earlier in the week, this story hit that ruth and bernie madoff actually did have some shame, for a few hours, and tried to end their sorry thieving fraudulent lives. ate some ambien and valium. shockingly, woke up the next morning. i did not know why this was a big news story.
but, during the sunday football, the reason for this 'news' was made apparent. cbs was pimping this week's 60 Minutes show. jeez, who cares.
somehow, rich thieves never figured out the only way valium or ambien will kill you is if you gulp so many pills at once, a dozen or so find there way past your epiglottis to physically clog your windpipe. and a big handful of tylenol is all you need to do the trick. shit, suicide is wasted on all the wrong people.
hey ruth. you tried to kill yourself. next time, try harder.
if you need a simple, focused message, you're welcome.
this simple, focused message that the folks downtown at Occupy Wall Street offer to the nation is clear and obvious. except to the people who will not, or can not, accept either the message, or the reality.
and Occupy Wall Street is a success. a smashing success. after only three weeks. sure, the success may be temporary. but they are Winning-Duh!
the fact that the system is broken is now part of the conversation. it was not a month ago. now it is, on the tee vee, in the new york times, even occasionally on the murdoch (including the occupied wall street journal; while the street proper is still safe from the mobs, for the moment they got into dey heads.)
that is a success without a single demand. or a list of demands. i'm sorry, i missed that part of the revolutionary cookbook--that demands must be produced, err, on demand. there was an old term from the 60s and before. consciousness raising. still counts.
on the demand front, another way of looking at it i read earlier in the week. when there is a single injustice--we'll have a single demand. when there is a simple, uncomplicated injustice, we'll have a simple, uncomplicated demand.
see me; hear me; even mace me and arrest me; those are the demands of the day. and the success--being seen, being heard. that only took a matter of days. well done, OWS.
enough about the messengers. let me hammer the message yet again.
the system is broken. a lot broken. to the point of failure. requiring massive overhaul, including replacement or rebuilding of many key components. possibly requiring junking and replacement, which becomes more likely the longer the crippled system is driven w/o the necessary overhaul.
the political component of the system has failed; it no longer performs its democratic function. Obama and his administration has functioned 100% in the best interests of the banks, the lobbyists, the huge corporations. not one single action, regarding war, economy, health care policy, has failed to supply those interests with everything they demand, at the expense of the population at large.
we have three years of historic record to serve as proof of this claim.
the party or individual identity of the president has ceased to matter. red/blue, democrat/republican makes zero difference in the day to day and year to year policies and actions of the federal government.
the finance industry component of the system has failed. despite being given every support and every dollar they demanded after their failure was obvious to the world in 2008, they again are on the brink of an extinction event. they cannot even maintain their stock prices, as boa, morgan and goldman shares tumble over the past year.
the larger economic component of the system has failed. in our system, economic prosperity requires growth. growth used to come from savings and investment; those inputs were replaced by debt. debt (and credit) is by definition based on confidence--a reasonable expectation that the debt will be repaid.
when debt grows beyond a certain point, the confidence fails, and debt growth stops. and economic growth, and prosperity, stops.
the problem appears to be how to replace/restore debt growth. the problem in actuality is too much debt. adding more debt only breaks the system more, compounds the failure.
all the efforts to feed the failed system serves only to foster more failure. more "stimulus" only stimulates 1) more money in the pockets of the rich, the corporate and banking heads; 2) more jobs to china and higher unemployment here; 3) more debt that will never be repaid. (paraphrased/stolen from Jessé at his blog today, Jessé's Cafe Américain
the further myriad failures--education, health care delivery and profit taking, infrastructure, government bureaucracy--merely outcomes of and symptoms of the above component failures.
simple, really. the system, that we have all participated in and enjoyed our entire lives is broken. really really badly broken. no republican or democratic president or group of congressmen is going to fix it. because all they will do is a tune up--change the oil, new spark plugs, maybe wheels and a coat of paint. that is all they know how to do.
the bad news--that is the good news. that only a small percentage of americans are willing or able to accept the fact that the system is severely crippled is grim. but OWS has chipped away at that, if only for a short while.
the really bad news--we are not gonna overhaul and repair the system until it seizes up. not until a catastrophic full-stop failure. despite the opportunities, the multiple clear warnings, the wake up calls. it looks like we may be blessed with yet another opportunity, to watch it happen in europe, with maybe time to avoid it here. (i doubt it; i think when europe blows, we will have about three minutes before the first bank failure here, then its party on garth.)
i try my best not to fall in love with and commit to my forecasts and predictions (i don't limit that to women.) most of the time, i don't even like my predictions. including these two today. that Occupy Wall Street will fade away; either by co-option by the entrenched left or the labor movement or the Democratic Party; or alternatively in a spasm of violent suppression, orchestrated or not. and that america will not wake up to the severity of the failures of politics, finance and economy and demand overhaul until after the broken system is totaled.
