld insurance, investment banking, mortgage lending, credit cards and stock brokerage services, the dissolution began.
Citigroup, it turned out, was too big to manage, too unwieldy to succeed and too gigantic to sell to one buyer.
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maybe we can go back to a banking model that is designed to do more than simply enrich the folks at the top of the enterprise while shareholders and taxpayers absorb all the hits.
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It’s too soon to say how much taxpayer money will be spent trying to rebuild banks hollowed out by bad lending practices. Paul J. Miller, an analyst at Friedman, Billings, Ramsey, thinks that the nation’s financial system needs an additional $1 trillion in common equity to restore confidence and to get lending — the lifeblood of a thriving and entrepreneurial free-market economy — moving again.
That $1 trillion would come on top of funds disbursed through the Troubled Asset Relief Program, which has tapped $700 billion, and the president-elect’s stimulus plan, clocking in at $825 billion.
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Larger capital requirements, beefed up to serve as a proper buffer when lenders misfire, will be one change facing banks when we emerge from this mess, Mr. Miller said. He thinks regulators will require banks to hold tangible common equity of 6 percent of assets. Now many institutions hold under 4 percent.
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“This industry made a lot of money by taking a business line with 20 percent return on assets and levering it up 30 times,” Mr. Miller said. “But no more. Banks are going back to being the boring companies they should be, growing roughly in line with gross domestic product.”
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FOR example, since 1995, according to Standard & Poor’s, earnings of financial concerns have accounted for 22 percent of profits, on average, among the S.& P. 500 companies. That performance is almost double that of the next largest contributor — the energy industry. In 2003, earnings among financial companies peaked at 30 percent of total profits generated by the S.& P. 500; back in 1995, financial company earnings accounted for 18.4 percent of the total.
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Of course, many of these earnings were ephemeral and have since turned to losses. But while the companies were reporting the profits, their stocks roared.
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“The leverage that these companies were using allowed them to lower their rates,” he said. “Rates have to go higher for the banks to operate in a safe and sound manner and make money.”
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“It is going to be difficult to get credit, and that is something the system has to adapt to,” Mr. Miller said. “That is where the government is going to have to step in and replace that debt growth to make sure there is a smooth transition.”
In other words, Barack Obama’s first stimulus plan is not likely to be his last.
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Beat the Press Archive | The American Prospect
Tags: economic
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The Washington Post made reducing the pay of autoworkers by $4.00 an hour a central theme of its coverage (both news and editorial) of the auto industry bailout. For this reason it is especially noteworthy that its discussion of new plans for bailing out banks has no mention whatsoever of executive compensation at the banks.
In good years, the highest paid bank executives could make more money in an hour than a UAW autoworker earns in a year. For this reason, readers may find restrictions on the compensation of bank executives to be an important part of what could be another trillion dollar bailout package for Wall Street. The omission of any discussion of executive compensation is quite striking.
–Dean Baker
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Regarding Nationalization of the banks, the reluctance do it I think has little do with protecting the shareholders, since they have all been pretty much wiped out at this point (Barry Rithholz Big Picture Blog has a nice chart on this). But the feudal lords still have the castles with their perqs and are reluctant to surrender and with their political contributions, they still have their knights in Congress to protect them (Chuck Schumer, Bob Bennett, and Chris Dodd have no party on this issue.)
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Posted by:
Rick Kane
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I read the article in the Post this morning, “Quarantine the Bad Assets,” and wondered, as you do, if the discussion on whether or not to follow the 1991/92 Swedish model of creating a “National Bank of Toxicity” oughtn’t also to include a provision to “Quarantine the Bad Bank Executives” too? By “quarantine,” I mean, isolate their executive pay and options.
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Posted by:
Thomas Molitor
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Interfluidity :: The Swedes did nationalize
Tags: economic
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But substantively, Drum is just wrong here. The state took full ownership and control over Nordbanken in 1992,
actively cleaned it up, and eventually reprivatized it. During the crisis, Nordbanken purchased Gota, effectively nationalizing the smaller bank. It is true that only these two banks were nationalized, and a Swedish government description of the crisis is careful to
note that, as a matter of policy “the state would not endeavour to become an owner of banks or other institutions.” But Nordbanken alone had an asset base of 23% of GDP. To put that in perspective, in US terms that’s almost as large as Citi and Bank of America. (Citi and Bank of America together had an asset base of 26% of US GDP at the end of 2007.) Nordbanken was not just some little bank. (I don’t think it’s fair to characterize Nordbanken prior to the crisis as “the state bank” either, as Drum does. Nordbanken was a product of mergers, and one of its parents was a large state-owned postal bank. Other parents were private. Nordbanken was a listed public company, and was not actively controlled by the state prior to the nationalization. I do not know how much of the firm was owned by the government prior to the banking crisis.)
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Drum also points out that during the Swedish crisis, existing bank management was not generally shown the door. But
Nordbanken’s management was replaced. Whether or not the Swedes insisted on management changes as a policy matter, in practice they did defenestrate the managers of their largest bank. The neighboring Norweigians made changing the board and senior management of failed banks an explicit condition of state support during their contemporaneous crisis. The Norweigians didn’t issue a blanket guarantee to bank creditors. (Norway, like Sweden, is viewed as having responded to its banking crisis effectively and successfully. Rather than the “Swedish model”, people sometimes refer to the “Nordic model”. Both Sweden and Norway forced exhaustive write-downs and wrote off shareholders prior to committing public capital, effectively nationalizing the recapitalized banks.)
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Thank you for the article. Kevin Drum is wrong and I was dumbstruck when I first read it.
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Steve – I think you’ve hit on all of the key points:
–Writedown of assets to realistic levels
–Wipeout of existing equity
–Replacement of top management
Whether it’s called nationalization or not is largely irrelevant (though I agree with you that in the Swedish case it was nationalization).
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Another good model for temporary nationalization is the S&L crisis in the U.S. in the late 80s, as Krugman notes in his column today.
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Posted by rosshunter on January 18, 2009
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Posted by rosshunter on January 17, 2009
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Emptywheel » This Miracle Brought to You by America’s Unions
Tags: political
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They’re
calling it a miracle–the successful landing of a US Airways jet in the Hudson and subsequent rescue of all 155 passengers. They’re detailing the heroism of all involved, starting with the pilot and including cabin crew, ferry crews, and first responders. What they’re not telling you is that just about every single one of these heros is a union member.
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Sullenberger is a former
national committee member and the former safety chairman for the
Airline Pilots Association and now represented by
US Airline Pilots Association. He–and his union–have fought to ensure pilots get the kind of safety training to pull off what he did yesterday.
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Bob Corker and Richard Shelby like to claim that union labor is a failed business model.
But I haven’t heard much about Bob Corker and Richard Shelby saving 155 people’s lives.
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But I haven’t heard much about Bob Corker and Richard Shelby saving 155 people’s lives.
Indeed.
But I have heard a lot about the Bush administration and its GOP allies relaxing safety regulations on behalf of their corporate masters.
Can you imagine what the story would have been yesterday if the Republican, free-market model had been in place?
I can, and it makes me shudder.
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EzraKlein Archive | The American Prospect
Tags: political
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didn’t watch the President’s final speech. In fact, I didn’t even think to watch it. I don’t care to hear the tinny defenses. I don’t care to rebut the desperate rationalizations. I don’t care what a highly trained team of speechwriters can do with the data furnished by a highly trained team of political hacks who are working with the themes developed by a highly trained team of pollsters. At this point, the facts of the case are clear. Because George W. Bush was president, innocent people died in large numbers. Because George W. Bush was president, the earth warmed and disaster edged nearer. Because George W. Bush was president, more children live in poverty. Because George W. Bush was president, the rich wield more power. Because George W. Bush was president, more people hate America. Because George W. Bush was president, more Americans view the presidency cynically. Because George W. Bush was president, this country is worse off, and this world is worse off. He betrayed us. I have no interest in engaging the debate that asks whether he was a cynical monster or a hapless fool. It is enough to say he was a failure, and leave it at that. He can spend the rest of his life giving speeches to justify his actions. But he will never be able to drown out the roar of his record.
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EzraKlein Archive | The American Prospect
Tags: political
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I didn’t watch the President’s final speech. In fact, I didn’t even think to watch it. I don’t care to hear the tinny defenses. I don’t care to rebut the desperate rationalizations. I don’t care what a highly trained team of speechwriters can do with the data furnished by a highly trained team of political hacks who are working with the themes developed by a highly trained team of pollsters. At this point, the facts of the case are clear. Because George W. Bush was president, innocent people died in large numbers. Because George W. Bush was president, the earth warmed and disaster edged nearer. Because George W. Bush was president, more children live in poverty. Because George W. Bush was president, the rich wield more power. Because George W. Bush was president, more people hate America. Because George W. Bush was president, more Americans view the presidency cynically. Because George W. Bush was president, this country is worse off, and this world is worse off. He betrayed us. I have no interest in engaging the debate that asks whether he was a cynical monster or a hapless fool. It is enough to say he was a failure, and leave it at that. He can spend the rest of his life giving speeches to justify his actions. But he will never be able to drown out the roar of his record.
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@ El Viajero
Lincoln won a huge portion of the country and the political process over to his way DURING his terms.
He was assassinated by a man who took seriously the paid vilification and habitual opposition of the gutter press – this man was immediately hated by the South for having killed the one man they felt would treat them honorably in their surrender. General Lee said he only surrendered because Lincoln had shown himself to be a greatly honorable and compassionate man.
Your history is wrong.
Just because history gives the ultimate perspective doesn’t mean that people don’t figure it out while it’s happening. History is not going to change what we’ve seen come out of this administration, except to reveal depths of damage that haven’t been released from hiding yet.
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Posted by rosshunter on January 15, 2009
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Posted by rosshunter on January 14, 2009
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Posted by rosshunter on January 13, 2009
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Posted by rosshunter on January 12, 2009
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Posted by rosshunter on January 11, 2009
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Weaver’s Way Co-op – Beyond Green Blog
Tags: planetary
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One of the best things about Paul Roberts’ book
The End of Food is his careful analysis of how food conglomerates, large retailers and fast-food companies have overwhelmed our food production systems with their outrageous demands for unimaginable quantities of dirt cheap “inputs” (i.e. crops, meat and dairy products), in order to make and sell food – much of which is, by any reasonable definition, fake. At this point, it’s their agricultural system; we just eat in it.
