As I lie in a 33rd floor window of a New Orleans skyscraper hotel, I look out over Canal Street, into the French Quarter and over the Mississippi River... all while surfing Tom Fitzmorris' restaurant reviews on a mobile phone.
Some come to New Orleans for the music, some for the bared breasts of Mardi Gras and the rest for every other thing this heat city has to offer. We've come for the food.
Looking over The Quarter, I'm reminded of the televised images of the flooding, the devastation and the misery of Katrina. Reminded of how an entire nation sat still while one of her great metropolises slowly drowned.

I am grateful that she has mostly recovered, pushing Katrina into the past as she has done with all other storms, floods, fires and other tragedies.

At the time of Katrina, I was infuriated by those that suggested that we should abandon New Orleans, built as she is on such continually sinking ground. Now I see that New Orleans can be no other way. She hasn't been here over 300 years solely on the opinions of a few Internet pinheads.

Welcome back old girl. You didn't need my help, but I came back as fast as I could.

Now let's eat!

Cut Costs! Build it Overseas

My response to Taunter Media's answer to GM's woes:

First-time caller, long-time listener. Love your stuff.

If I may, I would like to respectfully disagree with a few of your suggstions/conclusions.

Firstly,
"A great CEO would build better cars for less money..."

Why should the target be to be cheaper? Almost all other brands, Honda, Toyota, BMW, Mercedes, et. al. cost *more* than US makes, yet led the US makes in sales.

Apple is making a booming business in a near depression selling MP3 players for $400 when you can get them everywhere else for nearly free.

Why 'cheaper'? Why not just 'better'?


Secondly,
"You would place all of your new facilities in the cheapest place possible..."

Sure, this kills the unions, but now leaves us with the question "Who exactly, will be buying these cars?" Without jobs, GM's (and the world's) largest market is bankrupt. There's no money to buy cars. How does shipping one of the country's largest employers overseas put purchasing money into the hands of the world's largest consumer?

Germany is *filthy* with unions, but seems to be doing better than most, even in this "downturn".

I believe these and other similar memes have led us to where we are today. "Make it cheaper!" "Move jobs to where it's cheaper!" "Cut labor costs at any cost" has done but one thing: make recipients of such "savings" richer and the consumer poorer. We're now seeing the very predictable end of that process.

Everyone thought that buying Chinese products at Wal-Mart "saved money". Now, we can afford to shop nowhere else.

Everyone is a huge fan of "Democracy", but for some reason the common belief is that only the rich "know how to spend money properly". The "power of the ballot box" is supposedly reserved to the plebe, but the power of money is always directed to the top.

Who would (and has 1945-1990) make for the better economy? A relatively small few who "know how to spend money best" or 300M prosperous "plebes" who are well-off and spend money often?

US Pharma Racqueteering

Capitalism for you, not so much for us:

TPM

Over the last few years, drug-makers have embraced a startlingly simple tactic for fending off competition from generic brands: paying them off. In a nutshell, the company that holds the patent on a profitable drug strikes a deal with the maker of the cheaper generic brand: you hold off on marketing your generic for several years, and in return, we'll give you a share of our profits on the drug.

So common have these deals become lately that they've been given a name: pay-for-delay. The approach -- a textbook anti-competitive tactic -- is worth billions to drug-makers, because it essentially allows them to buy more protection than their patent confers.

The Linux "Community"

So what is the source of the conflict I'm having with Linux?

In short, I'm getting something for free and bitch that it doesn't work as well as I think it should.

Is that fair? No, it's not.

I can well imagine someone who toils for free year after year to manage, create and improve Linux, just to have some jackass come along and bitch that it doesn't have a GUI to make it easier. "Hey, either contribute or go away. This is a community, not a give-away."

As some might put it, Linux is free as in speech, not as in beer.

Just keep that in mind the next time you decide you're gonna throw together a Linux system. Its an amazing thing, Linux. Despite all the Cum-By-Ya of Ubuntu -- its logo symbolizing people holding hands in a circle after all -- you will have to become not just a system administrator, but a member of The Community. You might not be contributing your time to write code, but more than likely you will be contributing your time to figuring out how to get it running again after each upgrade. Think of your contribution as being part of the Test Community... a lot like Microsoft products.

The wonder of Linux is that it is modern magic. Once you know the correct incantation, it is amazingly simple to do mind-bogglingly complex tasks. Learning the correct incantation, however, is gonna take you some time... and sometimes learning to drive a car without a steering wheel.

In that respect, Linux may always remain a "hobby" system. Sure, it can be used in "production" environments, but it will always require a dedicated Sys Admin to keep it running. This in a society where computers are moving from being specialized tools to being appliances.

Overheard in the Heart of Recycling Land

Even here in the heart of Recycling Country, it can be hard to save the world without sounding priggish. I overheard the following conversation at a recent holiday get-together:

Guest: Where can I find the paper towels?
Host: Oh, we're not that kind of family. Here, use this wet cloth.
Guest: So it's ok to put my son's booger in it?
Guest: Oh, here, have a tissue.

Far away in the arctic, another polar bear cracks through the melting ice and drowns.

Linux in a Nutshell

So I once again upgrade my Linux server and watch everything inexplicably stop working. I take out my fury and frustration on an old friend and co-worker:

"Why the frickety f*ck does Linux just randomly stop working any time you do an upgrade and require another 36 hours of forum-surfing before finding some hack way to get it working again?

Every time they change something, they frequently don't bother to create a GUI interface to replace the one the old version had. Hell, I'm a computer programmer with all the time in the world and I can't sum up enough Give A Sh*t to go sorting through the codespace every time somebody decides to change something and not document it. Why the f*ck do we have to rely on random people on the internet to explain to us how to fix things (that used to work) that were broken or changed by other random people on the internet in order to keep a server working?

Its like getting your car back from the mechanic and he's replaced your shifter, steering wheel and pedals with a bunch of cords with knobs tied to the ends. "What the fuck is this?", you'd ask, only for the mechanic to sneer, "Real drivers would figure out how to pull the cords correctly in order to drive."

Every time its the same cycle. Get things working, upgrade, something changes, spend 3 days surfing the web trying to find a way to get it working again, all the while with some jackass posting "read all the documentation and edit the config files. Real men don't use GUIs".

Reason given? "They slow things down."

Seriously. Apparently chewing up hours and hours of research getting the system to work again doesn't count as "slowing things down."

I love it how all these "He Men Don't Use GUI" trolls manage to post these messages to the internet using their CLI (Command Line Interface). Are they not using a browser? Do their computers not have a mouse connected? Of course not. Whoo hoo! They spent the time and effort to get Lynx running on their TRS-80s. Good for them. Meanwhile, the real world wants to get a job done and move on.

Its the technological equivalent of having to dig through a box of 50 remote controls to find which one works every time you power-cycle your TV. What would these nerds do in that situation? They'd go balistic and hurl their X-box through the screen. Oh, wait, they don't use X-boxes, do they? X-boxes aren't controlled by 8 toggle switches and a "load" button. F*ck."

To all of this, my old friend simply says,

"Linux exists solely for the self-aggrandizement of its contributors."
-- A. Petit

Strangely, that quote answers every question I've even had regarding why Linux works the way it does.

Fuck Linux

I've been running a Linux server for 10 years and I'm tired of this shit.

Upgraded the server to Ubuntu 9.10 the other day. (I gave the new release a few months to shake out... long enough... I thought.)

Well, they've decided to change the way Ubuntu starts and stops services. Fine. I'm ok with that. As long as it works, I don't care.

Well, what do you know! While everyone was out there replacing the old sysv whatever method of starting and stopping services with "upstart" (whatever in the hell that is) no one ever thought that maybe a GUI interface might be needed. So I do what one does every time Linux stops working: I consult the documentation. You probably know it as "the internet". So what do we get?


