Guess what happened when none of us (humble self ignominiously included) weren't looking? Tiny Timmy Geithner took that TARP money and created some (I don't know how many, only that I am not among them) millionaires. I am pretty certain that there aren't many NEW millionaires in the flock, just ones with new millions.
How did this happen, you ask? Well, I have the answer.
To recap. The banks were outed as 2008 proceeded, some going under, others graced with billions in taxpayer dollars. As the banks sank, they took more and more of the rest of the economy with them. In the financial markets, billions of dollars were withdrawn from stocks, plunging the DOW from 14,000 to 6,500. March 9 was the bottom.
From then to May 9, if one had $100,000 lying around dormant, one could become a millionaire. Just two months. Numbers of stocks rose 10 times or more in those two months. The ones I've found were in the self same financial services industry; not all though, Palm (of the Pilot, etc.) went up 9 times. The reason, I am convinced, is that the plunge was not justified on real economic terms. That is the crime. Little of this had to happen. Had the MegaBanks been treated just as RegularBanks are by the FDIC, there would not likely have been any contagion into the real economy. And no opportunity for those savvy enough to realize that the plunge was only temporary and artificial to get 10 times their money in two months.
Here is one example. The insurance company Conseco was at $.26 in March (the graph isn't clear enough to see which day it hit bottom, but it was about the 9th). About 9 May, it was at $3.90. More than 10 times, and you had a couple of weeks either side of 9 March to have bought at $.39.
Only folks who could toss away $100,000, or knew that the plunge was fake, actually pulled it off. And, you would have to sell off the stock, which would be about 500,000 shares, without blowing out the price. It would require some sophistication in trading to do that.
Was this a direct gift from Tiny Tim? Basically, yes. While the insurance companies are culpable, to a lesser extent than the banks and we await the commercial real estate shoe to drop, it is true that the prices spiked right after it was announced that some would be getting TARP funds. Conseco wasn't one of them, in fact. It looks like their plunge was collateral damage; their rise inevitable, once TARP and such got rolling.
Thanks Tim, from all of us who aren't new millionaires.
06 May 2009
(Un)Intended Consequences
We all know about the phrase, unintended consequences, yes? Give a hand up to a struggling capitalist, and he lays off half of his employees in order to maximize profit. What, you didn't make him promise in writing that he would use the hand up to hire more employees and not just pocket the money? Oh, you believed him when he *said* that's what he'd do with the money. Silly you.
These last couple of weeks have been rather giddy for some parts of the stock market. The recession is over, some say. (Reminds me of "Top Gear": "Some say his testicles are case hardened ball bearings. All we know is, he's called The Stig!" OK, I made part of that up.) Recalling "The Giant Pool of Money", there was all those trillions pulled out of stocks, just looking for someplace to earn lots of capital gains. According to today's NYT, the 30%-ish rise in the Dow 30 since the (may be) bottom about a month ago brings it to its historical average with respect to earnings. In other words, if you missed the rise, your boat won't get floated any time soon.
So, what are all those capitalists saying now that they have their hand ups? Mostly, that "we" can't afford to take care of the tribe. The archetype is seen in the GM/Chrysler rescues. The evil lies in the retirees and union workers, who have bankrupted the companies. The constant refrain is that "we" can't afford to pay their pensions and health insurance.
This is particularly pernicious with regard to the retirees. There hundreds of thousands of them according to a recent article. Nearly a million. So what happens to the "recovery" if these million folks lose most, if not all, of their income? Can you say Mumbai?
The perpetual refrain from the wingnut capitalists is that "we" can't afford to pay middle class wages, anymore. What they won't admit, because making most everybody else poorer makes them richer, is that soon enough the society falls apart. I suppose they've decided that they'll hightail it to Lichtenstein when the rioting starts.
But, the destruction of the blue collar (and increasingly, white collar) middle class isn't a case of unintended consequence. It's the whole point; very much intended. Remember the wingnuts rallying cry: "starve the beast", when Reagan sent the deficit soaring? Didn't work out, of course. Clinton, Bill fixed things up rather nicely by taxing the rich, which caused the economy to grow rather well. That last bit is a fact the wingnuts don't like to roam around loose.