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Sustainable practices
by definition can’t supply the Nestles, McDonalds and Wal-Marts of the world. Meeting their demands is what created this teetering CAFO-ridden, monocultural, hydrocarbon-fueled, GMO-based agricultural mishegas in the first place. If the debate is between organic vs. conventional practices, organic will always lose. This is because an organic system exists in opposition to the food companies and retailers whose requirements cannot and should not be met. And there’s the rub. What do you get when you cross organic with industrial? An ungainly beast that has begotten little things like a
fertilizer scandal and big things like the
recent “split” between the so-called commercial organic and the sustainable organic movements.
Does anyone think that a world full of fake and fast food can really transition to a sustainable agriculture? We’re addicted to cheap and convenient food just as we’re addicted to cheap oil. And if the War on Drugs has taught us anything, it’s that until you eliminate demand, supply will keep coming and coming and coming.
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The Reckoning – Taking Hard New Look at a Greenspan Legacy – Series – NYTimes.com
Tags: economic
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The derivatives market is $531 trillion, up from $106 trillion in 2002 and a relative pittance just two decades ago. Theoretically intended to limit risk and ward off financial problems, the contracts instead have stoked uncertainty and actually spread risk amid doubts about how companies value them.
If Mr. Greenspan had acted differently during his tenure as Federal Reserve chairman from 1987 to 2006, many economists say, the current crisis might have been averted or muted.
Over the years, Mr. Greenspan helped enable an ambitious American experiment in letting market forces run free. Now, the nation is confronting the consequences.
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The Reckoning – On Wall Street, Bonuses, Not Profits, Were Real – Series – NYTimes.com
Tags: economic
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But Merrill’s record earnings in 2006 — $7.5 billion — turned out to be a mirage. The company has since lost three times that amount, largely because the mortgage investments that supposedly had powered some of those profits plunged in value.
Unlike the earnings, however, the bonuses have not been reversed.
As regulators and shareholders sift through the rubble of the financial crisis, questions are being asked about what role lavish bonuses played in the debacle. Scrutiny over pay is intensifying as banks like Merrill prepare to dole out bonuses even after they have had to be propped up with billions of dollars of taxpayers’ money. While bonuses are expected to be half of what they were a year ago, some bankers could still collect millions of dollars.
Critics say bonuses never should have been so big in the first place, because they were based on ephemeral earnings. These people contend that Wall Street’s pay structure, in which bonuses are based on short-term profits, encouraged employees to act like gamblers at a casino — and let them collect their winnings while the roulette wheel was still spinning.
“Compensation was flawed top to bottom,” said Lucian A. Bebchuk, a professor at Harvard Law School and an expert on compensation. “The whole organization was responding to distorted incentives.”
Even Wall Streeters concede they were dazzled by the money. To earn bigger bonuses, many traders ignored or played down the risks they took until their bonuses were paid. Their bosses often turned a blind eye because it was in their interest as well.
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Posted by rosshunter on January 10, 2009
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EzraKlein Archive | The American Prospect
Tags: political
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OIRA was birthed in the 1980 Paperwork Reduction Act as part of the effort to streamline the federal government’s regulatory processes. If Carter had won reelection, the department probably wouldn’t matter. But he didn’t. Tucked deep within the Office of Management and Budget, OIRA received relatively little notice until David Stockman, Reagan’s young turk of a budget director, realized that, properly applied, OIRA could be used to shut down the government’s regulatory functions by tying new regulations up in endless rounds of analysis and bureaucratic justification.
The key event here, and this gets a bit dull, was Executive Order 12291. Books have been written about this order. Academics still study it. It profoundly changed the nation’s regulatory machinery. 12291 required that cost-benefit analysis be conducted for “promulgating new regulations, reviewing existing regulations and developing legislative proposals concerning regulations” This meant the OMB was now in charge of reviewing all bureaucratic proposals, thus subjecting the entire federal bureaucracy to tight, centralized, executive control. Where individual regulations used to pass through the relevant agency, they were now subject to a central review by a presidential appointee. It was the agency the president used to fight his own government. OIRA began “reviewing” 2,000 to 3,000 regulations a year. This made the OMB so powerful that a non-profit watchdog, OMB Watch, sprang into existence to publicize its role.
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The point of all this is that OIRA is quiet, but important. It’s the chokepoint of the entire federal regulatory apparatus. If used wisely, it facilitates the flow, provides welcome analysis and judgment, and aids in implementation. If used as an anti-government weapon, it can do a lot of damage. Sunstein can do real good there.
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Senate Allies Fault Obama on Stimulus – NYTimes.com
Tags: political
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WASHINGTON — President-elect
Barack Obama’s economic recovery plan ran into crossfire from his own party in Congress on Thursday, suggesting that quick passage of spending programs and tax cuts could require more time and negotiation than Democrats once hoped.
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While relying on traditionally liberal notions of using government spending to spur growth, he has also tried to adapt it for a new era with investment in clean energy and technology. And he is trying to balance all of that with tax breaks that appeal to Republicans.
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“There is only one thing we have got to do in the stimulus, and that is how can we create jobs,” said Senator
Tom Harkin, Democrat of Iowa, as he left the meeting. “I am a little concerned by the way that Mr. Summers and others are going at this in that, to me, it still looks like a little more of this trickle-down, if we just put it in at the top, it’s going to trickle down. A number of people in there said, ‘Look, we have got to have programs that actually create jobs and put people to work.’ ”
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Mr. Conrad, who described the meeting as extremely positive, said Mr. Summers ended it by telling the senators, “Message received, loud and clear.”
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Text: Obama’s speech on the economy – Print Version – International Herald Tribune
Tags: political
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Thursday, January 8, 2009
The following is a transcript of President-Elect Barack Obamas speech on th economy, as prepared by Federal News Service.
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Panel criticizes Treasury use of TARP funds | Reuters
Tags: political
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In a draft of a report to be released on Friday, the panel said the Treasury has failed to reveal its strategy for stabilizing the financial system and had done little to track how the money was used.
It cited “significant gaps in Treasury’s monitoring of the use of taxpayer money,” including asking financial institutions to account for what they have done with taxpayer funds.
It also questioned whether Treasury has fulfilled its obligations to Congress.
“For Treasury to take no steps to use any of this money to alleviate the foreclosure crisis raises questions about whether Treasury has complied with Congress’s intent that Treasury develop a ‘plan that seeks to maximize assistance for homeowners,’” the panel said in the report.
The panel said the Treasury hasn’t used any of TARP’s first $350 billion tranche to help borrowers refinance or deal with mortgages that have a face value that is more than the current market value of their homes.
“Treasury needs to be clear as to what, if anything, it has done, and if it insists on taking credit for private sector efforts, it must explain what ‘help’ means,” the draft report said.
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EzraKlein Archive | The American Prospect
Tags: political
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Markey to take chairmanship of new Energy and Environment Subcommittee | Gristmill: The environmental news blog | Grist
Tags: political
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As Kate reported earlier today, new House Energy and Commerce Committee Chair Henry Waxman (D-Calif.) is reorganizing the committee, unifying oversight of climate, energy, air quality, and water issues under a single subcommittee: the Energy and Environment Subcommittee.
The Boston Globe just broke the news that Ed Markey (D-Mass.) will chair the new subcommittee.
This is a big deal, even if you don’t particularly care about inside Congressional baseball.
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This gives Markey a one-two punch: he can craft and help pass climate/energy legislation through the Subcommittee while using the Select Committee to educate other committee chairs about how the issue affects their jurisdictions. I can’t think of another committee chair who has the same kind of megaphone with which to drum up support for his own legislation, in the House and among the public.
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Of course there aren’t quite as many positive signals from the Senate, where courage on these issues has been sorely lacking. (Udall and Merkley are welcome additions to EPW though.) The 110th Congress was a dispiriting experience for greens, who watched again and again as the House passed ambitious green legislation only to have it compromised to impotence or blocked by threatened Republican filibusters in the Senate. Reid is out telling the media “Democrats have to be ‘very, very careful’ about overreaching.” Yeah, that’s the danger.
Nonetheless, with Franken’s apparent win, Dems have 59 votes. No more excuses. If Reid needs shiv weilding lessons he can get them from his counterpart in the People’s House.
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Weaver’s Way Co-op – Beyond Green Blog
Tags: planetary
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The Food Issue – An Open Letter to the Next Farmer in Chief – Michael Pollan – NYTimes.com
Tags: planetary
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After cars, the food system uses more fossil fuel than any other sector of the economy — 19 percent. And while the experts disagree about the exact amount, the way we feed ourselves contributes more greenhouse gases to the atmosphere than anything else we do — as much as 37 percent, according to one study. Whenever farmers clear land for crops and till the soil, large quantities of carbon are released into the air. But the 20th-century industrialization of agriculture has increased the amount of greenhouse gases emitted by the food system by an order of magnitude; chemical fertilizers (made from natural gas), pesticides (made from petroleum), farm machinery, modern food processing and packaging and transportation have together transformed a system that in 1940 produced 2.3 calories of food energy for every calorie of fossil-fuel energy it used into one that now takes 10 calories of fossil-fuel energy to produce a single calorie of modern supermarket food. Put another way, when we eat from the industrial-food system, we are eating oil and spewing greenhouse gases. This state of affairs appears all the more absurd when you recall that every calorie we eat is ultimately the product of photosynthesis — a process based on making food energy from sunshine. There is hope and possibility in that simple fact.
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Four of the top 10 killers in America today are chronic diseases linked to diet: heart disease, stroke, Type 2 diabetes and cancer. It is no coincidence that in the years national spending on health care went from 5 percent to 16 percent of national income, spending on food has fallen by a comparable amount — from 18 percent of household income to less than 10 percent. While the surfeit of cheap calories that the U.S. food system has produced since the late 1970s may have taken food prices off the political agenda, this has come at a steep cost to public health. You cannot expect to reform the health care system, much less expand coverage, without confronting the public-health catastrophe that is the modern American diet.
