Billionaires Against Regulating Finance (B.A.R.F)

by Dollars and Sense

A public service announcement on behalf of America's most oppressed minority: billionaires.



FOR IMMEDIATE RELEASE - September 29, 2009
Contact: Beemer N. Mazzerati (aka Steve Schnapp)
(857) 277-7868 sschnapp@faireconomy.org

"Billionaires Against Regulating Finance" to Face Off with Protesters in Boston's Financial District Day of Action set for Thursday, October 1, 2009

Boston, MA, September 29th, 2009 - In response to the so-called "March Against a Jobless Recovery" planned for Thursday, October 1, 2009, the Billionaires Against Regulating Finance (BARF), an activist group for the wealthy and the corporate elite, will protest the march in full suit and gown at Bank of America in Boston's financial district between 4:30 and 5:30 pm.

According to the event organizers, "The federal government gave hundreds of billions of taxpayer dollars to bail out big businesses, but corporations, in turn, are not creating the jobs that were promised."

BARF members strongly oppose the claim of a "jobless recovery." Stockson Bond, board chairman of investment banking firm, Goldin Racks, remarked, "Of course jobs have been created. Have you seen the number of foreclosed homes in the US? There must be hundreds, maybe even thousands, of people needed to print and post foreclosure yard signs. And don't forget about career counseling. That field is booming with the unemployment rate hovering at 10 percent!"

Gree D. Bastid, chief executive of Smells Fargo, noted, "To the extent that job creation is slower than preferred by the marchers, BARF's message is clear: Stop Whining! The fact is, we couldn't possibly create millions of jobs AND get our huge, hard-earned bonuses. Keeping our top talent is number one. It's all about priorities."

The Billionaires are prepared to defend corporate executives against the marchers' unfair claim that a recovery for Wall Street does not equate to a recovery for Main Street. Beau Ness, Vice President of Banking on America, fumed, "I resent the idea that these people don't consider Wall Street a part of Main Street. Complex derivatives and credit default swaps are as vital to average Americans and the economy as the neighborhood grocery or hardware store!"

BARF commends Treasury Secretary Timothy Geithner's recent action at the G-20 summit in Pittsburgh, where he rejected French President Nicolas "May-As-Well-Be-Communist" Sarkozy's outrageous proposal to place hard caps on financial executives' compensation. A triumphant Mr. Ciyo crowed, "Earlier this year, Tim talked tough to the American people about our taxpayer-funded bonuses. But we knew that when the rubber hit the road, he'd be with us 100 percent. It feels great to see our political 'investments' paying off."

$$$

Labels: BARF, billionaires, financial activism, jobs

 

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9/30/2009 11:25:00 AM 0 comments links to this post

 

One Year After Lehman (C. P. Chandrasekhar)

by Dollars and Sense

From NewsClick.in: P. Chandrasekhar is a Professor at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University. He has co-authored 'Crisis as Conquest: Learning from East Asia' and is a regular columnist for Frontline Magazine and Businessline financial daily.

In the video below Prof. Chandrasekhar talks about the global financial system 'a year after Lehman' and the September G-20 meetings.

Labels: C. P. Chandrasekhar, financial crisis, Lehman Brothers

 

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9/28/2009 12:13:00 PM 0 comments links to this post

 

Two Takes on Acorn

by Dollars and Sense

Here are two takes on the Acorn scandal/bashing—from the Yes Men (in the Washington Post) and from Bill Fletcher, Jr. (at Black Commentator).

Congress Went After ACORN. Big Business Must Be Next!

By Jacques Servin and Igor Vamos
Sunday, September 27, 2009

We are the Yes Men, two guys who dress up as powerful businessmen, propose horrible things to audiences of actual powerful businesspeople and film them cheerfully applauding our most outrageous—and often illegal—ideas.

In our new film "The Yes Men Fix the World," we posed as Dow Chemical representatives at a big 2005 banking conference where we said that, clearly, any number of human deaths is acceptable as long as a project is extremely profitable. A life-size golden skeleton made sure the message hit home. Instead of recoiling in horror, most of the bankers simply applauded. One chief executive said he was interested in working with us, and a senior manager at a financial technology firm said he found the idea "refreshing."

In 2006, we posed as Halliburton reps at an insurance conference on Amelia Island, Fla. There we unveiled the "SurvivaBall," a grotesque suit six feet in diameter, made of nylon and inflated by two small computer fans, which we said would keep corporate managers safe from the climate calamities that they had helped cause. Lawyers at the conference, who represented some of the most powerful American companies, had a few questions: How much would it cost? Could it be made more comfortable? Might it work in a terrorist attack?

The art of impersonation for political purposes is catching on. Recently, a couple of conservative provocateurs dressed up as a low-rent prostitute and a pimp and visited the offices of the community organizing group ACORN (an organization we briefly featured in our film), where they got some advice about how to buy a house and start a brothel.

Like ours, those antics were widely covered in the mainstream media. But in a new twist, Congress got involved, voting to cut off ACORN's federal funding. In an even more exciting turn of events, the House legislation intended to defund ACORN is written so broadly that it would similarly cut off money to "any organization" indicted for various forms of lawbreaking, and any organization with employees or contractors who have been indicted on certain charges.

This gives us great hope. Our corporate targets, unlike ACORN, have not yet been punished. If we had known that all it takes is pimp and hooker outfits to spur such ambitious legislation, we would have bought some ages ago! Now, thanks to this case, perhaps the many companies whose reps we've filmed vigorously nodding their heads at and asking for more details about our immoral and criminal proposals will finally see justice.

If the idiocy of a few ACORN workers can lead Congress to defund that organization, surely lawmakers will move to rescind the bailout cash given to the banks whose employees seemed ready to go along with our depraved schemes, and whose reckless gambling with other people's money helped create the foreclosure crisis—precisely the crisis that ACORN and other agencies are trying to help poor and working-class Americans cope with.

Surely such action will set a shining example for years to come and will save society from the most criminal tendencies in our midst.

Won't it?

Jacques Servin and Igor Vamos, also known as Andy Bichlbaum and Mike Bonanno, respectively, are the Yes Men, a culture-jamming activist group. Their new documentary, "The Yes Men Fix the World," opens next month in the United States.


Whither ACORN?
By Bill Fletcher, Jr.

Sometimes an organization is faced with a crisis of such proportions
that it calls into question its integrity and relationship with the
public. In the corporate world, one can think of the airline ValuJet
which, after the disastrous crash into the Everglades of one of its
planes, so lost the confidence of the public that it had to shut down;
remake itself; and brand itself with a new name: AirTran.

It is important to separate the attacks on ACORN which it is receiving
from the political Right from the actual content of the organization?s
problems. Let?s face it: any progressive organization, particularly
one as significant as ACORN, must assume that it will be attacked by
the political Right. In fact, the Right is very clear about that. So,
the fact of an attack from the Right should come as no surprise.

Something is very wrong in ACORN and, unfortunately, the leadership of
the organization does not seem to recognize the depth of the problem.
The alleged embezzlement of nearly one million dollars by Dale Rathke,
the brother of ACORN founder and long-time chief organizer, Wade
Rathke, sent shockwaves throughout the progressive movement and
foundation community. It was not simply the fact of the alleged theft,
but the reported manner in which this had been covered up such that
much of the leadership, not to mention the membership, apparently had
no knowledge of the circumstances. The matter was handled much like a
family embarrassment rather than as a legal and ethical challenge.

Now we are made witness to one of the most bizarre circumstances I can
remember. Right-wingers, with a clear objective of discrediting ACORN
largely due to its voter registration work among people of color,
undertook a mission to display ACORN?s alleged corruption to the
world. It does not matter, to a great degree, that in many places that
these right-wingers showed up that they were thrown out. What matters
is that they captured on camera ACORN employees allegedly offering to
assist undercover personnel in the establishment of a BROTHEL!!!

Unless those ACORN employees were plants within ACORN, there is an
obvious question: what could those employees possibly have been
thinking about? What level of training and supervision, not to mention
ethics, were they guided by such that they would think that this was
permissible? On top of all of this, what sort of basic common sense
did they lack that they would not GUESS that this might have been a
set up?

The response from the ACORN leadership to this latest incident has
been to terminate the employees and insist that this is
unrepresentative of the work of ACORN. While I know that this is not
representative of the work of ACORN, such an answer is insufficient at
best. Leaving aside other allegations targeted at ACORN, the question
is what is going on in the leadership such that such actions can
unfold?

From the outside it appears that at least two things are operating
within ACORN. The first is arrogance within a part of the leadership.
That fact that a clique within the leadership would attempt to shroud
an alleged theft and treat it as if it were a personal matter displays
a significant level of lack of accountability. The extent of the
alleged embezzlement was such that criminal prosecution should have
been entertained immediately. Yet this clique kept this silent and did
not discuss the ramifications for the entire organization.

The second thing that appears to be operating is that the organization
is not operating, at least in a functional manner. In other words,
there is a systemic lack of accountability and training. On the one
hand, in the face of the right-wing provocation, some cities
immediately recognized that something was up, but, for reasons
unknown, this was not communicated to the entire organization. Worse,
that some employees when actually confronted with an illegal business
proposition did not have the proper awareness of the consequences of
giving advice on an illegal matter shows, at a minimum, poor judgment.

The subsequent attacks on ACORN by the Right, therefore, have been
entirely predictable. ACORN has opened itself up and invited the enemy
in. Yet they now wish for all liberals and progressives to rally
around them in their defense yet their leadership only offers an
anemic explanation of the depths of this crisis.

Should ACORN dissolve? Absolutely not. ACORN has been an essential
part of the progressive movement for nearly forty years. That said,
neither should progressives act as if the extent of the crisis in
ACORN can be ignored. Certainly the attacks on ACORN by the Right are
both politically and racially motivated. But that does not mean that
ACORN can afford to act as if nothing is new under the Sun. In many
other countries, in the face of such scandals the entire leadership
would resign without a moment?s second thought. Yet here, in the face
of repeated, humiliating mistakes, the leadership seems to think that
relatively minor changes can remedy the extent of the problem.

What can ACORN do?

1. Bring in a crisis management team to take over the day-to-day
operations of ACORN: The current managing leadership should be either
suspended or given other duties while a new management team is brought
into ACORN to assess the extent of the organization?s problems and
INTRODUCE changes in the day-to-day operations of the organization.
This should include an evaluation of current staff and supervisors,
financial accountability, ethics and other aspects of organization. A
new organization operating system needs to be put into place to ensure
staff accountability, including in the hiring process. Such a team
would be on temporary assignment to ACORN to assist in the rebuilding
of the organization.

2. Leadership retreat: One part of the work of the crisis management
team should be the organizing of a leadership retreat of the current
national leadership plus any additional key leaders from chapters
around the country. Such a retreat should aim at evaluating the nature
of the current crisis in the organization; what has worked; what has
failed; and new strategic directions. New leadership elections should
be organized.

3. An apology to the friends, supporters and members of ACORN: To be
honest, I do not want to hear anything more about how the Right is
attacking ACORN. What I do want to hear is how sorry and self-critical
the ACORN leadership is about the current state of affairs and how
they, in fact, let down the members, supporters and friends of the
organization.

I know what the objectives of the Right are: they want to eliminate
any and all evidence of a progressive movement in the USA. What we do
not have to do is make their job any easier.

BlackCommentator.com Executive Editor, Bill Fletcher, Jr., is a Senior
Scholar with the Institute for Policy Studies, the immediate past
president of TransAfrica Forum and co-author of, Solidarity Divided:
The Crisis in Organized Labor and a New Path toward Social Justice
(University of California Press), which examines the crisis of
organized labor in the USA.

Labels: Acorn, Bill Fletcher Jr., The Yes Men

 

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9/28/2009 11:23:00 AM 0 comments links to this post

 

The G20 Must Wake America Up

by Dollars and Sense

A column from today's Guardian by Kevin Gallagher, a research fellow at the Global Development and Environment Institute at Tufts University.

We haven't done enough to fix the global financial crisis – or prevent the next one. The US has been asleep at the wheel

Kevin Gallagher
guardian.co.uk,
Thursday 24 September 2009 18.00 BST

When President Barack Obama hosts the G20 summit in Pittsburgh today, world leaders should send the United States a wake-up call to re-invigorate its stimulus efforts, get serious about financial reform and pass climate change legislation.

In London in April the G20 agreed to co-ordinate fiscal stimulus packages, support the world's poorest economies, reform global finance and avoid depression-style protectionism. On top of all that, they promised not to be diverted by such tasks when it came to putting together a serious global climate change treaty by year's end.

On many of these fronts the US is asleep at the wheel.

On the bright side, the US did pass a significant fiscal stimulus package. Despite lots of fear mongering to the contrary, the US also avoided anything close to Smoot-Hawley era trade protections. For all the commotion over tires and "Buy America" provisions, such measures are miniscule relative to the 50% increase on thousands of tariff lines during the depression. And for the most part these moves have been within the bounds set by our trade treaties.

Such efforts by the US and other G20 nations seem to be working. The IMF estimates that fiscal stimulus from the G20 is close to 2% of global GDP in 2009 and will be 1.6% in 2010. And despite minor and necessary deviations from "free" trade, the IMF saysglobal growth will contract by 1.4% in 2009 but expand by 2.5% in 2010 if the world doesn't begin exiting from their stimulus packages.

That's the good news. Alarming is that most stimulus packages don't include provisions that will benefit the world's poor. A new report by the International Labour Organisation estimates that approximately 222 million workers across the globe could slide into extreme poverty (living on less than $1.25 per day) if poorer nations aren't included in the global response to the crisis.

The G20 did commit to granting the IMF $500bn in capital for lending to those in need. However, the IMF's draconian conditions have kept all but the most desperate nations from opting for the funds. The World Bank pledged $100bn but has delivered less than one-third of those commitments, says a G20 scorecard by Jubilee USA, a development group.

The UN commission of experts on the financial crisis called for 1% of stimulus funds to be earmarked toward poorer countries this June. This goal should be enshrined in Pittsburgh.

Just as important is seeing to it that a crisis like this doesn't happen again. It has now become clear that unregulated financial markets are inherently unstable. When the economy seems to be in good shape, market participants and regulators tend to enter a dream world where they take on ever more risk – more risk than underlying assets can cover. That leaves us prone to panics that can quickly turn into crises.

Despite this recognition, little real regulation has materialised. And as we turn over in the night, Wall Street has re-instituted mortgage-backed securities and begun mimicking such instruments for life insurance policies and patents.

At the global level, the US won't seriously discuss the fact that reliance on the currency of a dominant power that borrows too much wreaks havoc on the world. Since little has been done, developing nations still have the incentive to accumulate reserves and thus accentuate global imbalances where the global poor loan to the rich.

On climate change, Jubilee's G20 assessment puts the amount of carbon-friendly stimulus dollars at $180bn. This is welcome, but without real action by the US and China – who account for 46% of global carbon dioxide emissions – such funds will go wasted.

China won't act unless the US does, and the Obama administration can't act if Congress doesn't. Congress must be on board before the administration goes off to Copenhagen to negotiate a global climate treaty, less they suffer the same fate as the Clinton administration in 1997 when it negotiated the Kyoto protocol without the advice and consent of Congress. That blunder lead to no deal at home and little action globally.

If G20 leaders help the US wake up and smell the coffee on the hard realities of the global economic crisis, they can help shame the US into getting back on a more sustainable course. We're dreaming if we think we've done enough to fix this crisis and prevent the others that loom.

guardian.co.uk © Guardian News and Media Limited 2009

Labels: economic crisis, G20, G20 summit, global economic crisis, Kevin Gallagher

 

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9/24/2009 02:33:00 PM 0 comments links to this post

 

HR Manager Beaten to Death by Angry Workers

by Dollars and Sense

From CNN/Asia. Yikes!

By Harmeet Shah Singh | Wednesday, September 23 2009

NEW DELHI, India (CNN) -- Angry workers beat to death a human resources vice president after he laid off 42 employees at an auto-parts manufacturing company in southern India, police said Wednesday.

Roy George was vice-president for human resources at Pricol, the auto-parts company.

Some four to five workers, belonging to a union not recognized by the company, barged into his office and beat him up with iron rods, said N. Kannan, a police superintendent of Coimbatore in Tamil Nadu state.

George, 47, died from his head injuries Tuesday, Kannan told CNN.

Police have arrested nine people and are expected to round up more.

Last year the Indian head of an Italian company died after allegedly being beaten by a mob of sacked employees.

More than 60 people were charged with the murder of the chief executive of Graziano Transmissioni near New Delhi.

Earlier this month, India's Jet Airways had to cancel hundreds of flights after pilots struck work over the sacking of two of their colleagues in August.

Companies in the South Asian nation, despite its rapid economic growth in recent years, have often been faced with tough labor issues because of archaic laws and company policies on hiring and retrenchment.

Business consultants in India blame such labor standoffs on what they call lack of transparency in retrenchment or layoff policies.

Hiring and firing conditions are often not explained to workers by their companies, said Rajeev Karwal, founding-director of Milagrow Business and Knowledge Solutions.

Issues could spiral out of control if the businesses and bureaucrats are seen in a "corrupt nexus" by the employees seeking reprieve from labor authorities, he said.

Labels: human resources, India, layoffs

 

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9/24/2009 01:37:00 PM 0 comments links to this post

 

The Staley Lockout (Thad Williamson)

by Dollars and Sense

Second in a series of blog posts by former D&S collective member Thad Williamson, who is teaching a course on social movements at the University of Richmond, where he teaches at the Jepson School of Leadership Studies. This post is on a 2009 book on the struggles of workers at A.E. Staley Company in Decatur, Ill., starting with a lock-out in 1993. The lessons the authors draw are particularly relevant today, as Richard Trumka assumes leadership of the AFL-CIO. —CS

What happens when a union engaged in a strike or lockout shows creativity, spunk and courage, has an activist-minded membership willing to do what it takes to get the message out, shows a willingness to begin to mend long-standing racial distrust among workers, and has the solidarity to stick together and stick it out for months and even years?

That's the question addressed by Steven Ashby and C.J. Hawking's rather remarkable book, Staley: The Fight for a New American Labor Movement, published earlier this year by University of Illinois press. Ashby and Hawking provide an insider's account of the two and a half year struggle of workers at A.E. Staley Company in Decatur, Illinois, a subsidiary of multinational giant Tate and Lyle and a producer of corn syrup and starches. After years of worsening safety standards and increasing worker unrest at Staley, including an effective work-to-rule campaign, management locked out its union workers in June 1993. The bitter conflict would not be resolved for two and a half years.