There is an unintended consequence of killing the middle class, which is easily observed in India and China today: since neither country is a self-sufficient economy, both depend on the US, and to a lesser extent Europe, to absorb their output. India, in particular, needs the US multi-nationals to absorb its excess labour. That is a tale for another post. With regard to output, the destruction of the American middle class will shortly cause the collapse not only of American capital (without consumers to buy widgets, capital is worthless), but Chinese and Indian as well.
No matter what the wingnuts say, it really is a zero-sum game without real wealth creation. Wealth creation doesn't happen in the stock or real estate markets, increases there are just sector specific inflation. Or bubbles, if you will. Wealth creation happens when raw materials are extracted, manipulated into shape, and sold for more than the value of the materials, labour, and capital used to create the widget. That's why Apple is profitable; it turns raw materials into iPods and iPhones. Not my cup of chai, those, but very much so to many. The wealth created is in that transformation process. All other value increases, financial sector shenanigans being a prime transgressor, are just as ephemeral as cotton candy. And just as empty calories as your Mama used to pester you about.
These last couple of weeks have been rather giddy for some parts of the stock market. The recession is over, some say. (Reminds me of "Top Gear": "Some say his testicles are case hardened ball bearings. All we know is, he's called The Stig!" OK, I made part of that up.) Recalling "The Giant Pool of Money", there was all those trillions pulled out of stocks, just looking for someplace to earn lots of capital gains. According to today's NYT, the 30%-ish rise in the Dow 30 since the (may be) bottom about a month ago brings it to its historical average with respect to earnings. In other words, if you missed the rise, your boat won't get floated any time soon.
So, what are all those capitalists saying now that they have their hand ups? Mostly, that "we" can't afford to take care of the tribe. The archetype is seen in the GM/Chrysler rescues. The evil lies in the retirees and union workers, who have bankrupted the companies. The constant refrain is that "we" can't afford to pay their pensions and health insurance.
This is particularly pernicious with regard to the retirees. There hundreds of thousands of them according to a recent article. Nearly a million. So what happens to the "recovery" if these million folks lose most, if not all, of their income? Can you say Mumbai?
The perpetual refrain from the wingnut capitalists is that "we" can't afford to pay middle class wages, anymore. What they won't admit, because making most everybody else poorer makes them richer, is that soon enough the society falls apart. I suppose they've decided that they'll hightail it to Lichtenstein when the rioting starts.
But, the destruction of the blue collar (and increasingly, white collar) middle class isn't a case of unintended consequence. It's the whole point; very much intended. Remember the wingnuts rallying cry: "starve the beast", when Reagan sent the deficit soaring? Didn't work out, of course. Clinton, Bill fixed things up rather nicely by taxing the rich, which caused the economy to grow rather well. That last bit is a fact the wingnuts don't like to roam around loose.
There is an unintended consequence of killing the middle class, which is easily observed in India and China today: since neither country is a self-sufficient economy, both depend on the US, and to a lesser extent Europe, to absorb their output. India, in particular, needs the US multi-nationals to absorb its excess labour. That is a tale for another post. With regard to output, the destruction of the American middle class will shortly cause the collapse not only of American capital (without consumers to buy widgets, capital is worthless), but Chinese and Indian as well.
No matter what the wingnuts say, it really is a zero-sum game without real wealth creation. Wealth creation doesn't happen in the stock or real estate markets, increases there are just sector specific inflation. Or bubbles, if you will. Wealth creation happens when raw materials are extracted, manipulated into shape, and sold for more than the value of the materials, labour, and capital used to create the widget. That's why Apple is profitable; it turns raw materials into iPods and iPhones. Not my cup of chai, those, but very much so to many. The wealth created is in that transformation process. All other value increases, financial sector shenanigans being a prime transgressor, are just as ephemeral as cotton candy. And just as empty calories as your Mama used to pester you about.
04 May 2009
Dueling Banjos
Today's Times has Paul Krugman, Nobelist and all around smart guy versus Allen Meltzer, capitalist toady dueling flation. Krugman looks at the data and concludes (and not the only economist or financial journalist) that deflation, motivated by falling wages, is clearly on the horizon.