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we need to wean the American food system off its heavy 20th-century diet of fossil fuel and put it back on a diet of contemporary sunshine. True, this is easier said than done — fossil fuel is deeply implicated in everything about the way we currently grow food and feed ourselves. To put the food system back on sunlight will require policies to change how things work at every link in the food chain: in the farm field, in the way food is processed and sold and even in the American kitchen and at the American dinner table. Yet the sun still shines down on our land every day, and photosynthesis can still work its wonders wherever it does. If any part of the modern economy can be freed from its dependence on oil and successfully resolarized, surely it is food.
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Before setting out an agenda for reforming the food system, it’s important to understand how that system came to be — and also to appreciate what, for all its many problems, it has accomplished. What our food system does well is precisely what it was designed to do, which is to produce cheap calories in great abundance. It is no small thing for an American to be able to go into a fast-food restaurant and to buy a double cheeseburger, fries and a large Coke for a price equal to less than an hour of labor at the minimum wage — indeed, in the long sweep of history, this represents a remarkable achievement.
It must be recognized that the current food system — characterized by monocultures of corn and soy in the field and cheap calories of fat, sugar and feedlot meat on the table — is not simply the product of the free market. Rather, it is the product of a specific set of government policies that sponsored a shift from solar (and human) energy on the farm to fossil-fuel energy.
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Scientific evidence becomes politically fashionable again | Blessed are the geeks, for they shall inherit the Earth | The Economist
Tags: political
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These appointments, therefore, mark a shift in political attitudes towards scientific advice. When he announced his selections Mr Obama said that promoting science is not just about providing resources (though he has promised to double the budget for basic science research over the next decade), but also about promoting free inquiry and listening to what scientists have to say, “especially when it is inconvenient”. Remarks such as this are causing excitement among researchers, particularly those who have had difficulty making their voices heard over the past few years.
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Mr Obama has said he will give NASA an extra $2 billion to close the gap between the space shuttle, which is due to be withdrawn from service in 2010, and its successor. That sounds like good news for the agency. But according to documents obtained by Space News, a specialist newspaper, his people are also asking NASA some ticklish questions.
They want to know how much money could be saved by cancelling parts of the shuttle’s successor. They have also asked for an estimate of the cost of carrying out all 15 missions that were recommended in a recent review of the agency’s Earth-science programme, which looks at things like the planet’s climate. At the moment, there is no money in the kitty for these missions, nor is much progress expected before 2020. The unstated implication of these questions is that someone is considering moving these missions up NASA’s priority list.
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Gloom at the AEA meetings | Drastic times | The Economist
Tags: economic
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The hubristic belief in America that “we don’t have financial crises” is now obviously false, said Mr Rogoff. In fact the authors find that banking crises have been almost as common in rich economies as developing ones (see table).
The main results of the research make depressing reading. Downturns that follow a financial crisis are typically long and deep (see table). On average, GDP per person falls by more than 9% from its peak and takes almost two years to reach bottom. The misery in the jobs market tends to last far longer. The unemployment rate increases by an average of seven percentage points after severe meltdowns and reaches a peak almost five years after its rise began. If that gauge is accurate, unemployment in America is set to rise to an alarming rate of 11-12% in coming years. The housing bust is unlikely to end quickly either. House prices take an average of five years to reach their nadir and fall by 36% in real terms. Equities take less time to reach rock bottom but lose more than half of their value by the time they get there.
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The most astounding result, said Mr Rogoff, is the effect on public finances. Real government debt rises by an average of 86% in countries afflicted by severe crises. The authors reckon the damage has little to do with the costs of bailing out banks. Rather ballooning debt reflects a collapse in tax receipts as a consequence of recession and, in most countries, a big increase in public spending to shore up the economy. It is chilling that such huge deteriorations in public finances are still not enough to prevent deep and prolonged downturns.
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Posted by rosshunter on January 8, 2009
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TAPPED Archive | The American Prospect
A Democratic aide on the hill passes along the first ten bills that Majority Leader Harry Reid will put in the hopper this evening to kick off the new session of Congress, as sent by leadership to various Senate Legislative Directors. Unfortunately for us, the bills are placeholders that only contain vague statements of purpose, not specific legislative language, so we can only get a sense of the basic priorities of the Senate Democrats. Here’s the countdown:
* S.1 — American Recovery and Reinvestment Act of 2009. “To create jobs, restore economic growth, and strengthen America’s middle class through measures that modernize the nation’s infrastructure, enhance America’s energy independence, expand educational opportunities, preserve and improve affordable health care, provide tax relief, and protect those in greatest need, and for other purposes.” The stimulus bill; no surprises here.
* S.2 — Middle Class Opportunity Act of 2009. Sound familiar? This is a retread of a bill sponsored by Senator Chuck Schumer in the last Congress that has a variety of tax reform goals; the additional descriptions in this bill include hints at union support (“ensuring workers can exercise their rights to freely choose to form a union without employer interference”) and perhaps another go at the Ledbetter law (“removing barriers to fair pay for all workers”).
* S.3 — Homeowner Protection and Wall Street Accountability Act of 2009. This bill will include a moratorium on foreclosures, Senator Dick Durbin’s plan to allow for easier reworking of troubled mortgages by bankruptcy judges, new regulations for the credit card and financial industry, and investment in the Small Business Administration to provide loans for small businesses in need. It also makes TARP — the Wall Street bailout — a larger part of foreclosure reduction.
* S.4 — Comprehensive Health Reform Act of 2009. “It is the sense of Congress that Congress should enact, and the President should sign, legislation to guarantee health coverage, improve health care quality and disease prevention, and reduce health care costs for all Americans and the health care system.” Paging Ezra!
* S.5 — Cleaner, Greener, and Smarter Act of 2009. This is a bill that focuses mainly on green investment and updating infrastructure to be more efficient and less polluting. But since a lot of those priorities are expected to be rolled into the stimulus package, one wonders if this is a vehicle for cap-and-trade and the Kyoto Protocols, given this provision: “requiring reductions in emissions of greenhouse gases in the United States and achieving reductions in emissions of greenhouse gases abroad.”
* S.6. — Restoring America’s Power Act of 2009. This is basically the Democrats’ ‘08 foreign policy consensus: Refocus on Afghanistan, transition in Iraq, strengthen alliances, WMD non-proliferation in Iran and North Korea… you get the idea. Most of this is in the executive branch’s bailiwick so this legislation may just be a supportive resolution indicating that if Obama needs new authorities or resources to accomplish these goals, he’ll get them. The bill also includes goals of providing proper training and equipment to the Armed Forces, and medical care when they return from duty.
* S.7 — Education Opportunity Act of 2009. “To expand educational opportunities for all Americans by increasing access to high-quality early childhood education and after school programs, advancing reform in elementary and secondary education, strengthening mathematics and science instruction, and ensuring that higher education is more affordable.” An education omnibus bill that will no doubt be split up into separate pieces of legislation.
* S.8 — Returning Government to the American People Act. “To return the Government to the people by reviewing controversial ‘midnight regulations’ issued in the waning days of the Bush Administration.” A sentiment we can all get behind, which promises to provide the new administration legislative authority, if it doesn’t have it already, to review (and presumably deny) the last administration’s late regulations.
* S.9 — Stronger Economy, Stronger Borders Act of 2009. Seems to be a placeholder for comprehensive immigration reform, including stronger border and employment security to crackdown on illegal immigration while “reforming and rationalizing avenues for legal immigration.”
* S.10 — Fiscal Responsibility Act of 2009. Gosh, this one is interesting. It’s one part congressional hand-wringing over the fact that “the Federal budget is on an unsustainable path of rising deficits and debt,” and it calls for a study of this. It’s one part fiscal hawkery, supporting “strong pay-as-you-go rules, to help block the approval of measures that would increase the deficit.” And it’s one part … populist? “A review of the current system of taxation of the United States to ensure that burdens are borne fairly and equitably.” That could be the justification for the Bush tax cut rollback in 2010.
Tags: political
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Book Review: The Liberal Hour, G. Calvin MacKenzie – B&N Review
Tags: political
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When John F. Kennedy was elected to office, he summoned Rayburn to Florida to steel the speaker for a simple proposition: Expand the Rules Committee. Enlarge it from 12 members to 15 members, and stock it such that the forces of progress enjoyed a working majority. The vote was close, and hard, but it was won, and it set the stage for all that followed.
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But, in the sharper focus of historical distance, it is now clear that many of the lasting effects of the 1960s had their roots in the liberal agenda and practical politics, mostly legislative policy making.” Government worked, in other words, and that meant the sentiments of the moment were woven into the legal fabric of the country.
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Kennedy was a pretty newcomer and Johnson was a southern conservative who’d often opposed civil rights legislation. But the moment beckoned and the participants proved surprisingly able to harness it. Part of their genius was to realize that if the moment were to turn into an era, then they needed to understand that their enemies were not merely those who preferred the status quo, but the legislative system that was so accustomed to inertia. Modern reformers would do well to absorb the lesson.
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The Way We Live Now – The Remedist – NYTimes.com
Tags: economic
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Among the most astonishing statements to be made by any policymaker in recent years was
Alan Greenspan’s admission this autumn that the regime of deregulation he oversaw as chairman of the
Federal Reserve was based on a “flaw”: he had overestimated the ability of a free market to self-correct and had missed the self-destructive power of deregulated mortgage lending. The “whole intellectual edifice,” he said, “collapsed in the summer of last year.”
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For the same “intellectual edifice” that Greenspan said has now collapsed was what supported the laissez-faire policies Keynes quarreled with in his times. Then, as now, economists believed that all uncertainty could be reduced to measurable risk.
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The basic question Keynes asked was: How do rational people behave under conditions of uncertainty? The answer he gave was profound and extends far beyond economics. People fall back on “conventions,” which give them the assurance that they are doing the right thing. The chief of these are the assumptions that the future will be like the past (witness all the financial models that assumed housing prices wouldn’t fall) and that current prices correctly sum up “future prospects.” Above all, we run with the crowd.