1. Fifteen thousand posts to the 'tubes' of "Hey! I can't find the old GUI that allows me to change services. How do I get it to work again?"

2. They changed it to "Upstart".

3. Cool. How do I start the "Upstart GUI"?

4. There isn't one.

5. Ok, ummm.... (posting to Ubuntu bug lists) "Can we get a GUI for upstart"?

6. 50 thousand responses of "Why don't you learn to use the command line interface?" "Any *real* Linux user doesn't need a GUI to get things done. It only slows things down."


How many go-rounds of this do we need before we just start shooting these people in the face? Let's all repeat this together: "Not everyone wants to spend their life in front of a screen trying to figure out how to turn off a fucking Linux service or some other minor horseshit to get their system working." Make an easy GUI or spend the rest of your days wondering why Apple is taking over the world. And from one geek to another: go talk to a girl for once.

"Buy American" Bad for America

I love these "truisms".

Similar ones are "Try to regulate Wall St. and it'll go somewhere else", "We pay huge bonuses to keep our (finance) executives from leaving our company", "The guys that got us into this mess (Wall St.) are the only ones who understand it and therefore can't be punished", "Jobs Americans don't want to do", etc.

This whole "Americans are too expensive" meme has got to be conquered before this economy can be rebuilt. Yes, I said "rebuilt" not "recover".

When we sit here and debate how impossible it is to spend American tax dollars *in America* we are *exposing the very problem*, not running into an unassailable problem whose only solution is to concede and send our tax money to other countries. Sending our incomes to China hasn't helped the economy... how will sending our tax dollars there turn out any differently?

http://www.greenbiz.com/blog/2009/11/11/buy-american-bad-america

Grateful Head

Aren'tcha always?

Never-Ending Happy Hour

MSM Reporting as Propaganda

Naked Capitalism

I’m of two minds about taking up this theme, since stating what ought to be obvious but is nevertheless unpleasant and inconvenient is apt to get one branded as lunatic fringe.

Access journalism has created what is in many respects a controlled press. And that matters because people are far more suggestible than most of us wants to admit to ourselves.

Let us start with the cheerleading in the media over Wall Street, and in particular, Goldman earnings. Matt Taibbi, in “Good News on Wall Street Means… What Exactly?,” tells us why this is so distorted:

It’s literally amazing to me that our press corps hasn’t yet managed to draw a distinction between good news on Wall Street for companies like Goldman, and good news in reality.

I watched carefully the reporting of the Dow breaking 10,000 the other day and not anywhere did I see a major news organization include a paragraph of the “On the other hand, so fucking what?” sort, one that might point out that unemployment is still at a staggering high, foreclosures are racing along at a terrifying clip, and real people are struggling more than ever. In fact the dichotomy between the economic health of ordinary people and the traditional “market indicators” is not merely a non-story, it is a sort of taboo — unmentionable in major news coverage.

The press has been on a downslope for at least a decade, as a result of strained budgets and vastly more effective government and business spin control (and it was already pretty good at that, see the BBC series, The Century of the Self, via Google video, for a real eye-opener). I met a reporter who had been overseas for six years, opening an important foreign office for the Wall Street Journal. He was stunned when he came back in 1999 to see how much reporting had changed in his absence. He said it was impossible to get to the bottom of most stories in a normal news cycle because companies had become very sophisticated in controlling their message and access.

I couldn’t tell immediately, but one of my friends remarked in 2000 that the reporting was increasingly reminiscent of what she had grown up with in communist Poland. The state of the US media became evident to me when I lived in Australia during the run-up and the first two years of the Gulf War. I would regularly e-mail people in the States about stories I thought were important and I suspected might not be getting much play in the US. My correspondents were media junkies. 85% of the time, a story that had gotten widespread coverage in Australia appeared not to have been released in the US. And the other 15%, it didn’t get much attention (for instance, buried in the middle of the first section of the New York Times). And remember, Australia was an ally and sent troops to the Iraq.

Why does this matter? Because influence via the adept packaging of information and images is very effective. The creator of the public relations industry, Edward Bernays, was the nephew of Freud and set about to use the subconscious to shape public opinion. His books included This Business of Propaganda and Manipulating Public Opinion. But it doesn’t fit our self image of being masters of our own view to recognize that we might be swayed.

In his classic, Influence: The Art of Persuasion, Robert Cialdini describes how salesmen can adeptly use social conditioning and norms to elicit favorable responses. Cialdini, a social psychologist, notes that even though he is aware of these techniques, he is unable to resist them.

One experiment from cognitive bias research assembles a number of people in a room together, but all save one are actors. Everyone in the room is shown a series of lines and asked to say out loud which is the shortest (the background design makes it a bit difficult to discern without concentrating a bit). For the first five or six rounds, the actors (and the lone experiment subject) pick the shortest one. Then, the actors start calling the LONGEST line the shortest one. After a few round s of this (and inevitably, the one not in on the game looks puzzled) about one-third of the experiment subjects start agreeing with the crowd, even though that answer is clearly incorrect. And there is boatloads of other evidence of suggestibility. For instance, numerous studies have found that if a number of people tell an individual he looks tired or sick, he will start feeling tired or sick, as the case may be.

Back to the main theme: the media dares not say anything too negative about financial services firms or their government operatives lest they lose access. The private sector has learned the lesson of the Bush Administration, that the threat of freezing a reporter out is a powerful weapon. I have had some well connected readers tell of story ideas that they served up in some detail that the media would not touch out of fear of alienating their sources. This is the sort of thing that one associates with banana republics, but we have been operating on that level for quite some time.

Not surprisingly, the government and large corporations were firmly in charge of the message during the crisis (remember the gap between the MSM reporting and the anger in the populace over the TARP, which was finally noted ONLY when Congress responded to a barrage of calls and e-mails and voted down TARP v. 1.0?) and perhaps more important, in pushing the, “move past that car wreck, things are really better” message. From the Pew Research Center:

Three storylines have dominated: efforts to help revive the banking sector, the battle over the stimulus package and the struggles of the U.S. auto industry. Together they accounted for nearly 40% of the economic coverage from February 1 through August 31. Other topics related to the crisis have been covered much less. As an example, all the reporting of retail sales, food prices, the impact of the crisis on Social Security and Medicare, its effect on education and the implications for health care combined accounted for just over 2% of all the economic coverage.

Actions by government officials and business leaders drove much of the coverage. The White House and federal agencies alone initiated nearly a third (32%) of economic stories studied through July 3. Business triggered another 21%. About a quarter of the stories (23%) was initiated by the press itself and did not rely on an external news trigger. Ordinary citizens and union workers combined to act as the catalyst for only 2% of the stories about the economy.

Fully 76% of the datelines on economic stories studied during the first five months of the Obama presidency were New York (44%) or metro Washington D.C. (32%). Only about one-fifth (21%) of the stories originated in any other city in the U.S., and about a quarter of those emanated from two other major media centers: Atlanta and Los Angeles…

Once the economic situation showed some signs of improvement—and the political fights over legislative action subsided—media coverage began to diminish. After accounting for 46% of the overall news coverage in February and March, for instance, coverage of the economic crisis dropped by more than half (to 21% of the newshole studied) from April through June. And in July and August, it fell even further (to 16%). The clearest example came in cable news. Once the political battles subsided, coverage fell by about two-thirds from March to April.

Notice even Pew has fallen for the party line a bit. The stock market rally started in March. That is not a sign of economic improvement (Krugman has said something along the lines of “The stock market has predicted 20 of the past 9 recoveries.”).

