Demonstrating his usual absence of anything resembling sensitivity, Mitt Romney kissed Binyamin Netanyahu's ass a couple of days ago, noting how Israeli "culture" must be superior to the Palestinian "culture next door" because the Israelis have more money. A lot of journalists and others have pointed out that it's hard to attain economic success while under occupation — but why belabor the obvious?
What I heard was the old stereotype of the "shrewd" Jewish businessman. Okay, that "shrewd" label, in the case of Jews, tends to include "cheap," "cutthroat," "greedy," "selfish," and "corrupt." Hey! No wonder Romney admires them so much! I wonder if anyone from AIPAC noticed.
Israelis and Palestinians, however, are not the only "neighbors" Romney cited with regard to one being economically superior to the other. Another comparison, of course, was the USofA v. Mexico; yet another was Chile v. Ecuador. For those accusing Romney of racism, those comparisons offer only more ammunition.
The USofA, as Sheriff Joe Arpaio clearly has observed, is a hell of a lot whiter than the predominantly mestizo Mexico. Chile, where the indigenous population was pretty much wiped out by the Conquistadores, had its "white" population greatly "enhanced" by emigrant Germans and Italians. Ecuador still is pretty much mestizo and Indio.
Nice examples, Mitt. As I recall, your quasi-Christian cult first allowed black members to be admitted to your priesthood way back in 1978, when you were in your early thirties. Given all of the above, it just might be reasonable to wonder if you might be a racist.
Whatever. Clearly, you want to attract many more big big bucks from Sheldon Adeldon — who accompanied you to Israel — and also from as many other right-wing corporatist Jews as you can suck into your bottomless maw. Most Jews, however — those who are not millionaires — remain pretty strong for Obama
Tuesday, July 31, 2012
Friday, July 27, 2012
Job Creators
Let's begin with the obvious: no firm hires more workers unless it needs more workers. Businesses hire when there is enough additional demand for the firm's product to justify a larger workforce. Needless to say, stagnant wages and high unemployment do not create much additional demand for most products.
Second, there must be no way management can squeeze more work out of the existing workforce. In times of job insecurity, squeezing more work out of an employee is easy. Workers will push themselves beyond all limits rather than risk being replaced by somebody more "productive." Insecure workers will be more productive, whatever the impact on their physical and emotional health.
Yes, entrepreneurs create jobs. A successful start-up needs workers, so new jobs are, indeed, "created." Aside from workers, entrepreneurs need capital — and those who produce the most jobs require a lot of capital. That's where venture capital firms come in. Venture capitalists take real risks when they bankroll new, unproven businesses. Sometimes they get good returns on their investments, and sometimes they just lose their money.
We should not confuse private equity firms with venture capital firms. Private equity firms find existing businesses that appear to be undervalued, buy them up, and look for ways to make profits for the private equity partners.
Occasionally they might change some failed business practices, and improve efficiency. Sometimes they can improve the "productivity" of the workforce — meaning that some workers become redundant. Sometimes, it makes sense to dissolve a business because its assets, sold separately, are worth more than what the private equity firm paid for it.
Sometimes it's easiest just to load up a business with debt, declare bankruptcy, and collect large "management" fees for doing so. The workers lose jobs, benefits, and pensions; lenders lose their investments; private equity partners shrug their shoulders and fatten their offshore bank accounts.
It doesn't matter when Mitt Romney stopped actively managing Bain Capital. The firm's objective never was to grow new business, much less "create" jobs. Its objective was to further enrich its already rich principals — and it did that very well.
Second, there must be no way management can squeeze more work out of the existing workforce. In times of job insecurity, squeezing more work out of an employee is easy. Workers will push themselves beyond all limits rather than risk being replaced by somebody more "productive." Insecure workers will be more productive, whatever the impact on their physical and emotional health.
Yes, entrepreneurs create jobs. A successful start-up needs workers, so new jobs are, indeed, "created." Aside from workers, entrepreneurs need capital — and those who produce the most jobs require a lot of capital. That's where venture capital firms come in. Venture capitalists take real risks when they bankroll new, unproven businesses. Sometimes they get good returns on their investments, and sometimes they just lose their money.