Krugman's argument, and mine since I started this endeavor, is that without a return to a true middle class median income, depressed economic conditions have to prevail. There is no other way. One can redefine normal full employment as 10%, but that doesn't make it normal or full employment.
Meltzer goes on and on about the evils of inflation, motivated by the government intervention in the banking meltdown. Phooey.
I'll leave it to you to figure out which is the sophisticated city guy, and which the inbred hillbilly. Read for yourselves, and decide.
Krugman's argument, and mine since I started this endeavor, is that without a return to a true middle class median income, depressed economic conditions have to prevail. There is no other way. One can redefine normal full employment as 10%, but that doesn't make it normal or full employment.
Meltzer goes on and on about the evils of inflation, motivated by the government intervention in the banking meltdown. Phooey.
I'll leave it to you to figure out which is the sophisticated city guy, and which the inbred hillbilly. Read for yourselves, and decide.
30 April 2009
Modern Lovers
Modernity has been in the language for years, if not centuries. My earliest recollection, and continuing, is hearing George Will use it with dripping sarcasm, as if a swear word. Conservatives, virtually by definition, abhor anything modern. But what, exactly is modernity? And what parts of it, assuming that it is separable, are worth having, desirable, or necessary? Let's take a walk.
To a Muslim, modernity is music. Not to be tolerated. To the Amish, electricity. To a Roman Catholic, mass in native language (assuming that Latin is no longer spoken anywhere conversationally). To a Boomer's parents, coed dorms.
So, what is modernity, negatively, to a horde of George Wills? Racial equality, enforced by law. Economic equality, permitted by law (unionization made easy). Gender equality, enforced by law. Gender preference, enforced by law. Marriage preference, permitted by law (miscegenation being the initial example). Universal health care.
But, what parts of modernity would a rational person want, at minimum? For concreteness, I'll define modernity to mean artifacts of culture and society which came into existence post World War II. That leaves out electric lighting, radio, TV (strictly speaking), air travel, and a host of other endeavors which a Boomer's grandparents didn't have at birth.
It is self-evident that the answer has to be medicine, broadly defined. I have no use for the iPhone; so far as I am concerned building them and the AT&T 3G network for them is a terrible waste of our capital. We don't need multiple, incompatible cell phone networks. Pick a standard technology, let all the manufacturers and providers implement it as best they can, and build it once. Use all that capital for other completely different purposes; rural health clinics come to mind. I like digital watches. I own a bunch, and get another about once a year. Complete waste of money, of course. One wrist. One time zone. One time. Manufacturers manage to design ever more intriguing, if only for a little while, models. I am a sucker for yet another variation on the theme of digital time. But they're modern and I really want them. Up to a point.
When push comes to shove, any adult is willing to relinquish some gadget for living longer. We all want to witness tomorrow's chapter of human history, regardless of how little we have to do with it. This is the essence of consciousness. The religious debate boils down to: if you buy our story, we guarantee you'll see all the remaining chapters of human history, just from someplace else. Now, go kill all those non-believers.
The evil in the George Wills of the world is that they are social Darwinists decrying modernity as permitting the survival of those not quite the fittest, but will go to great lengths to obfuscate their true intent. They wrap it up in words like freedom and self-expression, et cetera. Reality is that they want the many to die early to the benefit of the few. This is implicit in their campaign against unions, Medicare, Social Security; any aspect of the social safety net (so called).
The pathetic irony of Will and company is this. We are rapidly depleting the stuff in the ground, natural resources, which is required to make the gadgets we all want. As a colleague of mine (a math stat) put it: "the world is not linear". He made the observation long before it became popular as "the tipping point" and other similar aphorisms. If one assumes that a gradual change is part of a straight line, then the amount of change is tolerable and can be adapted to with sufficient time to avert permanent disaster. Non-linear phenomena, when misapprehended, don't forgive. They just fail. Oh, yeah the Irony. There are about 6,000,000,000 of us on the planet. From a resource point of view, if we neutron bombed Asia, Africa, South America, and the Pacific Islands (those low class folks) we'd get down to about 1,000,000,000. And we'd be no better off; we'd stave off disaster for a few years. Those 5,000,000,000 folks consumed resources in the neighborhood of 1% of the remaining 1,000,000,000 measured per capita. In other words, enforcing Darwinism doesn't buy us much. In order to stave off disaster for a generation or two longer, we'd have to neutron bomb half of Europe and half of the US (I vote for Florida as the first one).
