29 June 2010

So Soon You Forget, eh??

Well, that didn't take long.

A couple of days after the G-20 Monkeys asserted that their Best Plan was to repeat the stupidity of 1937, we get data which shows that 1937 is well on its way to returning; with a vengeance. Kindly refer to my Fat Man in Famine post for the reasons why. Obama?? Hillary wouldn't have been suckered by the Banksters, that much is now clear.

25 June 2010

Charlie Chan(nels) Dr. Keynes

I have argued more than once in the course of this endeavor that the Chinese government's economic decisions have been counter-productive as economic policy, although plausibly effective as warfare sans guns. Today's NY Times offers a double barrelled confirmation. First, some reporting from China.

So, the money quote:
These days, the workers are crucial for China's economy in another way: They must start buying the very products they manufacture, spending their paychecks on lipstick and lingerie, plastic lawn chairs and plasma television sets. Officials see them as the linchpin of China's move away from a lopsided economic model that relies too heavily on foreign consumption.

The government, likely being forced by the Foxconn mess as anything else, has finally figured out Econ. 101; trading with other countries only is beneficial if the trade is for physical goods (and possibly, a few services). China has used trade to simply collect foreign currencies, while denying the goods to its own people. As I pointed out in earlier posts, historically, foreign trade has been undertaken to sell surplus output to other countries, which in turn send back their surplus outputs. China's attempt to move goods to smaller markets overseas, only to collect paper bills, is ultimately foolish. They will pay the piper sooner or later. It looks like sooner. Despite what Econ. 101 teaches, comparative advantage makes sense only in a world of no monopolies, oligopolies, and manipulated currencies. Such a world does not exist today, nor did it when David Ricardo proposed the notion.

Speaking of manipulating currency, Dr. Krugman takes on that issue. Suffice it to say, he provides a bit more detail to my argument. In a nutshell, China treats currencies (other countries have done so, and will do so) like produced widgets, and strives to drive down its currency's value vis-a-vis others, principally the Almighty Dollar. This makes its exports cheap, and its imports expensive.

The two pieces dovetail nicely. The reporting shows that the government finally sees that exporting the bulk of its production is wasteful, and the analysis shows that the currency games only make sense if it were to continue to do that. Mao is reputed to have said, "Who cares if the west dropped a few nuclear bombs on china, a few hundred million chinese killed. We are china with a population of a billion, so we have a few hundred million to spare." That attitude, with the addition of nearly a United States worth of Chinese, no longer applies.

This Is the End

This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.

T. S. Eliot, "The Hollow Men"

I've come to the conclusion that Obama has neither the brains he appeared to possess during the campaigns, nor the stones necessary, to get this country out of the messes he inherited. I put the blame squarely on him, and in particular his Pollyanna facade of bipartisanship. There was never any chance of bipartisanship, given that Rove and his many dwarves continue to direct the Republican party, and any intelligent human knows that. This was a brilliant campaign strategy, but a truly foolish way to attempt to govern. Governing is about imposing your will. He has been singularly pathetic.

A few weeks before Deepwater blew up, he made his "Drill, Baby, Drill" speech announcing further drilling, and in that speech asserted that drill rigs don't cause spills. This was a bald face lie. The worst spills, world wide, are from drilling rigs, and have been for decades. There is no sign that this has abated. Either he knew these facts, and he lied; or he didn't bother to find out, merely puppeted the Bushmen's dialogue. It's a toss up which is worse; in either case, we were flummoxed. Now, would Hillary have been any better? I think so. I think she really does get it, having lived through eight years of Rovism.

From the beginning, the only way to sway the country out of its neo-fascist dream was to hammer, every day in every way, at the Right Wingnuts for what they'd done. They, mostly with lies albeit, never let a day go by without hammering anyone who isn't a card carrying fascist. Being nice to such people will only get you dead sooner.

Now that he's allowed the Right Wingnuts to set the program for "recovery", by killing the jobs bills, he's saddled the Democrats with "responsibility" for fixing the Great Recession (you do recall him saying that it was his problem now?), but given them no way to fix it. And, yes, the Right Wingnuts do want the USofA to fail, in the main. For the many to fail, the few who have accumulated wealth find that this wealth grows in value as the economy progresses through ever more pernicious deflation. So, now we enter the downward spiral, much like the Japanese since the 1990's, and the US in 1937. The double dip can't be avoided, and the second dip will be permanent.

For a few months, because (the professionals estimate) 200,000 per month will be thrown off the unemployment rolls, the unemployment rate may fall a bit. It may even do so into the Fall elections. The Right Wingnuts will take credit for having blocked the ruinous deficit busting unemployment law, and will take over both houses. They will then run the country until the 2012 presidential, when Palin will be elected, along with further Tea Baggers. The spiral into collapse accelerates. In order to prevent Democrats from ever gaining control of any branch of government, the Tea Bag Congress and Supreme Court (remember, the Tea Baggers on the Court are young-uns) write laws and "interpret" laws limiting individual action. Corporations will be allowed free reign, and the Federal government, now expunged of any left-leaning aspirations, will suddenly be empowered to do as it wishes.