So what do we have? A media that predominantly bases its stories on what it is fed because it has to. Ever-leaner staffing, compressed news cycles, and access journalism all conspire to drive reporters to focus on the “must cover” news, which is to a large degree influenced by the parties that initiate the story. And that means they are increasingly in an echo chamber, spending so much time with the influential sources they feel they must cover that they start to be swayed by them. It is less intense, but not dissimilar to the effect achieved when reporters are embedded in military units. The journalists often wind up adopting the views of the people they associate with frequently (I am sure readers will add more nefarious theories in comments, but the point here is a simple: an up the center description of what has happened to the media shows it has fallen under the sway of powerful interests).

Now how do we get to the propaganda part? Not only, per Taibbi, are we getting the view of the economy from the vantage of the bankers, as opposed to a broad swathe of the population, but we now we have the media (well, this example is that odd hybrid, an MSM blog) telling us there is no outrage. From the Los Angeles Times (hat tip JohnD):

Except for Michael Moore, whose new movie posits that capitalism is one big Ponzi scheme, the news Wednesday that banks are thriving and that Wall Street analysts are in line for big bonuses this year seemed to land with all the political weight of a dull thud.

Oh sure, the chairman of the House Oversight and Government Reform Committee said he’ll soon hold hearings on executive pay at firms that got taxpayer bailout money, like AIG and Bank of America….

But with the Dow Jones hitting 10,000 and the economy stepping back from the precipice of last fall’s collapse, there was little of that tea-party outrage that might have been expected.

Have we moved on? Arguing that the country is now more concerned with Afghanistan and healthcare, the Wall Street Journal said of bonus outrage: “That’s so last March.”

Maybe taxpayers have simply given up on Washington’s efforts to corral Wall Street.

Now why is this sort of thing (and the media was full of more subtle versions, of happy talk re Dow 10,000 and Goldman earnings) more pernicious than it might appear?

The message, quite overly, is: if you are pissed, you are in a minority. The country has moved on. Things are getting better, get with the program. Now I saw the polar opposite today. There is a group of varying sizes, depending on the topic, that e-mails among itself, mainly professional investors, analysts, economists (I’m usually on the periphery but sometimes chime in). I never saw such an angry, active, and large thread about the Goldman BS fest today. Now if people who have not suffered much, and are presumably benefitting from the market recovery are furious, it isn’t hard to imagine that what looks like complacency in the heartlands may simply be contained rage looking for an outlet.

But per the social psychology research, this “you are in a minority, you are wrong” message DOES dissuade a lot of people. It is remarkably poisonous. And it discourages people from taking concrete action. I was surprised that some people bothered to comment on a post I put up yesterday, calling on people in the Chicago area to attend some peaceful demonstrations against the banking industry during the American Bankers Association national meeting, October 25 through 27. Some people weighed in, saying (basically) “don’t bother”.

I suppose it makes a difference whether one is old enough to remember the 1960s. Because people in large numbers got out and protested, two sets of changes that seemed impossible came about: civil rights for blacks and an end to the US involvement in Vietnam (if you read the histories, the military and intelligence experts were on the whole persuaded it was an unwinnable war, but it was seen as too costly to US prestige for America to withdraw).

And even if the effort you make narrowly is not successful (does any one person’s effort have much impact?) it breeds apathy and cynicism to suggest that doing nothing is the best course of action. If nothing else, it is better for one’s psyche to do what one can, however small, to make a difference.

Now America does not have a tradition of taking to the streets; demonstrations and rallies historically are working class affairs. But the middle class is on a path of downward mobility while the elites continue to take the cream. The widening gap might waken some impulses that have been dormant in the American psyche.

Sacrificing to the Volcano God

Love this quote:

"Capitalism will never fail because Socialism will always bail it out."
- Nathra Nader

The Economic Populist

Hundreds of years ago the Incas would sacrifice virgins to appease their Volcano God.
The Gods and methods of sacrifice may have changed, but the tradition remains.

Like the Incas of old, we find ourselves helpless against forces we do not understand. The foundations of our economy shake and falter in terrifying ways.
In o The High Priests of Economics tell us that "globalization cannot be stopped," just like the wrath of the Volcano God. We've been told that there is no alternative to neoliberal globalization other than utter ruin.
The High Priests tells us that the destruction wrought by "Globalization is good" and should be embraced, and those that denounce multinational corporations are not just wrong, but dangerously wrong.

There is no shortage of politicians and media outlets who will tell you that free trade agreements are a "win-win" proposition, and that they will always create more jobs than they will destroy.
Yet history shows otherwise.ur desperation for answers we turn to High Priests of Economics who tell us these evils have befallen us because of our sins. We must sacrifice the innocent to the Volcano God or it will destroy us all.

The High Priests of Economics never explain exactly how these sacrifices will fix the economy, nor do they mention that the sins in question might be their own. Yet we still rush to offer up our children's futures through unpayable debts while never considering that there might be better alternatives.

...


A good example is NAFTA. Despite predictions that NAFTA would create 170,000 American jobs in just the first two years, Congress set up the NAFTA-TAA (Trade Adjustment Assistance) program for displaced workers. Between 1994 and the end of 2002, 525,094 specific U.S. workers were certified for assitance under this program. Because the program only applied to certain industries, only a small fraction of the total job losses were covered by this program.

...

And it wasn't just the wages of Americans that fell. The wages of manufacturing workers in Mexico have done nothing but go down in relative terms. In 1993, Mexican hourly compensation costs for production workers in manufacturing were 14.5% of those for their counterparts in the United States. By 2001 they had fallen to 11.5% of U.S. costs.
This shouldn't surprise anyone. David Ricardo, legendary economist and free-trade proponent, explained how this dynamic worked nearly two centuries ago.

How Wars "Cure" Depressions

Long post with lots of insights into other aspects of the current US economy.

Le Café Américain

By far this presents the most compelling case for a deflationary episode. As the money that is created flows into financial assets, it is 'taxed' by Wall Street which takes a disproportionately large share in the form of fees and bonuses, and what are likely to be extra-legal trading profits.

If the monetary stimulus is subsequently dissipated as the asset bubble collapses, except that which remains in the hands of the few, it leaves the real economy in a relatively poorer condition to produce real savings and wealth than it had been before. This is because the outsized financial sector continues to sap the vitality from the productive economy, to drag it down, to drain it of needed attention and policy focus.

The monetary stimulus of the Fed and the Treasury to help the economy is similar to relief aid sent to a suffering Third World country. It is intercepted and seized by a despotic regime and allocated to its local warlords, with very little going to help the people.

...

Those who have taken a huge share of the last three bubbles would like to stop the bubble now, keep their gains, and return to a system of fiscal restraint with light taxation on their windfall of assets.

So why does this not just simply happen? Because the political risks become enormous. It is difficult to reduce a population of free men into debt slaves, without risking a significant reaction. Therefore, it seems most likely that the government and the Fed will try to 'muddle through' for the time being, and look for an exogenous event to break the stalemate.

The traditional solution has been a military conflict, which stifles dissent against the government while generating artificial demand sufficient to energize the productive economy. It is a means of exporting your social misery, official corruption, and fiscal irresponsibility to another, weaker people.

Makin' it Rain

After watching this video, my thought was, "Wow! All that money and all you look forward to is impressing a bunch of hookers?"

But after thinking about it for a while, how is what Slim Thug does any different than a day at Congress?


The Daily Show, Oct 7, 2009


Slim Thug: "There's definitely not as many video ho's as there used to be... and now they bring their kids with them."

Really, how's this different than the health care industry, the energy lobby or any of the rest when they show up to the strip club...er 'Congress' to buy some favors and throw money around. So many Representatives and senators yelling, "Make it rain, Boss, Make it Rain!"