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Why, he asked, should anyone outside a lunatic asylum wish to “hold” money? The answer he gave was that “holding” money was a way of postponing transactions. The “desire to hold money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future. . . . The possession of actual money lulls our disquietude; and the premium we require to make us part with money is a measure of the degree of our disquietude.”
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t is this flight into cash that makes interest-rate policy such an uncertain agent of recovery. If the managers of banks and companies hold pessimistic views about the future, they will raise the price they charge for “giving up liquidity,” even though the central bank might be flooding the economy with cash. That is why Keynes did not think that cutting the central bank’s interest rate would necessarily — and certainly not quickly — lower the interest rates charged on different types of loans. This was his main argument for the use of government stimulus to fight a depression. There was only one sure way to get an increase in spending in the face of an extreme private-sector reluctance to spend, and that was for the government to spend the money itself. Spend on pyramids, spend on hospitals, but spend it must.
This, in a nutshell, was Keynes’s economics. His purpose, as he saw it, was not to destroy capitalism but to save it from itself. He thought that the work of rescue had to start with economic theory itself. Now that Greenspan’s intellectual edifice has collapsed, the moment has come to build a new structure on the foundations that Keynes laid.
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Posted by rosshunter on January 7, 2009
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RISK Mismanagement – What Led to the Financial Meltdown – NYTimes.com
Tags: economic
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Published: January 2, 2009
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There are many such models, but by far the most widely used is called VaR — Value at Risk. Built around statistical ideas and probability theories that have been around for centuries, VaR was developed and popularized in the early 1990s by a handful of scientists and mathematicians — “quants,” they’re called in the business — who went to work for
JPMorgan. VaR’s great appeal, and its great selling point to people who do not happen to be quants, is that it expresses risk as a single number, a dollar figure, no less.
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“We have lots of models here that are important, but none are more important than the P.& L., and we check every day to make sure our P.& L. is consistent with where our risk models say it should be. In December our mortgage business lost money for 10 days in a row. It wasn’t a lot of money, but by the 10th day we thought that we should sit down and talk about it.”
So Goldman called a meeting of about 15 people, including several risk managers and the senior people on the various trading desks. They examined a thick report that included every trading position the firm held. For the next three hours, they pored over everything. They examined their VaR numbers and their other risk models. They talked about how the mortgage-backed securities market “felt.” “Our guys said that it felt like it was going to get worse before it got better,” Viniar recalled. “So we made a decision: let’s get closer to home.”
In trading parlance, “getting closer to home” means reining in the risk, which in this case meant either getting rid of the mortgage-backed securities or hedging the positions so that if they declined in value, the hedges would counteract the loss with an equivalent gain. Goldman did both. And that’s why, back in the summer of 2007, Goldman Sachs avoided the pain that was being suffered by Bear Stearns, Merrill Lynch, Lehman Brothers and the rest of Wall Street.
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It’s not every day that an options trader becomes famous by writing a book, but that’s what Taleb did, first with “Fooled by Randomness,” which was published in 2001 and became an immediate cult classic on Wall Street, and more recently with “The Black Swan: The Impact of the Highly Improbable,” which came out in 2007 and landed on a number of best-seller lists. He also went from being primarily an options trader to what he always really wanted to be: a public intellectual. When I made the mistake of asking him one day whether he was an adjunct professor, he quickly corrected me. “I’m the Distinguished Professor of Risk Engineering at N.Y.U.,” he responded. “It’s the highest title they give in that department.” Humility is not among his virtues. On his Web site he has a link that reads, “Quotes from ‘The Black Swan’ that the imbeciles did not want to hear.”
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“How many of you took statistics at Columbia?” he asked as he began his lecture. Most of the hands in the room shot up. “You wasted your money,” he sniffed. Behind him was a slide of Mickey Mouse that he had put up on the screen, he said, because it represented “Mickey Mouse probabilities.” That pretty much sums up his view of business-school statistics and probability courses.
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Conglomerate Blog: Business, Law, Economics & Society
Tags: economic
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Some of the solutions embraced by Lewis and Einhorn make
some sense to me. But if anyone suggests,
as Einhorn and Lewis do, and, to be sure, as plenty of economists have also
done, that there are a “handful of … perfectly obvious changes in the financial
system to be made,” you should reach for your wallet. None of these worthies predicted the crisis –
Einhorn is getting killed by it. Be my
guest if you want to believe those who tell you that those running the show
during the crisis – all of Wall Street and much of Washington – are corrupt or
stupid or both, and that eight simple rules will lead us out of the business
cycle and to paradise. But I prefer to
believe that the crisis is complex, and that responding to it takes more than
knee-jerk reactions, and, especially, more than moralizing over how
dunderheaded the other guys are.
Okay, some praise. The Joe Nocera article on Value at Risk in the magazine is amazing
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naked capitalism: Obama Considering $310 Billion Tax Cut
Tags: economic
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As always, the devil lies in the details, which we will see in due course. But on a first pass, this looks like a pretty big ticket way to co-opt opposition.
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EzraKlein Archive | The American Prospect
note this in conjunction with Yves’s own writings cited in Ezra’s post. She makes this point as the last sentence conclusion, material here to co-opt some consensus with.
This comment says the same thing – again it’s Obama’s conciliation genius – I hope – that we’re going to see again and again. Much more on this to come
Tags: political, economic
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The tax cut isn’t the main part of the stimulus. Its just grease to get Republicans on board.
And there isn’t anything particularly wrong with a tax cut as long as it isn’t permanent. Its good because the government needs to run a major budget deficit to increase aggregate demand.
What people actually do with the money doesn’t matter as much as the fact that Republicans will vote for the stimulus package as a whole if it contains some tax cuts.
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Posted by rosshunter on January 6, 2009
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EzraKlein Archive | The American Prospect
Tags: political
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OpEdNews » FAIRNESS DOCTRINE: Life Isn’t Fair but Media Should Be
Tags: political
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There is always room in our Democracy for guys and gals with a talent for mockery and a swaggering anger to make a buck by abusing the truth, the sick, and the environment, but in serious times it is also necessary for thoughtful men and women to have the chance to express opposing views on the public airways. There are more smart progressives out there like Rachel Maddow waiting to add their voices to our continuing American debate. And I would like my three year old grand-daughter, and my new grand-twins to live in a world where all sides of an issue are heard so that they can someday become informed citizens. And while we’re at it how about restoring Civics as a subject in our schools so that the majority of the electorate understands that we have three separate but equal institutions, and then how about…
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Obama’s impressive new OLC chief – Glenn Greenwald – Salon.com
Tags: political
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Think Progress » Obama’s OLC nominee: ‘We must regain our ability to feel outrage whenever our government acts lawlessly.’
Tags: political
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President-elect Barack Obama announced today that
Dawn Johnsen will serve as the next Assistant Attorney General for the
Office of Legal Counsel (OLC). Salon’s Glenn Greenwald calls the pick “
Obama’s best yet, perhaps by far.” As evidence, Greenwald highlights
an article in Slate that Johnsen authored last year, in which she excoriated John Yoo’s infamous torture memo:
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Johnsen also criticized the Democratic Congress for legalizing Bush’s surveillance program. She also wrote passionately about restoring our “nation’s honor” by condemning “our nation’s past transgressions” and rejecting “
Bush’s corruption of our American ideals.”
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Wayne A. Schneider Says:
In order for this nation to “put the past behind us” (as the Republicans so desperately want us to do), we have to know what happened, and we have to feel those who broke the law will be punished. If we just ignore it all and pretend it doesn’t matter any more, then that will be the end of our constitutional form of government. And without our constitution, there is no United States of America.
Dick Cheney is already going around saying that if Bush wasn’t impeached, then he must not have done anything illegal. This kind of thinking needs to be stopped immediately, and a lifetime prison sentence should do the trick.
January 5th, 2009 at 1:18 pm
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In order for this nation to “put the past behind us” (as the Republicans so desperately want us to do), we have to know what happened, and we have to feel those who broke the law will be punished. If we just ignore it all and pretend it doesn’t matter any more, then that will be the end of our constitutional form of government. And without our constitution, there is no United States of America.
Dick Cheney is already going around saying that if Bush wasn’t impeached, then he must not have done anything illegal. This kind of thinking needs to be stopped immediately, and a lifetime prison sentence should do the trick.
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katy Says:
Where is the outrage, the public outcry?! The shockingly flawed content of this memo, the deficient processes that led to its issuance, the horrific acts it encouraged, the fact that it was kept secret for years and that the Bush administration continues to withhold other memos like it — all demand our outrage.
of course…
if only the public had been fully informed…
it’s never too late, i guess… i hope.
January 5th, 2009 at 1:32 pm
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I think if we saw some prosecutorial action, then a lot of the stuff that the electorate has cynically buried will rise to the surface again. I think that most people have lost their sense of outrage because they could see no purpose for it to serve – no amount of public outcry has seemed to harm or even shame the criminal Bush administration. But it’s still festering below the surfact of the national psyche. Just one significant conviction, impeachment, whatever, would raise a huge outcry for more.
January 5th, 2009 at 2:26 pm
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ElBruce Says:
curious Says:
The real question is whether this lady will do what Obama seems not to want. To investigate and prosecute those who broke the law…
That’s not the OLC’s job. The OLC are the ones who provide memos to the White House saying what the DoJ would consider to be legal and what wouldn’t be, of a set of hypothetical options under consideration. It’s the key office that BushCo have politicized and then used to claim that their crimes were legal.
The fact that Obama’s putting someone there who won’t let him get away with similar crimes is positive all around.
January 5th, 2009 at 8:45 pm
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Democracy Now! | Howard Zinn on “War and Social Justice”
Tags: political
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Governments, you know—they do that for the military. Did you know that? That’s what the military has. The military has free insurance. I was once in the military. I got pneumonia, which is easier to get in the military. I got pneumonia. I didn’t have to fool around with deciding what health plan I’m in and what—you know. No, I was totally taken care of. I didn’t have to think about money. Just—you know, there are a million members of the armed forces who have that. But when you ask that the government do this for everybody else, they cry, “That’s socialism!” Well, if that’s socialism, it must mean socialism is good. You know.