What follows from this Truly Great Depression? The most necessary aspect is a police state, just like in any other banana republic, or Asian autocracy. It was reported a couple of days ago that the millionaire class has prospered since 2009, while the rest of the society has diminished. It will only get worse. The rich will continue to convince the stupid and poor that laws shackling them to poverty are really the enablement of upward mobility. The poor will continue to have six packs of kids, thus ensuring that none of them has the resources to prosper. The police state is needed to prevent popular uprising as food, clothing, shelter (the three "basics" of Econ. 101) become ever more scarce for an ever larger proportion of the population. Eventually, Rove's tactics will fail, but their intent is to have a sufficiently pervasive police in place to punish the poor.

It will be "Robo Cop", but without the happy ending.

21 June 2010

The Bad Guys Did It

Well, there is a very long article in today's NY Times, which anyone interested in knowing who did what with respect to BP should read. And, not surprisingly, I was right: the person who approved the well came in with Reagan. Not only that, but Interior/MMS and the "industry" had studies done during BushII which found the issues with blow-out preventers. Both declined to do what the consultants said needed doing. It's a chilling article. A must read.

In earlier postings, I asserted, based only on logic and their benighted history, that the Bad Guys did this. They did.

15 June 2010

The Name of The Game is Blame

I was of DC for a decade, spanning Ford to Reagan. Some facts to consider. Without feds, the Nixon crisis would have toppled the government, only the feds kept the thing running. Feds are pretty much apolitical up to GS-14 (middle manager or super techy). From there up, it's *very* political, whether you're an official appointee or so-called civil service.

Which is why Obama tonight (and since the well blew) is so stupid. He doesn't get it. He has to name names, who appointed/hired the idiots who let that go on. If these people came in on his watch, bad on him. Not likely, though. It takes time to get to real decision making, in the staff. Given that Bush/Cheney corrupted the process, but Obama has shown that he doesn't have any balls, odds are 99.44% that both the appointees are still of Bush and the feds were hired in during Bush. We still don't know (do we??) when that well was permited; my guess is that it takes years from start to finish. In other words, Bushies did it.

DC is a pure Blame Game. Obama will get us all killed if he doesn't play the Game as dirty as Rove.

09 June 2010

I Expect You to Die, Mr. Bond

I, along with billions of other humans I'd wager, was blissfully unaware of Foxconn until the number of suicides reached a level that even jingoist American press took notice. Along the way, these articles provided background about Foxconn, its clients, and the products it makes. Boy howdy.

After reading a couple of these articles, my irony meter began to go off scale. I assembled a posting or two in my skull musing that Foxconn was just an old fashioned outfit, but didn't find the time or motivation to put fingers to keyboard and do a cerebral dump. Missed a scoop, since today I found this.

The scoop is that Foxconn builds high tech gadgets and widgets in 19th century capitalist fashion: lots of hands, not so much capital, machines, that is. My New England mill town ancestors (well, not mine; I wasn't to the manor born) would instantly recognize Foxconn. In response to the suicides, Fearless Leader has decreed that suicide payments end forthwith. He had already stopped paying for on the job dying. Yes, people fall down dead on the shop floor. Darwin would be so proud of Fearless Leader.

It would appear that my early conclusion was correct. Foxconn is not a Chinese enterprise, but Taiwanese; rhetoric about Taiwan being a rebel province be damned. Bejing, unable to put it's people to useful work, is more than happy to slave them out to foreign capitalists. If ever there is danger Will Robinson, this is it. What's even more disgusting is the contemporaneous reports that Apple, at least, intends to raise the price of Foxconn product. Now, I don't know the bill of materials for an iPhone, but I'd wager that labor cost is at most a couple of bucks. Foxconn "workers" get about $1/day; there is no way that there is as much as a day's worth of labor in an iPhone.

If you've not gone to read the article I'll tell you the punchline, Fearless Leader has decided to move his factories to Vietnam (another capitalist's wet dream regime) and other such places to secure cheaper labor. Fearless Leader also intends to switch to ROBOTS to do assembly.

Historically, as I've preached before, capital was employed in small population countries, England as example, to make surplus output, which was then traded with other countries, generally to acquire goods not easily available domestically. China, as well as India, has taken the opposite, and eventually fatal, course. Rather than exporting surplus output, it enslaves its population in order to export everything. Since it gets only specie in return, not goods, nothing good is accomplished.

I saw Paul Theroux on Book TV a few months back, flogging his latest tome, and he said what I'd been aware of for decades, having been brought up on Paul Ehrlich (look him up): if you want a better life, stop having so many damn kids. The Chinese government, under Mao anyway, recognized this fact and tried. The Chinese families (I'll guess the male chauvinist pigs, mostly) didn't like that idea, much as our homeboy Christian (and those few Hassidim) zealots like to breed like rats. Now, Chinese population growth is once again prodigious. What to do with all those mouths to feed? The Chinese response hasn't been as intelligent as one might expect from a civilzation the developed a few thousand years before Western peoples were living in caves. Pimping out your population to foreign capitalists doesn't increase the production of basic goods domestically.