What makes this book uniquely valuable is that Ashby and Hawking take us deep inside the internal life of a labor union local. Ashby and Hawking were personally involved in the struggle as members of solidarity committees, and literally lived the events they describe. Yet while Ashby and Hawking present the union's efforts in a positive, at times heroic light, they manage to remain objective and honest in assessing the union, its leadership, and its shortcomings. The result is a book with the level of detail and color you might expect from a top-notch journalist and a solid analytical perspective; or to put it another way, this book marks a landmark of labor scholarship and should and will be read by anyone serious about understanding the predicament of the labor movement in the United States.

As Ashby and Hawking recount, the battle with management at Staley began well before the actual lockout. After acquiring the plant in 1988, Tate and Lyle implemented a rotating 12-hour shift work schedule, while systematically gutting safety practices and placing workers with decades of experience under young supervisors who often had lacked any understanding of the nuts and bolts of production. The company's systemic neglect lead to deadly consequences in 1990 when a worker was gassed to death in a corn starch processing tank.

That incident, combined with increasing evidence that Tate & Lyle intended to bust the union, led workers to engage in a prolonged work-to-rule action, under the mentorship of union consultant Jerry Tucker. The union also brought in well-known consultant Ray Rogers to launch a corporate campaign. Matters come to a head in June 1993 when workers staged a safety stand-down in response to yet another neglected safety crisis. Shortly thereafter, Staley locked out its workers.

What happened next is the most inspiring part of this story. Highly mobilized union activists (including several workers who had been fired in the run-up to the lockout) engaged in a variety of activities designed to get the word out about the strike, both in Decatur, throughout the Midwest, and eventually nationally. Workers began producing a newspaper with ongoing updates on the dispute. A documentary film, "Deadly Corn" was produced in which workers plainly but graphically aired their grievances with the company, with particular attention to safety issues. A group of activists termed "Road Warriors" traveled by car throughout the Midwest to spread the word about the lockout to other unionists and potential supporters. Significant outreach was made to religious leaders, and crucial steps were taken to begin overcoming the long-standing racial divide within the union and incorporate African-American workers into the union leadership.

Missteps were made as well. The first iteration of the corporate campaign designed by Rogers was a bust; Rogers pushed for targeting State Farm insurance because of its financial ties to Archer Daniels Midland which in turn owned shares in Tate and Lyle. But those ties struck even union supporters as too tenuous and complex to build a compelling public case on. Later on, the authors suggest that union local president Dave Watts, described in largely positive terms overall, should have more aggressively embraced nonviolent civil disobedience strategies, particularly in an October 2004 march in Decatur when national support for the union was at a peak.

But the authors place far greater blame on the higher levels of organized labor for not matching the local's committed activism. Officials in the United Paperworkers International Union of which the Staley local was a part offered at first lukewarm support, then later actively sided with dissident unionists who wanted to accept the company's terms. Worse, at the crucial moment in the fall of 1995, the UPIU literally pulled the plug on a corporate campaign to get Pepsi (like Miller Beer before it) to drop Staley as a supplier.

National-level labor leaders fare no better. In of the book's most memorable scenes, Staley workers made a pilgrimage to AFL-CIO executive council meetings in Bal Harbour, Florida in February 1995, confronting stunned national leaders inside the luxurious Sheraton Hotel. The demands by Staley workers for greater support for their action became a key factor in John Sweeney's successful bid to displace Lane Kirkland as AFL-CIO president that year. But while Sweeney made extravagant promises to commit resources to the Staley fight during that campaign, after winning election in fall 1995 no concrete steps were taken by Sweeney to give Staley a reasonable chance of winning.
In the end, the Staley lockout was a crushing defeat for the union local. With the corporate campaigns called off and no help from higher levels of labor in sight, a majority of the union decided to pack it in. In December 1995, a 56% majority of the union approved a contract with no significant concessions from management and that provided for a dramatic reduction in union jobs. The majority of the locked-out workers in fact never went back into the plant, and many of those who did go back initially left within the first month.

The conclusion of this epic struggle is a kick in the teeth for anyone who reads this book and comes to sympathize with the many union leaders and activists the authors portray. But Ashby and Hawking's larger purpose is to provide a kick in the rear for organized labor as a whole. The workers at Staley and their many community supporters demonstrated creativity, commitment and courage over a prolonged period of time, but when they sought support from higher levels of the union hierarchy, they came home empty-handed.

Fourteen years later, the Sweeney era has run its course and Richard Trumka has just taken over as AFL-CIO president. This is ironic, for it was Trumka whom many Decatur unionists blamed for not delivering on the federation's promises of support. To his credit, Trumka traveled to Decatur to meet with angry union activists six months after the lockout ended, where he argued that the AFL-CIO's hands were tied because of the lack of support from UPIU for the lockout.

No one can doubt Trumka's commitment to organizing. Nor can anyone doubt that the rules of the game continue to be stacked against organized labor in ways which make winning conflicts like Staley extremely difficult. The key strategic challenge facing Trumka's new regime will be how much effort to devote to trying to change the rules of that game, how much effort to devote to supporting direct actions of worker militancy, and how much effort to commit to broader union movement goals, such as achieving health care reform.

It's fruitless to argue in the abstract about which of those goals should be the top priority. What's not fruitless is spending time reading Staley, drawing on both the positive and distressing lessons this book provides. The book beautifully illustrates the difficulties involved when workers challenge multinational corporations, shows how one union was able to muster sufficient tangible and moral support from a wider community to keep such a challenge going over a period of years, and unsparingly indicts modes of union leadership that simply forgot what grassroots solidarity is all about.

Near the end of Staley, union activist Gary Lamb says "I want the words 'Remember Decatur' to haunt Sweeney and Trumka."
Maybe they still will.

—Thad Williamson

Labels: AFL-CIO, labor, Richard Trumka, Staley, Thad Williamson

 

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9/24/2009 12:20:00 PM 0 comments links to this post

 

Energy Xtremism (Michael Klare)

by Dollars and Sense

From TomDispatch, with intro from Tom Engelhardt:

Talk about roller-coaster rides: the price of a barrel of crude oil, which was still under $20 the week after September 11, 2001, made it to $147 in July 2008, just before the global economic meltdown, only to hit a low of $32.40 early this year. And yet, in recent months, hardly noticed, it's crept back above $70—and this with "recovery" barely on the horizon and global industrial demand still muted at best. And that's the good news.

Surely, as economic activity picks up, oil demand will rise and prices will resume their upward march. And don't be fooled by a spate of announcements, as recently in the Gulf of Mexico, of new oil discoveries, as Michael Klare, author of the invaluable book Rising Powers, Shrinking Planet, indicates. If there is a surge in industrial demand globally, recent discoveries will have little impact on the growing supply of energy.

"It's still the one," energy expert Daniel Yergin says of oil in the current issue of Foreign Policy magazine. Yergin, author of a classic history of oil, The Prize, claims that petroleum will dominate the global energy equation for decades to come. Look elsewhere and you can find sprightly scenarios for energy futures based on climate-friendly renewable energy sources. As Klare makes painfully clear, however, there's a third way—and that is distinctly not good news. We are going to enter an age of Xtreme energy, he suggests, and the last-ditch efforts to keep our world on its normal course are likely to devastate the environment, accelerate climate change, inflict widespread pain, and create global conflict. It's not a pretty picture.
—Tom

The Era of Xtreme Energy
Life After the Age of Oil
By Michael T. Klare

The debate rages over whether we have already reached the point of peak world oil output or will not do so until at least the next decade. There can, however, be little doubt of one thing: we are moving from an era in which oil was the world's principal energy source to one in which petroleum alternatives—especially renewable supplies derived from the sun, wind, and waves—will provide an ever larger share of our total supply. But buckle your seatbelts, it's going to be a bumpy ride under Xtreme conditions.

It would, of course, be ideal if the shift from dwindling oil to its climate-friendly successors were to happen smoothly via a mammoth, well-coordinated, interlaced system of wind, solar, tidal, geothermal, and other renewable energy installations. Unfortunately, this is unlikely to occur. Instead, we will surely first pass through an era characterized by excessive reliance on oil's final, least attractive reserves along with coal, heavily polluting "unconventional" hydrocarbons like Canadian oil sands, and other unappealing fuel choices.

There can be no question that Barack Obama and many members of Congress would like to accelerate a shift from oil dependency to non-polluting alternatives. As the president said in January, "We will commit ourselves to steady, focused, pragmatic pursuit of an America that is free from our [oil] dependence and empowered by a new energy economy that puts millions of our citizens to work." Indeed, the $787 billion economic stimulus package he signed in February provided $11 billion to modernize the nation's electrical grid, $14 billion in tax incentives to businesses to invest in renewable energy, $6 billion to states for energy efficiency initiatives, and billions more directed to research on renewable sources of energy. More of the same can be expected if a sweeping climate bill is passed by Congress. The version of the bill recently passed by the House of Representatives, for example, mandates that 20% of U.S. electrical production be supplied by renewable energy by 2020.

But here's the bad news: even if all these initiatives were to pass, and more like them many times over, it would still take decades for this country to substantially reduce its dependence on oil and other non-renewable, polluting fuels. So great is our demand for energy, and so well-entrenched the existing systems for delivering the fuels we consume, that (barring a staggering surprise) we will remain for years to come in a no-man's-land between the Petroleum Age and an age that will see the great flowering of renewable energy. Think of this interim period as—to give it a label—the Era of Xtreme Energy, and in just about every sense imaginable from pricing to climate change, it is bound to be an ugly time.

Read the full article.

Labels: energy, Michael Klare, peak oil, Tom Engelhardt, TomDispatch.com

 

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9/23/2009 04:06:00 PM 1 comments links to this post

 

Emphasis on Growth Is Called Misguided

by Dollars and Sense

In today's NYT business section; reports on the study Joseph Stiglitz and Amartya Sen have put out, sponsored by Nicolas Sarkozy. The Times is somewhat more respectful than one might have expected, e.g. in this sentence: "In millions of households still grappling with joblessness and the tyranny of bills, signs of health served up by the traditional economic indicators seem disconnected from daily life." Hat-tip to TM.

Among the possible casualties of the Great Recession are the gauges that economists have traditionally relied upon to assess societal well-being. So many jobs have disappeared so quickly and so much life savings has been surrendered that some argue the economic indicators themselves have been exposed as inadequate.

In a provocative new study, a pair of Nobel prize-winning economists, Joseph E. Stiglitz and Amartya Sen, urge the adoption of new assessment tools that incorporate a broader concern for human welfare than just economic growth. By their reckoning, much of the contemporary economic disaster owes to the misbegotten assumption that policy makers simply had to focus on nurturing growth, trusting that this would maximize prosperity for all.

"What you measure affects what you do," Mr. Stiglitz said Tuesday as he discussed the study before a gathering of journalists in New York. "If you don't measure the right thing, you don't do the right thing."

According to the report, much of the world has long been ruled by an unhealthy fixation on swelling the gross domestic product, or the quantity of goods and services the economy produces. With a singular obsession on making G.D.P. bigger, many societies—not least, the United States—failed to factor in the social costs of joblessness and the public health impacts of environmental degradation. They allowed banks to borrow and bet unfathomable amounts of money, juicing the present by mortgaging the future, thus laying the ground for the worst financial crisis since the 1930s.

The report is more critique than prescription. It elucidates in general terms why leaning exclusively on growth as an economic philosophy may yield unhappiness, and it suggests that the incomes of typical people should be weighed more heavily than the gross production of whole societies. But it sidesteps the thorny details of slapping a cost on a ton of pollution or a waylaid career, leaving a great mass of policy choices for others to resolve.

Some Americans may reflexively reject the report and its recommendations, given its provenance: it was ordered up last year by President Nicolas Sarkozy of France, whose dissatisfaction with the available tools of economic assessment prompted him to create the Commission on the Measurement of Economic Performance and Social Progress. Tuesday's briefing was held in an ornate room at the French consulate. The official French statistics agency is already working to adopt the report's recommendations. Mr. Sarkozy plans to bring it with him to the G-20 summit meeting in Pittsburgh this week, where the leaders of major countries will discuss a range of policy issues.

But whatever one's views on the merits of European economy policy, and wherever one sits on the ideological spectrum, these appear fitting days to re-examine how economists measure vital signs—particularly in the United States.

By most assessments, the American economy is now growing again, perhaps even vigorously. Many experts expect a 3 percent annualized rate of expansion from July through September. As a technical matter, the recession appears to be over. Yet the unemployment rate sits at 9.7 percent and will probably climb higher and remain elevated for many months. In millions of households still grappling with joblessness and the tyranny of bills, signs of health served up by the traditional economic indicators seem disconnected from daily life.

This was precisely the sort of contradiction Mr. Sarkozy sought to unravel when he created the commission, tasking it with pursuing alternate ways of measuring economic health.

To head the panel, he picked Mr. Stiglitz, a former World Bank chief economist whose best-selling books amount to an indictment of the Washington-led model of global economic integration. Mr. Sarkozy also selected Mr. Sen, a Harvard economist and an authority on poverty.

The resulting report amounts to a treatise on the inadequacy of G.D.P. growth as an indication of overall economic health. It cites the example of increased driving, which weighs in as a positive within the framework of economic growth, as it requires greater production of gasoline and cars, yet fails to account for the hours of leisure and work time squandered in traffic jams, and the environmental costs of pollutants unleashed on the atmosphere.

Read the rest of the article.

Labels: Amartya Sen, growth, growth consensus, Joseph Stiglitz, Nicolas Sarkozy

 

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9/23/2009 10:25:00 AM 0 comments links to this post

 

FDIC May Seek Bailout for Failed Banks

by Dollars and Sense

Banks large and small continue to drop like flies. The Federal Deposit Insurance Corp (FDIC) was set up in the wake of the Great Depression to guarantee depositors' funds when a bank fails. The FDIC is funded by insurance payments and fees made by banks. The wave of bank failures that includes megabanks Indymac and Washington Mutual, has placed the greatest stress the FDIC's funding ability since the S&L crisis of the Reagan/Bush era.

Despite a recent hike in fees that banks pay to the fund, the latest reports indicate that the FDIC is planning on borrowing the money from banks themselves. Suddenly, instead of paying for their insurance, the banks will be earning interest.

From the wires:

WASHINGTON - Regulators may borrow billions from big banks to shore up the dwindling fund that insures regular deposit accounts.

The loans would go to the fund maintained by the Federal Deposit Insurance Corp. that insure depositors when banks fail, said one industry and one government official familiar with the FDIC board's thinking, who requested anonymity because the plans are still evolving.

Regulators also are considering levying a special emergency fee on all banks, charging regular fees early or tapping a $100 billion credit line with the U.S. Treasury, the officials said.

FDIC spokesman Andrew Gray said that while borrowing from the banks "is an option, it's not being given serious consideration." The board meeting where the plans will be discussed is scheduled for next week.

The fund, which insures deposit accounts up to $250,000, is at its lowest point since 1992, at the height of the savings-and-loan crisis. Ongoing losses on commercial real estate and other loans continue to cause multiple bank failures each week.

FDIC Chairman Sheila Bair wants to avoid tapping the Treasury credit line, and Treasury officials insist that the strongest big banks have enough extra capital to operate, the officials said. Comptroller of the Currency John Dugan, who is a voting member of the FDIC board, has said he doesn't want to levy another fee on banks while the industry is still recovering.

The loans would give big, healthy banks a safe harbor for their money and would limit their risk-taking, said Daniel Alpert, managing director of the investment bank Westwood Capital LLC in New York.

It also would allow the industry's strongest players - which still rely on FDIC loan guarantees and other emergency subsidies - to help weaker banks avoid paying another fee, he said.

"Lots of banks are going to require more capital, and (Bair is) trying to rob from the rich and give to the poor," said Alpert, who supports the plan as a creative way to avoid another bailout.

Bankers and lobbyists strongly support the plan to have some big banks lend money to the fund, since it would help still-struggling institutions avoid another fee.

Rest of story here.

Labels: bad bank, bank closures, bank failures, bank fees, FDIC, FDIC fund

 

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9/22/2009 11:19:00 AM 0 comments links to this post

 

Mankiw on Statins

by Dollars and Sense

Orthodox economist Greg Mankiw weighed in on the health-care debate in Sunday's New York Times, with a heavy dose of cost-benefit analysis, plus a personal note about the doses of cholesterol-lowering statins he takes every day. Makiw reasons that since his daily pill costs roughly "$150,000 for each year of life saved," this shows that health care can't be equal. "Society" just can't afford to keep everyone healthy!

Here is a nice response to Mankiw from economist Jeff Ely, on the blog Cheap Talk:

The centerpiece of Greg Mankiw’s column in the New York Times is this paragraph about the little white pill he takes every day:

Not long ago, I read that a physician estimated that statins cost $150,000 for each year of life saved. That approximate figure reflects not only the dollars patients and insurance companies spend on the treatment but also — and just as important — an estimate of how effective it is in prolonging life. (That number is for men. Women have a lower risk of heart disease.)

Mankiw used the word cost but I would say that what he is referring to is price. With monopolized drugs and dysfunctional health care insurance there is a huge difference between price and cost. And with this in mind, Mankiw’s column completely misses the real economic problem exemplified by his pills.

For a more in-depth discussion of statins and how they relate to "monopolized drugs and dysfunctional health care insurance," check out the article by Mark Hyman, MD on Why Cholesterol May Not Be the Cause of Heart Disease (on Huffington Post; hat-tip to CKS). Even though I, too, take my dose of statins every day (and I'm willing to bet that my dose is higher than Greg's!), I don't have any trouble understanding Hyman's argument: that part of the reason it is widely believed that high (LDL) cholesterol causes heart disease is that the pharmaceutical companies have developed a pill that lowers (LDL) cholesterol! In fact, as Hyman points out, the causes of heart disease are much more complex.

Yet more evidence that it may be easier for an MD to be critical about economics and policy than it is for an economics PhD.

