MLK Day

I probably must have mentioned, in the past, that I was there at the August 1963 March on Washington, but I was wading in the reflecting pond, trying to cool off; the acoustics were terrible, and there was a lot of background noise; and I didn't hear a word of the "I have a dream" speech until I heard it on TV back home.

In the years since 1963, the proportion of the unemployed who are black has not changed — roughly twice the proportion of the unemployed who are white.  Now that more whites are unemployed, of course, it's worse, especially for black teens, who may as well be living in Greece or Spain.  Some suggest the problem is not "racism," per se, but the fact that there are so few jobs in areas with high concentrations of blacks.

Well, when neighborhoods have miniscule incomes, demand is miniscule as well, so there are no jobs.  It looks like the problem is the same as it was half a century ago: segregation.

Stuff

Latest NSA revelations

Today's Times article, published despite NSA objections, confirms many more of our "paranoia is heightened awareness" suspicions.  I think it was especially interesting that Our Government coerced some companies into installing backdoors in their privacy software.  I'm pretty sure that GnuPG encryption still is safe, though, and it's not as hard to use as some would have you believe.  Anyway, if you want to discuss your secret terrorist plans without NSA interference, try it — but remember to do your composition and encryption offline, and to securely delete your original before you go back online.  Your hardware might be hacked.

Obama and Syria

It seems Our President did not have much success lining up support for his proposed attack on Syria at the G-20, and he's having even less success at home.  Americans, you see, are just not into it, and the ones against it for reasons more substantial than just hating Obama have some questions to ask, like, what if you bomb them now and they do it again later?  What if you make it easier for Al Nusra to come out on top?  What makes you think that sending missiles against Syria will have any impact at all on Iran, except to make nuclear negotiations more difficult for Hassan Rowhani?  Let's hope Congress, for whatever stupid reasons, says no.

Jobs

The unemployment rate is down to 7.3%, almost entirely because the labor-force participation rate is so low.  The new jobs being "created" by the "job creators" are nearly all "McJobs," and median family income remains roughly $4000 less than it was in 2008.  Sadly, the government we have is not going to do anything about it.  Some people just have too much goddamned money, and much too much of it goes to 501(c)(4)s, and from there to our "representatives" in Congress.

Trickle Up

No, it's not money trickling up.  Money is rushing up with an audible whoosh.

What's trickling up are jobs — crappy jobs.  All those asshole talking heads telling you how what young people need today is "more education" to qualify for "so many jobs" employers "can't fill" because they can't find "qualified" workers are, pretty much, full of shit.  These days, jobs that used to require a high school diploma — secretaries, sales reps, waiters and waitresses at upscale restaurants — are going to young people with four year college degrees.  Why?  Because they can't get anything better.

A 2-year degree might give you an edge up for a job at Hooters, provided your hooters make the grade, but you'll still be living on sub-minimum wage plus tips.  Unless your hooters are fantastic, don't expect the tips to be too great unless you can get those drooling bastards really drunk.

Then there are the famous "STEM" jobs — science, technology, engineering, and math.  Recently, I met a young man with a four-year degree in physics, but he couldn't even find a teaching job at a high school.  He had attended a well respected state university, and his grade point index was better than 3.5.  Yes, if he'd earned a 4.0 from an Ivy, he might have been recruited by Wall Street.  Too bad, kid.

As for all those "STEM" jobs, expect most of them go to immigrants with H-1B visas, who are accustomed to earning a lot less than native born "STEM" workers.  The main reason there is so much "bipartisan" enthusiasm for immigration reform is to keep wages low.

Will there be some young people who do well?  Of course, if their pedigree is sufficiently correct.  As Billie Holiday sang, "them that's got shall get..."

The Riots Across the Pond

I've been listening to the BBC for coverage of the rioting/looting in London and other English cities, and I've come to think that nobody over there actually gets it. In case you hadn't noticed, the class system over there is quite pronounced (including "clahhss," "clawws," "clows," and several others.) The rioters, according to David Cameron's "clahhssmates" from Oxbridge, are the "lowest of the low." They are young, uneducated, and unemployed. They are white, black, and various shades of brown. They are just knowledgeable enough to realize that the only way they ever are likely to have a few nice things is to steal them.

I think it was my favorite senator, Daniel Patrick Moynihan, who first coined the (now very politically incorrect) term, "underclass." Back in Moynihan's day, the "underclass" in the USofA was predominantly black, since race and class were even more closely correlated then. I know I heard that very term on the BBC today, spouted by some Tory twit or another, whose argument seemed to be that "the lowest of the low" are congenitally defective, with no regard at all for their lower-middle-class neighbors struggling to keep their beauty salons and falafel stands unburnt.

It's true. They couldn't care less. They'll never have a beauty salon or a falafel stand. A more upscale Blackberry or pair of sneakers is their height of aspiration.