We should not confuse private equity firms with venture capital firms. Private equity firms find existing businesses that appear to be undervalued, buy them up, and look for ways to make profits for the private equity partners.
Occasionally they might change some failed business practices, and improve efficiency. Sometimes they can improve the "productivity" of the workforce — meaning that some workers become redundant. Sometimes, it makes sense to dissolve a business because its assets, sold separately, are worth more than what the private equity firm paid for it.
Sometimes it's easiest just to load up a business with debt, declare bankruptcy, and collect large "management" fees for doing so. The workers lose jobs, benefits, and pensions; lenders lose their investments; private equity partners shrug their shoulders and fatten their offshore bank accounts.
It doesn't matter when Mitt Romney stopped actively managing Bain Capital. The firm's objective never was to grow new business, much less "create" jobs. Its objective was to further enrich its already rich principals — and it did that very well.
Sunday, July 22, 2012
Penn State and Joe Paterno
Penn State has removed the Joe Paterno statue, most likely to erase memories of the Sandusky scandal with all due dispatch. The goal, of course, was to minimize damage to Penn State's cash cow — its football program.
Mind you, I couldn't care less about football — college or professional — or any other pursuit where muscled young men, according to various arcane rules, move spherical or ovoid objects around a circumscribed area. I do care about economics — and college football, of course, is about money a hell of a lot more than it's about sport.
Personally, I think they should have left the Paterno statue in place — forever — but they should have changed the message by mounting the proverbial three monkeys on Joepa's back.
Mind you, I couldn't care less about football — college or professional — or any other pursuit where muscled young men, according to various arcane rules, move spherical or ovoid objects around a circumscribed area. I do care about economics — and college football, of course, is about money a hell of a lot more than it's about sport.Personally, I think they should have left the Paterno statue in place — forever — but they should have changed the message by mounting the proverbial three monkeys on Joepa's back.
Thursday, July 19, 2012
Tax Policy
I've been trying to figure out what kinds of tax policy are endorsed, respectively, by Obama and Romney. It's not easy. Yes, we know Obama wants the two top income tax brackets and the capital gains tax back where they were under Clinton, but those ideas are not policy — they're talking points. They have as much chance of making it through Congress as a squirrel fart has of making it through a hurricane. We also can look back to some Obama proposals when he and Boehner were trying to strike a "grand bargain," but those ideas were contingent on Boehner accepting some elements that he had no way of getting past the House he allegedly leads.
Romney is even harder to nail down. He maintains he can lower everybody's taxes by plugging "tax loopholes," but he refuses to identify any of those "loopholes" — better known as subsidies, tax credits, and tax deductions. Personally, I think we would be better off if all the credits and deductions in our convoluted tax code were eliminated, and subsidies limited to R&D — albeit I think a lot of it has to be done gradually.
The biggest "loophole" of all is the mortgage interest deduction. At this time, it applies to interest on loans of up to one million dollars, which means it is regressive. The greatest advantages go to those who finance the most expensive homes — which means that people like you and me, who don't live in $125 million dollar homes, get a lot less out of the deduction than our more affluent non-neighbors do. Renters get nothing.
Eliminating the mortgage interest deduction would depress property values, because without that deduction, home buyers could not afford the payments on more expensive homes. Even homes sold out of foreclosure would cost their buyers more. The solution is to drop the cap on mortgage interest deductions gradually, so that property values could adjust gradually. Needless to say, this won't happen.
Representative democracy in conjunction with capitalism doesn't work too well. The people who want to lead us feed us bullshit. The plutocrats control the flow of money, power, and ideas. I don't suppose it bothers too many of us with consistent sources of income and decent health insurance all that much, but it bothers me.
The current Republican credo is "leave every child (except mine) behind, so long as I get to hang onto my current comfort level." It just might work this November, but it still makes me sick.
Romney is even harder to nail down. He maintains he can lower everybody's taxes by plugging "tax loopholes," but he refuses to identify any of those "loopholes" — better known as subsidies, tax credits, and tax deductions. Personally, I think we would be better off if all the credits and deductions in our convoluted tax code were eliminated, and subsidies limited to R&D — albeit I think a lot of it has to be done gradually.