Labels: cholesterol, Gregory Mankiw, health care, health care reform, health insurance, pharmaceutical industry, statins

 

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9/22/2009 09:54:00 AM 0 comments links to this post

 

Bank of America's Awesome Pecans

by Dollars and Sense

An amusing item from New York Magazine's Daily Intel blog (though their spin on it is needlessly crude):

When House Committee on Oversight and Government Reform chair Edolphus Towns subpoenaed Bank of America for any and all correspondence "created between September 1, 2008 and January 16, 2009" relating to "the financial losses at Merrill Lynch or to Bank of America's receipt of financial assistance from the United States Government" as part of the committee's investigation into the merger, BofA CEO Ken Lewis and the bank's lawyers apparently thought it would be hilarious to pile literally every e-mail that passed through their server onto the representative's desk. After sifting through the 70,000 pages of documents, Towns indicated his displeasure in a letter to the CEO on Friday. "You responded to this request by providing hundreds of pages of unrelated, extraneous information," he wrote.

For example, you sent copies of numerous emails you received from your own employees, expressing admiration for your "awesome" performance on 60 Minutes. You also included copies of emails alerting Bank of America employees to discounts at Wal-Mart, Target, and Costco, an announcement of the "Annual Pecan Sale" featuring "This Year's Crop of Mammoth Pecan Halves," and an invitation to attend a conference on investment in Asia, written in Chinese.

We have to say, this does seem like a pretty jerky move on Bank of America's behalf. But we don't think Towns should dismiss all the spam they included. For instance: Are there any e-mails between Ken Lewis and the people at Makeitlarger.com? Because those could be viewed as circumstantial evidence.

Labels: Bank of America, Edolphus Towns, Ken Lewis, Merrill Lynch, pecans

 

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9/21/2009 03:31:00 PM 0 comments links to this post

 

Notre Dame to Dissolve Heterodox Econ. Dept.?

by Dollars and Sense

Here is a pretty shocking story—the University of Notre Dame is planning to dissolve its department of Economics and Policy Studies, which houses the heterodox economists at the university. Below is part of an article from the Chronicle of Higher Education; there is also an online petition for ND students and alums who oppose the plan. What a moment in history to purge heterodox economists!

Notre Dame Plans to Dissolve the 'Heterodox' Side of Its Split Economics Department

By David Glenn | September 16, 2009

Early in this decade, the University of Notre Dame's economics department was bruised by a long series of quarrels over methods and ideology. So in 2003 the university's leaders came up with a Solomonic solution: They split the department in two.

Some of the faculty members stayed in what became known as economics and policy studies, a heterodox department that made room for post-Keynesians, Marxians, and historians of economic thought. (Broadly speaking, that had been the character of Notre Dame's economics program since the 1970s.) Others moved into economics and econometrics, a more-mainstream department with an emphasis on quantitative tools.

But this was not a divorce made in heaven. University officials now say that the experiment has not worked, and that they expect to dissolve the department of economics and policy studies within the next two years.

A few of the department's 11 faculty members might be invited to join the mainstream department—indeed, one scholar already made the leap this summer—but most of them expect to be scattered into various other departments, institutes, and research centers at Notre Dame.

For those faculty members, most of whom opposed the 2003 split in the first place, the news is a bitter pill. They say that the administration has failed to consult with them or with their students. And they say that it will be peculiar, at best, for them to move into other academic units when the university originally hired them because of their doctorates in economics.

Above all, they say that the dissolution would represent an intellectual loss for the university. While Notre Dame once had an economics program that was distinctively shaped by currents in Roman Catholic social thought, they say, it will now be left with a neoclassical department much like the ones at almost every other major university.

"In light of the crash of the economy, you would think there would be some humility among economists, some openness to new approaches," says Charles K. Wilber, a professor emeritus of economics at Notre Dame. "There's not a lot."

Read the rest of the article.

Labels: heterodox economics, Notre Dame

 

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9/21/2009 03:20:00 PM 2 comments links to this post

 

The Populist Moment

by Dollars and Sense

This is the first in a series of blog posts by former D&S collective member Thad Williamson, who is teaching a course on social movements at the University of Richmond, where he teaches at the Jepson School of Leadership Studies. His first post, on Laurence Goodwyn's classic The Populist Moment, which is well worth reading if you haven't already. —CS

Over thirty years after its publication, Lawrence Goodwyn's The Populist Moment remains not only gripping history but a powerful statement about the meaning of democracy. The story Goodwyn tells is by equal measures uplifting (as we consider the audacity of what the Populists tried to achieve) and dis-spiriting (as we consider the comparative narrowness of our conventional discussions about reform). The continuing relevance of the book however lies not primarily in our emotional reactions to Goodwyn's account, but in what we can learn from it about what a serious movement to challenge the fundamental structure of the American political economy would need to entail.

Goodwyn—an emeritus professor of history at Duke University—issued The Populist Moment in 1978 as an abridged version (merely 349 pages) of his study Democratic Promise: The Populist Movement in America, which originally appeared in 1976 with a length of 718 pages. The shorter edition consists of nine chapters culled from the full-length book, shorn of footnotes, photographs, and appendices. Even in reduced form, however, the abridged version effectively presents an epic story about the efforts of "plain people" to overcome enormous cultural and political obstacles and create a political economy that worked in their interests.

The Populist movement set out to abolish the structural arrangements reproducing and exacerbating rural poverty in the United States. The most promising of these features consisted of the "crop lien" system whereby cashless farmers (whether or not they owned land) found themselves continually indebted to local merchants and other lenders. Without cash on hand to obtain goods, goods were borrowed at marked-up prices for merchants, who collected in the form of crops at harvest time. Typically, poor farmers ended up still in debt to "the man" at the end of this annual ritual. This situation amounted to a system of de facto serfdom.

Exacerbating the difficulty was the national currency policy pursued after the Civil War, which saw the gradual contraction of the effective money supply and a return to the gold standard in 1879. The scarcity of currency helped creditors while damaging debtors, in two ways: as money got more valuable, the real value of loans owed increased over time; and the high value of money in turn meant that agricultural prices would trend downward over time. Farmers in debt were thus compelled to pay back loans worth more than the initial dollar amount, and to do so through the sale of crops that got steadily lower prices over time. In addition, farmers faced a variety of shipping fees and related costs imposed by railroad monopolies and grain elevator companies, making it essentially impossible for farmers to do more than (at best) tread water.

Creating a social movement to respond to this reality required accomplishing the seemingly impossible: undertaking a radical, independent economic analysis of American capitalism and then articulating that analysis and organizing for it in a language with cultural resonance with farmers. Simply organizing voters or electing better politicians would not do the trick, as the dominant parties (Democrats and Republicans) competed on the basis of sectional loyalties, not class politics, and were dominated by vested economic interests. Indeed, once the Populist movement moved into its explicitly political phase, it would need to convince farmers and allies to make a decisive break with the reigning politics of the post-Civil War period.

But before the Populists could begin contemplating challenging the two-party system, much preliminary work needed to be accomplished: a movement culture needed to be established. The essence of the movement culture was the assertion of political and intellectual independence—what Goodwyn terms "self-respect"—from the predominant political culture that rationalized continued hierarchy. In contrast, the Populists began to create an indigenous egalitarian ethos, premised on the idea that (as Goodwyn puts it) by acting together, farmers (and allies) could enhance individual freedom and self-respect. This "self-respect" was actualized through both the act of political organizing itself and the vast mass meetings of the Farmers' Alliance beginning the late 1880s, through the self-education campaigns undertaken by thousands of lecturers in county after county, and through the establishment of a variety of cooperative enterprises, most notably the very ambitious Texas Exchange.

The hope of the cooperative strategy was that by combining economic forces, farmers could collectively get around the restrictions of the crop lien system, by selling their crops at more favorable prices and by acquiring goods and supplies on a cheaper basis. The fatal problem this strategy encountered was lack of credit. Farmers were simply too cash-starved to provide the capital the Texas Exchange required to work as intended, and the Exchange was not able to get credit from private banks, who were hostile to the cooperative's aims.

Charles Macune, the Texas populist who had championed the Exchange idea, responded to this difficulty not by giving up but by hatching the signature idea of the Populist Movement: the Sub-Treasury Plan. The aim of the sub-treasury plan was to use the power of the federal government to help farmers escape the crop lien system and to infuse the economy as a whole with a dramatic increase in currency. Under the plan, the government would establish warehouses in agricultural counties to store farmers' crops (for a variety of specified commodities). When depositing their crops, farmers would be issued paper money equivalent to 80% of the cash price of their crops, repayable within one year at a 1% interest rate. This system would free farmers from the need to pay for goods from local merchants in kind (by giving them cash) and also free them from the imperative to sell their crops at unfavorable prices (the storage system would allow them to wait until prices were relatively high rather than at the lower prices associated with harvest time). The sub-treasury plan also would have allowed farmers to obtain low-interest cash borrowed against the value of their land (if they owned it).

This plan, along with associated demands culminating in the "Omaha Platform" of 1892, provided Populism with a substantive agenda, rooted in an independent analysis of the economy from the standpoint of poor farmers. Translating the plan into a politically viable demand first required that Populists draw on and expand their networks of communication and education, including the lecturers and (increasingly significant) the emergence of thousands of reform periodicals nationwide. But it also required confronting America's broken political system and challenging the limits of the two-party system.

Ironically, Macune himself hesitated at this last step, the formation of the Populist Party, and found himself displaced by politically bolder leaders. What followed next was a high-water mark of political success for the movement—election of numerous Populist politicians to state and national office from a variety of states in 1892 and 1894, and the near destruction of the Democratic Party as a viable institution nationwide. In many southern states, Democrats held on to power only by literally stealing elections. In North Carolina, a Populst-Republican coalition actually gained control of the state legislature in 1894. For a brief moment, the Solid South appeared to be in serious jeopardy.

But in Goodwyn's account, the Populist movement had a fatal flaw—namely, that its new political party was not sufficiently democratic in organization and left too much power in the hands of its leadership. After 1894, party chairman H.E. Taubeneck, an Illinois politician who had become chairman despite not being involved with the original wave of Populist organizing, steered the party away from the Omaha platform and towards the embrace of "free silver" as the singular demand of Populists. In Goodwyn's account, Taubeneck was one of a number of politicians—encouraged amply by silver mining interests-- who saw a tactical advantage in getting themselves elected through the "free silver" cause—and were willing to abandon the long-term goals of restructuring the political economy to achieve this. This move was angrily opposed by the reform press, but the "fusionists" used their organizational advantages (and no small measure of deceit) to maneuver the Party into endorsing Nebraska Democrat William Jennings Bryan for President in 1896 on a "free silver" platform, effectively ending Populism as an independent political force.

Goodwyn argues that in terms of confronting the fundamental nature of the political economy, Populism was the most significant social movement in American history, and that subsequently the horizons of reform have narrowed dramatically. Socialists have remained politically marginal in America, while liberalism confines itself to reforms that do not fundamentally challenge who has economic power, the distribution of wealth, or the corporate state. Very few Americans understand the financial system we live our lives under or the manner in which the Federal Reserve System codifies the control of money by banking interests.

One political result of this situation is that the financial industry can cause the American and world economy nearly to fall into a cataclysm, receive a bailout of a magnitude far beyond that dreamed by the most ambitious proponent of new liberal social programs, all without any fundamental effort or even discussion about re-structuring the financial industry or the financial system, carried out under the imprimatur of a president widely regarded as the most liberal in one if not two generations.

Those convinced that there is something fundamentally wrong about a political-economic system in which the top 1% hold over one-third of the wealth, and in which for over thirty years living standards and poverty rates have stagnated at the same time total economic product has grown dramatically, have two choices. They can remain respectable and work within the narrow confines of socially acceptable political norms, one of which is that the fundamental premise of a corporate-dominated economy is not to be questioned. (To pass universal health care, it seems, we have to first placate the private insurers—or such is the apparent belief of the current administration.)

The alternative path is far more difficult. It involves undertaking an independent economic analysis; setting a goal of changing the economy in its fundamentals; envisioning practical steps both short-term (the equivalent of forming a cooperative) and long-term (using the power of government to support such development) in support of such goals; joining with other Americans to engage in the self-education needed to refine, publicize, and advance this vision; and eventually forming an independent political capacity to act.

Perhaps most fundamentally, this means setting the goal of creating a politics in which "the people" actively shape and create the agenda. This is an enormously ambitious goal, but refusing to even try represents both a constriction of democratic vision and an acceptance that one will be pursuing politics on terms set by the corporate state and its institutionalized backers—forever.

Twenty-first century populism, if it ever emerges, will no doubt entail cultural formations quite different from those that animated the late nineteenth century version. But as Goodwyn's account helps illustrate, both the bold assertion of collective self-respect and a boldness of economic analysis and vision must be the central ingredients of any serious movement to reclaim democracy's deepest meaning (rule by the people).

—Thad Williamson

Labels: Lawrence Goodwyn, populism, Thad Williamson, The Populist Moment

 

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9/17/2009 04:41:00 PM 0 comments links to this post

 

Obama vs. the Lobbyists (TomDispatch)

by Dollars and Sense

From Tom Engelhardt of TomDispatch; a link to Andy Kroll's article follows:

Congressman Joe ("You lie!") Wilson is undoubtedly not completely ignorant about how our health care system actually works. After all, in the course of his career, according to the Center for Responsive Politics, he's received $244,196 in contributions from the health-care profession -- and that doesn't even count another $86,150 from the pharmaceutical industry or the $68,000 that came in from hospitals and nursing homes. In fact, if you go to the page at that organization's OpenSecrets.org website on Congressional contributions and start clicking around among the members of Congress, you'll be struck by how many times the health and pharmaceutical industries (and their lobbyists) pop up.

It's not so surprising, of course, since there are staggering sums of money at stake, which means striking amounts of the same to inject like some potent drug directly into the bloodstream of our political system. Consider but one figure: since 2002, according to Harper's Magazine, the profits of the top 10 health insurance companies have increased by 428%. And the CEOs of those top insurers have a personal incentive for ensuring that those profits don't slide due to new health-care legislation; after all, they made a combined $690 million in the last nine years.

In fact, any administration arriving in Washington wanting to do anything these days walks into a blizzard of money, not to speak of the fact that the wind at its back, the campaign wind that got it there, was already blowing strong with similar contributions. TomDispatch regular Andy Kroll offers a vivid portrait of that world at this moment and what it means for the Obama administration. —Tom

Read Andy Kroll's article.

Labels: Andy Kroll, health care reform, health insurance, insurance industry, Joe Wilson, TomDispatch.com

 

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9/16/2009 10:03:00 AM 0 comments links to this post

 

How Tort Reform Can Raise Health Care Costs

by Dollars and Sense

Texas has been a magnet for doctors since they enacted tort reform a few years ago. (See Doctor's Flock to Texas After Tort Reform from the Wall St Journal).

The result? Insurance premiums have nearly doubled.

From the Austin American Statesman:

Insurance premiums rose 91.6 percent in Texas

By Mary Ann Roser | Tuesday, September 15, 2009, 12:48 PM

A national report that was released today says family insurance premiums in Texas increased 91.6 percent since 2000 - 4.6 times faster than earnings.

The report by the nonprofit consumer organization Families USA says the rise in health care premiums for workers went from $6,638 for the average Texas family to $12,721 a year, but folks got less for their money rather than more, according to the report. At the same time, median earnings of Texas workers rose from $23,032 to $27,573, a 19.7 percent increase.

"Our conclusion is that rising health care costs threaten the financial well-being of families across the country," said Ron Pollack, executive director of Families USA.

The report argues throughout for health care reform, and as Pollack said, if it doesn’t happen soon, more families will be priced out of the market.

In a report last year, Families USA said health insurance premiums grew 5.8 times faster than earnings in Texas. And this year, the growth rate in Texas is even below the national rate in which premiums grew 4.9 times faster than income between 2000 and 2009.

Even so, Pollack said he doubted "anyone in the state will be delighted" by the results this year.

Asked why premiums are growing so fast in Texas and nationally, the report cited four key issues:

*Increased spending on health care. The report says that nearly half of Americans have chronic conditions, with diabetes alone costing more than $174 billion annually.

*Lack of regulation of the insurance industry. Insurance companies can charge more, plus refuse coverage to people based on a variety of factors, including dropping or denying people because of illness, the report says.

*A lack of competition in the insurance market. The report says in some areas, too many companies have merged, leaving consumers with too little choice. The report claims health care reform will provide more options.

*The "hidden health tax," in which people with insurance help cover the uninsured. Last year, the portion that insurance companies charged families in insurance premiums to cover people who did not have insurance was $1,017.

Pollack said he believes insured people would pay less to cover uninsured people under health care reform.

Link to the study by Families USA (pdf).

Labels: families USA, health care, health insurance, tort reform

 

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9/15/2009 03:48:00 PM 2 comments links to this post

 

The Truth about the Public Option (Robert Reich)

by Dollars and Sense

From The Real News Network:

Former Labor Secretary Robert Reich explains what a public option for healthcare coverage really means for working people. We thank Jacob Kornbluth for directing and producing the Robert Reich interview portion of this piece. Pass it on to everyone you know. We can't let the insurance companies decide who gets care and who doesn't. Check out: www.sickforprofit.com for more details about the campaign.

Labels: health care, health care reform, public option, Robert Reich

 

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9/14/2009 09:36:00 AM 7 comments links to this post

 

T.D.C.o.t.E: The Mendacity of Hope

by Dollars and Sense

The Dull Compulsion of the Economic (xvii)

A series of blog postings by D&S collective member Larry Peterson

The Mendacity of Hope: Obama's Healthcare Speech

President Obama's speech to Congress on healthcare has been generally well received since it was delivered Wednesday evening. Commentators have focused on the President's charisma, of course, as well as his intelligence; but what was different this time was a pronounced hint of determination in the face of considerable adversity: and this is something we've yet to see from the young president. But the question then arises: what is there for Obama to be resolute about?

The speech featured the submission of a comprehensive presidential plan (which had been hitherto lacking: the president has been content, up to now, with letting members of Congress write the competing bills). The main feature of the plan consisted of a deal--some would say with the devil--with the insurance companies, pharmaceutical companies and for-profit healthcare providers: in return for losing the right to drop insurance for preexisting conditions, jack up deductibles and out-of-pocket expenses, and discriminating against customers based on age or even geography, individuals would be mandated to purchase health insurance, or face a financial penalty. Employers, too, would have to offer insurance policies to their employees, or pay a stipulated amount into the insurance fund (the so-called "pay-or-play" provision). Subsidies and exemptions would be provided for small businesses and the indigent, and a fund would be established to protect individuals with preexisting conditions who, under the plan, wouldn't be eligible for coverage until 2013.