In this country, the argument is that we are all living longer, but "we" can't support all those old people who refuse to die at the same age as old people died before Social Security happened. If you look at the data and cherry pick, well lie, you can say that between 1900 and 2000 life expectancy at birth went up by more than 25 years. That same data also tells you that between the start of Social Security and today, life expectancy at 65 went up by 4 years. That's it.
So, are you a modern lover? If swine flu visits your neighborhood, I'm going to guess yes.
To a Muslim, modernity is music. Not to be tolerated. To the Amish, electricity. To a Roman Catholic, mass in native language (assuming that Latin is no longer spoken anywhere conversationally). To a Boomer's parents, coed dorms.
So, what is modernity, negatively, to a horde of George Wills? Racial equality, enforced by law. Economic equality, permitted by law (unionization made easy). Gender equality, enforced by law. Gender preference, enforced by law. Marriage preference, permitted by law (miscegenation being the initial example). Universal health care.
But, what parts of modernity would a rational person want, at minimum? For concreteness, I'll define modernity to mean artifacts of culture and society which came into existence post World War II. That leaves out electric lighting, radio, TV (strictly speaking), air travel, and a host of other endeavors which a Boomer's grandparents didn't have at birth.
It is self-evident that the answer has to be medicine, broadly defined. I have no use for the iPhone; so far as I am concerned building them and the AT&T 3G network for them is a terrible waste of our capital. We don't need multiple, incompatible cell phone networks. Pick a standard technology, let all the manufacturers and providers implement it as best they can, and build it once. Use all that capital for other completely different purposes; rural health clinics come to mind. I like digital watches. I own a bunch, and get another about once a year. Complete waste of money, of course. One wrist. One time zone. One time. Manufacturers manage to design ever more intriguing, if only for a little while, models. I am a sucker for yet another variation on the theme of digital time. But they're modern and I really want them. Up to a point.
When push comes to shove, any adult is willing to relinquish some gadget for living longer. We all want to witness tomorrow's chapter of human history, regardless of how little we have to do with it. This is the essence of consciousness. The religious debate boils down to: if you buy our story, we guarantee you'll see all the remaining chapters of human history, just from someplace else. Now, go kill all those non-believers.
The evil in the George Wills of the world is that they are social Darwinists decrying modernity as permitting the survival of those not quite the fittest, but will go to great lengths to obfuscate their true intent. They wrap it up in words like freedom and self-expression, et cetera. Reality is that they want the many to die early to the benefit of the few. This is implicit in their campaign against unions, Medicare, Social Security; any aspect of the social safety net (so called).
The pathetic irony of Will and company is this. We are rapidly depleting the stuff in the ground, natural resources, which is required to make the gadgets we all want. As a colleague of mine (a math stat) put it: "the world is not linear". He made the observation long before it became popular as "the tipping point" and other similar aphorisms. If one assumes that a gradual change is part of a straight line, then the amount of change is tolerable and can be adapted to with sufficient time to avert permanent disaster. Non-linear phenomena, when misapprehended, don't forgive. They just fail. Oh, yeah the Irony. There are about 6,000,000,000 of us on the planet. From a resource point of view, if we neutron bombed Asia, Africa, South America, and the Pacific Islands (those low class folks) we'd get down to about 1,000,000,000. And we'd be no better off; we'd stave off disaster for a few years. Those 5,000,000,000 folks consumed resources in the neighborhood of 1% of the remaining 1,000,000,000 measured per capita. In other words, enforcing Darwinism doesn't buy us much. In order to stave off disaster for a generation or two longer, we'd have to neutron bomb half of Europe and half of the US (I vote for Florida as the first one).
In this country, the argument is that we are all living longer, but "we" can't support all those old people who refuse to die at the same age as old people died before Social Security happened. If you look at the data and cherry pick, well lie, you can say that between 1900 and 2000 life expectancy at birth went up by more than 25 years. That same data also tells you that between the start of Social Security and today, life expectancy at 65 went up by 4 years. That's it.