The biggest "loophole" of all is the mortgage interest deduction. At this time, it applies to interest on loans of up to one million dollars, which means it is regressive. The greatest advantages go to those who finance the most expensive homes — which means that people like you and me, who don't live in $125 million dollar homes, get a lot less out of the deduction than our more affluent non-neighbors do. Renters get nothing.
Eliminating the mortgage interest deduction would depress property values, because without that deduction, home buyers could not afford the payments on more expensive homes. Even homes sold out of foreclosure would cost their buyers more. The solution is to drop the cap on mortgage interest deductions gradually, so that property values could adjust gradually. Needless to say, this won't happen.
Representative democracy in conjunction with capitalism doesn't work too well. The people who want to lead us feed us bullshit. The plutocrats control the flow of money, power, and ideas. I don't suppose it bothers too many of us with consistent sources of income and decent health insurance all that much, but it bothers me.
The current Republican credo is "leave every child (except mine) behind, so long as I get to hang onto my current comfort level." It just might work this November, but it still makes me sick.
Sunday, July 15, 2012
The Corporatists
Did Mitt Romney actively participate in shipping American jobs overseas, or did he just profit from it? And, really, does it matter? After all, we know for certain that Romney will do whatever he must to continue currying favor from his fellow corporatists, especially in the finance sector.
The real shame, though, is that we can't expect a great deal more from Barack Obama. The popular press has had practically nothing to say about the top-secret Trans-Pacific Partnership (TPP) negotiations currently being conducted by the administration's trade representatives — even after the leak of a section of the proposed agreement which would allow foreign corporations to sue the United States, in foreign tribunals, for "damages" they might suffer as a result of our enforcement of our own legal regulations controlling labor, health, and environmental standards.
Six hundred corporate "advisers" have access to the working texts of the agreement. Before the leak, no members or Congress had access to any part of them — not even the proposals put forth by the United States representatives to the negotiations. Follow the link above for more details.
I'm not saying there would be no difference between a Romney administration and an Obama administration — there probably would be significant differences for the various classes of Americans. What I am saying, though, is that the corporate coup d'etat against what most of us once liked to think of as our form of governance has been a complete success, and that neither party will do anything to change that.
The corporations rule.
The real shame, though, is that we can't expect a great deal more from Barack Obama. The popular press has had practically nothing to say about the top-secret Trans-Pacific Partnership (TPP) negotiations currently being conducted by the administration's trade representatives — even after the leak of a section of the proposed agreement which would allow foreign corporations to sue the United States, in foreign tribunals, for "damages" they might suffer as a result of our enforcement of our own legal regulations controlling labor, health, and environmental standards.
Six hundred corporate "advisers" have access to the working texts of the agreement. Before the leak, no members or Congress had access to any part of them — not even the proposals put forth by the United States representatives to the negotiations. Follow the link above for more details.
I'm not saying there would be no difference between a Romney administration and an Obama administration — there probably would be significant differences for the various classes of Americans. What I am saying, though, is that the corporate coup d'etat against what most of us once liked to think of as our form of governance has been a complete success, and that neither party will do anything to change that.
The corporations rule.
Wednesday, July 11, 2012
Regarding Inequality
Inequality in the USofA has been getting more than a little press lately. That makes sense, of course, since we haven't been less equal in these parts since before the Great Depression. Needless to say, it doesn't really matter how much inequality there really is, only how much inequality the public perceives there is. Anyway, here's the Pew Research Center's latest polling data.
I guess I just don't understand Republicans. The largest number of them, by far, are middle class — and a good many of those are lower middle class. It's widely said that ideology trumps reality, albeit we have to assume that's just as true of Democrats as it is of Republicans (and, perhaps, even moi.) Nevertheless, it would be illogical to assume that reality lies somewhere in between Republican and Democratic perceptions.
How much power is too much power? Here's something both parties might agree to: too much is however much it takes to disable or demolish our democratic institutions. Personally, I'm of the opinion that democracy and finance capitalism are incompatible. Are there some among the wealthiest who will refrain from corrupting the political system? I hope so. Are there some who are irredeemably corrupt? Read the news.
