Category Archives: Economy

From Huxley to Orwell

Chris Hedges over at TruthDig has a well thought out article on our transition from Huxley’s Brave New World to Orwell’s 1984.  Corporate/Governmental domination R Us.  A few exerpts:

“The façade is crumbling. And as more and more people realize that they have been used and robbed, we will move swiftly from Huxley’s “Brave New World” to Orwell’s “1984.” The public, at some point, will have to face some very unpleasant truths. The good-paying jobs are not coming back. The largest deficits in human history mean that we are trapped in a debt peonage system that will be used by the corporate state to eradicate the last vestiges of social protection for citizens, including Social Security. The state has devolved from a capitalist democracy to neo-feudalism. And when these truths become apparent, anger will replace the corporate-imposed cheerful conformity. The bleakness of our post-industrial pockets, where some 40 million Americans live in a state of poverty and tens of millions in a category called “near poverty,” coupled with the lack of credit to save families from foreclosures, bank repossessions and bankruptcy from medical bills, means that inverted totalitarianism will no longer work.

Those who do not comply with the dictates of the war on terror, a war which, as Orwell noted, is endless, are brutally silenced. The draconian security measures used to cripple protests at the G-20 gatherings in Pittsburgh and Toronto were wildly disproportionate for the level of street activity. But they sent a clear message—DO NOT TRY THIS. The FBI’s targeting of antiwar and Palestinian activists, which in late September saw agents raid homes in Minneapolis and Chicago, is a harbinger of what is to come for all who dare defy the state’s official Newspeak. The agents—our Thought Police—seized phones, computers, documents and other personal belongings. Subpoenas to appear before a grand jury have since been served on 26 people. The subpoenas cite federal law prohibiting “providing material support or resources to designated foreign terrorist organizations.” Terror, even for those who have nothing to do with terror, becomes the blunt instrument used by Big Brother to protect us from ourselves.”

On the face of it I don’t buy that high government deficits mean that the US government will be crippled.  The Fed can easily print money to pay those deficits and we could inflate our way out of our debts albeit slowly and reasonably.  A bit of inflation tends to improve the situation better than the deflation we are approaching.

That all said, the one and half parties of the wealthy will attempt to convince us otherwise, cut the deficit by imposing austerity on the poor and middle class, not the wealthy or the military.  They never willingly impose austerity on the wealthy or the military.  Chris’ suggestions of our path looks true to me.

UPDATE: A friend suggested that Chris Hedges’ article reminded her of this Barbara Ehrenreich talk, put to cartoons – Smile or Die!

Touchy, Touchy Bankers

I really cannot say it better than Paul Krugman in this case:

A great piece about Wall Street rage
by Max Abelson. Basically, they feel underappreciated [sic]. How dare Obama
talk about fat cats, or suggest that runaway finance had something to do
with the mess we’re in?

Bankers are offended. They speak of betrayal. Feelings have been hurt.

Did our nation’s elite always consist of such spoiled brats? I don’t
think so. We’re in the new Gilded Age — but while the old robber barons
said “The public be damned”, the new ones say “Ma! He’s looking at me

And these are the Masters Of The Universe.

I don’t believe in the death penalty, but …

after reading about BP & its compatriots desire to increase profits by cutting corners and the resulting human, animal and ecological devastation in the Gulf of Mexico, I'll make an exception for BP and the other corporations that created this mess.


Your kids’ economy is being robbed!

Years ago, when I took undergraduate economics, we were taught that as a person’s income increases, their savings increase as a percentage of their income.  The rationale is that wealthier people would rein in their consumption as their incomes rose.  No doubt there more than a few Republican, supply-side boosters who parroted the line to justify why it was fine and dandy for the rich to get so much richer than everyone else.

Reality hasn’t been so accommodating to that line of thought, what with the fall in the savings rate as income inequality went through the roof.  However, i didn’t have good figures until this post by Yves Smith of Naked Capitalism.  Her graphs (which she gets from a Citigroup report on Plutonomy, and why it is a good thing) sum things up nicely:

Picture 69

That is savings rate on the right and share of income claimed by the top 1%.

Picture 70

Here is the same data as a scatter plot showing the relationship even better. 

Certainly, correlation does not equal causation, but falls in the savings rate seems to lag behind rises in the share of income claimed by the top 1%.  I cannot think of a way that falls in savings rates would trigger a rise in the income of the top 1%.  However, as Yves says:

“If you are rich, you can afford to spend all your income. You don’t need
to save, because your existing wealth provides you with a more than
sufficient cushion.”

To simplify things, many folks who are poor don’t have the income to save.  Folks in the middle class have more of an ability to save and see saving for retirement as possible and so do.  The rich don’t need to save.  There is a status incentive for the middle class to spend beyond their means and emulate “their betters.”  Of course, incomes have shrunk for everyone who isn’t in the top 90%, so perhaps folks are spending to keep the status quo.

One interesting result of this condition is that as the savings rate decreases, we need to borrow more from other countries, assuming investment and government deficits are stable as a percentage of income.  Or perhaps investment could fall, leading to a future dismal economy.

On possible solution is to tax the rich and reduce the federal government’s deficit or even create a surplus.  After all, if the rich aren’t willing to save, there is no reason we cannot have the federal government do it for us.  Indeed, reversing Bush the Lessor’s tax cuts and cutting military spending would go a long way to balancing the federal government’s budget as Doug Henwood pointed out in a recent issue of the Left Business Observer.

[Yes, the title is semi-recycled.]