Clue:"In this sense, the theory of" this group "may be summed up in the single sentence: abolition of private property"
Answer: Who are the Communists ?
Monday 10/24
Category: U.S. CITIES
Clue: Of the top 10 cities in population within city limits, this one of 1.4 million is the only state capital
Answer: Where is Phoenix, Az ?
Tuesday 10/25
Category: CLASSIC GAMES
Clue: Monopoly creator Charles Darrow's sole quote in "The Yale Book of Quotations" includes this 3-digit number
Answer: What is 200?
Wednesday 10/26
Category: DEATH OF AN AUTHOR
Clue: In 1940 at age 44 he died of a heart attack at his Hollywood home while reading his Princeton Alumni Weekly
Answer: Who was F. Scott Fitzgerald?
Thursday 10/27
Category: MOVIES
Clue: The villain's visage in this movie series was partly chosen due to its likeness to an 1893 work by a Norwegian artist
Answer: What are the "Scream" movies ?
Friday 10/28
Category: INVENTORS
Clue: In 1823 this Scot obtained a patent for a process that made silk, paper & "other substances impervious to water and air"
Answer: Who was Charles MacIntosh ?
Monday 10/17
Category: 2011 EVENTS
Clue: To mark an historic visit, on May 17 an Irish Army band played this song, followed by Ireland's anthem
Answer: What is 'God Save the Queen'? she ain't a human being
Tuesday 10/18
Category: FOREIGN-BORN INVENTORS
Clue: His 1922 New York Times obituary mentions that his patent no. 174,465 "has been called the most valuable patent ever issued"
Answer: Who was Alexander Graham Bell?
Wednesday 10/19
Category: THE 20TH CENTURY
Clue: In the 1940s Franklin Roosevelt coined this term in reference to all the countries allied against the Axis powers
Answer: What are the United Nations ?
Thursday 10/20
Category: TOP OF THE POP CHARTS
Clue: In 1978 he replaced his brothers at No. 1, who then replaced him; one of the brothers was a writer on all 3 songs
Answer: Who was Andy Gibb ?
Friday 10/21
Category: CHILDREN'S LITERATURE
Clue: In the original 1883 work, this title character kills a talking cricket, has his feet burned off & nearly starves
Answer: What is 'Pinocchio' ?
Monday 10/10
Category: The Revolutionary War
Clue: He was executed in 1780 & buried in Tappan, New York; his remains were moved to Westminster Abbey in 1821
Answer: Who was Major John André? he was the head of brit army intelligence, who ran benedict arnold (and probably banged arnold's wife).
Tuesday 10/11
Category: 19th CENTURY LITERATURE
Clue: " 'How are you getting on?' said" this animal character, "as soon as there was mouth enough for it to speak with"
Answer: Who is the Cheshire Cat?
Wednesday 10/12
Category: ART & STATE CAPITALS
Clue: The Georgia O'Keeffe Museum, home to the largest permanent collection of her works, is in this state capital
Answer: Where is Santa Fe, New Mexico ?
Thursday 10/13
Category: THE OSCARS
Clue: This performer is the only person to win Oscars for acting & also songwriting
Answer: Who is Barbara Streisand ?
Friday 10/14
Category: THE WESTERN HEMISPHERE
Clue: This nation lost its direct access to the Pacific around 1880 but retains a navy that now patrols its rivers & a large lake
Answer: Where is Bolivia ?
Monday 10/3
Category: REMEMBERING U.S. HISTORY
Clue: Issued in 2011, a stamp commemorating the 150th anniversary of a major event in U.S. history depicts this stronghold
Answer: Where is Fort Sumter?
Tuesday 10/4
Category: EUROPEAN TRAVEL & TOURISM
Clue: Visited by 15 million people a year, this spot in Britain honors an 1805 battle fought elsewhere
Answer: Where is Trafalgar Square?