Such a plan would control costs in a definitive way in only one regard: it would force some thirty million people or so to purchase insurance (a good amount of these are children, and will be covered by their parents). And the savings to the system that would accrue from the proper funding and even avoidance of expensive emergency-room treatment of uninsured persons would indeed provide some offset to the relentless upward pressure in healthcare costs. But there was almost nothing else in the speech about containing costs, especially over the long term, as the population ages and the financing of Medicare(not to mention Medicaid) becomes a serious problem in its own right. Instead, the President played with the politics of the public option and spoke of offsetting the entire cost of the program--set at $900 billion over 10 years.

Regarding the public option, the president brought it up merely to offer it as a potential sacrifice for measures that have yet to be put articulated--never mind put forward, especially by Republicans--as presumably equally valid means to one specific end: the controlling of health care costs. And on financing the program--providing all the subsidies and exemptions for many of the tens of millions who will be absorbed into the system--Obama claimed that all of the $900 billion should be capable of being offset by savings to the system that will be the result of the cutting of huge amounts of waste in the system. Many say that he won't be able to come up with even half of this figure.

So what's wrong with all this? First of all, the idea that the insurers should be compensated for dropping some of the most despicable policies in America is absurd: the denial of preexisting conditions and so on has become a national scandal that should simply have been abolished outright. But such policymaking fits into the Obama notion of change very well: look at the banks, for example (and it's interesting: of all the things that aroused ire over the health care plan, pundits have yet to acknowledge that its timing, coming right after the bailout of the banks, may have played a major role in enhancing the negative connotations the program was capable of arousing, precisely because it is--somehow--a "government" program, and, as such, open to the sort of gaming that has come to characterize the banking bailout).

Then there's the question of cost control. The reason why no Republicans or conservative Democrats have sought out the President's open door is because there simply is no clear way to even hope to control costs in the shorter-term other than through the implementation of a robust public option, or, even better, a single-payer system. Again, like with the banking system, we are in completely unchartered territory, and the signs of systemic health do not look promising. Obama said that he was reluctant to embark upon more ambitious measures like single-payer because he feared that potentially major disruptions involving nearly one-fifth of the economy were simply unacceptable to Americans. But he himself has acknowledged that the health care system as we know it is turning into an unsustainable drag on the economy. So--how do you combat an unsustainable drag, which is only getting bigger by the year? By implementing policies that more than anything else are chosen because they do not cause disruption? And this while disruptions--in finance, the labor market, you name it--are becoming the order of the day in so much of the rest of our daily lives?

So where cost control is concerned, Obama seems to be asking us to trust him and the legislators he's reaching out to (some/most of whom, no doubt, are raking in wads of cash from big pharma, the insurance lobby and for-profit hospitals). It is conceivable that, although Obama pointedly didn't mention this in the speech, a "trigger" mechanism of some sort may be built into legislation, perhaps mandating some kind of public option if costs aren't sufficiently contained. But maybe not; and at this point, given all the prior hemming and hawing, it's hard to trust the administration on this score, never mind the Blue Dog Democrats Obama is looking to sway. It's quite possible that the establishment of heath care co-ops is as far as the latter will go, and who's to say that they won't demutualize or something even if costs are--relatively speaking--constrained for a few years, once/if things get back to "normal"?

In the longer-term, though, the gamble grows more desperate: so many of the things that make the US healthcare system so very expensive, and at the same time so ineffective--the proliferation of specialists to the detriment of general practitioners, the emphasis on treatment of diagnosed conditions to the detriment of preventative medicine, the ludicrous sums spent in the last year of life (and especially to the extent that the latter command outsized levels of pharmaceutical and technology spending), the malpractice premiums, the ever-duplicated paper trail that wends between insurers, hospitals and bureaucracies, and even the President's beloved medical information-technology (also unmentioned in the speech) initiatives--there are no proposals to harness any of these for the sake of cost control. I suppose the President feels that to tinker with any of them would risk interfering with the sacred marketplace. But these factors play a big part in pushing costs up. And though, as noted before, the individual and company mandates may mitigate against the upward spiral somewhat, it is a crap shot at best, and more likely a desperate--even irresponsible--gamble to assume that these mechanisms alone will contain costs in anywhere near effective a way so as to convert the healthcare sector from being a drag on the economy to being a sustainable source of growth (not to mention turning it into a system that actually improves the health care indicators, and, by extension, the productivity--and well-being--of the people).

And even if some kind of public option finds its way into legislation, there is a further worry: President Obama himself made a very unfortunate comparison on Wednesday when he spoke of the public university system as a successful--and popular--check on higher-ed costs. But, as we all know, in education the public alternative has been becoming less-and-less available as public costs follow those of their private competitors upwards: hardly a felicitous precedent for a public option that stands to be much, much weaker, in terms of its financing, than public universities. And then there's the question of quality: will quality decline for those who choose the public option, especially seeing that the funding is set to be so delicate? Will there be huge waiting queues like those we've endured here in Massachusetts for those forced to go on a system that doesn't have the capacity (remember the relative shortage of GPs here) to absorb the newcomers anyway?

One other proposal was left unmentioned during the speech: the removal of the tax exemption for businesses that insure their employees. Presumably Obama is looking to his supporters amongst unionists here, seeking to appeal to their worst instincts to prevent them from demanding payback for getting him elected by insisting on single-payer. But this exemption, which has wrought so much havoc on pay scales in this country for so long, will presumably be allowed to distort them unabated. In a time of economic contraction like we're seeing, the continued drag on wages already reeling from the crash seems destined to hinder economic recovery--and screw up innumerable lives--in a major way. Surely Obama sees that?

But, at the end of the day, the dirty little secret about American health care is that it uniquely sets different parts of the population against each other. And it does so in a way that is the inverse mirror image of that which is supposed to hold sway under competition: seniors with Medicare, the insured with employer-provided, tax-exempt healthcare, and the uninsured who must subsidize both, but who risk the running up of huge bills which fall on the insured (and increase their bills) if they can't stay out of the system, are all induced to get what they can out of the system at the expense of other groups. And the insurers and providers are all too eager to assist in this game, ordering expensive tests for some, denying those they can, and hoping that those left by the wayside won't form a common cause to overturn this rotten system. So far it has worked, and it looks like it will work again, whether or not a health care bill is passed.

On Monday, on what is euphemistically known as "Labor Day" in the US, I was with thousands of demonstrators on Boston Common, rallying for healthcare reform. It was very strange. I, like many of my comrades there, found myself cheering for two opposed policies whenever they came up: single-payer and the public option. It was almost surreal, to use the cliche. What were we demonstrating for? The same thing, I suppose, that President Obama was calling up his commendable resolution about: the perceived necessity of a fudge. Obama is a unique political figure in that he has corralled his undisputed charisma to advance the agenda of discredited--but, in the eyes of the administration, indispensable--elites by putting a somehow positive spin on a palpable sense of his supporters that things are bad and getting worse--intolerable, even. This is the "hope" he speaks of with seeming conviction. That his most important policy stance--the one on which he has said he will risk his presidency--is so obviously defective, from so many standpoints, reveals in a particularly stark way the despair with which he must, in lucid moments, view his signature emotion.

Labels: Barack Obama, health care reform, insurance industry, Larry Peterson, Medicaid, Medicare, pharmaceutical industry, public option, single-payer, the dull compulsion of the economic

 

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9/11/2009 05:27:00 PM 0 comments links to this post

 

Baucus's Public Option

by Dollars and Sense

Yes, here it is (thanks to Emptywheel for bringing it to our attention):

Health Insurance Exchange. The Baucus plan would establish the Health Insurance Exchange through which individuals and small businesses in the market for insurance could obtain affordable health care coverage. ...

The Exchange would also include a new public plan option, similar to Medicare. This option would abide by the same rules as private insurance plans participating in the Exchange (e.g., offer the same levels of benefits and set the premiums the same way). Rates paid to health care providers by this option would be determined by balancing the goals of increasing competition and ensuring access for patients to high-quality health care. A number of options could be considered to determine who runs the plan, who is eligible for it, and how to ensure that the public-private insurance competition lowers costs and improves quality. The Independent Health Coverage Council, described below, would inform these decisions.

This is from “Call to Action: Health Reform 2009,” put out by Sen. Finance Committee Chairman Max Baucus. The title may have you confused for a few minutes; why is everyone saying the Baucus plan has no public option? But then you notice the date on the document: November 12, 2008.

A few interesting numbers from the current Baucus plan:

The plan puts limits on insurance company “rating”—i.e., charging higher or lower premiums based on characteristics of the insured such as age. (The plan allows rating based on age, tobacco use, and family composition.) With the limits, premiums for the same-size family could vary by 7.5 to 1. That sounds pretty unaffordable for the late-middle-aged smoker.

The plan defines affordability: as long as the lowest-cost plan available has annual premiums equal to 10% of household income or less, then “affordable” coverage is deemed available and the mandate to have insurance will apply—enforced by fines of up to $950/year for an individual and $3,800/year for a family.

Labels: health care reform, health insurance, Max Baucus, public option

 

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9/11/2009 04:29:00 PM 0 comments links to this post

 

Whole Foods and Health Care

by Dollars and Sense

John Mackey, the CEO of Whole Foods (or as we call it here in Boston, Whole Paycheck), wrote a hide-bound and ideological op-ed for the Wall Street Journal last month (find it here). The first tip-off that it's going to be silly is that it calls health-care reform "Obamacare" (nothing like a little derision right in the title of an op-ed to command the interest of the readers of the WSJ opinion pages). What follows are all the usual canards of the Right's views on health care, and all their usual free-market, individualistic, deregulatory policy solutions.

A movement has developed to boycott Whole Foods because of Mackey's opposition to meaningful (i.e., single-payer) health-care reform. The group Single Payer Action is also part of this boycott. Now would be a good time to shift over to farmers' markets and food co-ops to send Mackey and Whole Foods a message.

Here's an interesting tidbit from the Boycott Whole Foods website: Michael Pollan, author of The Omnivore's Dilemma and other books about food and food production, has weighed in against the boycott, because although Mackey is wrong about health care, "Whole Foods is often right about food," Pollan tells us. According to the Boycott Whole Foods website, Pollan has spoken at a conference put on by America's Health Insurance Plans (the main lobbying organization for the health insurance industry), on a panel entitled "Leaving the 'Fast Food Nation' Behind: Challenging American's Attitudes Towards Personal Responsibility and Health." (The other speaker on that panel was Richard Thaler, co-author of the pop-behavioral economics book Nudge.) And he posted against the Whole Foods boycott on the website of archconservative David Frum (newmajority.com).

Now, I don't begrudge Michael Pollan an appearance at an AHIP conference (Howard Dean also spoke on a panel at the conference), or a comment on a website "dedicated to the modernization and renewal of the Republican party and the conservative movement," as its "About" page says. The man is pretty much omnipresent, so why not in these venues? But it doesn't surprise me that he doesn't seem to get the importance of collective action. I heard a radio version of a talk he gave a couple of years ago--it was about the prevalence of corn in the American diet (via corn syrup, mostly, but also as feed for the animals that become our meat), and the history of overproduction of corn post WWII. A terrific talk--the whole time I was craving broccoli (which I don't usually care for too much), because I figured there's no way they'd figured out how to make broccoli with corn. But in the question period, someone asked him early on what we could do about this, and all he had to say was something about making good choices about what we eat, choosing to shop at places (like Whole Foods) that offer fresher food, etc. There doesn't appear to be a truly political bone in his body--for him it's all about individual consumer choice. (It reminded me of Al Gore's otherwise terrific movie, ending with rousing call for us to change our lightbulbs.) So I'm not surprised that Pollan blandly opposes this boycott.

Joel Harrison, who wrote this terrific article for us last year, has written a point-by-point rebuttal of John Mackey's WSJ op-ed. Here are the basics; click on the links to get the details on each point.

YES, TO HEALTHCARE FOR ALL, NO, TO MACKEY'S WHOLE FOOD CARE

Rebuttal to John Mackey's Wall Street Journal Op-Ed, "The Whole Foods Alternative to 'ObamaCare'"

By Joel A. Harrison, PhD, MPH | September 8, 2009

John Mackey's editorial in the Wall Street Journal is merely a continuation of the myths propagated by the for-profit health insurance and pharmaceutical industries and the right-wing think tanks they fund. His suggestions would take us farther in the direction that has already failed.

For this rebuttal I'll focus on the following points:

* Healthcare IS a right in other countries. So, what does our Constitution "guarantee?" The European Union's Constitution includes Health Care as a Right. The U.S. Supreme Court ruled in 1936 that Article II Section 8's "Promote the General Welfare" applied to Social Security. Medicare falls under this ruling. Though not binding, the Universal Declaration of Human Rights, signed by the United States, includes medical care as a right. (Details and references)
* Does health reform mean a "government take-over?" Ridiculous question but NO! Free markets do not work without rules and an independent arbiter. All Bills before Congress maintain the private sector for delivery of health care, both hospitals and doctors; but include regulations such as protection from arbitrary loss of health insurance and greater transparency. (Details and references)
* Repealing mandates on what insurance must cover & state laws which prevent insurance companies from competing across state lines. Without some minimum national regulations and means of enforcement, companies will incorporate in states with the least regulations and enforcement, leaving consumers vulnerable. (Details and references)
* Health Savings Accounts—Why they don't work. 80% of health care costs for individuals in the U.S. exceed $2,500 and 73% exceed $5,000, so people would rapidly exhaust their health savings accounts. Sick and injured people trust their doctors to make appropriate decisions and neither have the skills for making the decisions nor the availability of data to base such decisions on. High deductibles leads to reductions in both appropriate and inappropriate care, e.g. blood pressure monitoring. (Details and references)
* Medicare reform and finances—Why we will not allow Medicare to go bankrupt. Medicare has done a better job than private insurance companies in keeping costs down. Medicare covers the costliest sector of our population, altogether over 43 million Americans. Private insurance would either be denied due to pre-existing conditions or prohibitively expensive. Medicare pays for all specialty residencies and subsidizes hospitals with a high proportion on uninsured. Without Medicare, besides the human tragedy of seeing our loved ones experience both reduced quality and length of life, emergency rooms will collapse under the additional strain, hospitals will close, and many doctors will go out of business. Medicare's cost cannot be separated from a health care system whose current projectory is unsustainable. (Details and references)
* Wait times here and abroad (including emergencies)—Mackey's misleading statistics. Wait times in Canada are far better than reports given here and they are investing vast sums in improving both quality and timeliness of care. Wait times in many other nations with non-profit universal health care are actually quite good. And wait times in the U.S., especially for the un- and underinsured are worse than in many other countries and, even for those with insurance, wait times exist and are deteriorating. (Details and references)
* Medical Liability/Tort Reform—why this won't solve the healthcare crisis. Malpractice costs are an infinitesimal portion of total health care costs. Up to 100,000 Americans die from preventable medical errors. Just five percent of all doctors are responsible for approximately 40% of malpractice suits. Truly bad doctors seldom lose their licenses. Only about 1/10th of all medical errors that cause death or serious disability lead to malpractice suits. So-called "defensive medicine" is often just an income generator for physicians who own or are invested in labs and radiology facilities. (Details and references)
* Healthy life styles are good but don't save us enough. Many factors affect health, including genetics, air and water pollution, infectious diseases, commercial food interests targeting children, even in our schools, availability of recreational facilities, physical education in our schools, and longer and longer working hours. Healthy life styles are important; but almost everyone will sometime in their lives need health care. A healthy life-style can often delay the onset of chronic diseases and/or if ill or injured contribute to a more rapid recovery; but it is naive to believe that healthy life styles can solve our health care system problems. (Details and references)

CONCLUSION: John Mackey doesn't know what he is talking about. In essence, he is just parroting the myths and propaganda created by the for-profit insurance and pharmaceutical industry together with their well-funded right-wing think tanks.

I don't wish to support a platform of policies that allow private insurance companies to continue to take undue advantage of average citizens for profit, much less make it easier for them by adopting any of Mackey's ideas. I am joining thousands of former Whole Foods loyalists to redirect my dollars to support organic co-ops and local farmers' markets. I hope you will join me.

Joel A. Harrison, PhD, MPH, lives in San Diego, where he does consulting in epidemiology and research design. He has worked in the areas of preventive medicine, infectious diseases, medical outcomes research, and evidence-based clinical practice guidelines. He has lived and studied in both Canada and Sweden.

Labels: David Frum, health care, health care reform, health insurance, Joel Harrison, John Mackey, Michael Pollan, single-payer, Wall Street Journal, Whole Foods

 

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9/09/2009 09:43:00 AM 7 comments links to this post

 

Anti-Union Campaigns from the Right

by Dollars and Sense

We received this from former D&S editor Abby Scher. Abby is currently editor of The Public Eye, a publication of Political Research Associates. Scroll down for the press release about the Making Contact program Abby produced on right-wing anit-union campaigns.

I've been tracking anti-union campaigns from the Right and did a short radio documentary for Making Contact being broadcast this week about the Right's misinformation campaign to stop labor law reform this year They are going all out. Unions are a potent reality check. People in unions don't tend to fall for a lot of the free market mythology about how the world works. And of course, the GOP hates unions because white men in unions voted for Obama by 18 points—while those outside of unions voted for McCain by 16 points (which I wrote about in the summer Public Eye, the quarterly I edit for Political Research Associates). My economists friends will be happy to hear I interviewed Rick Wolff. My historian/sociologist friends will be happy I included Kim Phillips-Fein. And my labor friends will be thrilled to hear Angel Warner of the Rite Aid campaign. Here is the press release with links to the radio show. I hope it is useful.

Berlet and Scher Track Anti-Union Organizing on the Right

Antilabor campaigns by corporate interests are nothing new, and are frequently masked by rhetoric about freedom of choice for employees and union leaders as thugs eager to take away your rights. Like most Big Lie campaigns, the truth emerges when we shine the light of history and research on the issue.

We are hearing these Big Lies in the first major battle to reform labor law since the 1970s. Then the reform failed by one vote. Now the U.S. Chamber of Commerce, National Right to Work Committee and patriotic sounding front groups like the Alliance to Save Main Street Jobs are working to ensure that the Employee Free Choice Act suffers the same fate.