The Meaning of Information

"There is no inherent meaning in information. It is what we do with that information that matters."

http://www.ted.com/talks/beau_lotto_optical_illusions_show_how_we_see.html

American Colonialism

Some have predicted that the American Empire will soon go the way of the British Empire. I wonder, did Britain's Colonialism turn inward on itself like American C0lonialism has? George Orwell's description of colonialism sounds very much like Wall Street's view of America in the late 2000s.


Satyajit Das

... is a view of the emerging world best captured by the term ‘Orientalism’, associated with Edward Said. A Palestinian academic, Said’s writings on colonialism explored the caricatures, cliches and pre-conceptions that shaped Western perception and therefore relationships with Eastern nations. Said’s argument was that the West’s view of the East was shaped by political power and unequal commercial exchange.

Said’s work built on George Orwell’s criticism of colonialism. Writing in 1939, Orwell provided a vivid and stark view of the developing world that has rarely been equalled: “When you walk through a town like this – two hundred thousand inhabitants, of whom at least twenty thousand own literally nothing except the rags they stand up in – when you see how the people live, and still more, how easily they die, it is always difficult to believe that you are walking among human beings. All colonial empires are in reality founded upon the fact. The people have brown faces – besides they have so many of them. Are they really the same flesh as yourself? Do they even have names? Or are they merely a kind of undifferentiated brown stuff, about as individual as bees as coral insects? They arise out of the earth, they sweat and starve for a few years, and then they sink back into the nameless mounds of the graveyard and nobody notices that they are gone. And the graves themselves soon fade back into the soil.”

Exaggeration of Wall Street's Ethics

Many have alleged that Wall Street's ethics can be best summed up as "Willing to sell their mothers for a nickel."

This is exaggeration. The more accurate assessment would apparently be "Willing to sell everyone else's mother for a nickel."

Please make a note of it.

Still Masters of the Universe!

Brilliant!

Still The Masters of the Universe
Posted At : October 4, 2009 3:40 AM Posted By : Satyajit Das
Related Categories: Traders

Tom Wolfe writing in Bonfire of the Vanities created the term – ‘Masters of the Universe’: “He considered himself part of the new era and the new breed, a Wall Street egalitarian, a Master of the Universe, who was only a respecter of performance.” Wall Street bond trader Sherman McCoy, the original Master of the Universe, came to personify the avariciousness and self-aggrandisement of financiers.

Human history is a sequence of “ations” – civilisation, industrialisation, urbanisation, globalisation interspersed with actual or threatened “annihilation”. The most recent “ation” is “financialisation” - the conversion of everything into monetary form (also known as another “ation” – “monetisation”).

New paper economies emerged directly from the demise of the gold standard that removed restrictions on the ability to create money, especially debt. Finance inexorably displaced industry with trading and speculation becoming major activities as financial engineering replaced real engineering. In an earlier age, Heinrich Heine, the German poet, too had identified the change: “Money is the God of our time….” The rise of financiers is intimately linked to this financialisation of the global economy.

Financial innovations such as securitisation (the packaging up and sale of loans) and derivatives (effectively risk insurance) enabled banks to extend more credit. Banks could literally by increasing throughput, making more loans and selling them off to eager investors, magically increase returns to their investors. Bankers had invented a ‘money machine’.

Bank also began to trade more actively with their shareholders money, following the advice of Fear of Flying author Erica Jong: “If you don’t risk anything then you risk even more”.

All of this, of course, meant increased earnings for the bank and its star performers. As people who work in financial institutions know, it is primarily an enterprise that is run for the employees with an afterthought for shareholders.

Sherman McCoy could with a single phone call make $50,000 and, even better, a share of that was his and his alone. At the height of the boom, top hedge fund and private managers could make more in 10 minutes than the average worker earned in an entire year. In 2007, James Simons of Renaissance Technologies earned $1.5 billion and David Rubinstein of The Carlyle Group earned $260 million in the ethereal “economic stratosphere.” In Australia, Macquarie Bank employees rejoiced in the sobriquet – the ‘Millionaires factory”.

The ability to earn high rewards only becomes a problem where the promise of a share of profits encourages excessive risk taking and a focus on short-term earnings. It also becomes a problem where the basic measure of performance is ambiguous and can be systematically manipulated. Unfortunately, ‘earnings’ proved to be the result of wildly inaccurate models, accounting tricks and risks that had not been accurately captured.

Finance is also problematic when it comes to dominate the economy. In the U.S.A., financial services’ share of total corporate profits increased from 10% in the early 1980s to 40% in 2007. The combined stock market value of these firms grew from 6% to 23% over the same period.

It is now conventional wisdom to accept the central role of financial services. Gordon Brown, the Chancellor of the Exchequer under Tony Blair and then Prime Minister, harboured secret dreams of a Scandinavian-style social welfare state with low taxes funded by the growth of the City. In 2007, he told bankers: “What you have achieved for the financial services we … now aspire to achieve for the whole of the British economy.” Alistair Darling, Gordon Brown successor as Chancellor, was no less loquacious describing financial services as “absolutely critical” to the economy.

The golden age seemed to come to an end with the GFC. Initially, the world viewed the destruction of storied financial institutions in Global Financial Crisis as an entertaining blood sport.

Some bankers lost their jobs by the thousands. Others lived with the psychological fear of firing by text message.

In New York, bankers confessed it was hard to live on less than $500,000 – after all, the children’s private school fees, the maid, the Pilates lessons etc all cost money. They economised by buying cheaper cuts of meat. In London, families deferred moves to more expensive suburbs. The latest Gordon Ramsay restaurant was no longer a must have.

The effects of belt-tightening were seen in a fall in bookings at luxury hotels, holiday resorts and sales of super yachts – some of the plutocrats were down to their last billion. Once rich hedge fund managers were back in court trying to renegotiate the terms of their divorce pleading ‘poverty’.

For some women, the aphrodisiac quality of a young unattached male purring “I’m an investment banker” in a certain type of bar lost its allure. Some professions – personal trainers, dog walkers, personal dressers, children's party organisers – were in danger of extinction.

There was a sense of Schadenfreude as the Masters of the Universe received their comeuppance. Unfortunately, the “financial” crisis quickly spread to the “real” economy – jobs, consumption, and investment- becoming everybody’s problem. “Too large to fail” financial institutions had to be bailed out by governments, that is the ordinary taxpayer. In a perverse piece of income redistribution, the less fortunate now were subsidising the masters of universe because it was in their best interest.

Commentators briefly dared hope that the power and influences of finance and financiers would be reduced. Finance would revert to being a facilitator rather than the central driver of the economy.

The Economist wrote: “Over the past 35 years it has seemed as if everyone in finance has wanted to be someone else. Hedge funds and private equity wanted to be as cool as a dot.com. Goldman Sachs wanted to be as smart as a hedge fund. The other investment banks wanted to be as profitable as Goldman Sachs. America's retail banks wanted to be as cutting-edge as investment banks. And European banks wanted to be as aggressive as American banks. They all ended up wishing they could be back precisely where they started.”

Unfortunately, those hopes are misplaced. Low or zero interest rates, heavily managed markets, reduced competition and state underwriting of solvency has helped surviving banks prosper.

Bank risk levels have increased to and in some cases beyond pre-crisis levels. The higher levels of risk taking reflect increasing comfort in central bank support of financial institution’s liquidity and their ability and willingness to intervene to limit price risks.

In 2008 in Canary Wharf, the financial district in London’s docklands, I meet two affable recruiters from the English Teachers Union who explained that there was “a bit of financial crisis”. Well-educated and highly motivated bankers who were losing their jobs by the thousands might like to consider a new career teaching. I questioned the adjustment in salaries that the change in careers would necessitate. One recruiter’s responded: “If you haven’t got a job then it’s not relevant is it? It was never real money and it wasn’t going to ever last was it?”