No, I was really gratified when Obama called for “Let’s tax the rich more, and let’s tax the poor and middle class less.” And they said, “That’s socialism.” And I thought, “Whoa! I’m happy to hear that. Finally, socialism is getting a good name.” You know, socialism has been given bad names, you know, Stalin and all those socialists, so-called socialists. They weren’t really socialist, but, you know, they called themselves socialist. But they weren’t really, you see. And so, socialism got a bad name. It used to have a really good name. Here in the United States, the beginning of the twentieth century, before there was a Soviet Union to spoil it, you see, socialism had a good name. Millions of people in the United States read socialist newspapers. They elected socialist members of Congress and socialist members of state legislatures. You know, there were like fourteen socialist chapters in Oklahoma. Really. I mean, you know, socialism—who stood for socialism? Eugene Debs, Helen Keller, Emma Goldman, Clarence Darrow, Jack London, Upton Sinclair. Yeah, socialism had a good name. It needs to be restored.
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You know, I like him. I’m for him. I want him to do well. I’m happy he won. I’m delighted he won. But I’m a citizen. I have to speak my mind. OK? Yeah. And, you know—but when I saw Obama and McCain sort of both together supporting the $700 billion bailout, I thought, “Uh-oh. No, no. Please don’t do that. Please, Obama, step aside from that. Do what—I’m sure something in your instincts must tell you that there’s something wrong with giving $700 billion to the same financial institutions which ruined us, which got us into this mess, something wrong with that, you see.” And it’s not even politically viable. That is, you can’t even say, “Oh, I’m doing it because people will then vote for me.” No. It was very obvious when the $700 billion bailout was announced that the majority of people in the country were opposed to it. Instinctively, they said, “Something is wrong with this. Why give it to them? We need it.”
That’s when the government—you know, Obama should have been saying, “No, let’s take that $700 billion, let’s give it to people who can’t pay their mortgages. Let’s create jobs, you know.” You know, instead of pouring $700 billion into the top and hoping that it will trickle down to the bottom, no, go right to the bottom, where people need it and get—so, yes, that was a disappointment. So, yeah, I’m trying to indicate what we’ll have to do now and to fulfill what Obama himself has promised: change, real change. You can’t have—you can say “change,” but if you keep doing the old policies, it’s not change, right?
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If we start really thinking about what it is, then we will reject these cries that you’re not patriotic, and we’ll say, “Patriotism is not supporting the government.” When the government does bad things, the most patriotic thing you can do is to criticize the government, because that’s the Declaration of Independence. That’s our basic democratic charter. The Declaration of Independence says governments are set up by the people to—they’re artificial creations. They’re set up to ensure certain rights, the equal right to life, liberty, pursuit of happiness. So when governments become destructive of those ends, the Declaration said, “it is the Right of the People to alter or abolish” the government. That’s our basic democratic charter. People have forgotten what it is. It’s OK to alter or abolish the government when the government violates its trust. And then you are being patriotic. I mean, the government violates its trust, the government is being unpatriotic.
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No, there’s no one national interest. There’s the interest of the president of the United States, and then there’s the interest of the young person he sends to war. They’re different interests, you see? There is the interest of Exxon and Halliburton, and there’s the interest of the worker, the nurse’s aide, the teacher, the factory worker. Those are different interests. Once you recognize that you and the government have different interests, that’s a very important step forward in your thinking, because if you think you have a common interest with the government, well, then it means that if the government says you must do this and you must do that, and it’s a good idea to go to war here, well, the government is looking out for my interest. No, the government is not looking out for your interest. The government has its own interests, and they’re not the interests of the people. Not just true in the United States, it’s true everywhere in the world. Governments generally do not represent the interests of their people. See? That’s why governments keep getting overthrown, because people at a certain point realize, “Hey! No, the government is not serving my interest.”
That’s also why governments lie. Why do governments lie? You must know that governments lie—not just our government; governments, in general, lie. Why do they lie? They have to lie, because their interests are different than the interests of ordinary people. If they told the truth, they would be out of office.
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We have an educational job to do about our relationship to government, you know, and to realize that disobedience is essential to democracy, you see. And it’s important to understand democracy is not the three branches of government. It’s not what they told us in junior high school. “Oh, this is democracy. We have three branches of government, kiddos, the legislative, the executive, judicial. We have checks and balances that balance one another out. If somebody does something bad, it will be checked by”—wow! What a neat system! Nothing can go wrong. Well, now, those structures are not democracy. Democracy is the people. Democracy is social movements. That’s what democracy is. And what history tells us is that when injustices have been remedied, they have not been remedied by the three branches of government. They’ve been remedied by great social movements, which then push and force and pressure and threaten the three branches of government until they finally do something. Really, that’s democracy.
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And no, we mustn’t be pessimistic. We mustn’t be cynical. We mustn’t think we’re powerless. We’re not powerless. That’s where history comes in. If you look at history, you see people felt powerless and felt powerless and felt powerless, until they organized, and they got together, and they persisted, and they didn’t give up, and they built social movements. Whether it was the anti-slavery movement or the black movement of the 1960s or the antiwar movement in Vietnam or the women’s movement, they started small and apparently helpless; they became powerful enough to have an effect on the nation and on national policy. We’re not powerless. We just have to be persistent and patient, not patient in the passive sense, but patient in the active sense of having a kind of faith that if all of us do little things—well, if all of us do little things, at some point there will be a critical mass created. Those little things will add up. That’s what has happened historically. People were disconsolate, and people thought they couldn’t end, but they kept doing, doing, doing, and then something important happened.
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Posted by rosshunter on January 5, 2009
Posted from Diigo. The rest of blogread group favorite links are here.
Posted in Uncategorized | Leave a Comment »
Posted by rosshunter on January 4, 2009
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The Economic Consequences of Mr. Bush: Politics & Power: vanityfair.com
Tags: economic
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Globalization means that America’s economy and the rest of the world have become increasingly interwoven. Consider those bad American mortgages. As families default, the owners of the mortgages find themselves holding worthless pieces of paper. The originators of these problem mortgages had already sold them to others, who packaged them, in a non-transparent way, with other assets, and passed them on once again to unidentified others. When the problems became apparent, global financial markets faced real tremors: it was discovered that billions in bad mortgages were hidden in portfolios in Europe, China, and Australia, and even in star American investment banks such as Goldman Sachs and Bear Stearns. Indonesia and other developing countries—innocent bystanders, really—suffered as global risk premiums soared, and investors pulled money out of these emerging markets, looking for safer havens.
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Joseph E. Stiglitz on capitalist fools: About Us: vanityfair.com
Tags: economic
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Greenspan played a double role. The Fed controls the money spigot, and in the early years of this decade, he turned it on full force. But the Fed is also a regulator. If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll get. A flood of liquidity combined with the failed levees of regulation proved disastrous.
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Greenspan presided over not one but two financial bubbles. After the high-tech bubble popped, in 2000–2001, he helped inflate the housing bubble.
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Of course, the current problems with our financial system are not solely the result of bad lending. The banks have made mega-bets with one another through complicated instruments such as derivatives, credit-default swaps, and so forth. With these, one party pays another if certain events happen—for instance, if Bear Stearns goes bankrupt, or if the dollar soars. These instruments were originally created to help manage risk—but they can also be used to gamble. Thus, if you felt confident that the dollar was going to fall, you could make a big bet accordingly, and if the dollar indeed fell, your profits would soar. The problem is that, with this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else—or even of one’s own position. Not surprisingly, the credit markets froze.
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The deregulation philosophy would pay unwelcome dividends for years to come. In November 1999, Congress repealed the Glass-Steagall Act—the culmination of a $300 million lobbying effort by the banking and financial-services industries, and spearheaded in Congress by Senator Phil Gramm.
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The most important consequence of the repeal of Glass-Steagall was indirect—it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money—people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking.
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As we stripped back the old regulations, we did nothing to address the new challenges posed by 21st-century markets. The most important challenge was that posed by derivatives.
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The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease—the modern-day equivalent of leeches. The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity.
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The flood of liquidity made money readily available in mortgage markets, even to those who would normally not be able to borrow. And, yes, this succeeded in forestalling an economic downturn; America’s household saving rate plummeted to zero. But it should have been clear that we were living on borrowed money and borrowed time.
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Meanwhile, on July 30, 2002, in the wake of a series of major scandals—notably the collapse of WorldCom and Enron—Congress passed the Sarbanes-Oxley Act.
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The scandals had involved every major American accounting firm, most of our banks, and some of our premier companies, and made it clear that we had serious problems with our accounting system.
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Unfortunately, in the negotiations over what became Sarbanes-Oxley a decision was made not to deal with what many, including the respected former head of the S.E.C. Arthur Levitt, believed to be a fundamental underlying problem: stock options. Stock options have been defended as providing healthy incentives toward good management, but in fact they are “incentive pay” in name only. If a company does well, the C.E.O. gets great rewards in the form of stock options; if a company does poorly, the compensation is almost as substantial but is bestowed in other ways. This is bad enough. But a collateral problem with stock options is that they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.
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The incentive structure of the rating agencies also proved perverse. Agencies such as Moody’s and Standard & Poor’s are paid by the very people they are supposed to grade. As a result, they’ve had every reason to give companies high ratings, in a financial version of what college professors know as grade inflation. The rating agencies, like the investment banks that were paying them, believed in financial alchemy—that F-rated toxic mortgages could be converted into products that were safe enough to be held by commercial banks and pension funds. We had seen this same failure of the rating agencies during the East Asia crisis of the 1990s: high ratings facilitated a rush of money into the region, and then a sudden reversal in the ratings brought devastation. But the financial overseers paid no attention.
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Both the administration and the Fed had long been driven by wishful thinking, hoping that the bad news was just a blip, and that a return to growth was just around the corner.