In a special Labor Day collaboration with syndicated radio program Making Contact, PRA Editorial Director Abby Scher uncovers the truth behind the U.S. Chamber of Commerce’s multimillion dollar misinformation campaign to defeat the bill in the name of saving small businesses. Listen to her documentary, Still Looking for the Union Label, here. Or listen on Monday to Heidi Boghosian’s Labor Day interview with Abby on the show Law and Disorder at 10am on WBAI. Click here.

In a series of articles, PRA Senior Analyst Chip Berlet outlines the history of anti-union campaigns dating back to the 1930s, showing how the National Right to Work Committee and U.S. Chamber of Commerce have tried to “flip the script” so it appears that corporate repression of workers aren’t the problem, unions are! Visit our new page on anti-labor activities on the Right here.

With union membership dipping to dangerous lows, and 40 percent of union organizing drives stopped by corporate intimidation even before workers have a chance to vote, labor law is in dire need of reform. The U.S. Chamber of Commerce is the nation’s biggest lobby, spending an average of $400,000 a day in a single legislative session (according to the Center for Responsive Politics). It is spending tens of millions more spreading its anti-union message on the airwaves to shape the fall battle. Can the light of truth and the heat of organizing stop them this time?

Labels: anti-union campaigns, Making Contact, Political Research Associates, Public Eye, the Right, unions

 

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9/08/2009 01:22:00 PM 2 comments links to this post

 

Life Insurance Securitization

by Dollars and Sense

Is Obama planning to kill grandma? Probably not, unless grandma is Afghani or Pakistani, and the murder weapon is an aerial drone. Or maybe you consider capitulation to private health insurance companies in health care reform an indirect way of killing grandma, given that the true death panels are the ones convened by those companies to deny coverage to, among other people, some grandmas.

But another industry that the Obama industry is busy capitulating to—Wall Street—has figured out another way to profit from grandma's death: securitizing her life insurance. Here's how it works, according to an article in today's New York Times: Investment banks would give policy-holders cash for their policies, which would then be securitized and bundled as "life settlements" (with fees going to the bundlers), sold, traded, resold—just the way subprime mortgages were. And there are similar possibilities for fraud and conflict of interest as with the complex derivatives that played such a big role in the current financial crisis. The most striking aspect of this new scheme, though, is that it bets against grandma: "The earlier the policyholder dies, the bigger the return—though if people live longer than expected, investors could get poor returns or even lose money."

Hat-tip to Mike P., who points out: "The article gets better the farther you read. It's like a description of the mortgage bubble written before it happened. You can picture gangs of insurance salesmen ripping through elderly housing complexes, badgering old deaf people to sell their life policies. On the first page of the link, to the left of the article, is a fascinating graph showing that 'the market for mortgage securities has shrunk to less than a fifth of its peak size'—a picture of a bubble."

Read the full article.

Labels: aerial drones, Afghanistan, health care, health care reform, health insurance, life insurance, life settlements, Obama administration, Pakistan, securitization, Wall Street

 

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9/07/2009 11:57:00 AM 2 comments links to this post

 

Labor Day Ironies

by Dollars and Sense

From Logos: a journal of modern society & culture; hat-tip to Danny Postel of Interfaith Worker Justice.

Labor Day Ironies

By John G. Rodwan, Jr.

Appreciation of Labor Day requires an active sense of irony. Local celebrations of workers' collective strength in the United States predated the declaration of May Day, its international equivalent. While May Day never took root in the United States, the day's selection for a global event resulted from the earlier scheduling of an American one. The president who made Labor Day a national holiday did so soon after sending federal forces to end a major strike, precisely the maneuver he'd opposed while campaigning for office around the time of another labor action with a bloody ending. The leader whose union that president decimated had initially backed his electoral campaign. For his involvement in the strike, the unionist ended up in jail, from which he emerged as a national figure who became one of the most prominent third party presidential candidates in the nation's history. May Day and Labor Day share decidedly secular origins, but workers grafted religious elements to their holidays. Unions in the city that first celebrated Labor Day eventually saw it members preferring to use the day off from work that their efforts have won for activities other than a parade, which they eventually held on another day, if at all.

The convocation of socialist parties and unions known as the Second International in 1889 passed a resolution calling for a simultaneous, worldwide demonstration in favor of law limiting the working day to eight hours and since such a rally had already been planned in the United States for the following May 1, the body decided to use that date. As it fell on a Thursday, unions in various countries found themselves having to decide whether members should go on strike in support of the cause. Cautious parties and unions opted to demonstrate on the first Sunday of the month instead. However, historian Eric Hobsbawm insists that refusing to work made May Day meaningful. In a paper on it in Uncommon People, he writes:

It was the act of symbolically stopping work which turned May Day into more than just another demonstration, or even another commemorative occasion…. For refraining from work on a working day was both an assertion of working-class power – in fact, the quintessential assertion of this power – and the essence of freedom, namely not being forced to labour in the sweat of one's brow, but choosing what to do in the company of family and friends. It was thus both a gesture of class assertion and class struggle and a holiday: a sort of trailer for the good life to come after the emancipation of labour.

The call for this symbolically potent event did not specify it as a recurring one, but with the day's success, in the form of unexpectedly high levels of participation in many cities, the Brussels International Socialist Congress of 1891 pledged that May Day should be celebrated every year. By the time of its centenary, May Day qualified as an official holiday in more than 100 countries.

The holiday's symbolism extends beyond the act of stopping work. "Spring holidays are profoundly rooted in the ritual cycle of the year in the temperate northern hemisphere," observes Hobsbawm, "and indeed the month of May itself symbolizes the renewal of nature." Flowers figured prominently in celebrations from the very start. Indeed, May Day celebrations of seasonal renewal happened long before an organized labor movement seized the day. Even then the day involved symbolism involving both economic class and seasonal renewal. For example, during Shakespeare's lifetime, according to scholar Stephen Greenblatt, "on May Day people had long celebrated the legend of Robin Hood, with raucous, often bawdy rituals" involving dancing around a Maypole "decked with ribbons and garlands" and a young Queen of the May also decorated with flowers. One of the most popular May Day icons depicts a Phrygian bonnet-wearing girl amid garlands.

Before May Day blossomed internationally, Labor Day celebrations started in New York City, gradually spreading to other areas. "Ironically, in the USA itself May Day was never to establish itself as it did elsewhere, if only because an increasingly official holiday of labour, Labor Day, the first Monday in September, was already in existence," explains Hobsbawm. At that time, however, it did not exist as a holiday throughout the country. The Central Labor Union organized the first Labor Day in New York on September 5, 1882. After celebrating it again on the same date the next year, the union picked the first weekday of the month as the time for the "workingmen's holiday" in subsequent years and urged other cities to do so as well. Although the New York unionists' creation effectively kept May Day from catching on in the United States, holiday imagery connects the city with the international festival: A German plaque commemorating the first May Day represents the Statue of Liberty on one side and Karl Marx on the other.

Early local Labor Day events included calls for the establishment of a national holiday, which happened in 1894, immediately after the movement suffered a shattering defeat. President Glover Cleveland signed the bill just days after the end of a massive strike against the Pullman Palace Car Company in Illinois. He was responding to protests against his aggressive tactics to suppress what became called the "Debs Rebellion." Eugene Debs led the American Railway Union, which had come into being less than a year before Pullman workers, angered both by severe wage cuts and by the firing of three men who had presented management with a list of grievances, put down their tools. Not only did they stop building Pullman sleeping cars; they and railroad workers around the country (against Debs's advice) began a boycott of any railroad that continued to pull them, refusing to run any train with one attached. The boycott went into effect on June 25 and by the end of the month almost 125,000 workers joined it, affecting twenty railroads. "Across the nation the American Railway Union was so successful during the first week that the old Knights of Labor slogan, 'An injury to one is the concern of all,' seemed fulfilled, as yet another impressive display of labor unity spread throughout the country," writes Nick Salvatore in Eugene V. Debs: Citizen and Socialist. Union members' muscle-flexing aggravated and worried management, which aimed to dismantle Debs's young union and its brand of militancy. The railroad corporations' General Managers Association persuaded the federal government that the strike disrupted mail delivery and impeded interstate commerce. Judges issued an injunction against Debs and the union on these grounds and Cleveland (against Governor John Altgeld's advice) agreed to send troops to enforce it. The troops arrived the evening before Independence Day.

Read the rest of the article.

Labels: Eugene V. Debs, Grover Cleveland, Labor Day, May Day, Pullman Strike, socialism

 

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9/07/2009 11:42:00 AM 1 comments links to this post

 

T.D.C.o.t.E: An Ugly Scene

by Dollars and Sense

The Dull Compulsion of the Economic (xvi)

A series of blog postings by D&S collective member Larry Peterson

An Ugly Scene

This morning I was party to an unpleasant, and rather absurd encounter. I almost always take my morning caffeine injection at a local (Cambridge, MA) establishment, the Crema Cafe, which, unusually, has a relatively long common table. At this table, people unrelated to each other can sit together without feeling Anglo-Saxon anxiety at the idea that they are in the intimate presence of strangers. This morning I settled down at the table virtually alone, when members of a group slowly began congregating around me. As the group gathered, and the conversation developed, it became clear that these were students at Harvard Business School, who were reacquainting themselves after summer recess. All very normal, right?

Well, as I continued to read my newspaper, the conversation centered on the various internships the students had been involved in over the summer. One student did hers in Philadelphia, and another was just back from Moscow. Another, who (on account of his age) may not have been a student, but a teacher, had been traipsing around Amsterdam. All of them seemed to be doing private equity work of some sort.

As I sat there, I became more and more angry. I suppose it was the kid from Moscow who set me off: here he is, coming from a country which has seen its GDP drop by close to 10% in the last year, seemingly interested only in recounting his daily routine: how many hours he worked, what the nightlife was like, that sort of thing. But that's no big deal: it's normal among friends to focus on things like this when they first meet up after a while. Why was I so upset?

My frustration with this question amplified my original annoyance, which was itself exaggerated by what my eyes kept glancing over. I was reading the Sunday New York Times print edition, and I kept looking at an article I posted yesterday on this blog, about how Wall Streeters are developing products to get the elderly to sell their life insurance policies at a loss for a larger up-front sum than they can get from the insurance companies, which would be securitized, a la subprime mortgages, and provide potentially high winnings for investors if the previously-insured died prematurely (the revenue streams would go towards paying the premiums the former holders didn't want to pay anymore). Considering that at least some of the sellers must be selling precisely because they got saddled with mortgages that have gone bad, the whole idea made me sick. But this didn't necessarily have anything to do with those at the table. And I just kept getting angrier.

Finally I finished my coffee and went to leave. As I passed on the way out, I excused myself and said some stupid things to these people, which must have appeared even more stupid because my voice tends to crack when I get all hot and bothered. I told them that they, prime examples of the jet-setting, super-networked elite, made me sick with their internships and elite pursuits. After this outburst, I was so mortified that I beat a hasty retreat, but one of them followed me out of the cafe and challenged me: why didn't I just move away from them?

I responded by going a little--only just--deeper, and offering a boilerplate denunciation of the kind of mentality fostered in business schools, which wrecked the global financial system and screwed up innumerable lives. I was becoming even more horrified by my pathetic performance in elucidating the obvious, though, and continued to leave. Finally, she administered the coup de grace, spoken with contempt, of course, rather than feeling: "I'm sorry you're unemployed!"

At this point I was transported, through no effort of my own, from the ridiculous to, if not the sublime, a major fault-line in relations between the incipient elite and the rest of us in a time of an economic contraction of historic proportions. In the rest of this post, I'll try to explain what this fault line consists of.

The chief implication of the woman's rejoinder, to me, was that I was animated primarily by resentment, which was certainly true. But what was interesting to me was the following: first of all, I'm not unemployed, but--even worse for me, as I could be making more if I was collecting unemployment, based on my last employer's wage--seriously and perilously underemployed (I'm working at a temp job for $9 hour in expensive Boston right now, two years after leaving my last permanent position). Second, there's no way she could have known, based on my dress, my speech, my reading material, appearance or anything like that, what my class or occupational status was, unless I had gone off the handle like I did. One of the chief characteristics of the elite these days is that they, unlike their forebears, go out of their way to look and talk not only like "us", but like an absurdly representative everyman: hence Obama and Bernake appearing with identical open collared shirts and blazers on Martha's Vineyard a few weeks ago, Steve Jobs' grungy black-turtleneck/jeans combo, etc.

Back to the original point, though, my--not even class, but class-attitudinal (itself conditioned increasingly by consumer choice)--status was made clear to this woman by my imputed resentment. Resentment at what? To her, and I'm guessing here, I was some unemployed guy, who, while enduring a temporary hardship, would, "when things pick up", find myself in a similar position to the one I had, able to resume the lifestyle to which I was accustomed, and we'd all live happily ever after. After all, in the words of so many well-meaning people, "something will turn up." Thus, my contention with them had no basis in fact, and I was merely fulminating, and I should, like my betters, just stop whining and, even if I get pissed off, move away.

But there may have been something else: in another time, I could see someone similarly placed responding with a hearty "get a job!" Today, this exhortation is not available. The future business leaders of today do not even have the luxury of entertaining ideas that they are creating jobs and generating conditions for upwards mobility for those of us who aren't so resentful and uppity that we don't recognize an opportunity when we see one. So they offer faux sympathies for those temporarily--and this qualification remains the key assumption for them, even though all evidence is pointing to the contrary (the great majority of job losses in this recession are permanent, the periods spent unemployed are rising, the workweek is plummeting, etc; and workers in certain demographic categories are being hit exceptionally hard)--indisposed, hoping they'll get a grip and avoid further embarrassing themselves with impromptu protests about things no one can do anything about anyway.

And to me, this sheds light on a key feature of today's elite: they may look and sound like us (or like the ever-shrinking economic, if not cultural, "middle-class"), but they are in one important sense different from their forebears: they tend to work extremely hard; and, far from being a leisure class, often do not allow themselves anywhere near enough space to properly enjoy their trophies. One consequence of this is that they have no time: constantly engaged in projects, internships, charity work, networking and so on, they require a vast sector of glorified servants in the service industries to allow them the means to perpetuate not only their privileges, but even to cushion their competitive advantages (by providing them with timesaving, educational, regenerative leisure and other services increasingly out of reach for the general population) in the workforce. And that means that they don't necessarily reflect on what should be obvious to them merely by looking around. And they certainly don't realize the extent to which they enjoy extraordinary privileges: after all, they've worked for it, right?

But consider these internships. Recently an increasing amount of attention has been placed on the importance of internships to career success. It's got so bad, in fact, that desperate parents are paying so their children can be, well, unpaid laborers. This in addition to ponying up for skyrocketing educational bills, starting with day care and on to test-prep and then on to elite college tuition. When I was young, virtually no one did an internship or volunteer work--most kids worked in restaurants or stores; now it's becoming not only a cost of doing business for the elite-to-be, but a modern form of indentured servitude for middle-class students who can still get the work. Everywhere, students are being pressured to do this sort of work in order to gain a foothold on the corporate or government ladder, and if you don't do it, you are going to be less connected--and probably less employable--than those (who almost always come from families with larger pockets) who do, or simply can afford to do so. But even those in the latter category are still working their butts off--so they "deserve" it.

I have to wrap this up soon, even though I'm highly dis-satisfied with my armchair theorizing on a complicated topic, and with the fact that I made a fool of myself to no effect this morning. But there's one thing I should mention in closing. There's one thing the geniuses at Harvard Business School still need me for: my propensity to consume. And, after the bursting of a bubble which desperately sustained obviously unsustainable levels of consumption on several levels--economically, financially, environmentally and even politically (impact of consumerism on the decline of political consciousness, etc)--that's not something that's going to materialize unless some of the elites--not to mention the rest of us--start getting as animated about the dire state of the labor market as I was this morning. And it's not likely to happen if we confine our protests to comic scenes at a little cafe.

Labels: income inequality, labor, Larry Peterson, the dull compulsion of the economic

 

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9/06/2009 01:33:00 PM 1 comments links to this post

 

Main Obama Advisor: Public Option Negotiable

by Dollars and Sense

From Boston.com; the resignation of Obama green industry adviser over upsetting right-wing sensitivities does not bode well, either, for the public option.

White House: public health care plan is negotiable

By Ricardo Alonso-Zaldivar
Associated Press Writer / September 6, 2009

WASHINGTON White House officials said Sunday a government health insurance option is negotiable, signaling a potential compromise on an issue that President Barack Obama's liberal supporters consider do-or-die.

As Obama prepares for a Wednesday night speech to Congress in a risky bid to salvage his top domestic priority, political adviser David Axelrod said a public plan is not the core issue in the health care debate. White House spokesman Robert Gibbs danced around a question about whether Obama would veto a bill without the public option.

The president "believes the public option is a good tool," said Axelrod, who joined with Gibbs in a one-two punch on the Sunday talk shows. "It shouldn't define the whole health care debate, however."

Their appearances came ahead of Congress' return this week from a summer break that saw eroding public support for an overhaul and contentious town hall meetings in lawmakers' districts.

Gibbs called the government plan a valuable tool. But asked if Obama would reject legislation that didn't include it, he responded: "We are not going to prejudge where the process will be."

Read the rest of the article

Labels: Barack Obama, david axelrod, health care reform, public option, robert gibbs

 

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9/06/2009 11:48:00 AM 0 comments links to this post

 

Resistance to Tourism

by Dollars and Sense

This Observer piece documents how affected communities are resisting tourist encroachments. Tourism--using the term loosely, by collapsing several related industries together, used to be, according to some measures, the biggest industry in the world. It's also one of the dirtiest, again if you include several related industries, like air travel, which is the fastest-growing contributor to global greenhouse-gas emissions as an industry. Tourism also thrives on big global income gaps, which to be fair, it does tend to alleviate somewhat, but not at a rate anywhere near what is acceptable, or which characterized other periods, which featured other development models.


Tourist hordes told to stay away from world heritage sites by the locals

From Easter Island to Venice, communities are up in arms at the environmental damage being caused by mass tourism

Tracy McVeigh, chief reporter
The Observer, Sunday 6 September 2009


In the brochure or guidebook they look idyllic and fascinating. Unspoilt beaches, ancient monuments and historic cities dripping with charm. But the Wish You Were Here postcard scenes of the world's tourist sites do not show you an increasingly common sight: the band of placard-waving locals who wish you weren't.