Over the last 30 years, talent has increasingly been lured from productive profession into finance and the speculative economy. The rewards available mean that the brain drain into these professions is unlikely to stop. The excesses of the financial economy are also unlikely to be easily tamed.

The Masters of the Universe that survived the carnage are back to their old tricks. The ‘fight for talent’ means that bonuses and remuneration guarantees for new employees are all back in vogue.

Government attempts to deal with the problems of the financial system, especially in the U.S.A., Great Britain and other countries, illustrate Mancur Olson’s thesis - small distributional coalitions tend to form over time in developed nations and influence policies in their favor through intensive, well funded lobbying. The resulting policies benefit the coalitions and its members but large costs borne by the rest of population.

The “finance government complex” (dubbed “Government Sachs” by its critics) and financiers have proved exquisite masters of the game of privatisation of profits and socialisation of losses. Many countries now practice Chinese socialism with Western characteristics.

A year after the collapse of Lehman, the near collapse of AIG and the grande mal seizure in financial markets, the Masters of the Universe are still firmly in charge. As Giuseppe di Lampedusa, author of The Leopard knew: “everything must change so that everything can stay the same.”

© 2009 Satyajit Das All Rights reserved.

Satyajit Das is a risk consultant and author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives (2006, FT-Prentice Hall).

Where the Economy Went

Feeling particularly irascible after celebrating my first year of unemployment, I figured I would sit down and pen a few notes for those in the "economic forecasting community".

So many people in the economic community -- particularly (but not limited to) Wall St., academia, and TV talking heads -- are scratching their heads wondering where the economy went. After yet another long, sleepless night of anger caused by wondering why so many people could be so highly educated yet so stupid in practical terms, I've decided to explain the current economy to people who don't understand why the economy hasn't recovered yet. In short, the economy hasn't recovered yet because you don't understand what happened to it.


Executive Summary: No, Virginia, there is to be no "V-shaped" Immaculate Recovery.


In Business Model Terms:
Great news boss! We laid off Research and Design. We also laid off Manufacturing and Purchasing! We've cut our costs completely to 0! Even better news! As a side benefit, we were able to completely eliminate Shipping! We now consist only of the Profit Centers of Marketing, Sales and of course, Upper Management. That's right, ZERO overhead!

(To Self) I'm sure its only a matter of time before we're able to optimize those. Just wait until the analysts hear how we've been able to cut costs! oooooohhhh I just can't WAIT until the next round of bonuses! I'm gonna CASH IT IN! Hello corner office!


In Semi-Allegorical terms:
You had a goose that laid golden eggs. Every quarter, like clockwork, your goose would plonk out a auric cackleberry worth $10,000. Good, true, but how to make it better? Hmmm.... how's about feeding it twice as much? Would that make even more golden eggs? Nahhh, that would make it cost too much. We're already spending $100 per quarter on feed already. How's about figuring out a way to cut the cost of feed? Instead of duck food, why not try dirt? Or better, why not air! That's cheap and provided by the government (or whoever... we're not really sure where air comes from, but at least it don't come from our pocket!)

Ok, output is down, but we're sure there'll be a rebound in 3Q12. After all, the sharper the downturn, the more dramatic the recovery!


For you Analysis/Quant types:
99% of the income-earners in the American economy (The Poor) get by on roughly $40k per year. 9/10th of 1% (The Middle Class) earn $100k per year and the remaining 1/10th of 1% (The Rich) earn upwards of that.
Eliminate the income stream of The Middle Class by destroying and/or outsourcing manufacturing (damn American autoworkers, they're expensive!), "in-sourcing" tech jobs (fucking electronics designers, they're expensive!) and shipping overseas every other fucking job that isn't nailed down. Who's that leave us with on the jobs front? Lessee... Wall Mart and bussing tables at Denny's (By the way, both of those jobs now employs the New Middle Class, who just pushed the poor out of all those cush jobs.) and The Rich -- who, when not raiding the Treasury -- mill about all day wondering why Wall St. investments aren't up. Nothing to worry about here... after all it's the Rich that drive this economy. Come on V-shaped recovery! (Don't forget to tip!)


For Fans of W-esque Republican Sloganeering:
That "Next Technology" that all of us were supposed to "retrain" ourselves to do.... well, it never happened because you sent all the fucking technology jobs to China and China ain't so hot on sending "New Technology" jobs anywhere other than... (I'll give you a hint: It ain't Taiwan.)


In Environmental Terms:
You strip-mined the economy and are now wondering why nothing's growing in the bare rock. Come back in a few hundred years.


In Biological Terms:
You stupid, idiotic, blood-sucking leeches. You sucked the host dry. It's dead. You're gonna either spend the next 30 years dodging vultures feeding on the carcass of your dead (former) host, or dry-hump it into the hinterlands and find a new victim. Hope you speak Chinese are a quick-study on Communist Party slogans.


In Geopolitical Terms:
China's version of Ronald Reagan demanded that America "tear down that (trade) wall!". We did. Now we have the economy of (the former) East Germany.


In Psychological Terms:
Maslow's Hierarchy of Needs: Food, Housing, Health, Education for their Kids, Big Screen TVs. The top four are shot in the ass. Guess what's left?


Executive Executive Summary: It's the jobs, stupid. You fucking destroyed them. 300 million people working at Wall Mart ain't an economy and they damn-sure couldn't afford to shop at the mall even if they wanted to.

Orwell: "Comes Invariably From People Who Are Not Fighting"

"All the war-propaganda, all the screaming and lies and hatred, comes invariably from people who are not fighting." -- George Orwell

Herman Goering: "It works the same way in any country"

We got around to the subject of war again and I said that, contrary
to his attitude, I did not think that the common people are very thankful for leaders who bring them war and destruction.

"Why, of course, the people don't want war," Goering shrugged. "Why would some poor slob on a farm want to risk his life in a war when the best that he can get out of it is to come back to his farm in one piece. Naturally, the common people don't want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship."

"There is one difference," I pointed out. "In a democracy the people have some say in the matter through their elected representatives, and in the United States only Congress can declare wars."

"Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy.

All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."

First Death Panels, Now This

I found this on World News Daily, but the link is not working, so I posted it here so people can see the *real* plan.

Obama health care bill to offer curbside recycling

In a closed-door town hall restricted to liberal Democratic partisan groups in San Francisco, Obama unveiled a proposal to further reduce the impact of catastrophic illness on American families.

"Studies show that Americans spend upwards of $10,000 for an average funeral. Costs are even higher if the family selects a non-cardboard casket option. This burden is simply unbearable for anyone but the wealthiest among us. Working families simply cannot afford the funerary burden brought about by the death panels, even if they save money in the long run by retiring their elderly early. We have to bring some of the death panel cost savings forward."

"With our plan, family members will be able put their dear departed in specially marked containers on the curbside for next-morning pickup, " adding, "After the grieving process is complete, of course."

The estimated 10,000+ audience at the San Francisco Convention Center seemed to be generally pleased. San Francisco after all has had an aggressive recycling program for several years, as California has imposed a requirement on municipalities to recycle at least 50% of their area's waste.

"These Death Panels are going to save us a lot of money, but in the short term, we'll have a lot of bodies stacking up
without an economical way to handle the load. This plan turns a problem into a solution by taking something seen only as a burden and turning it into rich, loamy compost." "Besides", he continued, "filling valuable land with dead people rather than empty commercial buildings hampers our ability to make optimal use of scarce real estate."
"Sometimes, complex problems really do have simple solutions!", he beamed.

San Francisco mayor Gary Newsom was generally supportive. "This will only help us meet the state's requirement for recycling of more than 50% of our current waste stream. Keeping departed family members out of landfills will be a big help in us continuing to meet that goal."