Cameron and the Conservatives are committed to austerity. So are our homegrown plutocrats and their political allies, from both parties. Here in the USofA, as the rate of teen unemployment and the widening gap between rich and poor continue to increase, our ability to pretend that we really don't have a class system is falling apart. As state and local governments, strapped for cash, cut back on policing, fire fighting, and education, things can only get worse.

'Ow's 'at 'it ya, guvner?

Obama on regulation

In an editorial in yesterday's Wall Street Journal, the President announced an executive order calling on administrative agencies to work towards "more affordable, less intrusive" government regulation of business. The business world emitted welcoming, albeit distrustful, purrs of approval; consumer and environmental groups, to continue the cat analogy, got their backs up and their fur in a fluff, anticipating another presidential sell-out.

The general consensus, though, is that not much is likely to happen either way. Indeed, it seems most likely that the executive order is nothing but a bit more triangulation, aimed to appeal to "moderates." (Who are those legendary moderates? In my experience, "moderate" is a self-description by those who don't know enough to have an opinion.)

Anyway, if every agency begins the presidentially mandated review of all its regulations tomorrow, scarcely any changes are likely before the 2012 election. Rule changes require hearings, hearings, and more hearings, and every lobbyist and his pet iguana will line up to testify. I figure I'll just ignore the whole thing for now.

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Note: Don't miss David Leonhardt's column in today's Times, which discusses reasons the U.S. unemployment rate is so much higher than unemployment rates in other parts of the world, including most of Europe, Japan, China, and Russia.

2010

Yes, it was a pretty crappy year.

Our President spent the year sucking up to Wall Street again, except for a couple of days when he tried to sound like the populist he pretended to be pre-election. Bad couple of days, Barack — you got those Wall Street boys all mad at you and they started tossing all the taxpayer money you gave them at the Republicans. With a little help from the Supreme Court, they took the House, and all the ass kissing you've done since has been to no avail.

Now that long-term unemployment lasts longer than ever before — at least since it's been measured, which was roughly when the Great Depression ended — it's nice to have a new statistic that allows people to be unemployed longer than 99 weeks. It's also nice of you to remind us how the private sector keeps adding jobs, even if it's not fast enough to accommodate the young people entering the workforce, and even if the public sector is cutting jobs faster than the private sector is adding them.

Did Larry Summers and Tim Geithner remind you to cash in those municipal bonds before they default? Probably not. They don't work for you, Barack, they work for Wall Street.

Fuck bipartisanship — we really didn't need that tax cut legislation. As for "postpartisanship" — well, that best describes both major parties pole dancing for Wall Street, each hoping for a few more bucks tucked into its g-string than might be tucked into the g-string of the other.

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By the way, I turn 65 in January, and I have decided to officially declare myself the very first Baby Boomer ever. It is a serious responsibility, and I intend to fulfill it by being a total pain in the ass.

Quantitative Easing

The figures keep coming in — and lately, as you may have noticed, they have not been looking too good. The chief problem seems to be that both consumers and producers are more interested in paying down debt than in expanding consumption or production. Some talk about double-dip recession. Some talk about deflation.

Ben Bernanke says the Fed has not exhausted its supply of tools for fighting such threats, but he has not been especially specific. Presumably he is referring to quantitative easing, a central bank policy that, essentially, creates a bit (hopefully only a bit) of inflation and makes the "security" of Treasury bonds less attractive by further lowering the already low rates of interest they currently pay.

The recent Fed announcement that proceeds from mortgage backed securities now beginning to bring in some earnings would be reinvested in Treasuries does not really count as quantitative easing, since it does not really increase the money supply. It suggested, though, that the Fed might be willing to purchase securities with newly created money — how much, or how soon, is anybody's guess.

There are a couple of problems, though, with quantitative easing. One is the possibility that it could stimulate inflation without prompting any increase in productive business activity. If that happened, prices would go up while unemployment stayed high — stagflation, seventies style — and people certainly would feel poorer. Those on fixed or limited incomes would be poorer.

More likely, though, it would accomplish nothing at all — the experience of the Bank of Japan when it used quantitative easing in an attempt to get Japan out of its "Lost Decade" of the nineties and the recession of 2000-2001. While a cheaper dollar ought to stimulate exports, it's just as likely to spark a trade war. Every country in the developed world is trying to export its way out of the current mess, and it's illogical to think they all could succeed.

I'm inclined to think the Fed really is out of ammo, so we're going to have to depend on Congress making intelligent fiscal policy. Since I'm not making predictions anymore, I'll let you decide for yourself how likely it is that that will happen.

Recovery?

The stock market is doing great, especially the financials. GDP was up last quarter. The recession is over — right?

Technically. Maybe.

The stock market is doing well because corporate earnings are up — but not because of increased sales, because of decreased costs. When you fire half your workers and force those who remain to work twice as hard, costs are way down, and suddenly you're profitable again. With the Fed holding interest rates at rock bottom levels (should you happen to be a large corporation and not an individual consumer), it is much cheaper to replace labor with new capital.