Last week the Chilean under-secretary of the interior, Patricio Rosende, travelled more than 2,000 miles to a volcanic speck in the ocean to spend two days in heated talks with the people of Easter Island. Those who live on the island, which is part of Chile and famed for its massive ancient stone statues, believe they are facing ecological disaster because of hordes of tourists. But their complaints have fallen on deaf ears and lack support from those on the island who survive on visitor dollars.

Last month, protesters resorted to blocking the airport, moving tents and trucks on to the runway and demanding that the 65,000 visitors who fly in each year, some of whom choose to stay on and work, be capped. As about 600 angry US tourists expressed their irritation after they faced the resultant flight cancellations at the airport in the Chilean capital, Santiago, the government agreed to discuss the islanders' concerns about overcrowding, the environment and controls on commerce.

"The only thing we are looking for is an answer from the government regarding the need for greater control on who comes to Easter Island," said the island's mayor, Luz Zasso. "We ask, for example, that those who arrive have a card which describes the activity they will be doing here, just like in the Galápagos Islands."

With a population of 4,900 that has grown by 29% since 2002, the island is forced to deal with more than it can handle. A similar problem led to the Pitcairn Islands, also in the Pacific, establishing immigration controls, with categories for "short-period" tourists with a maximum stay of 14 days and "long-period" tourists with a maximum stay of six months.

Read the rest of the article

Labels: Airline Industry, development economics, income inequality, tourism industry

 

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9/06/2009 11:37:00 AM 0 comments links to this post

 

Mike Davis on Elites and New Forms of Struggle

by Dollars and Sense

From his Znet page:

Why We Need Rebels

September 06, 2009 By Mike Davis
Source: Socialist Worker

Mike Davis's ZSpace Page


At the Socialism 2009 conference in San Francisco, two of California's best-known radicals, Mike Davis and David Bacon, led a discussion about the causes of the crisis and the struggle ahead. Here, we publish the presentation and concluding statement of Mike Davis, author of City of Quartz, a brilliant social history of Los Angeles, and more recently, the essay collection In Praise of Barbarians.

. . .

I TOOK my 15-year-old son last night to the movies in Berkeley to see the remake of The Taking of Pelham 1-2-3. I kept thinking: is this set in Sacramento?

Here you have the governor and his gang of Republicans, and they're holding the people captive and threatening to shoot them one by one unless their demands for budget cuts and a new stage in the Republican fiscal revolution occurs. And then on the other hand, you have the leadership of the Democratic Party in Sacramento, Karen Bass and Darrell Steinberg, and they're saying "Oh, no, no, no, don't shoot all the passengers, just shoot half the passengers."

If you compare--as the California Budget Project has--the governor's proposals for destroying what remains of the social safety net in this state with the Democratic-dominated Budget Conference Committee in the legislature, you come up with the following proposals: the governor wants to eliminate CalWORKS [the state's version of Temporary Assistance to Needy Families], home support services, healthy families, maternal and child health, domestic violence, rural migrant clinics and poison control.

If these programs are just shut down completely, it would affect a million poor kids, half a million poor families, and doom as many as 400,000 people to the possibility of early death from disease for the lack of access to medical services or home care.

The Democratic response to this has been to say, "Oh no, don't do that--cut these programs by margins of 20 percent to 60 percent."

Read the rest of the piece

Labels: Arnold Schwarzenegger, Barack Obama, California, financial crisis, Mike Davis, revolutionary praxis

 

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9/06/2009 11:27:00 AM 0 comments links to this post

 

Good Piece on Deficiencies of Public Option

by Dollars and Sense

From MRZine, by Andy Coates. Mentions precedents in Maine and Massachusetts, and what's wrong with them, besides reminding us of other deficiencies of Obama-style healthcare reform with or without public option, like the ever-increasing healthcare bankruptcy problem.

Notes on the Status of Health Reform
by Andy Coates
MRZine 5.9.09


The election of Obama raised expectations for sweeping health reform sky high. But in spite of several self-imposed deadlines, Senate and House health reform bills were not ready by the time of the August Congressional recess, when passionate local debate erupted at Congressional home district town hall meetings.

The Onion pierced the din with truth: "After months of committee meetings and hundreds of hours of heated debate, the United States Congress remained deadlocked this week over the best possible way to deny Americans health care."

If the goals are health care for all and reduced costs of care, the measures being prepared in Congress will not reform the health system. Instead they amount to a massive taxpayer subsidy for the private health insurance industry.

In 2007, more than one of five working-age people were uninsured for a year or longer. One of six working people had health insurance insufficient to meet the expenses of a serious illness. And there were 8 million uninsured children in the United States. At least 5 million more people lost their health insurance in 2008 and 2009 thanks to galloping unemployment--on top of years of progressively unaffordable health insurance, inadequate coverage, and steep out-of-pocket costs. The failing economy further accelerated the crisis in health care through devastating state and local cutbacks in safety net care.

Yet the Congressional bills that have come through committees, whose key provisions would not start until 2013, offer precious little relief for these ills.

Against this background, a nascent mass movement for single-payer national health insurance, plugging away for decades, steadily accumulates new force. Single payer would deliver all necessary care for all individuals, lifelong, with no co-pays and no deductibles, through a system in which health care would be publicly financed but privately delivered. By eliminating private insurance, single payer would save an estimated $400 billion annually in health spending. The single-payer bills in Congress are HR 676 and S 703. HR 676 has 86 co-sponsors and has been endorsed by over 500 labor bodies, including 39 state AFL-CIO federations.

Whether a bill passes or flounders this fall, the details in the proposals that have come through Congressional committees have little connection with the popular expectations and grassroots clamor this summer. If Congress enacts reform, in 2013, individuals will be required to purchase health insurance. This is the centerpiece of the "reform." The proposal has come straight from the insurance industry: criminalize the uninsured and subsidize unaffordable private insurance premiums with public funds.

Read the rest of the post

Labels: Andy Coates, Barack Obama, health care reform, MRZine, public option, single-payer

 

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9/06/2009 11:16:00 AM 0 comments links to this post

 

Private Death Panels

by Dollars and Sense

Doug Henwood posted this on LBO Talk. Here's a tidbit: "Kaiser Permanente, which denied 28 percent of all claims [in California] in the first half of 2009, was one of two systems to reject options for radiation and chemotherapy for 57-year-old Bob Scott of Sacramento after his diagnosis of a brain tumor in 2005. The reason cited was his age, says wife Cheryl Scott, RN. "He had been in perfect health all of his life. This was his first problem other than a sprained ankle. He died six months later."

Also, MRZine has this on the lobbying campaign surrounding health care "reform."

Finally, for what little it's worth, here's Huffington Post on what Obama will say in his healthcare address.

Labels: Barack Obama, Doug Henwood, health care reform, insurance industry, Left Business Observer, lobbyists, Monthly Review, MRZine, public option

 

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9/05/2009 04:04:00 PM 0 comments links to this post

 

Extent to Which Employers Ignore Labor Law

by Dollars and Sense

The next time someone holds forth on the competitive advantage that accrues to US business because the US is a "society based on law," the obvious corrective would be to mention the advantage that accrues to capital precisely because the law is simply ignored in regard to labor issues. Enforcement of labor complaints has been awful--and getting worse--for decades, and this article from The Nation discusses a new study that "measure[s] for the first time the effect of decades of deteriorating labor standards and slack enforcement."

That reminded me of this recent study, by labor scholar Kate Bronfenbrenner (who was kind enough to talk to Dollars and Sense on the state of the labor market two years ago), which documents the increasing intensity of employers in fighting unionization drives, often by employing techniques that are of dubious legality.

Labels: Department of Labor, Kate Bronfenbrenner, labor, labor law, union organizing

 

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9/05/2009 03:39:00 PM 0 comments links to this post

 

Breadlines of the 21st Century

by Dollars and Sense

Two stories from today's FT Weekend on the condition of the working (sic--most of these people work) class in America. The first documents new ways in which food is being distributed to people who are having problems paying for it (trying to pay off mortgages, etc.). Predictably, perhaps, it looks to be based--at least where transport is concerned--on the Wal-Mart model. The second notes the shocking increase in the use of food stamps in the last year or so. Here's a particularly telling excerpt from the former article: "People who used to donate to the food bank are now coming to the food bank--so imagine the shame,' says Shamia Holloway, communications manager at the Capital Area Food Bank in Washington, which supplies food to the Community Ministry and 700 other local agencies."

How very American. Instead of changing society, we focus on individual shame. Meanwhile, many of those who should be the most ashamed take our money and gain more power, exhorting us to do more charitable work during periods of unemployment. Why do we put up with this?

Labels: agriculture department, financial crisis, food stamps, stimulus package, welfare

 

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9/05/2009 03:13:00 PM 0 comments links to this post

 

The Preliminary G20 Financial Reform Meeting

by Dollars and Sense

Yves Smith cautions us to view the communique with caution. She also says this on the quibble on the Basel II (which were wholly ineffective in the run-up to the crisis, and indeed contributed mightily to it) capital adequacy standards between the US and France.


Simon Johnson says that assumption that we need modern (characteristic of the last 30 years) finance for economic growth, which all the G20ers seems to assume as gospel, is misconceived. He also says that modern finance has provided, more than anything else, a means for the wealthy to capture state power. The former point cannot be made emphatically enough after the bogus recapitalization of the banks.

Finally, perhaps to illustrate the latter point in a particularly enraging way, here's what some of the creative minds in finance have been up to lately.

Labels: bailout, banking regulation, Baseline Scenario, financial crisis, G20 summit, insurance industry, international finance, Naked Capitalism, securitization, shadow banking system, Simon Johnson

 

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9/05/2009 02:47:00 PM 0 comments links to this post

 

How Did Economists Get It So Wrong?

by Dollars and Sense

From tomorrow's NYT magazine, apparently (though the dateline on the web version says Sept. 2nd); hat-tip to Arpita B.

How Did Economists Get It So Wrong?

By Paul Krugman

I. MISTAKING BEAUTY FOR TRUTH

It's hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes—or so they believed—were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled "The State of Macro" (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that "the state of macro is good." The battles of yesteryear, he said, were over, and there had been a "broad convergence of vision." And in the real world, economists believed they had things under control: the "central problem of depression-prevention has been solved," declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making.

Last year, everything came apart.

Few economists saw our current crisis coming, but this predictive failure was the least of the field's problems. More important was the profession's blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable—indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. Neither side was prepared to cope with an economy that went off the rails despite the Fed's best efforts.

And in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever. Lucas says the Obama administration's stimulus plans are "schlock economics," and his Chicago colleague John Cochrane says they're based on discredited "fairy tales." In response, Brad DeLong of the University of California, Berkeley, writes of the "intellectual collapse" of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten.

What happened to the economics profession? And where does it go from here?

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn't sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession's failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets—especially financial markets—that can cause the economy's operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don't believe in regulation.

It's much harder to say where the economics profession goes from here. But what's almost certain is that economists will have to learn to live with messiness. That is, they will have to acknowledge the importance of irrational and often unpredictable behavior, face up to the often idiosyncratic imperfections of markets and accept that an elegant economic "theory of everything" is a long way off. In practical terms, this will translate into more cautious policy advice—and a reduced willingness to dismantle economic safeguards in the faith that markets will solve all problems.

II. FROM SMITH TO KEYNES AND BACK

The birth of economics as a discipline is usually credited to Adam Smith, who published "The Wealth of Nations" in 1776. Over the next 160 years an extensive body of economic theory was developed, whose central message was: Trust the market. Yes, economists admitted that there were cases in which markets might fail, of which the most important was the case of "externalities"—costs that people impose on others without paying the price, like traffic congestion or pollution. But the basic presumption of "neoclassical" economics (named after the late-19th-century theorists who elaborated on the concepts of their "classical" predecessors) was that we should have faith in the market system.

This faith was, however, shattered by the Great Depression. Actually, even in the face of total collapse some economists insisted that whatever happens in a market economy must be right: "Depressions are not simply evils," declared Joseph Schumpeter in 1934—1934! They are, he added, "forms of something which has to be done." But many, and eventually most, economists turned to the insights of John Maynard Keynes for both an explanation of what had happened and a solution to future depressions.

Keynes did not, despite what you may have heard, want the government to run the economy. He described his analysis in his 1936 masterwork, "The General Theory of Employment, Interest and Money," as "moderately conservative in its implications." He wanted to fix capitalism, not replace it. But he did challenge the notion that free-market economies can function without a minder, expressing particular contempt for financial markets, which he viewed as being dominated by short-term speculation with little regard for fundamentals. And he called for active government intervention—printing more money and, if necessary, spending heavily on public works—to fight unemployment during slumps.

Read the rest of the article.

Labels: Adam Smith, depression, economics profession, Keynes, Paul Krugman, recession

 

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9/05/2009 10:25:00 AM 0 comments links to this post

 

Keynes and the Current Crisis

by Dollars and Sense

We have just posted the latest installment of D&S collective member Alejandro Reuss's web-only series, "The General Theory and the Current Crisis: A Primer on Keynes' Economics."

The new installment (Part III) is entitled Keynes, Wage and Price "Stickiness," and Deflation.

The main page for the series is here.

Enjoy!

Labels: Alejandro Reuss, deflation, Keynes, Keynesianism, wages

 

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9/04/2009 03:53:00 PM 0 comments links to this post

 

Public Option Sent To The Bench

by Dollars and Sense

Will be used, presumably, merely as a backup. There is no longer any reason, if there ever was one at all, of supporting this pathetic "reform". From The New York Times:

Health Care Idea Has Public Plan Only as Backup
New York Times
By ROBERT PEAR and JACKIE CALMES
Published: September 3, 2009

WASHINGTON As President Obama faces conflicting pressures from the left and the right over his proposal for a new public health insurance program, White House officials are investigating a possible compromise under which the government would offer its own health plan only if private insurers failed to provide affordable coverage

The idea of such a backup plan or "trigger mechanism" has emerged in negotiations between the White House and the one Republican willing to engage with them on the issue, Senator Olympia J. Snowe of Maine, on whom the White House rests its hopes of finding a middle ground.

The secretary of health and human services, Kathleen Sebelius, was in Maine on Thursday, promoting the president's health care proposals as a boon to older Americans.

Ms. Sebelius was accompanied by Representative Chellie Pingree. Like Speaker Nancy Pelosi and many other Democrats, Ms. Pingree supports the idea of a new public plan, to compete with private insurers. Ms. Pingree praised Ms. Snowe, saying Maine was "truly lucky" to have her as a senator, seeking a bipartisan solution on health care.

For several months, the administration has sent mixed signals on proposals for a public plan, sometimes embracing the idea and sometimes suggesting it is not essential.

Read the rest of the article

Labels: Barack Obama, health care reform, Kathleen Sibelius, Olympia Snowe, public option

 

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9/04/2009 11:41:00 AM 3 comments links to this post

 

FHA Losses Threaten Funding

by Dollars and Sense

Calculated risk quotes the following on why this is so. Unbeleievable.

John Burns Consulting sent out a note today titled: FHA Likely To Be The Next Shoe To Drop

"The FHA's aggressive lending programs have continued throughout the housing downturn, causing its market share of the mortgage industry to grow from 2% in 2005 to 23% today. ... The FHA insurance fund, however, is likely running dry. ...

SEPTEMBER 4, 2009 Loan Losses Spark Concern Over FHA
By NICK TIMIRAOS and DEBORAH SOLOMON
Wall Street Journal

The Federal Housing Administration, hit by increasing mortgage-related losses, is in danger of seeing its reserves fall below the level demanded by Congress, according to government officials, in a development that could raise concerns about whether the agency needs a taxpayer bailout.

The rising losses at the FHA, part of the U.S. Department of Housing and Urban Development, come as the agency has rapidly increased its role in guaranteeing loans in an attempt to stabilize the housing market.

It isn't clear how the rising losses may affect home buyers. Options for the agency could include politically unpalatable choices, such as asking for taxpayer funds to boost reserves or increasing the premiums borrowers pay for the insurance offered by the agency. Agency officials say if there is a shortfall, they don't have to do anything except report it to lawmakers. But some mortgage and housing analysts see trouble ahead. "They're probably going to need a bailout at some point because they're making loans in a riskier environment," says Edward Pinto, a mortgage-industry consultant and former chief credit officer at Fannie Mae. "...I've never seen an entity successfully outrun a situation like this."

The FHA insures private lenders against defaults on certain home mortgages, an inducement to make such loans. Insurance from the New Deal-era agency has enabled lending to buyers who can't make a big down payment or who want to refinance but have little equity. Most private lenders have sharply curtailed credit to those borrowers.

Read the rest of the article

Labels: bailout, Federal Housing Administration, financial crisis, mortgage meltdown

 

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9/04/2009 11:31:00 AM 0 comments links to this post

 

Communications Breakdown and Lehman Crash

by Dollars and Sense

This is part of a series (here's part 2), no doubt timed for the anniversary of the meltdown phase that begins on 7 September, when Fannie Mae and Freddie Mac were taken over.

Lehman downfall triggered by mix-up between London and Washington
Communication breakdown revealed in first-hand accounts of bank collapse

Blame game goes on as G20 ministers prepare for crucial London talks

Larry Elliott and Jill Treanor guardian.co.uk
Thursday 3 September 2009 18.17 BST

A breakdown in communications at the highest level between the US and the UK led to the shock collapse of the investment bank Lehman Brothers in September last year, a Guardian/Observer investigation has revealed.

The downfall of Lehman, which triggered the biggest banking crisis since the Great Depression, came after a rescue bid by the high street bank Barclays failed to materialise.

In London, the Treasury, the Bank of England and the Financial Services Authority all believed that the US government would step in with a financial guarantee for the troubled Wall Street bank. The tripartite authorities insist that they always made it clear to the Americans that a possible bid from Barclays could go ahead only if sweetened by US money.

But in Washington, the former Treasury secretary Hank Paulson has blamed Lehman's demise on Alistair Darling's failure to let Washington know of his misgivings until it was too late. Paulson has told journalists that during a transatlantic phone call the chancellor said he was not prepared to import the American "cancer" into Britain--something Darling strongly denies.

With finance ministers and central bank governors from the G20 countries meeting in London on Saturday, the first-hand accounts of those handling last year's events underline a rift between London and Washington over who was to blame for the demise of Lehman, which triggered a month of mayhem on the financial markets.