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The original proposal by Treasury Secretary Henry Paulson, a three-page document that would have provided $700 billion for the secretary to spend at his sole discretion, without oversight or judicial review, was an act of extraordinary arrogance. He sold the program as necessary to restore confidence. But it didn’t address the underlying reasons for the loss of confidence. The banks had made too many bad loans. There were big holes in their balance sheets. No one knew what was truth and what was fiction. The bailout package was like a massive transfusion to a patient suffering from internal bleeding—and nothing was being done about the source of the problem, namely all those foreclosures. Valuable time was wasted as Paulson pushed his own plan, “cash for trash,” buying up the bad assets and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with money they needed, he did it in a way that not only cheated America’s taxpayers but failed to ensure that the banks would use the money to re-start lending. He even allowed the banks to pour out money to their shareholders as taxpayers were pouring money into the banks.
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The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, “I have found a flaw.” Congressman Henry Waxman pushed him, responding, “In other words, you found that your view of the world, your ideology, was not right; it was not working.” “Absolutely, precisely,” Greenspan said. The embrace by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.
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Against Intellectual Monopoly
Tags: economic
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It is common to argue that intellectual property in the form
of copyright and patent is necessary for the innovation and creation of
ideas and inventions such as
machines, drugs, computer
software, books, music, literature and movies. In fact intellectual
property is a
government grant of a costly and dangerous
private monopoly over ideas. We show through theory and
example
that intellectual monopoly is not necessary for innovation and as a
practical matter is damaging to
growth, prosperity and liberty.
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Think Progress » Bush Administration Trying To Make It Easier To Turn Forests Into Housing Subdivisions
Tags: politcal, economic, planetary
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In yet another potential last minute rule change, “the Bush administration appears poised to push through a change in U.S. Forest Service agreements that would make it far easier for mountain forests to be converted to housing subdivisions.” Though President-elect Obama has opposed the move, Mark E. Rey, the former timber lobbyist who heads the Forest Service, has signaled that he intends to finalize the plan before Obama’s inauguration. As a presidential candidate, Obama vocally criticized Rey’s plan while campaigning in Montana, calling it “outrageous.”
Rey is pushing a technical change that it will have “large implications“:
The shift is technical but with large implications. It would allow Plum Creek Timber to pave roads passing through Forest Service land. For decades, such roads were little more than trails used by logging trucks to reach timber stands.
But as Plum Creek has moved into the real estate business, paving those roads became a necessary prelude to opening vast tracts of the company’s 8 million acres to the vacation homes that are transforming landscapes across the West.
Scenic western Montana, where Plum Creek owns 1.2 million acres, would be most affected, placing fresh burdens on county governments to provide services, and undoing efforts to cluster housing near towns
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The $3 Trillion War: Politics & Power: vanityfair.com
Tags: economic
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The true cost of the war in Iraq, according to our calculations, will, by the time America has extricated itself, exceed $3 trillion. And this is a deliberately conservative estimate. The ultimate cost may well be much higher.
Why the huge difference between our number and the administration’s? One big reason lies in the misleading way the federal government does its accounting. Any publicly owned business, no matter how small, is required by law to use a method of accounting that takes future obligations into consideration. This is known as “accrual” accounting. But Defense Department accounting is done on a “cash” basis, which logs only what the government is actually spending day by day and ignores future obligations. In the case of the Iraq war, the future obligations are huge. They include the cost of replacing military equipment, which is being used up at 6 to 10 times the peacetime rate. They also include the cost of providing health care and disability payments for our returning troops. These costs will be especially high because of our improved ability to keep even the most horribly wounded soldiers alive.
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Finally, we should point out that the procedure used by the administration to fund the Iraq war was chosen deliberately in order to deflect close attention. The administration has requested nearly all the money for the war in the form of “emergency” funding, which is not subject to standard budget caps or vigorous scrutiny. Emergency funding is intended for genuine crises, such as Hurricane Katrina, where the utmost speed is required to get the money to the field. The continued use of this emergency procedure—five years after the war began—is budgetary sleight of hand that makes a mockery of a democratic budget process.
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To date, more than 1.6 million American troops have been deployed in the Iraq and Afghanistan operations. More than 4,000 have been killed. More than 65,000 have been wounded or injured, or have contracted a disease. Of the 750,000 troops who have been discharged so far, some 260,000 have been treated at veterans’ medical facilities. Nearly 100,000 have been diagnosed as having mental-health conditions. Another 200,000 have sought counseling and re-adjustment services at walk-in vet centers.
No adequate preparation was made for casualties on this scale. The Department of Veterans Affairs (V.A.) and other agencies have been overwhelmed—both by the need for immediate medical care and by the demand for disability benefits. Already, a quarter of a million returning veterans have applied for disability benefits. Not surprisingly, many disability claims are complex: the average veteran cites five separate disabling medical conditions. The least fortunate among the veterans have suffered unimaginable horrors: brain trauma, amputations, burns, blindness, and spinal damage. Because a greater number of the injured are surviving today, the relative costs of long-term care will be greater than for any previous war. This is the surge the administration doesn’t talk about.
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Most Americans have yet to feel any of the costs of the Iraq war. The price in blood has been paid by members of the volunteer military. The price in treasure has been financed entirely by borrowing. Taxes have not been raised to pay for the war—in fact, taxes on the rich have actually fallen. Deficit spending gives the illusion that the laws of economics can be repealed. They cannot. Americans will have to pay for the war at some point—and when they do, they will be paying not the Bush markdown but the full price.
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Reversal of Fortune: Politics & Power: vanityfair.com
Tags: economic
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Millions of Americans are losing their homes. (Already, some 3.6 million have done so since the subprime-mortgage crisis began.) This social catastrophe has severe economic effects. The banks and other financial institutions that own these mortgages face stunning reverses; a few, such as Bear Stearns, have already gone belly-up. To prevent America’s $5.2 trillion home financiers, Fannie Mae and Freddie Mac, from following suit, Congress authorized a blank check to cover their losses, but even that generosity failed to do the trick. Now the administration has taken over the two entities completely, a stunning feat for a supposedly market-oriented regime. These bailouts contribute to growing deficits in the short run, and to perverse incentives in the long run. Market economies work only when there is a system of accountability, but C.E.O.’s, investors, and creditors are walking away with billions, while American taxpayers are being asked to pick up the tab. (Freddie Mac’s chairman, Richard Syron, earned $14.5 million in 2007. Fannie Mae’s C.E.O., Daniel Mudd, earned $14.2 million that same year.) We’re looking at a new form of public-private partnership, one in which the public shoulders all the risk, and the private sector gets all the profit. While the Bush administration preaches responsibility, the words are addressed only to the less well-off. The administration talks about the impact of “moral hazard” on the poor “speculator” who borrowed money and bought a house beyond his ability to pay. But moral hazard somehow isn’t an issue when it comes to the high-stakes speculators in corporate boardrooms.
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Ideology proclaimed that markets were always good and government always bad.
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We learned from the Depression that markets are not self-adjusting—at least, not in a time frame that matters to living people. Today everyone—even the president—accepts the need for macro-economic policy, for government to try to maintain the economy at near-full employment. But in a sleight of hand, free-market economists promoted the idea that, once the economy was restored to full employment, markets would always allocate resources efficiently. The best regulation, in their view, was no regulation at all, and if that didn’t sell, then “self-regulation” was almost as good.
The underlying idea was, on the face of it, absurd: that market failures come only in macro doses, in the form of the recessions and depressions that have periodically plagued capitalist economies for the past several hundred years. Isn’t it more reasonable to assume that these failures are just the tip of the iceberg? That beneath the surface lie a myriad of smaller but harder-to-assess inefficiencies? Let me venture an analogy from biology: A patient arrives at a hospital in serious condition. Now, it may be that the patient has simply fallen victim to one of those debilitating ailments that go around from time to time and can be cured by a massive dose of antibiotics. In this case we have a macro problem with a macro solution. But it could instead be that the patient is suffering from a decade of serious abuse—smoking, drinking, overeating, lack of exercise, a fondness for crystal meth—and that it has not only taken a catastrophic toll but also left him open to opportunistic infections of every kind. In other words, a buildup of micro problems has led to a macro problem, and no cure is possible without addressing the underlying issues. The American economy today is a patient of the second kind.
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Economic theory—and historical experience—long ago proved the need for regulation of financial markets. But ever since the Reagan presidency, deregulation has been the prevailing religion. Never mind that the few times “free banking” has been tried—most recently in Pinochet’s Chile, under the influence of the doctrinaire free-market theorist Milton Friedman—the experiment has ended in disaster. Chile is still paying back the debts from its misadventure. With massive problems in 1987 (remember Black Friday, when stock markets plunged almost 25 percent), 1989 (the savings-and-loan debacle), 1997 (the East Asia financial crisis), 1998 (the bailout of Long Term Capital Management), and 2001–02 (the collapses of Enron and WorldCom), one might think there would be more skepticism about the wisdom of leaving markets to themselves.
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As America attempts to work its way out of the present crisis, the danger is that we will listen to the same people on Wall Street and in the economic establishment who got us into it. For them, our current predicament is another opportunity: if they can shape the government response appropriately, they stand to gain, or at least stand to lose less, and they may be willing to sacrifice the well-being of the economy for their own benefit—just as they did in the past.
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There are a number of economic tools at the country’s disposal. As noted, they can yield contradictory results. The sad truth is that we have reached the limits of monetary policy. Lowering interest rates will not stimulate the economy much—banks are not going to be willing to lend to strapped consumers, and consumers are not going to be willing to borrow as they see housing prices continue to fall. And raising interest rates, to combat inflation, won’t have the desired impact either, because the prices that are the main sources of our inflation—for food and energy—are determined in international markets
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Our ethanol policy is also bad for the taxpayer, bad for the environment, bad for the world and our relations with other countries, and bad in terms of inflation. It is good only for the ethanol producers and American corn farmers. It should be scrapped. We currently subsidize corn-based ethanol by almost $1 a gallon, while imposing a 54-cent-a-gallon tariff on Brazilian sugar-based ethanol. It would be hard to invent a worse policy. The ethanol industry tries to sell itself as an infant, needing help to get on its feet, but it has been an infant for more than two decades, refusing to grow up. Our misguided biofuel policy is taking land used for food production and diverting it to energy production for cars; it is the single most important factor contributing to higher grain prices.