What is fair, economically speaking? Warren Buffet apparently thinks it's unfair that he pays taxes at a lower rate than his secretary does. I think it's unfair that my 2011 tax rate was higher than Mitt Romney's. On the other hand, I'm sure Paul Ryan or Mitch McConnell can point out reasons why Buffet's and my interpretations of "fairness" are off the mark.
As for Wall Street, more evidence for its corrupt practices is reported every day — but how much corruption is too much corruption? Could our economy survive without it, for example?
Your perception may be as good as mine — but I'll never admit it! ;-)
I guess I just don't understand Republicans. The largest number of them, by far, are middle class — and a good many of those are lower middle class. It's widely said that ideology trumps reality, albeit we have to assume that's just as true of Democrats as it is of Republicans (and, perhaps, even moi.) Nevertheless, it would be illogical to assume that reality lies somewhere in between Republican and Democratic perceptions.
How much power is too much power? Here's something both parties might agree to: too much is however much it takes to disable or demolish our democratic institutions. Personally, I'm of the opinion that democracy and finance capitalism are incompatible. Are there some among the wealthiest who will refrain from corrupting the political system? I hope so. Are there some who are irredeemably corrupt? Read the news.
What is fair, economically speaking? Warren Buffet apparently thinks it's unfair that he pays taxes at a lower rate than his secretary does. I think it's unfair that my 2011 tax rate was higher than Mitt Romney's. On the other hand, I'm sure Paul Ryan or Mitch McConnell can point out reasons why Buffet's and my interpretations of "fairness" are off the mark.
As for Wall Street, more evidence for its corrupt practices is reported every day — but how much corruption is too much corruption? Could our economy survive without it, for example?
Your perception may be as good as mine — but I'll never admit it! ;-)
Friday, July 6, 2012
The "Other" Economics
I have been doing my best to escape the "echo chamber" effect. In my case, of course, it means seeking out non-Keynesian perspectives, and while David Brooks may be enough to satisfy most Times readers, he's not enough for me. Hence, I listen regularly to Econtalk, a fascinating podcast hosted by Russ Roberts of George Mason University. Roberts, who is keen on Hayek, interviews other economists, most of whom share many of his views. (I haven't heard him go up against a real Keynesian yet, but I think it would be great fun to hear him converse with Robert Skidelsky.)
In his most recent podcast, Roberts interviewed Luigi Zingales of the University of Chicago (as in "Chicago school of economics.") Like Roberts, Zingales believes in the power of markets to achieve the greatest efficiency — but he also is concerned about the widening disparities of wealth and income in the United States. I won't try to distill the entire interview into a single blog post, but I want to mention a couple of points that perked up my ears.
First, Zingales asserts that government intervention in the economy is necessary to keep the free market functioning correctly. Roberts agrees, citing no less an authority than Adam Smith. The impact of wealth on politics, it seems, can lead to market failure. Zingales points to a little noticed feature of our most recent bankruptcy legislation, which requires that the first to be paid when a company fails are the holders of derivatives. Guess who lobbied for that provision.
Another idea that jumped out at me was that being pro-free market is not the same as being pro-business. Businesses are far less interested in free markets than in gaming the system in their favor. Makes sense, no?
Anyway, getting out of the echo chamber informs us that real economists (which excludes that asshole and Romney adviser Arthur Laffer) are not lined up with the Republican Party or Fox News. Needless to say, neither Roberts nor Zingales mentioned that specifically, but the message comes through.
Download the full interview and listen to it. It goes a bit over an hour, so maybe you'll want to listen on a long drive or during an insomniac night. Still, it's much more interesting than those vampire and/or self-help audiobooks. Then, subscribe to Econtalk on iTunes or whatever.
Get out of the bubble.
***
Update: after this post originally went online, Roberts interviewed neo-Keynsian Joseph Stiglitz. It was a fascinating conversation — nothing. Russ Roberts argues for the Austrian School in a way that helps us to understand why Keynes and Hayek, in their personal lives, got along so well.