Secretary of Health Kathleen Sibelius is scheduled to deliver a presentation on the details of the proposal,
including pilot locations, proper labeling of remains for pickup and scheduled pickup days.

She is also expected to cover the delivery of memorials. Early information packets released to the media by Sibelius's office included photographs of the memorials. Our sources tell us that the memorials will be made partially of recycled aluminum as worldwide copper prices are forecast to remain prohibitive for the next several quarters.

Image of funerary urn prototype released today by Sibelius's' office

Insiders admit that prototypes of the memorials are suffering from early production problems due to the recycled content, but they see no reason that all the problems couldn't be ironed out by the time the program is finally rolled out.

"We're working closely with our Chinese manufacturers", said one source who wished to remain anonymous.

The Centainty of One's Convictions

... is often inversely proportional to one's understanding of the problem.

How We Got Here: Management Nation

We have become a nation of managers.

Perhaps it was the national fascination with "Being one's own boss". Whatever the reason that the nation accepted it, the truth remains that we have internalized the ideas being peddled by "The Rich", that is:

- American's don't want to work
- America doesn't have the talented X to do the job
- Unemployed Americans simply need to "retrain" themselves in the Next New (as of yet unspecified) Thing.

What has really happened is that the country's collective conscience has declared anything relating to labor as "icky" and to be dispensed with in the cheapest, most expeditious manner possible.

Follow for a moment the distribution of compensation today. It falls along a very bright line: people who "manage" things get compensated well (even in failure: see Wall St.), people who *do* things get paid relatively pitifully. Think plumber, teacher, fire fighter, engineer, laborer.

Any "doer" job that could be outsourced was. "It's cheaper in China" was the mantra. Any "doer" job that wasn't outsourced was replaced by flooding the labor market through immigration. Everyone was fine with immigrants (both legal and not) cutting grass and washing cars. When America ran out of "talented X", immigrants were called in to replace engineers, IT, customer service, you name it. Even doctors and nurses are feeling downward income pressure coupled with increasing education costs. (So far only lawyers have so far evaded this downward income pressure.) It is the commoditization of labor.

But there is a a downside. There simply aren't 300 million projects in America that need managing. Everyone that "saved money" watching Wal-Mart export their job slowly but surely watched Wal-Mart become their only shopping option as income, savings and yes, eventually the "Home ATM" dwindled.

Now the world wonders how America is going to pick itself up and once again become the world's favorite consumer. What America has yet to realize is that in order to consume (nay, to eat) one has to have an income.

The Rich has long contended that The Rich are responsible for the jobs in this country. They repeatedly demand that laws not impinge The Rich's ability to "create jobs". Curiously, The Rich are nowhere to be seen as we wait for a knight in shining armor to save us.

What *is* happening is the states and the country as a whole is looking at extreme tax income shortfalls as the bulk of the country go unemployed. When the bulk of the country's tax base loses jobs, the onus of tax payment has to go somewhere. People without a roof over their head are hard to coerce into tax payments. This leaves The Rich facing the outstretched hand of Uncle Sam without anyone else to shift that burden to.

How We Got Here: Lying Central Bank Head

How We Got Where We Are

"Should we fault Chairman Bernanke for 'Green shoots'? Isn't it appropriate for a central bank to provide a rhetorial confidence? Aren't central bankers supposed to say things like 'green shoots'?"

Have we sunk so low that this is considered a valid question? Roughly re-worded, this question is, "Shouldn't the central banker cheerlead the economy and try to convince people that it is better than it is [in the hopes that this will make the economy better]?"

I can almost stomach this concept when applied to CEOs. Ok, so part of their job is as Marketeer in Chief. But our government officials? Our head of the Central Bank?

What happens when the cheerleading is revealed to be false? Where is his integrity and authority then?

Now we know.

http://www.ritholtz.com/blog/2009/07/shiller-roubini-discuss-anemic-economic-recovery/

What Journalism Has Become

Why Journalism is Dying, Part 2x10^74

Irish student hoaxes world's media with florid but phony quote from dead French composer


DUBLIN (AP) -- When Dublin university student Shane Fitzgerald posted a poetic but phony quote on Wikipedia, he was testing how our globalized, increasingly Internet-dependent media was upholding accuracy and accountability in an age of instant news.

His report card: Wikipedia passed. Journalism flunked.

The sociology major's obituary-friendly quote -- which he added to the Wikipedia page of Maurice Jarre hours after the French composer's death March 28 -- flew straight on to dozens of U.S. blogs and newspaper Web sites in Britain, Australia and India. They used the fabricated material, Fitzgerald said, even though administrators at the free online encyclopedia twice caught the quote's lack of attribution and removed it.

A full month went by and nobody noticed the editorial fraud. So Fitzgerald told several media outlets they'd swallowed his baloney whole.

"I was really shocked at the results from the experiment," Fitzgerald, 22, said Monday in an interview a week after one newspaper at fault, The Guardian of Britain, became the first to admit its obituarist lifted material straight from Wikipedia.

"I am 100 percent convinced that if I hadn't come forward, that quote would have gone down in history as something Maurice Jarre said, instead of something I made up," he said. "It would have become another example where, once anything is printed enough times in the media without challenge, it becomes fact."

So far, The Guardian is the only publication to make a public mea culpa, while others have eliminated or amended their online obituaries without any reference to the original version -- or in a few cases, still are citing Fitzgerald's florid prose weeks after he pointed out its true origin.

"One could say my life itself has been one long soundtrack," Fitzgerald's fake Jarre quote read. "Music was my life, music brought me to life, and music is how I will be remembered long after I leave this life. When I die there will be a final waltz playing in my head that only I can hear."

Fitzgerald said one of his University College Dublin classes was exploring how quickly information was transmitted around the globe. His private concern was that, under pressure to produce news instantly, media outlets were increasingly relying on Internet sources -- none more ubiquitous than the publicly edited Wikipedia.

When he saw British 24-hour news channels reporting the death of the triple Oscar-winning composer, Fitzgerald sensed what he called "a golden opportunity" for an experiment on media use of Wikipedia.

He said it took him less than 15 minutes to fabricate and place a quote calculated to appeal to obituary writers without distorting Jarre's actual life experiences. He noted that the Wikipedia listing on Jarre did not have any other strong quotes.

If anything, Fitzgerald said, he expected newspapers to avoid his quote because it had no link to a source -- and even might trigger alarms as "too good to be true." But many blogs and several newspapers used the quotes at the start or finish of their obituaries.

He said the Guardian was the only publication to respond to him in detail and with remorse at its own editorial failing. Others, he said, treated him as a vandal who was solely to blame for their cut-and-paste content.

"The moral of this story is not that journalists should avoid Wikipedia, but that they shouldn't use information they find there if it can't be traced back to a reliable primary source," said the readers' editor at the Guardian, Siobhain Butterworth, in the May 4 column that revealed Fitzgerald as the quote author.

"It's worrying that the misinformation only came to light because the perpetrator of the deception emailed publishers to let them know what he'd done, and it's regrettable that he took nearly a month to do so," she wrote.

Fitzgerald said he had waited in part to test whether news organizations or the public would smoke out the quote's lack of provenance. He said he was troubled that none did.

And he warned that a truly malicious hoaxer could have evaded Wikipedia's own informal policing by getting a newspaper to pick up a false piece of information -- as happened when his quote made its first of three appearances -- and then use those newspaper reports as a credible footnote for the bogus quote.

"I didn't want to be devious," he said. "I just wanted to show how the 24-hour, minute-by-minute media were now taking material straight from Wikipedia because of the deadline pressure they're under."

Best AIG Bonus Analogy Yet

"Tipping your rapist."

I can't take credit for this one, I'm just repeating it.