Wednesday 10/5
Category: LITERARY TITLE CHARACTERS
Clue: He gave his horse a name that partly means "nag" in Spanish; the name he gave himself refers to a piece of armor
Answer: Who is Don Quixote? and i thought his name refers to a breakfast favorite. (quick-oats)
Thursday 10/6
Category: OSCAR NOMINATIONS
Clue: The only time 3 actors from the same movie were nominated for best actor was for this high seas film
Answer: What is Mutiny on the Bounty ?
Friday 10/7
Category: ROYALTY
Clue: The son of an Oscar winner, this prince is also a 5-time Olympian
Answer: Who is Prince Albert of Monaco ? (Grace Kelly and Prince Ranier's son)
Monday 9/26
Category: FAMILIAR PHRASE ORIGINS
Clue: In medieval times, an act of bravery got you dubbed a knight & won you a pair of golden these
Answer: What are spurs?
Tuesday 9/27
Category: ENGLISH WRITERS
Clue: English poet Thomas Hoccleve, a contemporary of this man, called him the "firste fyndere of our fair langage"
Answer: Who was Geoffery Chaucer?
Wednesday 9/28
Category: THE CHANGING U.S.A.
Clue: According to the census, this point has progressed westward since the U.S. was founded, & has moved southwest since the 1960s
Answer: What is the center of population distribution ?
Thursday 9/29
Category: THE 20th CENTURY
Clue: In February 1967 this Asian leader said his people would "never agree to negotiate under the threat of bombing"
Answer: Who was Nguyễn Sinh Cung, aka Ho Chi Mihn ?
Friday 9/30
Category:
Clue:
Answer: Wh ?
Monday 9/19
Category: AMERICAN WRITERS
Clue: In the 1840s he wrote, "I ask for, not at once no government, but at once a better government"
Answer: Who was Henry David Thoreau?
(yeah, i say the same thing, and everyone thinks i'm nuts.)
Tuesday 9/20
Category: NAME'S THE SAME
Clue: Name shared by a popular world sport & a member of the Gryllidae family
Answer: What is cricket?
Wednesday 9/21
Category: OSCAR WINNERS
Clue: The most recent father & daughter to win acting Oscars; he won for playing a veteran, she for playing a mental patient
Answer: Who are Jon Voight and Angelina Jolie?
Thursday 9/22
Category: PHILOSOPHY
Clue: Nietzsche wrote, "once you said 'God' when you gazed upon distant seas; but now i have taught you to say" this word.
Answer: What is "ubermensch" or 'superman'? just last night, listening to the ny philharmonic play Wagner (Overture to Tannhauser), i was thinking how the music made me feel like an ubermensch.
Friday 9/23
Category: AMERICAN BUSINESS
Clue: In the 1880s he developed 'Crystal A Caramels'; a product under his own name came out in 1900
Answer: Who was Milton S. Hershey? if it involves chocolate, i would not bet against me.
yet, our leaders seem to be quite confused this week.
the deficit and the debt ceiling were the recent crisis to be solved. but now, spending $400 billion is imperative to create jobs. we must cut spending, so important is this need, a congressional supercommittee has been created. but we must increase spending, right away.
that was president obama, speaking to congress. he is not alone. the ben bernanck was confused.
even though he specified severe unemployment, fallen housing prices, high gasoline and food prices and high household debt as current problems. yet he was puzzled as to why consumer spending is so weak.
now i have yet another reason for unease. i have been uneasy, dysphoric, and downright depressed because i see the economic calamity unfolding as, well, calamitous. but nearly everyone around me in america sees things quite differently.
i figured the folks nominally in charge told a bunch of lies (for our benefit, of course) while understanding the score. the true state of the economy.
now, i am not so sure. particularly the ben bernanck. i have vacillated between thinking him evil, knowing exactly what he is doing serving the banks and speculators, and thinking him incompetent, frantically pulling levers and spreading liquidity, not understanding why his drastic monetary stimulus has failed to promote sustained economic growth and prosperity.
the way he sounded yesterday, now i'm pretty sure it is the latter. he did everything his lifetime of academic work promised would prevent economic depression and deflationary collapse. he printed up a buttload of money. he did everything possible to recapitalize insolvent banks. he manipulated interest rates and the cost of credit to near zero. he weakened the dollar as far as he dare. and all he got was energy and food inflation, severe enough to negatively drag on the economy. no decrease in unemployment, no increase in exports, no GDP growth once QE2 ended.
