Category Archives: Economics

This Time *IS* Different

Kenneth Rogoff wrote a book with Carmen Reinhardt, titled This Time Is Different. The book chronicled economic crises around the world over the last 300 years and came to the conclusion that in the run-up to a big crash, everyone says “This time is different!” and that a crash can’t happen.

Then the crash happens.

Ironically, after the crash, governments and big financial institutions try to assure us that this time isn’t different, that this is a common-or-garden variety recession. Sadly, Rogoff informs us all that this time is different. We’re in the midst of an asset-devaluation recession, which lasts longer and deeper than the normal sort of recession. We know it’s different because, three years after the big drop, we still see unemployment at high rates and have had no return to pre-crash GDP. The debts run up by governments that should now be reckoned as insolvent is coming down hard on them and we need to own up to the fact that there are lots of toxic assets still on those bank balance sheets.

Crises don’t happen all at once. They are drawn-out affairs, especially the sorts of crises as the world is experiencing right now. Nobody in 1929 or 1930 thought they were in a depression: most folks started 1931 thinking things would be all right that year. Instead, it was the start of a long slide to the real bottom of the Great Depression, which hit the USA in 1932. The situation in the world is reminiscent of the way things were in 1931, so maybe that’s where we’re headed.

So Who’s Behind the Tea Party?

Koch Industries, that’s who. The company’s management, the Koch (rhymes with Coke) brothers, use huge sums of money to lobby on behalf of their interests as heads of a massive oil, chemical, and timber firm – as well as issues of interest to billionaires from sea to shining sea. Koch Industries are also heavily involved in derivatives trading… guess how their lobbying dollars fall on that issue.

Koch Industries and its leadership is also against regulations against dioxin, asbestos, and formaldehyde. Nice to know they’ve got loads of say in Congress with their $20 million or so per year spent on lobbying.

I can scrape up enough time in my busy day to email or call my Congressman and Senators: these guys flat-out buy them. I can’t compete with that. You can’t compete with that. Even as a we, we can’t compete with that.

Worse, these guys have tapped into the anger felt by many people in the Tea Party and used it to further their own ends. The Tea Party was hijacked from day one, when the Koch-backed Americans For Prosperity opened up a Facebook page for the Tea Party and got into organizing stuff for them.

It shouldn’t be any surprise that Rupert Murdoch has been the Tea Party’s biggest supporter in the media. He’s another billionaire in favor of less regulation of shady dealings when they’re perpetrated by the very rich.

Want more on the Tea Party backers? Her’s a report from Go to the “Bills” tab and take a look at some of the things these guys have influenced: clean water standards, exempting greenhouse gases from the Clean Air Act, price gouging standards, oil spill accountability, and the Over-the-Counter Derivatives Markets Act of 2009, among others. My guess is that Koch Industries is in favor of dirty water, filthy air, price gouging, not cleaning up oil spills, and continued abuse of the wide-open derivatives market – as these issues suit their bottom line.

Need more? Here’s another report from The Center for Public Integrity. Their work shows that Koch is all about getting rid of government influence when it helps them, and gets as much government regulation, subsidy, and involvement when it aids their cause. Not my cause, your cause, or our cause. THEIR cause.

These guys handle 10% of all the ethanol in the USA. They forget their Libertarianism language when it comes to ethanol subsidies. The Koch brothers are tied at 18th place on Forbes’ list of ungodly rich people, and you bet your sweet bippy that they’re going to fight any measure that threatens to touch their piles of cash.

So now you know the real reason why the Tea Party people don’t want to end tax breaks for big oil, ethanol subsidies, or billionaires: their movement is funded by and guided by the very people that benefit from the biggest of governments.

Goldman Sachs Hates You

Goldman Sachs hates you. Now that the BSkyB takeover is dead, thanks to revelations that Rupert Murdoch’s employees were the private-sector equivalents to the KGB, all the big brokerages that took up huge positions on BSkyB stock in anticipation of that merger are left holding a very expensive bag.

They thought the BSkyB stock would go up, but it is not going to do that anymore. They will take big losses on their positions unless something else happens to get that stock back up. Goldman Sachs just issued a strong “buy” recommendation to its clients in a naked attempt to prop up its bottom line by selling its stock to bigger fools than they. That’s why Goldman Sachs hates you.

The bigger picture is that lots of former GS executives are all over the financial side of the US Government, and they carry that hate with them. Given a choice between ruining 90-95% of Americans or letting the 1% that have been pillaging take a loss, the GS crowd and its cronies will take the first option, every time.

Czech Dream

Czech Dream is a compelling documentary that asks some penetrating questions about the power and pervasiveness of advertising. Although the filmmakers lied about the new hypermart, the ending showing the ads for a fake market coming down to be replaced with ads for cigarettes and credit cards made me ask which ads were really more damaging.

Apple’s Exploiting Example

Apple makes the iPod, right? Sure they do, but where? Try overseas. Apple employs 27,250 overseas employees at an average salary of $11,743. Sure, the company is making great profits, but that’s because it’s both exploiting overseas labor and refusing to give jobs to Americans. Most of its US jobs are low-paying, to be fair. No, wait, that’s unfair!

7789 of Apple’s US jobs pay an average of $28,244, about 2.5 times what the Chinese and Filipinos are paid, but still hardly anything relative to what it costs to live here. And before someone brings up the “it’s cheaper to live in Asia” argument, there’s a reason why it’s cheaper there: they don’t have access to lots of things that are necessary for getting around in the USA. They still face massively more expensive food prices, crowded living conditions, and poor access to health care – kind of like the poor in the USA, but without cars.