Greenspan takes no blame, has no shame

Well it seems former Fed Chairman Alan Greenspan is saying he saw the housing bubble, except that he wasn't able to stop it.  If his inability to fess up to his own complicity in the financial meltdown wasn't bad enough, now he wants to blame Fannie & Freddie (GSEs).  As Barry Ritholz wrote back in 2008:

  • 50% of subprime loans were made
    by mortgage service companies not subject comprehensive federal
    supervision; another 30% were made by banks or thrifts which are not
    subject to routine
    supervision or examinations
    . How was this caused by either CRA or
    GSEs ?
  • What about "No Money Down"
    Mortgages (
    0% down
    ? Were they
    required by the CRA? Fannie? Freddie?
  • Did the GSEs require banks to
    not check credit scores? Assets? Income?
  • What was it about the CRA or
    GSEs that mandated fund
    managers load up on an investment product that was hard to value,
    thinly traded, and poorly understood

I expect that there will be more attempts by conservatives to blame government laws & regulation for causing the crisis and ignore the fact that a lack of government financial regulation caused the crisis.

Web users will have to pay for what they watch and use & Where do people find the time?

Clay Shirky wrote an interesting blog post about "The Collapse of Complex Business Models" (thanks to Boing Boing and TechDirt, among others).  Here is an excerpt:

About 15 years ago, the supply part of media’s supply-and-demand
curve went parabolic, with a predictably inverse effect on price. Since
then, a battalion of media elites have lined up to declare that exactly
the opposite thing will start happening any day now.

To pick a couple of examples more or less at random, last year Barry
Diller of IAC said, of content available on the web, “It is not free,
and is not going to be,” Steve Brill of Journalism Online said that
users “just need to get back into the habit of doing so [paying for
content] online”, and Rupert Murdoch of News Corp said “Web users will
have to pay for what they watch and use.”

Diller, Brill, and Murdoch seem be stating a simple fact—we will have
to pay them—but this fact is not in fact a fact. Instead, it is a
choice, one its proponents often decline to spell out in full, because,
spelled out in full, it would read something like this:

“Web users will have to pay for what they watch and use, or else we
will have to stop making content in the costly and complex way we have
grown accustomed to making it. And we don’t know how to do that.”

With that article in mind, it seems time to revisit another one of his articles, "Gin, Television, and
Social Surplus
" that I mentioned to my friend Amy last month and haven't gotten around to sending her:

I started
telling her about the Wikipedia
article on Pluto. You may remember that Pluto got kicked out of the
planet club a couple of years ago, so all of a sudden there was all of
this activity on Wikipedia. The talk pages light up, people
are editing the article like mad, and the whole community is in an
ruckus–"How should we characterize this change in Pluto's status?" And
a little bit
at a time they move the article–fighting offstage all the
while–from, "Pluto is the ninth
planet," to "Pluto is an odd-shaped rock with an odd-shaped
orbit at the edge of the solar system."

I tell her all this stuff, and I think, "Okay, we're going to
have a conversation about authority or social construction or
whatever." That wasn't her question. She heard this story and
she shook her head and said, "Where do people find the time?"
That was her question. And I just kind of snapped. And I said, "No
one who works in TV gets to ask that question. You know where the
time comes from. It comes from the cognitive surplus you've been
masking for 50 years."

how big is that surplus? So if you take Wikipedia as a kind of unit,
all of Wikipedia, the whole project–every page, every edit,
every talk page, every line of code, in every language that Wikipedia
exists in–that represents something like the cumulation of 100
million hours of human thought. I worked this out with Martin
Wattenberg at IBM; it's a back-of-the-envelope calculation, but
it's the right order of magnitude, about 100 million hours of

Here is a talk he gave on his book "Here Comes Everybody" which elaborates further on the post's topic.

Looks like I need to pick up a copy of his book.

Just another damn quote from a tree hugger! [Good, we need more!]

Mark Boyle over at Just for the love of it posted a useful piece on why he attempts to live a life of zero waste and simplicity.  Here is one quote:

"Because we are so disconnected from the embodied energy, embodied
suffering and embodied destruction that goes into the things we buy,
the natural ecology of the planet we share is being eroded by the
minute, factory farms and horrific slaughterhouses have become insanely
'normal', and we kill millions of people in the middle east just so
that us greedy bastards can have the luxurious, built-in-obsolescence
gadgetry that oil cheap oil affords us. I am sorry if that sounds
harsh, but the truth shouldn't be avoided for fear of offence. One of
the problems in the media and the publishing world is that everyone is
so cautious that they'll upset the reader and lose some sales, and so
the truth is rarely laid bare. We're adults though, so lets all grow
up, it's really our ego's that are making this planet inhabitable for
many species."

Will Greece be the next sovereign default?

Midtowng over at The Economic Populist has a short and useful post on why Athens may default on its debts: "Five Minutes to Midnight" in Athens.  Greece is in recession, and if it balances its budget, it will likely cause it to drop into a depression.  Since it is part of the Euro, it cannot devalue its currency as a way of dealing with its crisis.

Greece has been dealing with civil unrest that started over a year ago and led to the electoral defeat of the previous conservative government.  Costas Panayotakis has one take on it and sums up the motivations of the many youthful protesters thus:

the rage of the protestors is also a feeling that today's Greek youth
will be the first generation not to live better than their parents.
Fueling this feeling are high unemployment rates, low salaries that do
not keep up with the rising cost of living, high levels of poverty (one
out of five Greeks is poor), growing household indebtedness, and
"flexible" labor relations that consign many young people to insecure,
temporary positions. This situation is partly the result of the
commitment of conservatives and Socialists alike to the European Union
and its insistence that inflation and deficits be kept low, even at the
cost of chronically high unemployment rates."

Chris Spannos posted some pictures and background on some of the more recent demonstrations, such as those by students, pensioners and public workers.