So, are you a modern lover? If swine flu visits your neighborhood, I'm going to guess yes.
25 April 2009
Where's Joe?
Joe Nocera remains absent from the Times today. I spent a bit of time with Jack Anderson, and when Van Atta went quiet (he was the principle reporter then) it meant that a Big Story was in the works.
Here's hoping we'll read something Really Big next Saturday. Yummy.
Here's hoping we'll read something Really Big next Saturday. Yummy.
22 April 2009
You say Toe-may-toe, I say you lying bastard
Am I the only person on the planet sick and tired of hearing "innovation" as the reason for the meltdown? The Wall Street scum steal our money, then they steal the language outright.
Time was, innovation meant an improvement. A better way to make widgets. A new widget that didn't exist before, and which does something for society that is useful. The iPhone, which I won't buy for lots of reasons, is arguably an innovation. It is a new widget which some folks find more useful than other phones.
Somehow, I cannot accept that finding new and shady ways to game both law and regulation, for the sole purpose of taking money from society at large, can be termed "innovation". By that definition, Al Capone was a master of innovation. No thanks.
The most irritating use: some decide that creating new law or regulation is pointless because the Wall Street crowd will "innovate" to defeat said laws or regulations. I guess Orwell was right; Newspeak has arrived. A quote from the book: "It's a beautiful thing, the destruction of words."
And here is Orwell: "I said earlier that the decadence of our language is probably curable. Those who deny this would argue, if they produced an argument at all, that language merely reflects existing social conditions, and that we cannot influence its development by any direct tinkering with words or constructions."
Mayhaps a bit of rioting in the streets is in order.
Time was, innovation meant an improvement. A better way to make widgets. A new widget that didn't exist before, and which does something for society that is useful. The iPhone, which I won't buy for lots of reasons, is arguably an innovation. It is a new widget which some folks find more useful than other phones.
Somehow, I cannot accept that finding new and shady ways to game both law and regulation, for the sole purpose of taking money from society at large, can be termed "innovation". By that definition, Al Capone was a master of innovation. No thanks.
The most irritating use: some decide that creating new law or regulation is pointless because the Wall Street crowd will "innovate" to defeat said laws or regulations. I guess Orwell was right; Newspeak has arrived. A quote from the book: "It's a beautiful thing, the destruction of words."
And here is Orwell: "I said earlier that the decadence of our language is probably curable. Those who deny this would argue, if they produced an argument at all, that language merely reflects existing social conditions, and that we cannot influence its development by any direct tinkering with words or constructions."
Mayhaps a bit of rioting in the streets is in order.
19 April 2009
Let them eat cake, it's good for them
Whilst watching today's political chat shows, a couple of lies kept being repeated.
The first is that having a single payor health system would mean the government makes health care decisions. Well, they would likely make decisions more in line with patient needs than what goes on today. I wrote, and there are at least two other, "pre-certification" systems, used by HMO's to decide whether a patient is allowed to get certain kinds of procedures. The notion that our current private sector health delivery respects the decisions of doctor and patient is one of the Winguts Big Lies. The current system is designed to generate profits for HMO's, not doctors, nor to provide superior health care to patients.
The other Big Lie, voiced by the Wingnuts and Progressives alike, is that we have to save the banks before the economy can be back on its feet. The reason credit isn't flowing is that few Americans can qualify; most Americans don't have any income to speak of. Until the 1%/22% is turned around, the economy will continue on its Marie Antionette flop.
The first is that having a single payor health system would mean the government makes health care decisions. Well, they would likely make decisions more in line with patient needs than what goes on today. I wrote, and there are at least two other, "pre-certification" systems, used by HMO's to decide whether a patient is allowed to get certain kinds of procedures. The notion that our current private sector health delivery respects the decisions of doctor and patient is one of the Winguts Big Lies. The current system is designed to generate profits for HMO's, not doctors, nor to provide superior health care to patients.
The other Big Lie, voiced by the Wingnuts and Progressives alike, is that we have to save the banks before the economy can be back on its feet. The reason credit isn't flowing is that few Americans can qualify; most Americans don't have any income to speak of. Until the 1%/22% is turned around, the economy will continue on its Marie Antionette flop.
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