English Empire: Result of Bad Food?

Paul writes:

There are advantages to not having a food culture. I have always claimed that the reason England conquered half of the world is that Englishmen were seeking a decent meal. The English sailor would sit down to a meal of overcooked and greasy meat and vegetables and think, I need to go conquer a country that knows how to prepare a decent meal.

The Italians, on the other hand, dined very handsomely and stayed at home.

Iron Chef, Family Edition

We've all seen that cheesy Japanese TV show (and it's equally cheesy American spinoff) where top chefs compete to whip up amazing dishes in an hour.

That's all fine and good, but as a practical matter, Iron Chef is as valuable to a parent as trying to learn tire rotation tips by watching NASCAR pitstops.

So I propose a new spinoff: Iron Chef Family.

Same basic format, with the array of Iron Chefs and a weekly guest challenger, but from there the rules would be a bit different.

Instead of the mystery ingredient being rare Peruvian sea cucumber, eye of newt or whatnot, ICF would have everyday items like 'hamburger meat', 'broccoli' or 'whatever's on sale that day at Safeway'.

Then would come the *real* challenge: preparing in an hour a meal using everyday ingredients that one could serve to a typical family. No soux chefs, blast chillers, 5 megawatt electric skillets or 'mixologists'. Just a stove, knives, a sink, maybe on special occasions (if they've been good) a blender and a microwave. Oh, and did I mention that the chef has to also get the dishes washed and put away within the hour?

Then would come the judging. Two families of four. Mom, dad and the 2.2 kids would judge the meals. Scoring would be on taste, nutrition, balance (did the chef put out an entree, a starch AND a vegtable?) and most importantly: did the kids eat it?

Iron Chef is great for the fancy restaurant crowd with their huge fully-staffed kitchens. But you want to impress me? Make a great meal that everyone will eat in an hour. Hell, if it tastes good enough, I'll throw in an extra 30 minutes to let him square away the leftovers.

Heck, just watching the Chairman scream "Hamburger Helper!" while revealing the secret ingredient might make the entire show worthwhile.

The Fall of Empire

Talk about reporting your own death:
http://www.nytimes.com/interactive/2009/03/12/business/20090312-papers-graphic.html


I find this another interesting example of the *huge* social changes that the internet has brought. Digital cameras have devastated (for now, at least) professional photography, all the way from High Fashion and Advertising to the mall photo booth. Job outsourcing has within a few years devastated domestic employment as any "information job" can be run from "anywhere". Finance and Wall St. have exploded with the ability to suck money from anyone with cash and an internet connection. Online sales have put major pressures on "Brick and Mortar" retailers. Medical, political, the list goes on and on.

We all remember the power of William Randolf Hearst. Strange how the seemingly unrelated invention of "The Internet" has brought these huge and powerful institutions to their knees. They can't even sell the newspapers now... the entire business or even the paper its printed on. Remarkable.

P.S. I predict TV will be the next media victim. In the next 10-15 years, we'll see broadcast TV and many "cable" TV shows go the way of the payphone. (Cue post on the remarkable social re-working brought about by the mobile phone!)

So... Do We Have Free Healthcare Now or What?

For decades Republicans have warned that free healthcare for all would lead to economic collapse, the onset of high taxes, unemployment, frozen equity markets, just to name a few.


So.... we got all that. Where's my free healthcare? I'm still getting bills.

We're totally in the crapper. Did we lose a war or what?

Oh, right. We did. We lost to ourselves.

Saving the Rich

On Thu, Mar 12, 2009 at 2:00 PM, XX wrote:
There needs to be a examination of the cost of government compared to the output of it's citizens. When Gov't expenses go to high, taxes go up, workers are likely to balk at improving their income.

It will cease to be an issue, because we are approaching 50% of our voters not paying any federal tax. That means they will decide to increase taxes on those who do pay. Notice how "the wealthy" are now paid less and less. Now it's about $250K. In a previous Democratic administration, a Millionaire was someone that earned a million dollars in their life time.

Ah, another Red Herring. "If you raise taxes too high, people will just refuse to work."

This reflects an *aggregious* mis-understanding of the tax code.


Let's say, for example that you make $100. Let's say that the tax rate is 40% up to and including $100, and 50% for $101 and up.

So, when you make $102, what is your tax?

A) $102 * 0.5 = $51
B) ($100 * 0.4) + ( $2 * 0.5 ) = $40 + $1 = $41


We have a *staged* tax system. The answer is 'B'.



I've not heard of a single extremely-rich person (we used to call them "millionaires") that's in it for the money. I doubt there's a single one that says, "You know, I've made enough money, why don't I stop for a while?" or "You know, if I make over X, it'll just send me into the next tax bracket. No thanks."

The only people we hear talking about this is A) Republican talking heads B) People who *want* to be millionaires, but don't even understand the basics of finance enough to become rich, let alone millionaires.

Show me one instance in which Warren Buffet said, "No more money for me! I don't want to be in the next tax bracket."

Rich people will turn all sorts of tricks to avoid paying taxes. They may *defer* income into "down" years or whatnot, but I'd like to see one case of a truly "rich" person refusing the opportunity to make money because it would kick them into the next income tax bracket.

I never cease to get amusement out of middle-class Republicans that will bend over backwards to screw themselves in order to save "the rich" money.


A much better avenue of attack would be chasing down that 50% that doesn't pay taxes.


Lemme propose a test:

Let's say someone approaches you on the street and says, "If you give me a nickel, I'll give you $250k, but you must give 75% of it to a random passer-by."

Do you accept or no?



A final point. I *used* to be in the $250,000 bracket. I'll *gladly* pay whatever tax Obama wants rather than continue to "save tax money" under the W administration. I'm tired of this "American's don't want to work (because taxes are too high)" bullshit.

My thoughts exactly:

The Cunning Realist

That Would Have Worked Out Well

Anyone seen any recent calls for Social Security private accounts?

The stock market crash has shown how catastrophic private accounts would have been, and who would have really benefited from them. Would the government have allowed the Bear Stearns and Lehman outcomes had the Social Security system been chock full of those stocks? Remember, both were former blue chips, the sort of companies that proponents of private accounts insisted any new system would be limited to. The same for Citi, AIG, Fannie Mae, and others. How much pressure would the Fed and Treasury have felt -- and what more would have been done -- to keep those afloat and/or out of penny stock land?

That pressure would have been exerted by millions of unpaid but highly effective lobbyists: people emailing and calling Washington, demanding that their Social Security money -- and so the stocks, the companies, and the executives -- be saved. Corporate bondholders would have loved it, since the Social Security system effectively would have become a massive safety buffer. Would "nationalization" even be considered if it meant destroying part of Social Security?

Private accounts are dead now, so it's a bit of a moot point. But I wonder how many of those who both supported them and genuinely object to the prevailing bailout ethos ever thought this through.

Krugman: Nonrival and Nonexcludable

Krugman at NY Times

What should government do? A Jindal meditation

What is the appropriate role of government?

Traditionally, the division between conservatives and liberals has been over the role and size of the welfare state: liberals think that the government should play a large role in sanding off the market economy’s rough edges, conservatives believe that time and chance happen to us all, and that’s that.

But both sides, I thought, agreed that the government should provide public goods — goods that are nonrival (they benefit everyone) and nonexcludable (there’s no way to restrict the benefits to people who pay.) The classic examples are things like lighthouses and national defense, but there are many others. For example, knowing when a volcano is likely to erupt can save many lives; but there’s no private incentive to spend money on monitoring, since even people who didn’t contribute to maintaining the monitoring system can still benefit from the warning. So that’s the sort of activity that should be undertaken by government.

So what did Bobby Jindal choose to ridicule in this response to Obama last night? Volcano monitoring, of course.