no wonder he looks and sounds like a broken man. and no wonder he has nothing new to offer, despite plenty of opportunities (stock market volatility, big jackson hole meeting). i am figuring we will get little more than words out of the ben bernanck and the fed over the next year. because the cost of aggressive monetary policy (printing money and buying treasury securities or other 'assets') has become too great--inflation of oil and food prices, weakening of the dollar toward the breaking point.
even if things get so desperate that he tries QE3, those costs will reassert themselves even more quickly than in previous turns.
as for the other folks who are supposed to be less confused, the president and the leaders of the congress bounce wildly from spending to cutting, in their rhetoric. the third rail of politics is no longer social security, but it is now raising taxes. woe to anyone standing for election who dares mention increasing taxes, on rich or middle class.
the superficial nihilism of the gop is fake; no one loves big government more than a republican holding office. they talk 'starve the beast in the cradle' then when they hold power, they nurture the beast on borrowed money, pushing the due date off to the future. and the superficial populism of the democrats is equally fake; their true loyalty is to the big campaign contributors and to the status quo. they push off into the future the recognition on the part of their base that they have been bought off temporarily by 99 weeks of unemployment bennies on the wall and 1 in 7 americans being fed with food stamps is a holding action, not true populism.
but mr. obama, railed all summer about the need to cut spending. even social security spending. now, he insists $400 billion in new spending is just the ticket. and he'll explain in 11 days how he will pay for it.
yeah, sure. one truism, proven over and over again. the spending always happens. the paying for it in the future, never happens. that is how the deficit doubled since the last presidential election (didn't he promise to cut the deficit in half?) that is how the unfunded liabilities of the government swelled to $100 trillion with a T. that is how the literal debt, measured by the treasury bond market, grew to $14 trillion so quickly.
an economy built upon credit, once it begins to fall apart because of too much accumulated debt, cannot be repaired with more debt. an economy built upon consumer spending and consumption, once it tops out because of too much consumer debt, cannot resume growing with more consumer borrowing.
why is that so confusing?
i nearly forgot. greece is gonna blow up within a matter of days/weeks. this could spread slow or quick. but spread it will. karl thinks "It's Over" and he may be right.
and here are three good 9/11 anniversary articles. the first sums up my thoughts precisely.
some of my best lessons have come from people with whom i seriously disagree. i am often rewarded when i read/pay attention to viewpoints and ideas provided by smart, thoughtful people i think are wrong about one thing or another, large or small.
Jesse, on his wonderful daily blog, Jesse's Café Américain is one of those. kinda sorta. there is precious little of his economic and market analysis and opinion with which i disagree. but, he is an 'inflationist' (horrors!). no, he does not believe inflation is a good thing; he anticipates the resolution of our economic collapse will be inflation. he proffers that the commodity inflation we have experienced was an entirely expected result of conditions and behaviors by leaders over the past few years. he called it before and during QE1 and QE2. mad props for his profferings.
folks spend time arguing inflation vs deflation without ever clarifying their definitions of or understanding of the terms. jargon, technicalities, and lack of agreement over simple historic events confound defining and mutual understanding of the very definition of these words. even once those chores are complete, inflation and deflation are difficult factors to understand, much less to forecast.
money is an even more difficult, complicated concept. juxtaposed by the apparent simplicity of the question 'what is money'?
Jesse begins with addressing what is and what is not money, in the context of the events of the last few years. i appreciated that he and others do not consider credit and debt to be money (many other folks, including me, do so consider). but i did not understand why he did not consider credit to be money. until i read his piece today.
Let me give you three things to think about.
First, credit is NOT money. Money can be created from a number of sources throughout an economy. The expansion of credit at the business and banking level, often involving savings and fractional reserve leverage, is the major organic source of money, the point of its creation from economic activity or transactions themselves. It is the most utilitarian form of money, because it is directly tied to what one might ordinarily expect to be productive investment and economic benefits.
Sometimes this mechanism is distorted and abused, in the case of fraud or reckless lending for speculation as an example, and then the money supply begins to decouple from the real economy. It is the job of the regulators and the Fed to control this.