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Financial markets produced loans and other products that were so complex and insidious that even their creators did not fully understand them; these products were so irresponsible that analysts called them “toxic.” Yet financial markets failed to create products that would enable ordinary households to face the risks they confront and stay in their homes. We need a financial-products safety commission and a financial-systems stability commission. And they can’t be run by Wall Street.
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If banks won’t renegotiate, we should have an expedited special bankruptcy procedure, akin to what we do for corporations in Chapter 11, allowing people to keep their homes and re-structure their finances.
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But one side—the lender—is supposed to be financially sophisticated. In contrast, the borrowers in the subprime market consist mainly of people who are financially unsophisticated. For many, their home is their only asset, and when they lose it, they lose their life savings. Remember, too, that we already give big homeowner subsidies, through the tax system, to affluent families. With tax deductions, the government is paying in some states almost half of all mortgage interest and real-estate taxes. But many lower-income people, whose deductions are meaningless because their tax bill is too small, get no help. It makes much more sense to convert these tax deductions into cashable tax credits, so that the fraction of housing costs borne by the government for the poor and the rich is the same.
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I have been critical of weak anti-trust policies that allowed certain institutions to become so dominant that they are “too big to fail.” The harsh reality is that, given how far we’ve come, we will see more bailouts in the days ahead. Now that Fannie Mae and Freddie Mac are in federal receivership, we must insist: not a dime of taxpayer money should be put at risk while shareholders and creditors, who failed to oversee management, are permitted to walk away with anything they please. To do otherwise would invite a recurrence. Moreover, while these institutions may be too big to fail, they’re not too big to be reorganized. And we need to remember why we’re bailing them out: in order to maintain a flow of money into mortgage markets. It’s outrageous that these institutions are responding to their near-monopoly position by raising fees and increasing the costs of mortgages, which will only worsen the housing crisis. They, and the financial markets, have shown little interest in measures that could help millions of existing and potential homeowners out of the bind they’re in.
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The standard analysis coming from financial markets these days is that inflation is the greatest threat, and therefore we need to raise interest rates and cut deficits, which will restore confidence and thereby restore the economy. This is the same bad economics that didn’t work in East Asia in 1997 and didn’t work in Russia and Brazil in 1998. Indeed, it is the same recipe prescribed by Herbert Hoover in 1929.
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It is a recipe, moreover, that would be particularly hard on working people and the poor. Higher interest rates dampen inflation by cutting back so sharply on aggregate demand that the unemployment rate grows and wages fall. Eventually, prices fall, too. As noted, the cause of our inflation today is largely imported—it comes from global food and energy prices, which are hard to control. To curb inflation therefore means that the price of everything else needs to fall drastically to compensate, which means that unemployment would also have to rise drastically.
In addition, this is not the time to turn to the old-time fiscal religion. Confidence in the economy won’t be restored as long as growth is low, and growth will be low if investment is anemic, consumption weak, and public spending on the wane. Under these circumstances, to mindlessly cut taxes or reduce government expenditures would be folly.
But there are ways of thoughtfully shaping policy that can walk a fine line and help us get out of our current predicament. Spending money on needed investments—infrastructure, education, technology—will yield double dividends. It will increase incomes today while laying the foundations for future employment and economic growth. Investments in energy efficiency will pay triple dividends—yielding environmental benefits in addition to the short- and long-run economic benefits.
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In fact, the tax cuts in 2001 and 2003 set the stage for the current crisis. They did virtually nothing to stimulate the economy, and they left the burden of keeping the economy on life support to monetary policy alone. America’s problem today is not that households consume too little; on the contrary, with a savings rate barely above zero, it is clear we consume too much. But the administration hopes to encourage our spendthrift ways.
What has happened to the American economy was avoidable. It was not just that those who were entrusted to maintain the economy’s safety and soundness failed to do their job. There were also many who benefited handsomely by ensuring that what needed to be done did not get done. Now we face a choice: whether to let our response to the nation’s woes be shaped by those who got us here, or to seize the opportunity for fundamental reforms, striking a new balance between the market and government.
Posted from Diigo. The rest of blogread group favorite links are here.
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Posted by rosshunter on January 3, 2009
Posted from Diigo. The rest of blogread group favorite links are here.
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Posted by rosshunter on January 2, 2009
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Bush Shoe-Toss Immortalized in Games, Animations | The Underwire from Wired.com
Tags: political
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The Iraqi journalist who tossed his shoes at President George W. Bush missed the commander in chief, but he scored a direct hit on the web zeitgeist.
The incident, in which reporter Muntadar al-Zeidi flung his footwear at Bush during a Baghdad press conference Sunday, has turned into a fast-moving internet meme, spawning dozens of games and video mashups.
In the Sock and Awe browser game (screenshot above), players toss shoes at the bobbing-and-weaving president. The Flying Babush and Bush’s Boot Camp games offer similar action.
Comedic video cut-ups like b3ta.com user printmeister have already filtered the great presidential shoe-toss of 2009 through the lens of The Matrix (embedded, right).
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Boston Review — Dean Baker: Free Market Myth
Tags: economic
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In general, political debates over regulation have been wrongly cast as disputes over the extent of regulation, with conservatives assumed to prefer less regulation, while liberals prefer more. In fact conservatives do not necessarily desire less regulation, nor do liberals necessarily desire more. Conservatives support regulatory structures that cause income to flow upward, while liberals support regulatory structures that promote equality. “Less” regulation does not imply greater inequality, nor is the reverse true.
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False ideological claims have circumscribed the public debate over regulation and blinded us to the wide range of choices we can make. Without these claims, what would guide regulatory policy? What kinds of choices would we have?
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Alternatives to copyright are feasible and probably far more efficient than the copyright system. And they would replace a gigantic array of enforcement measures that can themselves be seen as unnecessary forms of government intervention into the economy.
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However, we cannot have a serious discussion of the relative merits of patents and copyrights until we recognize that these are public policies and not intrinsic features of the free market. Debates about both patent and copyright have been hugely distorted by the failure to recognize this obvious fact.
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A final example of excessive government regulation, never discussed as such, is the bankruptcy-reform bill that passed Congress in 2005.
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The new law hugely expanded the creditors’ claims on future earnings. This means that the government will be far more involved in bill collection in the future than it has been in the past, possibly monitoring the wages of millions of individuals in bankruptcy who still have debts to creditors.
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Other cases in which the conservative position arguably requires more government involvement in the economy than the liberal position abound.
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The real issue is the structure of regulation and its impact on economic outcomes, especially income distribution.
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Banks did exactly what economic theory predicts. They took huge risks, leveraging themselves to the hilt with questionable assets, knowing that they would gain as long as the housing bubble held up. And the banks did so with willing accomplices among pension funds, hedge funds, and other investors because these investors knew that the government would rescue them if things went badly.
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Deregulation can be a principled position held by true believers in a free market. But Wall Streeters all wanted one-sided regulation that provided them with an enormous government security blanket without any costs or conditions.
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most liberals still accept the proposition that the distribution of income is fundamentally determined by the market rather than political decisions embodied in regulations such as patents, copyrights, and bankruptcy law.
But what if we accept a view that virtually every facet of the economy is shaped by policies that could easily be altered?
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Doctors are well-paid because, unlike less politically connected workers, they enjoy protection from international competition. The same is true for lawyers and other highly paid professionals. The six-figure salaries depend less on skill and hard work than on being able to structure labor markets in ways that autoworkers, textile workers, and cab drivers cannot.
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But as the above examples illustrate, no one is really talking about an unregulated market—rather we are all just talking about whom the regulation is designed to benefit. Distribution of income has never preceded the intervention of government.
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The government is always present, steering the benefits in different directions depending on who is in charge. Accepting this view provides a political vantage point much better suited to the case for progressive regulation. After all, conservatives want the big hand of government in the market as well. They just want the handouts all to go to those at the top.
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We know that when we emerge from the current crisis the economy will be extensively regulated. The questions is, to whose benefit?
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Gaza: the rights and wrongs | Gaza: the rights and wrongs | The Economist
Tags: political
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In general, a war must pass three tests to be justified. A country must first have exhausted all other means of defending itself. The attack should be proportionate to the objective. And it must stand a reasonable chance of achieving its goal. On all three of these tests Israel is on shakier ground than it cares to admit.
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Managing young workers in the downturn | Generation Y goes to work | The Economist
Tags: economic
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The global downturn has been a brutal awakening for the youngest members of the workforce—variously dubbed “the Millennials”, “Generation Y” or “the Net Generation” by social researchers. “Net Geners” are, roughly, people born in the 1980s and 1990s. Those old enough to have passed from school and university into work had got used to a world in which jobs were plentiful and firms fell over one another to recruit them. Now their prospects are grimmer. According to America’s Bureau of Labour Statistics, the unemployment rate among people in their 20s increased significantly in the two most recent recessions in the United States. It is likely to do so again as industries such as finance and technology, which employ lots of young people, axe thousands of jobs.
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Re-training America’s workers | The people puzzle | The Economist
Tags: economic
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The federal government has three main ways for leading workers back to employment, according to Gary Burtless of the Brookings Institution, a think-tank. The first is to help match workers with employers who seek their skills. The second is to provide unemployment insurance,
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The third way to help workers is to train them for new jobs. Current programmes, though, are woefully inadequate. The Trade Adjustment Assistance act (TAA) serves those who have lost their jobs because of changing patterns of trade, giving eligible workers counselling, training, income support and other services. But TAA relieves only a fraction of the displaced. The more sweeping federal initiative is the Workforce Investment Act (WIA) of 1998, which sought to replace jumbled federal schemes with a streamlined system for workers and employers. States have some flexibility, but across the country “one-stop” career centres house a fairly standardised range of programmes, including help with job searches, career counselling, and, for a few, money for training, often at community colleges.