6101 professionals and engineers working for Apple’s iPod division made an average of $86,051. They can afford the stuff the rest of the workers made. This is a pattern common across US-based firms and firms that were formerly based in the US, but which moved their HQs to Switzerland to avoid paying taxes to support the nation that gave them their start.

While my own salary is just above the nation’s per capita income, I don’t earn enough for my household of 5 to have a total income equal to that per capita number times 5. I don’t have health care, it’s kinda crowded in this house, and food and fuel are part of my inflationary worries, even if the USG doesn’t want me to think about them. I’m not part of the world of the Apple engineers and the rest of the iPod users. I’m constantly asked to “do more with less”, which is a codephrase for “you’re going to be exploited more.” The whole world has to do more with less so that those who have more can get more still.

Budget Graph

You need to see this. The proposed cuts for 2012 are very, very small indeed. Neither the Republocrats nor the Demicans are serious about trimming the deficit. Both talk about the need for either more taxes and/or more cuts, but neither is willing to go to the extent necessary to keep the wolf from the door.

Have a nice 4th, everyone. I mean that. We still live in a nation where we can holler about things we don’t like, and that’s a precious thing indeed. Governments are idiots everywhere: at least our idiots have to put up with people complaining about them.

How to Save $220 Billion

Interested? Well, it’s quite a clever idea. Change the way inflation is calculated. With that fudge, the US government can make inflation look like it’s increasing less rapidly and, therefore, can slow down the cost of living increases in its payments. Sure, it’s a scam, but it’s a scam that saves the USG $220 billion dollars through a soft default on its promises, so it’s a good scam, right? Look for more great scams like this in the days to come!

Africa and the Myths of the Free Market

Emergent promises a great return on their African funds. The Oakland Institute would like you to know that, yes, the great returns exist, but that you might not like the way in which the returns are attained.

Basically, the people of Africa targeted by Emergent’s investors are stripped of their lands and left to starve as their subsistence farms are plowed under to make way for plantation economies. Lands that supported 50,000 people are bulldozed to “create over 2000 jobs” that support no-one. To throw a wrench into the minds of ultra-conservative Christian free-market boosters, the bulldozing included the largest Christian church in East Africa. Seriously, people… Jesus wasn’t kidding when he said between God and money, you can serve only one. You either have unfettered free marked capitalism OR you have Christianity (or any other religion, for that matter), but you can’t have both. But I digress, even if it is with a purpose.

The “job creation” is a mask for paying basement-level wages that are just enough to avoid laws against chattel slavery. It was the same in Juarez when the maquiladoras went up there. Should workers ask for more money, the labor organizers are fired or murdered and the rest are told that the factory jobs will go elsewhere if wages go up, so shut up and get back to work if you want to earn enough so 75% of your family can have enough to eat. Maybe.

It’s outright plundering disguised as a solid, sane retirement plan. Free market cheerleaders will say that the people are better off with those jobs: that’s an outright lie. What they had was subsistence, which I admit is a harsh existence. What they get is unemployment, starvation, marginalization, wage slavery, and a industry-government partnership we used to call “fascism.”

More Mess for the Euro

Looks like the EU finance ministers are asking a basic question… IE, “Anyone with ideas?”

By requiring Greece to implement additional austerity measures (such as hiring the proper accountants Edinburgh to rake up proper numbers), the EU finance ministers have pulled a Pontius Pilate move. If Greece doesn’t implement the measures, it’s not their fault. Technically, their hands are clean.

Greece won’t implement the measures and it will have to default. After defaulting, it will have to pull out of the euro if it wants any hope of recovery, and the EU ministers will need to recognize that. The euro is a political currency that’s supposed to tie Germany economically to every nation on the continent so it won’t start another war, sort of the opposite of the idea after WW1… Now, though, the rest of Europe doesn’t necessarily want a tie with Germany if it means hampering the local economy. The political will to hold the euro together seems woefully lacking.

I’m not going to provide timing signals, but you can bet the number of currency trading newsletters that will advise readers to short the euro is going to increase with each passing week. It’s going to lead to a speculative run on the euro, which will last until the involved governments defend it no more and impose financial tyranny on the speculators. Those that get in at the start will make some tidy sums, those that run the game in the middle will get big rewards, and those at the very end will make all or nothing, depending on how good their internet connections are at the time the EU pulls the plug on it.

I recall the currency runs of 1997. Indonesia, Thailand, Taiwan… all the little tigers fell, one by one. Then the raiding funds targeted Hong Kong and lost big when the PRC said it would defend the HK dollar. Back then, it had the means to do just that. Now, in 2011, we have a set of governments that are ready to defend the euro. They say, “whatever the cost!”, but we all know their financial systems are weak from the fallout of the 2007-8 crisis. The euro will fall, they will prop it up, it will fall some more, they will prop it some more, all the while with the euro losing value over time. Once the EU banks can defend it no more, there will be a time period where the euro falls mercilessly and everyone shorting it will laugh all the way to the US-owned bank… I suppose the last laugh will be Europe’s, though, after the US banks collapse because of they way the US financial system was insuring European assets.

Hardly a Defense…

As Moody’s rating service placed the three largest French banks under review for a possible downgrade due to their exposure to Greek debt, they attempted to make their situation seem not all that bad by pointing out how Germany’s banks were way more exposed than they were…

In other news, Greece’s largest private bank has started to sell all of its Greek government bonds. Greece’s prime minister might be forced to resign and in between riots, Greek citizens are shopping for forks to stick into their country, because it’s done.

There are rumours that Elton John is considering re-re-recording a version of “Candle in the Wind” to commemorate Greece’s brief flirtation with the euro. Other rumours say he’s holding off to see if he has to re-re-record it to commemorate Europe’s brief flirtation with the euro.