Lehman's demise sent shock waves around an already fragile financial system and raised fears that any bank, anywhere in the world was vulnerable to collapse. Within three days, HBOS had been rescued by Lloyds TSB. A month later RBS, HBOS and Lloyds were propped up with an unprecedented 37bn pounds of taxpayer funds.

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Labels: Alistair Darling, bailout, financial crisis, Henry Paulson, Lehman Brothers

 

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9/04/2009 11:22:00 AM 0 comments links to this post

 

Friday's Jobs Report

by Dollars and Sense

Well, the August jobs report came in, and while not a complete disaster, revealed that job losses are not declining any faster (as July's did). Meanwhile, the unemploment rate, which had shown a small reversal in July, jolted vigorously back in the wrong direction (to 9.7% from 9.4%). 15 million Americans are now out of work. And the percentage of Americans working continues to plunge precipitously (this chart--thanks to Calculated Risk--is really a shocker: it shows that the drop is the biggest and fastest during a recession since 1960, and that by rather a long shot): it's a bit above 59% now, compared with almost 63.5% in January, 2007. All told, 216,000 jobs were lost in August. June and July's losses were also revised upwards, by 49,000. The 9.7% reading is the worst since July, 1983. And the U-6 measure, which includes people working part-time who need (they say "want") full-time work, broke another record, arching to 16.8% from 16.3% in July.

The average work week (thanks again, Calculated Risk!) blipped upwards, though, in a surprising--well, sort of--development. Like the employment-to population ratio, it has been undergoing a dramatic decline, but this since January of '08. It fell a almost a full hour, to 33 hours, in that short amount of time. The uptick no doubt reflects the enormous productivity gains employers are squeezing out of shellshocked workers to pad up the bottom line given the fact that they're not selling much of anything to the same shellshocked workers. Squeezing them even more should be really helpful in this regard....

Calculated Risk also shows the "diffusion index"; this shows how job losses are spread amongst the industries that make up the productive--using that term loosely, of course--economy. This is what the writer of the blog has to say about that:

Before last Summer, the all industries employment diffusion index was in the 40s, suggesting that job losses were limited to a few industries. However starting in September the diffusion index plummeted. In March, the index hit 19.6, suggesting job losses were very widespread. The index has recovered since then to 35.2 in August, suggesting job losses are not as widespread across industries as early this year - but losses continue in many industries.

The manufacturing diffusion index fell even further, from 40 in May 2008 to just 6 in January 2009. The manufacturing index has rebounded to 29.5 in August, indicating improvement, but still fairly widespread job losses across manufacturing industries.

So the outlook for US workers is more of the same: private-sector employers very reluctant to hire or invest if they can get the job done (i.e. tease out any profits) with workers who fear for their jobs (and healthcare) in a way many of them have never done before, and government stimulus either held-up or not doing very much by way of jobs creation in the first place. And the consumer spending outlook, regarding that other means to increase those profits, must remain biased on the downside. With government programs set to be drawn down, the authorities cagily mentioning "exit strategies" once again, and expensive legislation and escalating wars to be paid for, it's devilishly hard to see where those profits could possibly come from.

Labels: Calculated Risk, economic indicators, employment, real unemployment rate, unemployment

 

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9/04/2009 10:42:00 AM 0 comments links to this post

 

Finance Gone Wild (Simon Johnson)

by Dollars and Sense

Posted this morning to the NYT Economix blog:

Finance Gone Wild

By Simon Johnson | September 3, 2009, 7:24 am

Simon Johnson, a professor of entrepreneurship at M.I.T.'s Sloan School of Management, is the former chief economist at the International Monetary Fund.

What is finance?

At one level and in most economics textbooks, this is an easy question with a rather encouraging answer. The financial sector connects savers and borrowers—providing "intermediation services." You want to save for retirement and would obviously like your savings to earn a respectable rate of return. I have a business idea but not enough money to make it happen by myself. So you put your money in the bank and the bank makes me a loan. Or I issue securities—stocks and bonds—that you or your pension fund can buy.

In this view, finance is win-win for everyone involved. And financial flows of some kind are essential to any modern economy—at least since 1800, finance has played an important role in America's economic development.

Unfortunately, 200 years of experience with real-world finance reveal that it also has at least three serious pathologies—features that can go seriously wrong and derail an economy.

First, the financial sector often acquires or aspires to political power. The fact that banks have a great deal of cash on hand always makes it easy or tempting to buy some political favors, and to obtain privilege and power for big financial enterprises. President Andrew Jackson had exactly this struggle with the Second Bank of the United States in the 1830s.

Second, the financial sector can obtain disproportionate power over industry. The "money trust" idea of the early 20th century may have been somewhat exaggerated—money cannot be corralled as effectively by private players as can, say, copper or steel—but there is no doubt that 100 years ago, Wall Street banks dominated the process of consolidating railroads and of creating pernicious industrial trusts. Trust-busting required taking on the country's most powerful financiers.

Third, finance can also go crazy, running up speculative frenzies. This is what happened the 1920s, leading to the Great Crash of 1929 and the struggle to effectively constrain finance during and after the long, depressed 1930s.

Which kind of financial sector pathologies do we face today?

Unfortunately: all of the above. And, not just in nature but also in size, we face a financial sector much more potentially debilitating than anything stared down by Jackson, Teddy Roosevelt or Franklin Roosevelt.

In our previous showdowns with finance, the sector was small. During the 19th century, the value of financial intermediation services was no more than 1 or 2 percent of gross domestic product, and in the early 20th century, the extent to which real resources—including talented people—were drawn into this sector remained very limited. J.P. Morgan, in his heyday, had great economic and political power, but he never employed more than 100 people.

With the growth of a much bigger and more diversified economy after World War II, there was some increase in financial activity as a share of G.D.P., but the really big jump came after the deregulation of the 1980s.

Just a few years ago, finance accounted for an astonishing—and unprecedented for the United States—40 percent of all corporate profits, and even today the sector generates around 7 percent of what we measure as G.D.P. Even ardent defenders of finance now concede that the sector may or even should end up significantly smaller as a share of the economy.

But at current scale, the financial sector has great ability, through political donations and other means, to maintain its lightly regulated environment. Note that there is nothing (other than the proposed consumer protection agency for financial products) to which the industry has ever objected in the administration's financial reform proposals.

And yet the amount of risk-taking that this sector can pursue remains mind-boggling, and its ability to "put" the cost of big failed bets onto the government is undiminished. Financial "innovation" remains mad and bad, and when it all goes wrong—you know who gets the bill. The implications for your future taxes and job security are not good.

We need finance, but finance as it currently operates in the United States has become a problem. Yet, with the headline numbers for the economy beginning to improve, the impetus for any real reform of this sector—within the United States or internationally—starts to fade. The likely future is: more of the same, at least until we find a Jackson or a Roosevelt.

Read the original post (which includes several hyperlinks).

Labels: finance sector, Simon Johnson

 

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9/03/2009 11:50:00 AM 0 comments links to this post

 

More on Effective Levels of Carbon Cuts

by Dollars and Sense

Needless to say, they're a lot more than what's being discussed in "serious" policy circles. From The Guardian and Vox EU.

And one more article on geoengineering. One "entrepreneurial" company actually claims to have found out how to harness "dark matter". Sometimes you just want to cry.

Labels: 10:10 pledge, climate change, Copenhagen Climate Conference, environmental crisis, geoengineering

 

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9/03/2009 10:56:00 AM 0 comments links to this post

 

Thursday's Indicators

by Dollars and Sense

More signs that the boost to US employment in August was merely a blip on the screen came in today, ahead of tomorrow's penultimate employment reports. Initial claims for unemployment continued to fall, but at a slower rate than anticipated. Applications fell 4,000 to 570,000 last week. Continuing claims rose by 92,000 in the week ended Aug. 22 to 6.23 million, however. In the all-important service-sector (from the point of view of employment), however, the pace of the business activity decline slowed, but remained in depressed territory. So the data remain uncomfortably mixed, with the outlook bias stuck in discernably negative territory. Tune in tomorrow at the same bat time for the big news to get a clearer picture (and even then...).

The Washington Post reports today that the US will need "massive" hiring" to fill mission-critical posts in the next three years. But the number given, 270,000, represents a little more than the offset on one GOOD month's losses during this recession, so it's not like it's going to make much of a difference, especially over three years, as unemployment is slated to persist at more than 8 percent levels beyond 2011.

Retail sales numbers came in, and confirm a contunuing trend toward success for low-end stores at the expense of those catering to fashion addicts. But the data are unusual because the important back-to-school numbers are truncated due to the lateness of the Labor Day holiday next week (which aren't included, for obvious reasons).

The Financial Times reported yesterday (I forgot to post this then, and I'm piggybacking on Morningstar--thanks--for this link) that insider selling on Wall Street soared in August, in yet another sign that the summer equity rally had little substance to it (beyond huge rises for the like of AIG, Fannie and Freddie, Citi, etc., and indications that short-sellers were engaged in panic-buying to cover bets gone bad, for starters). And it's funny: whereas, during the "green shoots" days, stocks moved up with every report that wasn't a disaster, now even better news is being greeted with frostiness from investors. But bonds continue to stay with stocks at relatively advanced levels, at least if you're not in China. And stocks rose there for the third straight day, at an impressive 4.8% clip (losses from Monday's dive were 2 percentage points more), on assurances from a Chinese regulator that markets were functioning despite all the hoopla about gazillions of yuan of loans being cut off and whatnot. In Japan, howver, the Nikkei index was down because of strength in the yen (which serves as something of a safety valve when temporary or slight weakneses in the US--like a poor jobs report--surface). Also, China is bracing for another bout of instability in the west.

Finally, the European Central Bank left its key interest rate at one percent, in a move that surprised only those who perhaps never knew that a Europen Central Bank ever existed. A far more interesting development will take place in two developed-country central banks, Norway's and Australia's, in the next few months. These countries, having chalked up impressive growth (both on rising natural resource prices, and Australia on super-stimulus enabled Chinese growth), are saying they will begin to extricate themselves from their "quantitative easing" programs in the next few months. You'd better believe that the folks at the Fed, the Banks of Japan and England, and the European Central Bank will be watching to see how messy an affair this could be.

Labels: Australia, China, corporate profits, economic indicators, economic stimulus, european central bank, insider trading, Monetary Policy, Norway, retail sales, service industries, weekly initial claims

 

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9/03/2009 09:55:00 AM 0 comments links to this post

 

SEC Faulted on Madoff by Inspector General

by Dollars and Sense

From Reuters:

Blistering report faults SEC for Madoff misses
Wed Sep 2, 2009 4:44pm EDT
By Ross Kerber and Rachelle Younglai

BOSTON/WASHINGTON (Reuters) U.S. securities regulators missed "numerous" red flags that may have led to Bernard Madoff's $65 billion Ponzi scheme and never did a "thorough and competent" probe despite complaints dating to 1992, a federal watchdog has concluded.

The U.S. Securities and Exchange Commission's inspector general said in a blistering report that despite five probes into Madoff's activities and catching him in "lies and misrepresentations," the SEC failed to follow up on inconsistencies.

"Despite numerous credible and detailed complaints, the SEC never properly examined or investigated Madoff's trading and never took the necessary, but basic, steps to determine if Madoff was operating a Ponzi scheme." Inspector General David Kotz wrote. The SEC also resisted whistle-blowers' efforts to help, he said.

A summary of the report was released on Wednesday and posted on the SEC's website, here. The full 450-page report is due on Friday.

Kotz said his investigation had not found evidence of improper ties between the SEC and Madoff that interfered with the SEC's examination or investigatory work.

He said he had not found that former SEC Assistant Director Eric Swanson's romantic relationship with Madoff's niece, Shana Madoff, had influenced the SEC's conduct.

Kotz said the SEC's "most egregious" lapse was its failure not to verify Madoff's purported trading with any independent third parties, even after it took testimony from Madoff himself in May 2006.

Madoff later admitted that he thought it was "game over" after testifying to having cleared his trades through the Depository Trust Co, part of the U.S. Federal Reserve, and provided his account number. He said he was "astonished" that the SEC did not follow up.

Kotz quoted one senior-level SEC examiner as saying, "Clearly, if someone ... has a Ponzi and they're stealing money, they're not going to hesitate to lie to create records," and thus "some independent third-party verification" such as through the DTC would be essential.

He also said the SEC made a "surprising discovery" earlier this decade that Madoff's hedge fund business was making far more money than his better known market-making business, but that no one thought this was a "cause for concern."


Read the rest of the article

Labels: Bernard Madoff, financial regulation, SEC, SEC Inspector General David Kotz

 

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9/02/2009 04:06:00 PM 0 comments links to this post

 

Social Networks and New Media

by Dollars and Sense

Includes box on a new scam (imagine that!). From The Financial Times:

Friends, not editors, shape internet habits
By David Gelles in San Francisco
Financial Times
Published: September 2 2009 03:00 | Last updated: September 2 2009 03:00
Charles Miller has had his media diet reshaped by social networks.

Just a year ago, the marketing executive for DirecTV in Los Angeles began his day by looking at the home page of the Yahoowebsite, surfing links to the major news stories selected by the site's editors. But today Mr Miller begins his day on Twitter and Facebook - primarily social networking sites--where he reads stories and watches videos suggested by his friends and connections.

Mr Miller's changing habits are representative of a broad shift occurring among internet users.

With social media on the rise, traditional internet portals such as Yahoo and AOL, once the front doors to the online world, are being spurned in favour of social sites, where users are discovering a new, more personal filter to the infinite world of the internet.

"The people you know are going to pick things that are more interesting to you," says Mr Miller.

This behavioural change has forced content providers to adapt quickly. Rather than assuming that users will seek out their content, media organisations--from the big international newspaper groups, down to the small local publications--are now actively promoting their content on social networks, and encouraging readers to distribute links to their friends. It is de rigueur for news websites to be embedded with devices that automatically publish articles to social networks such as Facebook and Twitter and to content sharing websites such as Digg and StumbleUpon.


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Labels: advertising, media, new media, publishing industry, social networks, underground economy

 

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9/02/2009 02:24:00 PM 0 comments links to this post

 

The Regulatory Revolving Door

by Dollars and Sense

This is what Yves Smith said about this Counterpunch article:

A reader who has first hand knowledge of some of the major US financial regulators flagged a CounterPunch article by Pam Martens as the best discussion of the "revolving door" problem that he had ever seen.

The interesting thing about this article is that it highlights a problem that is not widely recognized and therefore has no safeguards against it.

The problem is, to wit

The most important aspect of this is that the "revolving door" problem is most acute, not with the actual regulated firms, but with the professional firms that provide services to regulated entities, especially law firms (it is also a serious issue with compliance consulting firms, although that is something of a separate issue.)

One reason for that is that the standards are different for lawyers than for financial professionals. Financial professionals are forbidden from joining any company they have recently examined; but lawyers are forbidden only from working on cases they have had contact with–there are no specific prohibitions on working for law firms that have cases that they have had contact with, as long as they don't work on those cases (as if that could ever be enforced.)

That means that lawyers like Linda Thomsen, who as head of Enforcement would have been familiar with every case of significance, could go directly to work for a securities law firm already handling cases which she would most certainly have been familiar with, without Ethics making so much as a peep. I don’t know how that can be seen as anything other than a serious conflict of interest.

Will the IG Report Cover the Role of White Shoe Law Firms? Madoff and the SEC's Revolving Door
By PAM MARTENS
CounterpunchThe long-awaited investigative report by the Securities and Exchange Commission's (SEC) Inspector General on how the SEC bungled multiple investigations of Bernard Madoff is set for release this week. Unfortunately, according to media reports, the long suffering investing public will not receive the report until the SEC itself has had a chance to review it.

The team that produced this report on one of the most long-running and convoluted frauds in the history of Wall Street included Inspector General H. David Kotz who came to the SEC-IG post in December 2007 after five years as Inspector General and Associate General Counsel for the Peace Corps. The Deputy Inspector General, Noelle Frangipane, also came to the SEC from the Peace Corps where she had served as Director of Policy and Public Information.

This lack of Wall Street cronyism by the top two in the Inspector General's office might have been refreshing to some in Congress and compensated for their not knowing the difference between puts and calls and peaks and troughs and the intricacies of Mr. Madoff's split-strike conversion strategy (he splits with your money while converting you to a pauper). But the background of the member of the team heading up the Inspector General's Office of Investigations, J. David Fielder, should have rang serious alarm bells to Congressional investigators.

For the ten years leading up to July 2007, J. David Fielder worked for the SEC as a Senior Counsel in the Division of Enforcement. In February 1999, he moved to the Division of Investment Management, first as Senior Counsel on the Task Force for Adviser Regulation, then as Advisor to the Director. In November 2000, SEC Chairman, Arthur Levitt, appointed Fielder Counsel to the Chairman.

Read the rest of the article

Labels: ADP private sector employment report, Bernard Madoff, lobbyists, Pam Martens, securities law, Yves Smith

 

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9/02/2009 02:09:00 PM 0 comments links to this post

 

China Ups Copenhagen Ante

by Dollars and Sense

China has made a dramatic move in the run up to the December Copenhagen conference, which is set to decide on a successor (if any) to the (much ignored) Kyoto climate change protocols. It says that since the projected cost of its reducing emissions of greenhouse gases to anywhere near an effective level will increase dramatically after 2030, it and other developing countries should be compensated by the rich world (which caused virtally all of the accumulated damage so far, but are set to see its comparative emissions fall drastically). The logic seems to go like this: if it signs on to Copenhagen or other more-immediate targets, especially in the present time of pronounced eceonomic weakness, even for China, in order to avoid paying even greater sums in future (costs of dealing with the problem after any delay will increase the bill enormously, according to sceintists and economists), the rich world should pay for part of the cost of avoiding the delay. And according to the Chinese, waiting till after 2030 will result in a bill of no less than 7.5% of GDP after 2030.

The Chinese also want more technology transfer, claiming that they simply don't have the technological means to cut emissions in half by 2050 (though this is much less than what is necessary to seriously hold off deleterious effects of climate change). Good luck. Such technology almost invariably occupies the misty regions between national-security, rent-seeking and mass-produced consumer goods that preoccupies lobbysits and policy-makers. The idea that such issues can be ironed out in anywhere near a sufficient way be December, never mind afterward, is far fetched, at least under present institutional circumstances.