In his most recent podcast, Roberts interviewed Luigi Zingales of the University of Chicago (as in "Chicago school of economics.") Like Roberts, Zingales believes in the power of markets to achieve the greatest efficiency — but he also is concerned about the widening disparities of wealth and income in the United States. I won't try to distill the entire interview into a single blog post, but I want to mention a couple of points that perked up my ears.
First, Zingales asserts that government intervention in the economy is necessary to keep the free market functioning correctly. Roberts agrees, citing no less an authority than Adam Smith. The impact of wealth on politics, it seems, can lead to market failure. Zingales points to a little noticed feature of our most recent bankruptcy legislation, which requires that the first to be paid when a company fails are the holders of derivatives. Guess who lobbied for that provision.
Another idea that jumped out at me was that being pro-free market is not the same as being pro-business. Businesses are far less interested in free markets than in gaming the system in their favor. Makes sense, no?
Anyway, getting out of the echo chamber informs us that real economists (which excludes that asshole and Romney adviser Arthur Laffer) are not lined up with the Republican Party or Fox News. Needless to say, neither Roberts nor Zingales mentioned that specifically, but the message comes through.
Download the full interview and listen to it. It goes a bit over an hour, so maybe you'll want to listen on a long drive or during an insomniac night. Still, it's much more interesting than those vampire and/or self-help audiobooks. Then, subscribe to Econtalk on iTunes or whatever.
Get out of the bubble.
***
Update: after this post originally went online, Roberts interviewed neo-Keynsian Joseph Stiglitz. It was a fascinating conversation — nothing. Russ Roberts argues for the Austrian School in a way that helps us to understand why Keynes and Hayek, in their personal lives, got along so well.
Wednesday, July 4, 2012
Bankers Behaving Badly
Is anybody surprised? No. We know they behave badly. In the past week, though, we have learned of some previously unrevealed varieties of misbehavior.
In my day to day life, any time I've mentioned the London Interbank Offered Rate (Libor), I've watched the eyes of my friends and acquaintances glaze over. In brief, though, it is the average interest rate at which major banks borrow from each other. Other rates for consumer and business borrowing are derived from Libor.
To compute Libor, banks report their own borrowing rates. Barclays' Bank, we now know, was reporting lower rates than it actually paid back in 2008, because being forced to pay higher rates would have been seen as a sign of financial weakness. As a result, Barclays' has paid a $450 million fine for fibbing (amounting to little more than a rounding error for a major international bank) and its CEO, COO, and board chairman have resigned.
Barclays' excuse? "All the other kids were doing it!"
Indeed, that seems to be the case. British and US regulators are investigating ten other large banks, including (needless to say) Citigroup and JPM. A bit more distressing, though, is Barclays' claim that its regulators knew what was happening, and gave tacit consent. Among those regulators was the New York Fed, at that time under the leadership of Tim Geithner.
"Well," I can hear the regulators saying should they ever be called upon to explain themselves, "we thought it would be better for market confidence if people didn't know just how fucked we really were back then."
Krugman's confidence fairy strikes again.
In my day to day life, any time I've mentioned the London Interbank Offered Rate (Libor), I've watched the eyes of my friends and acquaintances glaze over. In brief, though, it is the average interest rate at which major banks borrow from each other. Other rates for consumer and business borrowing are derived from Libor.
To compute Libor, banks report their own borrowing rates. Barclays' Bank, we now know, was reporting lower rates than it actually paid back in 2008, because being forced to pay higher rates would have been seen as a sign of financial weakness. As a result, Barclays' has paid a $450 million fine for fibbing (amounting to little more than a rounding error for a major international bank) and its CEO, COO, and board chairman have resigned.
Barclays' excuse? "All the other kids were doing it!"
Indeed, that seems to be the case. British and US regulators are investigating ten other large banks, including (needless to say) Citigroup and JPM. A bit more distressing, though, is Barclays' claim that its regulators knew what was happening, and gave tacit consent. Among those regulators was the New York Fed, at that time under the leadership of Tim Geithner.
"Well," I can hear the regulators saying should they ever be called upon to explain themselves, "we thought it would be better for market confidence if people didn't know just how fucked we really were back then."
Krugman's confidence fairy strikes again.
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