Like gold or any other asset or liability, credit must be transformed into a utilitarian form of wealth, or money, in order to effect the exchange. You may HAVE a million dollars in credit somewhere, but at some point someone must agree to transform that credit into actual money for you to use it. If an unused million dollar credit line expires, we do not see ourselves as a million dollars poorer.
When organic credit expansion fails to create money, the Fed or the Treasury can step in and create money non-organically, that is, not as the result of economic activity. In the case of an external standard, the Treasury can formally devalue the currency, as the US had done in the first half of the 1930s. Monetary authorities do not like to do this, because it makes their activity more transparent, and therefore more controversial.
i don't agree with many of Jesse's points and arguments. i am not smart enough or knowledgeable enough to counter many of those disagreements clearly or intelligently. but the essay helps me understand his position and perspective much more than i had previously.
i will briefly state that i believe his distinction between credit and conversion of same into actual money is a distinction without a difference, when applied to the US economy of the past 15 years.
without bothering to try to find some actual numbers (hey, i'm a blogger, not a frigging economic historian; and i ain't getting paid for this), i am gonna take a wild leap and guess that the vast majority of credit made available during the 90s and 2000s was actually converted into money (and debt). and further converted into assets. housing, other real estate, stocks, bonds, wages, goods and services. and vast amounts of those debts were destroyed, (default), as were many of those assets (housing/real estate equity and valuations, stock share values).
and, in short, at least i now understand why and how Jesse does not consider credit to be money or a money equivalent. i don't agree, but i get where he is coming from. and i sure as shit understand he may well be right, and i may be wrong. (um, i think the betting public would be justified and correct in setting odds on him, and against me.)
unfortunately, Jesse falls into some rhetorical traps (while discussing the mother of all liquidity traps), lumping all of the opposing point of view into a mis-characterization he describes. and some name calling. these are tense times; there is a lot of falling into such traps going around.
Jesse correctly (imo) states a pair of truths in his other two of three things to think about:
The second thing to remember is that the extent ofinflation or deflation is a policy decision in an otherwise unconstrained environment.
Greece does not have such a choice, for example, because the ECB controls their currency. The US probably has the most choice of all, because it not only owns its currency, but the dollar is also still the world's reserve currency. While the audience is not captive, it is at a disadvantage.
The third thing is that the creation of money from the Fed or Treasury may result in more money, but it may not result in a sustainable recovery. Money created by the Fed is high powered money, created as it were from the will of the monetary authority's policy.
Money creation, or monetary stimulus, works well in situations wherein the economy has fallen into a temporary slump, especially because of some exogenous shock or a slack period that is cyclical in nature, such as seasonal variation.
But in the event of a secular crisis or problem, monetary stimulation is a palliative, but no cure. The remedy lies generally on the fiscal and political policy actions, with the aim of correcting or repairing whatever had caused the problem in the first place.
Monetary stimulus alone, without the will to effect political reform for example, results in very uncommon economic conditions, one of which Keynes described as a 'liquidity trap.'
even if i reject my own analysis, opinions, and judgments that rest upon what i have managed to learn about our economic collapse, and 100% agree with Jesse's formulation of the finance/macroeconomic world, i can continue to hold tightly to one of my central ideas regarding the path of our collapse.
it is an idea that was little more than a wild-assed guess in 2007. and today, while i have acquired a rudimentary understanding of macro and finance, this idea is informed much more by human action, than by numbers and exponents. (wtf did you expect? i love mises to pieces; and Human Action is a great fucking book.)
as bad as a deflationary depression is for the interests of the true powers that be, the people who actually run the country and the economy (not our puppet president and elected officials), a hyperinflationary collapse is worse. much worse, if you are a superwealthy former chief executive of a wall street bank, pharmaceutical house, or other mega corporation.
and while collapse is inevitable, particularly since zero significant reform and restructuring has occurred in our banking and finance system, the mode of collapse is ultimately a policy choice. (Jesse said so!) and while high inflation is very appealing if you are a short-sighted politician (sorry for that redundancy), it is the only thing more scary to the uber-rich who actually call the shots than deflation.
i learned a lot from this essay, gained tremendous food for thought, and came to value his ideas and opinions that are directly contrary to my own even higher than the price of Apple stock three weeks ago. like Chomsky, Richard Brookheiser, Gore Vidal, at times Howard Zinn, and tons of others, thank goodness for really smart people whose ideology i do not share, but whose ideas i always value and often find agreement.