Nor is it clear that doing so leads to a Pareto optimal (look that up, too) allocation globally. To translate economist speak: if the cost of some product is artificially low, making excess quantities of said product is a Bad Thing. Without slave labor, the iPhone might cost $1,000. And that would be a Good Thing; less stress on networks, less time wasted making and using pointless Apps, etc. I know, I know; social engineering is Evil. But social engineering happens no matter what; with Apple and Foxconn making the decisions, only a few benefit from the misery of the many. Get It?

What we have here is object lesson in the subtitle of this endeavor: It's the Distribution, Stupid!!!

The Man Who Cried, Wolf

The NY Times has two stories today (call them Mutt and Jeff ), which I find synchronistic. The piece on leading indicators is so funny. The one on the impoverished blogger, is ever so close to my heart.

The synchronisity arises from me. I have been saying and writing and so recently blogging (in my penury) that the cause of the Great Recession (and predicted long before it occurred and this endeavor began) is other than the conventional pundits (well, most of them most of the time) conventional wisdom.

If one wants to know the direction of an economy, the sole metric one needs is median income. If it's rising, then the economy is doing well. If not, well, not. How then to explain the stability which led to the Great Recession? Median income was not rising during Reagan, BushI or BushII. The answer is median income, in particular the ratio of house price to median income. Since this ratio was rising, which it can't do in a rational economy, something nefarious had to be going on; and it was. Which I've detailed all along. It's the distribution, stupid! The clobbered middle class was robbing some Peters to pay some Pauls, those who bought early (or before) the mania supported their Keeping Up With the Joneses lifestyle by burning all that windfall equity passed on by those who bought late. If that sounds kind of like Ponzi and Bernie, well, yes it does.

The problem with being among the Accepted Crew of Pundits is that the Accepted Crew of Publishing Gatekeepers (from Fixed News to the NY Times) have only a limited tolerance for notions outside the mainstream. Thus Mr. Hugh, and I (he says blushingly), labor discreetly just for the jollies of it. Now, I know for a fact that some members of the Accepted Crew of Pundits were also leery of the Euro's ability to withstand turbulence (remember Professor Galbraith: "genius is a rising market") early on. So long as the livin' is easy, the Euro worked. But, as I have said here, a multi-country currency without a multi-country fiscal policy (one that can be enforced over any objections of sovereign states) gets dicey once recession hits.

One of the more amusing, and incorrect, aspects of the piece was comparing the thrifty countries with the spendthrift countries. The writer, and the Accepted Crew of Pundits, have always ignored the synchronisity, symbiosis even, of both. Like love and marriage, the thrifty and the spendthrift go together like a horse and carriage. It's in the distribution, Stupid! If there were level distribution, thrift and profligacy would carry out their battle within each entity (household, company, town, state, country). But there isn't level distribution, so money and production pile up on one side of the scale. In order to level the scale (if it doesn't get leveled, then a deflationary debacle results), the spendthrift on the other side must rise into action. And so it is.

08 June 2010

Let the Dominoes Fall Where They May

Another comment from someplace else. This time it's a Seeking Alpha thread, a review of Roger Lowenstein's review of the Great Recession, "The End of Wall Street". In the comments, is the assertion that the Great Recession was sparked by oil prices. Not even close. Oil, even with manipulation is a lagging indicator.

No. The crash was caused by the stagnation of median income, which is the root cause of all previous recessions/depressions (and this one too). Read economic history. Since Reagan, median income has either fallen or stagnant (depends on when you measure).

The dominoes:
- median income stagnates under Reagan/BushI
- demand for goods stagnates, as a result
- Greenspan cuts interest rates hoping for a monetarist recovery, as a result
- Wall Street (funds, largely) seek higher returns on "risk free" instruments, as a result
- housing, since it involves no heavy capital expenditure in the way manufacturing does and gets considerable government support, is the logical source of such instruments, as a result
- excess fiduciary capital exists in China, India, and it, too seeks such "risk free" instruments, as a result
- builders, seeing the inflow of money, decide to ignore the SMSA income data, and build out subdivisions at prices far in excess of established norms; median income and house payment track (until this mania) exactly; they make out like bandits (well, they are)
- subprime, Alt-A, and all other non-conventional loans depend on two assumptions: 1) household income will rise to meet the adjusted payment (it hasn't been for years, and there is no reason to conclude it will) and 2) prices will continue to rise sufficient to cover the adjusted payment and equity withdrawals (which are made to level consumption in the face of stagnant median income); neither is true

when the exotics begin to re-set, the Ponzi scheme falls. The only winners are the builders, who've gotten the money, dumped the houses, and fired all those nail hammerers. Well, the ones smart enough to realize what they were doing. Not all were.

All of this was obvious as early as 2003. It was to me, anyway, and it turns out, the Fed, recently reported. I felt so much better.

04 June 2010

Dive Into the Shallow End

A really simple post today. Just this link. The posts from 28 May on are the ones that caught my interest.