So far, though, all we've seen is the supply side. The demand side doesn't look nearly so rosy.

Henry Ford is remembered for his decision to pay his workers well enough so that they could afford to buy his company's cars. Somewhere along the line, that idea was forgotten. As unemployment continues to rise and wages continue to be depressed, demand for everything but luxury goods has to decline. The Wall Street execs may continue to buy their $15 million condos and $18 thousand wristwatches, but who's going to be buying the Fords?

In the meanwhile, regulatory reform looks like it's going nowhere. Flush with taxpayer subsidized profits, the banks have successfully lobbied the teeth out of proposed legislation that still might not pass. It looks pretty certain that derivatives will remain largely unregulated, and that capital requirements won't be increased enough to significantly reduce risk. Chris Dodd's plan to consolidate regulation into a single agency (that is not the Fed) is dead in the water, because no Congressional committee supervising the current assortment of agencies will be willing to give up its power. I suspect a good deal of his populist stand is an attempt to get us to kind of forget about the extra-favorable treatment he got from Countrywide Finance.

As for Obama, Emmanuel, and company — I don't think they're too anxious to give up the vast contributions coming in from those generous folks at Goldman-Sachs and the like. Don't look for leadership from the White House.

The Good News: despair?

Good news, everyone! Only 247,000 jobs were lost in July – and the unemployment rate dropped from 9.5% to 9.4%!

Those who have studied arithmetic may be counting their fingers, trying to figure that out. It takes 100,000 new jobs a month just to stay even with the flow of new entrants into the job market, so how can the unemployment rate have gone down?

The answer, of course, is a reduction in the size of the labor force. Some number of individuals substantially in excess of 347,000, it seems, are no longer looking for work – or so we are told, according to government surveys of households.

I have little to no confidence in the statistical analysis accounting for the reduction in the unemployment rate. Surveys? How many? Seems to me that, in earlier decades, people were considered "no longer actively looking for work" as soon as their unemployment benefits were exhausted. I don't recall hearing anything about a change in that accounting procedure.

Granted, plenty of those people must be pretty "discouraged workers" by now, but I still suspect most of them would accept a job if something decent were offered – which is to say, I suspect the labor force is substantially larger than we're being told.

Naturally, the drop from 9.5 to 9.4 will be good news to those who think economic activity is entirely a function of psychology – that "thinking positive" is all we need to emerge from the current morass. On the other hand, if a huge number of workers have fallen into such despair that they truly are no longer looking for work, "thinking positive" really presents some problems.

The Confidence Game

Listen to enough economic news and you might be inclined to believe that the economy takes place entirely in our heads. As long as we feel good about the economy, it will be fine. It follows that the economic distress we're experiencing now is our own fault. It was brought on by a lack of faith.

If that sounds totally idiotic, that's only because it is totally idiotic. Nevertheless, the mullahs of Wall Street breathlessly await the publication of the "consumer confidence" index each month, and the Obama administration has based a good deal of recent policy on the idiotic axiom that the economy is as good as we think it is.

Well, maybe not -- or not exactly. If we believe the economy is doing better, and that our personal distress might be alleviated sometime soon, we are likely to believe that the Obama administration is doing a good job. Be confident, America! Your youngish, blackish, liberalish president is out there, taking care of you.

With that in mind, let's look at the stress test results.

The first thing that struck me was that the amount of capital we were told the top nineteen banks had to raise was roughly the same as the amount of still uncommitted TARP funds. It would be very nice if the private sector stepped up to the bat and provided that capital, but, if not, it is available in government funds without having to go back to Congress for more.

How convenient! No major bank is insolvent because the funds needed to bring it back to "health" already have been approved by Congress! Be confident, America!

Sadly, America cannot muster the patriotic spirit it needs to feel confident. It is difficult to feel confident when you think your job might disappear next week, or next month. Oh, wait! I forgot the good news -- that job losses in April were a bit less than losses in February or March.

That's not good news. It means that businesses are running out of the easy jobs to cut, and are getting into the hard ones -- that is, the people who will be harder to replace when things finally turn around and business picks up again. Under those circumstances, 539,000 is a hell of a lot of jobs. It's expensive to train a new worker to use specialized equipment or software, or to understand the specific needs of your particular customers. You hang onto those workers as long as you can, and only let them go if it's absolutely necessary.

The unemployment rate as of the end of April was 8.6%. The stress test criteria included a "worst case" unemployment rate of 10.2%. Hopefully, that's as high as unemployment will go, but it's really not the proper figure for a stress test -- it's more of a "reasonable expectation" than a "worst case."

Should my suspicions be justified, and it turns out that the stress tests were rigged to keep the big banks' additional capital requirements in line with the availability of TARP funds, more trouble is on the horizon. Unemployed workers have a distasteful propensity to default on their credit card debt. Businesses in bad enough shape to lay off workers they know they will need if they survive this recession are one step away from defaulting on their business loans.

Stress tests, my ass. Confidence? No, not much.