In fact, UN economists have argued that
"advanced countries had already used up a good part of the "atmospheric space" for greenhouse gas emissions in their climb to the top of the development ladder over the past 60 years." and that "[g]iven the close link between energy use and economic growth, there is a real concern that the sustainable development ladder has already been kicked away and with it any real chance of combining climate and development goals." And you thought neoliberalism had already done a sufficient job at that task...

Still, there's one more ludicrously desperate, highly problematic option, if all else fails: geoengineering. And who knows how the costs and benefits of that, spread appropriately unevenly, will be spread under the same inhumanly irresponsible conventions that allowed the climate change problem to get to such a destructive point in the first place....

Labels: Copenhagen Climate Conference, Environment, environmental crisis, geoengineering, George Monbiot

 

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9/02/2009 01:32:00 PM 0 comments links to this post

 

More Homespun Wisdom from the Village Idiots

by Dollars and Sense

From The Huffington Post (click on link for video). I suppose you could, to be charitable, put it down to nervousness, but I don't think a lot of these people are very nervous.

Protester Holds Up Copy Of "U.S.S Constitution" To Prove That Congress Can't Regulate Health Care
First Posted: 09- 1-09 09:10 PM | Updated: 09- 1-09 10:00 PM

Think Progress catches an amusing moment at a seemingly virulent protest against health care reform. At one point, a protester brandishes a copy of what he calls the "U.S.S. Constitution" in order to prove the false idea that the federal government doesn't have the right to regulate health care.

Think Progress has more on this new false talking point about health care.

Watch the video of the protest below

Labels: Barack Obama, health care reform, public option

 

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9/02/2009 01:24:00 PM 0 comments links to this post

 

The Empire and the Robots

by Dollars and Sense

From The Hindu. Fidel claims that those lacking health insurance in the United States are "mostly blacks and Latinos"—is that true? The idea of replacing Congress with robots is hilarious.

The Empire and the Robots

By Fidel Castro Ruz

A short while ago I dealt with the United States' plans to impose the absolute superiority of its air force as an instrument of domination on the rest of the world. I mentioned the project that by 2020 they would have more than a thousand latest generation bombers and F-22 and F-35 fighter planes in their fleet of 2500 military aircraft. In twenty more years, every single one of their war planes will be robot-operated.

Military budgets always count on the support of the immense majority of American legislators. There is hardly any state in the Union where employment does not depend in part on the defence industries.

On a global level and with constant value, military expenses have doubled in the last 10 years as if there were no danger at all of any crisis. At this moment, it is the most prosperous industry on the planet.

By 2008, approximately $1.5 trillion were invested in defence budgets. The U.S. spends 42 per cent of world expenses in this area—$607 billion—not including war expenses, while the number of people who go hungry in the world has reached the figure of 1 billion.

Two days ago a western news dispatch informed that in mid-August the U.S. army exhibited a tele-guided helicopter along with robots capable of working as sappers, 2500 of which have been sent into combat zones.

A company marketing robots maintained that the new technologies would revolutionise the manner of directing the war. It has been published that in 2003 the U.S. barely had enough robots in its arsenal and, according to AFP, "today it has 10,000 land vehicles as well as 7,000 air devices, from the small Raven that can be hand-launched right up to the gigantic Global Hawk, a spy plane 13 meters long and with a 35 meter wingspan capable of flying at great altitudes for 35 hours." This dispatch lists other weapons as well.

While the United States is spending such huge figures in killing technology, the president of that country is sweating buckets trying to bring health services to 50 million Americans who don't have them. There is such confusion that the new President said that he felt he was closer than ever to achieving reform of the health care system but that the battle is becoming fierce.

He added that the story is clear, that every time health care reforms seem closer on the horizon, special interests fight with everything they've got applying their leverage, launching publicity campaigns and using their political allies to scare the American people.

The fact is that in Los Angeles 8,000 people—most of them unemployed, according to the press—turned up in a stadium to receive medical care from a travelling free clinic that provides services to the Third World. The crowds had spent the night there. Some of them had travelled from as far away as hundreds of miles.

"'What do I care whether it's socialist or not? We're the only country in the world where the most vulnerable people have nothing,' said a college-educated woman from a black neighbourhood."

According to the report "a blood test can cost $500 and a routine dental treatment more than $1,000."

What kind of hope can that society offer the world?

The lobbyists in Congress make their profits working against a simple law intended to provide medical care to tens of millions of poor people, mostly blacks and Latinos who lack it. Even a blockaded country like Cuba has been able to do it and is even cooperating with dozens of countries in the Third World.

If robots in the hands of the transnationals can replace imperial soldiers in the wars of conquest, who will stop the transnationals in their quest for a market for their artefacts? Just as they have flooded the world with automobiles that today compete with mankind for the consumption of non-renewable energy and even foods converted into fuel, so too they can flood the world with robots that would displace millions of workers from their workplaces.

Better yet, scientists could also design robots capable of governing; that way they could spare the U.S. government and Congress that terrible, contradictory and confusing work. No doubt they would do it better and cheaper.

Labels: Cuba, Fidel Castro, health care reform, health insurance, militarism

 

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9/02/2009 12:26:00 PM 1 comments links to this post

 

Wednesday's Indicators

by Dollars and Sense

Today's important indicators focus on trends in or affecting the US labor market. The ADP US private-sector employment report, which surprised on the downside last month (i.e. its projection for job losses was for too many losses), is forecasting losses of 298,000 in August. This figure is down from the 371,000 forecasted for June, which was revised down to 360,000. Please note that this indicator, provided by the private-sector company ADP (i.e. not a government entity), excludes the government sector. On Thursday, weekly first-time and continuing unemployment claims come out, and on Friday, of course, the sacred First Friday Labor Department employment reports are to be exhibited to their countless devotees in the markets and in government (not to mention the rest of us). Bloomberg notes that the private sector losses were greater than forecast, so it'll be interesting to see if the undershoot on the downside in July's government report estimates, which was greeted with adulation (but not much of a market bounce) in early August will be matched by disappointment on the markets, if it materializes, on Friday.

Factory orders were up in July, but not as much as forecast, and an outsized part of the activity was in aircraft production, which doesn't mean it's very sustainable (aircraft, as one might imagine, tends to be a one-off sort of purchase). This type of growth may look hard to square with yesterday's upturn in manufacturing (which showed strong growth for homebuilders and autos), but this is a July figure, and the manufacturing report was for August. Meanwhile, the revised 2Q productivity figure stayed at its stratospheric level of 6.6% (it was supposed to be trimmed down to 6.1% or so). Unit labor costs were revised downward (meaning workers are getting screwed more) by .1%, to 5.9% from 5.8%.

Also, US mortgage applications fell, as did loan requests (for the first time in three months).

US employment situation continues to deteriorate in fiscally-strapped urban areas to a particularly disturbing extent, as this WSJ piece documents.

Finally, in accordance with our philosophy of widening the category of "economic indicators" beyond that focused on by wilfully short-sighted investors and economists, it seems that opium production in Afghanistan is down by 20%. Opium is Afghanistan's largest export by far, and accounts for 90% of the world's refined heroin. It's not only important for this country and region, but its precedence (though down, it seems its for supply reasons, as the article states, not so much from eradication/substitution measures taken by the "authorities"--many of whom are involved in the trade)reflects that fact that the US and NATO have precious little control over the fiefdom they inherited from the Taliban in 2001. And that lack of control, combined with an almost certainly half-baked escalation strategy by the US, will quite possibly cost US taxpayers (never mind Afghan citizens, of course) increasingly over the next few--probably highly penurious already--years.

Labels: ADP private sector employment report, drug industry, economic indicators, factory orders, mortgage offers, productivity, unit labor costs, urban life

 

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9/02/2009 10:02:00 AM 0 comments links to this post

 

Crisis Impact on US Cities

by Dollars and Sense

From The Financial Times. Worthy of note:

Because of assessment cycles, for example, it often takes several years for city property taxes to reflect changes in property values. For this reason, cities will feel the deeper effects of the recession beyond 2009, with the worst years being 2010 and 2011, the survey predicted.

That dynamic poses a potential headwind for a national economic recovery, as local governments lay off workers and scrap projects to cut costs.

"One out of seven jobs in the US is the state and local government sector," said Christopher Hoene, director of the NLC centre for research and innovation. "It suggests that this sector is large enough to drag the economy down."

It represents about 12-13 per cent of national gross domestic product, equivalent to the tourism sector, Mr Hoene said. "This is a big sector of the economy: they hire, they spend, they invest and not in inconsequential ways."

Recession hits US cities' finances
By Nicole Bullock in New York
Financial Times
Published: September 1 2009 13:44 | Last updated: September 1 2009 13:44

The finances of US cities continue to deteriorate as the ripple effects of a national recession reach local revenues, according to research.

For 2009, 88 per cent of city finance officers said their cities were less able to meet fiscal needs than in 2008, amid declining house values, restrictive credit markets, slowed consumer spending and rising unemployment, a survey conducted by the National League of Cities and released on Tuesday shows.

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Labels: employment, financial crisis, fiscal policy, housing market, meanest cities, municipal finance

 

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9/01/2009 11:13:00 AM 0 comments links to this post

 

Monbiot on the Most Recent Climate Science

by Dollars and Sense

From The Guardian:

We're pumping out CO2 to the point of no return. It's time to alter course
Scientists now say peak temperatures will not fall back. Join me in taking the 10:10 pledge--it's the best shot we've got leftGeorge Monbiot
The Guardian
Tuesday 1 September 2009

Until a few months ago, government targets for cutting greenhouse gases at least had the virtue of being wrong. They were the wrong targets, by the wrong dates, and they bore no relationship to the stated aim of preventing more than 2C of global warming. But they used a methodology that even their sternest critics (myself included) believed could be improved until it delivered the right results: the cuts just needed to be raised and accelerated.

Three papers released earlier this year changed all that. The first, published in Proceedings of the National Academy of Sciences in February, showed that the climate change we cause today will be "largely irreversible for 1,000 years after emissions stop". About 40% of the carbon dioxide produced by humans this century will remain in the atmosphere until at least the year 3000. Moreover, thanks to the peculiar ways in which the oceans absorb heat from the atmosphere, global average temperatures are likely to "remain approximately constant...until the end of the millennium despite zero further emissions".

In other words, governments' hopes about the trajectory of temperature change are ill-founded. Most, including the UK's, are working on the assumption that we can overshoot the desired targets for temperature and atmospheric concentrations of CO2, then watch them settle back later. What this paper shows is that, wherever temperatures peak, that is more or less where they will stay. There is no going back.

The other two papers were published by Nature in April. While governments and the United Nations set targets for cuts by a certain date, these papers measured something quite different: the total volume of carbon dioxide we can produce and still stand a good chance of avoiding more than 2C of warming. One paper, from a team led by Myles Allen, shows that preventing more than 2C means producing a maximum of half a trillion tonnes of carbon (1,830bn tonnes of carbon dioxide) between now and 2500 – and probably much less. The other paper, written by a team led by Malte Meinshausen, proposes that producing 1,000bn tonnes of CO2 between 2000 and 2050 would give a 25% chance of exceeding 2C of warming.

If you want an idea of what this means...

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Labels: 10:10 pledge, carbon emissions, climate change, Copenhagen Climate Conference, environmental crisis, George Monbiot

 

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9/01/2009 11:05:00 AM 0 comments links to this post

 

Gordon Brown on the Pittsburgh G20 Meeting

by Dollars and Sense

World leaders meet in Pittsburg in three weeks to try to provide some sort of binding rules for international banking. The hapless British Prime Minister, Gordon Brown, has, surprisingly perhaps, made the following ambitious proposal--which hearkens back to Keynes himself, and is, on that count alone, worthy of note. Lord knows if he's serious, as always....

This third element would include a commitment to balanced growth--avoiding the imbalances between countries that contributed to the crash--as well as an agreement between rich and emerging economies to tackle climate change.

The package would include "insurance policies" to encourage countries running huge current account surpluses to stop hoarding foreign currency. A recapitalised International Monetary Fund would be on standby, if necessary, to intervene.

Brown's three-part prescription for the G20
By Lionel Barber and Philip Stephens
Financial Times
Published: September 1 2009 03:00 | Last updated: September 1 2009 03:00
A bank holiday afternoon at the end of August and 10 Downing Street is deserted save for a handful of aides. Gordon Brown, just back from a lightning visit to British troops in Afghanistan, has already left the summer behind.

Britain's prime minister, trailing badly in the opinion polls, faces a general election many commentators expect him to lose. The war in Afghanistan is not being won. And the government faces allegations (firmly denied) that the Lockerbie bomber was returned to Libya as part of a deal to boost British business.

Mr Brown, though, is convinced he still has a story to tell. The bright spot in his short and often troubled premiership has been his prominent role in co-ordinating a global response to the financial and economic crisis.

His chairmanship of the London summit of the G20 group of leading nations in the spring was praised. His grasp of the issues--from the technicalities of banking regulation to arguments about global economic imbalances - is probably unmatched among his peers.

So it is the forthcoming G20 summit in Pittsburgh that Mr Brown wants to discuss: a chance, he says, to build on agreements struck in London and cement global recovery. Of recent signs that the world is pulling out of recession, he is "cautiously optimistic". But it would be a "historic mistake to think we can now return to business as usual."

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Labels: G20 summit, Gordon Brown, international economics, international finance, Keynes, Pittsburgh Summit

 

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9/01/2009 10:51:00 AM 1 comments links to this post

 

On Japan's Elections

by Dollars and Sense

First, A couple of pieces from today's Financial Times. This one focuses on the "business community's" fears of the newly-elected Democratic Party of Japan, especially regarding temporary workers. Temps have been notoriously exploited during the long process culminating in Japanese companies (especially big exporters) returning to profitability, and have been rewarded for their labors by being let go en masse since the crash. The DPJ has promised to ease their lot, but it's an open question whether or not they're serious or capable of standing firm on this and other issues important to business.

The second is about what the DPJ victory may mean by way of foreign policy. The DPJ has pledged that it will pursue a more independent (of the US) foreign policy than its predecessor, the Liberal Democratic Party, even to the point of reaching out to China. This would constitute a huge step in the development of Asian foreign relations, and one must ask whether or not the old cliche about Japan buying nuclear protection from the US by purchasing its ever-less valuable bonds will continue to hold true.

The FT's David Pilling is an excellent observer of Asia. Here he writes interestingly on the DPJ victory's potential impact on the Japanese ruling classes and bureacracy.

Finally, Karel van Wolferen is another fine observer of the Japanese scene, who has written about Japan in New Left Review and other fine publications. Here he meditates on the prospects for real change after the election.

Labels: Asia, Bank of Japan, China, David Pilling, Democratic Party of Japan, Foreign Policy, Karel van Wolferen, temporary workers, Yukio Hatoyama

 

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9/01/2009 10:25:00 AM 0 comments links to this post

 

New Head of Senate Banking Committee

by Dollars and Sense

And he's a beut. More change you have to see to believe. From Huffington Post:

Banks' Favorite Dem Set To Chair Banking Committee
First Posted: 09- 1-09 09:40 AM | Updated: 09- 1-09 10:32 AM
Ryan Grim
If Senator Tim Johnson ascends to the chairmanship of the Senate Banking Committee, the biggest winners will be Wall Street, pay-day lenders and credit card companies. The biggest losers: widows and orphans.

No, really.

In late 2006, the South Dakotan spoke out against an effort by his fellow Democrats to cap the interest rates that members of the military pay for short-term loans. "This time it's military. Who's to say it isn't going to be widows and orphans or other sympathetic groups in the future?" he griped in an interview with the American Banker.

That's the man who's next in line to lead the Banking Committee if the current chair, Sen. Chris Dodd (D-Conn.), as expected, vacates the position to take the Health, Education, Labor and Pensions Committee chair left empty by the death of Ted Kennedy.

Meanwhile, Democrats are hoping to push through the most sweeping financial regulations in a generation, including the creation of a government panel that would regulate financial products with an eye toward consumer protection. All of that will have to go through the Banking Committee.

Consumer advocates and backers of a regulation overhaul are deeply concerned that handing the committee to Johnson would be a death sentence for reform.

"He's got a long track record of supporting small predatory loan companies, pay-day loan companies," said one longtime consumer advocate, who spoke on the condition of anonymity because he would have to work with Johnson as banking chair.

In 2003 and again in 2005, Johnson intervened with federal regulators on behalf of pay-day lenders, sending a letter to the Federal Deposit Insurance Corporation, urging it to go slow in writing and implementing tighter pay-day lending restrictions. He urged that regulators consider the perspective of the industry.

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Labels: Chris Dodd, payday loans, Senate Banking Committee, Senator Tim Johnson, Teddy Kennedy

 

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9/01/2009 10:18:00 AM 0 comments links to this post

 

Tuesday's Indicators

by Dollars and Sense

Canada grew in June for the first time in a year, but 2Q GDP fell by 3.4%

In the US, manufacturing grew in August for the first time in close to 2 years: autos and homebuilders, which had vastly supported any upward momentum in this sector during the boom years, and whose job losses have accounted for half those lost since December 2007, kept things going with cash-for-clunkers and tax credits for first time homeowners. And in fact, pending sales of existing homes grew faster than expected in July.

In the Eurozone, unemployment numbers weighed on stocks, as July figures rose their highest level in ten years, reaching an expected 9.5% from 9.4% in June. Also, eurozone prices fell for the third straight month, though the pace of the drop is starting to level off.

China's manufacturing grew at its fastest pace since 2008 in August. And South Korea's exports fell for the 10th month in a row, at a 20.6% rate, in July, from a year earlier.

All in all, today's figures give a boost to the slow, weak but co-ordinated worldwide recovery scenario, with the troubling exception of the Chinese and South Korean figures. The latter attest (regading China, the key question concerns how much of the uptick in manufacturing is a result of overcapacity enabled by veritable torrents of bank lending which may be abruptly cut off, something that caused Shanghai shares to drop much deeped into bear--20% loss from height--territory on Monday) to the persistence of vast imbalances in the international economic and financial systems that could upend recovery--especially of such a uniquely fragile sort as we seem to be witnessing.

Labels: Canada, China, consumer prices, economic indicators, eurozone, GDP, manufacturing, South Korea, unemployment, United States

 

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9/01/2009 09:25:00 AM 0 comments links to this post