And leaving aside the chutzpah of casting the failure of his own party’s governance as proof that government can’t work, does he really think that the response to natural disasters like Katrina is best undertaken by uncoordinated private action? Hey, why bother having an army? Let’s just rely on self-defense by armed citizens.

The intellectual incoherence is stunning. Basically, the political philosophy of the GOP right now seems to consist of snickering at stuff that they think sounds funny. The party of ideas has become the party of Beavis and Butthead.

Republicans Keep Forgetting Who Created This Mess

Andrew Sullivan

Which party added over $32 trillion to future unfunded liabilities, turned a surplus into a trillion dollar deficit, and endorsed indefinite nation-building at a simply staggering cost in two of the most intractably divided non-countries in the world? Which party asserted "near-dictatorial" powers for the executive, the priority of the will of the leader over the rule of law, and a mantra, in the words of the most "conservative" vice-president in memory, that "deficits don't matter." Which party described prohibitions against torture "quaint" and presided over the most reckless, and irresponsible period in American finance since the 1920s?

Republicans Keep Forgetting Who Created This Mess

Andrew Sullivan

Which party added over $32 trillion to future unfunded liabilities, turned a surplus into a trillion dollar deficit, and endorsed indefinite nation-building at a simply staggering cost in two of the most intractably divided non-countries in the world? Which party asserted "near-dictatorial" powers for the executive, the priority of the will of the leader over the rule of law, and a mantra, in the words of the most "conservative" vice-president in memory, that "deficits don't matter." Which party described prohibitions against torture "quaint" and presided over the most reckless, and irresponsible period in American finance since the 1920s?

Of Drug Dealers and Liars

Both drug dealers and Liars put themselves in the most peril when they consume their own product.

Economic Depression - Republicans Blame Moon

My racquetball coach (an ex Marine) used to "award" us penalties. When I asked why he was "awarding" me penalties, he replied, "You earned them."


I'm agnostic. I don't think Republicans are any better or worse than the Democrats. They're all politicians. A necessary evil.

BUT

The current batch of Republicans have had almost totally unopposed rule of this land for 6, arguably 8 years.

They fucked it up. Not only that, but they fucked it up *BIG* time.

The current batch of republicans and their sycophants, tin-hats and fan boys need to go sit in the corner and STFU.

They aired their ideas. They had 6 years to implement them. We're reaping what they sowed.

Everybody but the current batch of Republicans, their mouthpieces and their fan-boys know it. For those who don't realize who's responsible for the mess Republicans made, please continue to blame it on the moon or whomever else was there at the time... just do it quietly. Trust me, nobody wants to hear *why* Republicans failed. Nobody cares who they want to blame. Nobody.

We're living the results of the promised Republican economy. Path to hell being paved, whatever.

Republicans like military references. Here's one: it happened on the Republican watch. Man up, stop blaming others for Republican mistakes and please, STFU.

Sit tight, let the next group of idiots try their hands at it. Then you can pick up your cloak of virtue and start swinging the sword of righteousnous at whoever will listen. Until then, grow up, find some humility (you now, the "family values" kind) and sit in the corner quietly.

If there are any more Republican "ideas" , please don't include me on the distribution. I've still suffering the last batch of them.

What Reagan Actually Said About Government

SJ Mercury News

Opinion: Ronald Reagan wouldn't recognize these conservatives

By Mickey Edwards
Posted: 01/27/2009 07:03:38 PM PST

In my mind's eye, I can see President Ronald Reagan perched on a cloud and watching all the goings-on down here in his old earthly home.

Rolling his eyes and whacking his forehead over the absurdities he sees, he's watching his old political party twist itself into complex knots, punctuated by pauses to invoke "the Gipper's" name.

It's been said that God would be amazed by what his followers ascribe to him; believe me, Reagan would be similarly amazed by what fervent admirers cite in their desire to be seen as true-blue Reaganites.

On the premise that simple is best, many Republicans have reduced their operating philosophy to two essentials: First, government is bad (it's "the problem"); second, big government is the worst and small government is better (although because government itself is bad, it might be assumed that small government is only marginally preferable).

Government is "... us

This is all errant nonsense. It is wrong in every conceivable way and violative of the Constitution, American exceptionalism, freedom, conservatism, Reaganism and common sense. In America, government is "... us.

What would Reagan think of this? Wasn't it he who warned that government is the problem?

Well, permit me. I directed the joint House-Senate policy advisory committees for the Reagan presidential campaign. I was part of his congressional steering committee. I sat with him in his hotel
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room in Manchester, N.H., the night he won that state's all-important primary. I knew him before he was governor of California and before I was a member of Congress.

Let me introduce you to Ronald Reagan.

Reagan, who spent 16 years in government, actually said this: "In the present crisis," referring to the high taxes and high levels of federal spending that had marked the Democratic administration of President Jimmy Carter, "government is not the solution to our problem; government is the problem."

Reagan then went on to say: "Now, so there will be no misunderstanding, it's not my intention to do away with government. It is rather to make it work."

Government, he said, "must provide opportunity."

He was not rejecting government, he was calling — as President Barack Obama did at his inauguration — for better management of government, for wiser decisions.

This is the difference between ideological advocacy and holding public office: Having accepted partial responsibility for the nation's well-being, one assumes an obligation that goes beyond bumper-sticker slogans. Certitude is the enemy of wisdom and, in office, it is wisdom, not certitude, that is required.

How, for example, should conservatives react to stimulus and bailout proposals in the face of an economic meltdown? The wall between government and the private sector is an essential feature of our democracy. At the same time, if there is a dominant identifier of conservatism — political, social, psychological — it is prudence.

If proposals seem unworkable or unwise — if they do not contain provisions for taxpayers to recoup their investments; if they do not allow for taxpayers, as de-facto shareholders, to insist on sound management practices; if they would allow government officials to make production and pricing decisions — conservatives have a responsibility to resist.

But they also have an obligation to propose alternative solutions. It is government's job — Reagan again — to provide opportunity and foster productivity. With the nation in financial collapse, nothing is more imprudent, and more antithetical to true conservatism, than to do nothing.

The Republican Party that is in such disrepute today is not the party of Reagan. It is the party of Rush Limbaugh, Ann Coulter, Newt Gingrich, President George W. Bush and Karl Rove. It is not a conservative party; it is a party built on the blind and narrow pursuit of power.

Not too long ago, conservatives were thought of as the locus of creative thought. Conservative think tanks (full disclosure: I was one of the three founding trustees of the Heritage Foundation) were thought to be cutting-edge, offering conservative solutions to national problems.

Rejection of ideas

By the 2008 elections, the very idea of ideas had been rejected. One who listened to Barry Goldwater's speeches in the mid-1960s, or to Reagan's in the 1980s, might have been struck by their philosophical tone, their proposed (even if hotly contested) reformulation of the proper relationship between state and citizen.

Last year's presidential campaign, on the other hand, saw the emergence of a Republican Party that was anti-intellectual, nativist, populist (in populism's worst sense) and prepared to send Joe the Plumber to Washington to manage the nation's public affairs.

Over the past several years, conservatives have turned themselves inside out: They have come to worship small government and have turned their backs on limited government. They have turned to a politics of exclusion, division and nastiness. Today, they wonder what went wrong, why Americans have turned on them, why they lose, or barely win, even in places such as Indiana, Virginia and North Carolina.

And, watching, I suspect Reagan is smacking himself on the forehead, rolling his eyes and wondering who in the world these clowns are who want so desperately to wrap themselves in his cloak.


Mickey Edwards, a former congressman from Oklahoma, is a lecturer at Princeton University"s Woodrow Wilson School and author of "Reclaiming Conservatism." He wrote this article for the Los Angeles Times.