WIA is an improvement, but a flawed one. Its funding is volatile and declining, down 10% since 2002 to just $3.2 billion for the whole country in 2008. Only about 40% of WIA money is spent on training, according to the Government Accountability Office. Overall, America spends less on training than almost any other country in the OECD. George Bush made a few small changes to the system, including a pilot programme to create something like a voucher system for training; but an overhaul of WIA is overdue.
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A sea of troubles | A sea of troubles | The Economist
Tags: planetary
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Each of these changes is a catastrophe. Together they make for something much worse. Moreover, they are happening alarmingly fast—in decades, rather than the aeons needed for fish and plants to adapt. Many are irreversible. It will take tens of thousands of years for ocean chemistry to return to a condition similar to its pre-industrial state of 200 years ago, says Britain’s most eminent body of scientists, the Royal Society. Many also fear that some changes are reaching thresholds after which further changes may accelerate uncontrollably. No one fully understands why the cod have not returned to the Grand Banks off Canada, even after 16 years of no fishing. No one quite knows why glaciers and ice shelves are melting so fast, or how a meltwater lake on the Greenland ice sheet covering six square kilometres could drain away in 24 hours, as it did in 2006. Such unexpected events make scientists nervous.
What can be done to put matters right? The sea, the last part of the world where man acts as a hunter-gatherer—as well as bather, miner, dumper and general polluter—needs management, just as the land does. Economics demands it as much as environmentalism, for the world squanders money through its poor stewardship of the oceans. Bad management and overfishing waste $50 billion a year, says the World Bank.
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Yet the mass extinction, however remote, that should be concentrating minds is that of mankind. It is not wise to dismiss it where CO2 emissions, the other great curse of the oceans, are concerned. In the long run, the seas are the great sink for nearly all carbon. They may be able to help avert some global warming—for instance, by providing storage for CO2, by providing energy through wave or tidal power, or by somehow taking carbon out of the atmosphere faster than at present. They will, however, continue to change and be changed as long as man continues to put so much carbon into the atmosphere.
So far, the rising sea levels, dying corals and spreading algal blooms are only minor distractions for most people. A few more hurricanes like Katrina, a few dramatic floods in the coastal cities of the rich world, perhaps even the shutting down of a part of the world’s great conveyor belt of ocean currents, especially if it were the one that warms up western Europe: any of these would catch the attention of policymakers. The trouble is that by then it may be too late.
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Economist Debates: Financial crisis: Statements (Printer Version)
Tags: economic
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Wall Street has asked for a massive bail-out—some $1.6 trillion so far, but most believe that this is just a down payment. The American taxpayer has bailed out Wall Street repeatedly—the S & L bailout, Mexico, Indonesia, Korea, Thailand, Argentina, Russia, Brazil and now this, the largest ever. One cannot keep asking for bigger hospitals and argue that nothing should be done to prevent hospitalisation in the first place.
Regulations (including those relating to corporate governance, incentive structures, speed limits, lending practices) are necessary to restore confidence. When, a hundred years ago, Upton Sinclair depicted graphically America’s stockyards and there was a revulsion against consuming meat, the industry turned to the government for regulation, to assure consumers that meat was safe for consumption. Regulatory reform would help restore confidence in our financial markets. We have seen how badly the banks have behaved; we have yet to reform the regulatory structure or change the regulators. Why, with the extra cushion of taxpayer money, of the kind proposed in the British bail-out, without such reforms, should we expect them to behave much better in the future than in the past?
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Indeed, anyone who has seen America’s political processes at work knows that after Wall Street gets its money, it will begin fighting the regulations. It will say: Government must be careful not to overreact; we have to maintain the financial markets’ creativity. The fact of the matter is that most of that creativity was directed to circumventing regulations and regulatory arbitrage, creative accounting so no one, not even the banks, knew their financial position, and tax arbitrage. Meanwhile, the financial system didn’t create the innovations which would have addressed the real risks people face—for instance, enabling ordinary Americans to stay in their home when interest rates change—and indeed, has resisted many of the innovations which would have increased the efficiency of our economy. In some places, there has been real innovation—the Danish mortgage market (though it’s hardly new) is an excellent example, with low transactions costs and much greater security. But elsewhere in Europe, there has been resistance to adopting this model.
Markets have failed, but so too has our regulatory system. No one would suggest that because our tax system is imperfect, with evasion and avoidance, we should abandon taxation. No one is suggesting that because our markets have failed, and failed miserably, we should abandon a market-based economy. And no one should suggest that because our regulatory system is imperfect, it should be abandoned. As Paul Volcker once put it in the middle of the East Asia crisis, even a leaky umbrella can be helpful in a rainstorm. To be sure, both markets and our regulatory structures need to be improved upon.
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CEPR – Publicly Funded Drug Trials Will Counteract the Corruption and Inefficiency of Testing
Tags: economic
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CEPR – Homeownership Without Equity: What’s It Worth?
Tags: economic
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The reality is that almost all of the millions of families facing foreclosure have zero equity left in their homes. That is why they face foreclosure. If they still had equity in their house, they would borrow against it and meet their mortgage payments.
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This means that when we propose plans to pay banks money to have partial write-downs of mortgages, we are paying them to allow homeowners to remain in homes in which they have zero equity.
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This is the reality facing the homeowners whom we are trying to help with most of the government-subsidized refinancing schemes. In many cases, the homeowners will end up with nothing at the end of the day. The winners in these stories are the banks. In underwater mortgages where banks stood to lose $100,000 or even $200,000, these proposals would have the government generously step in to pick up a large share of the loss.
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TPMCafe | Talking Points Memo | When the world’s in crisis, the rules don’t apply
Tags: economic
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Paul, I have to ask you. If the point of the $700 billion bailout was to get credit moving (which definitely has not happened), wouldn’t it have been better to create a $700 billion fund to directly loan money to businesses, would be car buyers, and others? We could have cut out the middlemen who kept all of the money anyway. Detroit might not be in such dire straits if people could get loans to buy cars.
Every step of the way with this bailout you’ve supported it while also saying any given step was awful but necessary.
Do you regret not supporting a $700 billion fund from the start, ensuring the money was well spent?
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If peoples’ salarys were going up at the same rate the profits made by the businesses they worked for did for the last 8 years, we wouldn’t be having this problem. We have 8 years of people playing the housing market to make up the difference between their salarys and their life-styles. That’s what we get when the government allows business profits and shareholder equity become the rule of thumb. Unfortunately, we have to feed the beast – business and shareholder equity – to keep this barge from sinking. The problem is … how do we do it without rewarding those who are responsible for the problem in the first place?
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1) Why won’t an incredibly massive “helicopter drop” of say, $10K to each household in America, have a better effect than $10K per household of gov’t spending?
1a) If the problem is that households will swallow up the money into their savings accounts, then are there other options, like fancier helicopter-drops of e.g. “gift certificates” set to expire soon?
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The “helicopter drop” won’t build infrastructure. We have to replace all those bridges at some point. There’s absolutely no reason not to do it up front, rather than wait. We’ve got the labor idle. It’s a total waste not to use it.
The point isn’t about money. Money is just an arbitrary, made-up game of little real value. The point is about real people accomplishing real things in the real world. Money generally diverts us, rather than motivates us, in regards to reality. It’s the real things accomplished which are the real wealth. We’ve got to distribute those fairly, and money is a game we sometimes play to try to do that.
It hasn’t worked particularly well lately, especially when many of the brightest players specialize in cheating. If it takes hyperinflation and total devaluation of the dollar to wean us from money, I for one welcome our new barter economy.
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The US middle class is simply tapped out. The European middle class has been reduced in size and divided between the wealthy and the abject poverty of their legal imigrant labor. For how many years have we heard that the driving force of the economy has beeen the US as a consumer nation? How did we finance that consumer nation? With massive national and middle class debt.
There is no stimulus package that can be large enough to conquer US debt and once again produce the consumptive US middle class. The only hope for the economy is that large Federal Government investments in infrastructure and newer green technologies can produce enough demand to float the country until the global problem can be fixed.
The failure of the Globalists and the free traders to build middle class consumers throughout their Global economy will drive the global downturn for years.
The danger to the future is that the Globalists will once again over-inflate sectors of the economy to bubble our way through a short term recovery. Greenspan was a master at this and either deliberately ignored global fiscal data and purposely deceived the country or was truly ignorant of the long term consequences of his policies.
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The bailout of the world banking system will produce no economic benefits or lasting stability until the banks accept the prospect of lower returns and realize that the future requires investment in the actual poor of the world.
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We must build a Global economy that truly begins to raise the wealth of the great majority of the poor people that inhabit our planet.
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Economic stimulus in the US is needed to keep us from going over the edge. There is no amount of US government money that can keep us from the edge until we repair our basic understanding of what a Global economy really is and how we build one that works for everyone.
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I know how deep the rabbit hole goes. It goes as deep as looking for work and not being able to obtain it. That’s as deep as it gets. Samuel Gompers, the early leader of the AFL said, “so long as there is one man who seeks employment and cannot obtain it, the hours of labor are too long.”
What is your view on THAT, Professor Krugman? Is reducing the hours of work a viable approach to reducing unemployment? If not, why not?
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The middle class wants more income so they can spend it…
The wealthy want more income so they can HAVE it…
One model creates an economic flow that contributes to growth, the other an economic rollercoaster that’s heading for a black hole.
Enrich the American and European middle classes, and you enrich the entire world.
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TPMCafe | Talking Points Memo | Dean Baker Talks to His Inner Hayek
Prof. Brad DeLong in response to Krugman at Talking Points Memo suggests lowering the mortgage rate – most people shoot holes in this concept, notably on the score that there is no viable market now, and the element of risk is substantial.
Tags: economic
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But, the key part of the Swedish model not really given sufficient attention in this piece, is that the executives get fired or get really big pay cuts. We are not going to pay civil servants multi-million dollar salaries. I’m sure all of these folks are really smart (at least this is what I’m told), but if they work for the government, they get government salaries, end of story. Of course, they wouldn’t be needing a government bailout if they really knew what they were doing.