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TechnoratiCrash Course in Economics
The first time I was in a car crash, I was six or seven years old.
That's a long time ago. But there are certain things about it that I remember quite vividly.
My father was driving. The road was icy. We began to slide. This was in the days before seat belts and cars had bench seats, upholstered, but not shaped for each individual bottom. My father shot out his right arm and pressed me against the seat back to keep me from flying forward if, indeed, we ended up in hitting something.
The thing that was most extraordinary was how long it seemed to take. How time slowed while we slid forward and sideways, heading onto the shoulder, then past it .... it seemed as if we had all the time in the world, yet there was nothing we could do to get off the ice, alter the trajectory, slow down ... nothing ... until we crashed.
As I read the economics news, I'm having that exact same sensation, that we're in a slow motion crash.
Each week, sometimes daily, we slide by a new warning sign, by another wreck that's already off the road.
The new one is Lehman Brothers.
Before that Fannie Mae and Freddie Mac. Before that Bear Stearns.
In August, "one in every 416 U.S. households entered the foreclosure process." In spite of a 2005 law that made personal bankruptcies more difficult and that allows creditors to squeeze money out of people even after they've gone bankrupt, personal bankruptcy rates are soaring. General Motors stock has been trading at 1950s prices. Like GM, Ford is laying off thousands of workers. Both of them are asking for federal assistance to survive. Pension funds are routinely failing.
Then there are my personal experiences.
Like when I go to the gas station and watch the ticker on the pump go up over fifty, sixty, and then seventy dollars to fill the tank. Or when I go to the supermarket and lay down a hundred and forty dollars for what cost me a ninety a year or so back.
From time to time I run into rich people or their handlers. Last February I was traveling with a lawyer from one of New York's leading law firms. He does the legal work on IPO's. He told me their January, 2008 business was down 90% from January, 2007. A couple of days ago a hedge fund guy dropped in on our regular tennis doubles game. Between sets he mentioned how hard it was to get credit these days. "On a secured loan," which means 40% backed by assets, mostly commercial real estate, he was talking about $120 million and up, "the banks want 20% interest."
Every analyst that I see or hear blames it on the "housing bubble" and the "sub-prime mess."
That doesn't seem right.
It doesn't explain why the dollar has lost about a third of its value against the Canadian Looney and the Euro, among others. Or why gold is bouncing up against the $1,000 ceiling. Both of which happened before the bubble sprung a leak.
It doesn't explain why the stock market - as measured by the Dow Jones average - is down (adjusted for inflation) about 15% from 2001. Moreover, at its peak during the Bush years, it was only 14% (adjusted) over the 2001 mark.
It doesn't explain why median income is down - depending on who's reporting it - $700, $1,000, $1,200 per person, over that same time period. Even median family income, with more people working per family, is down.
It doesn't explain why, during the so-called Bush boom, corporate profits were at an all time high, but corporations were starved for places to invest the money.
Let us presume that government policy has an effect on the economy.
What are the policies that have produced this economy?
The one that's on an icy road, sliding, in slow motion, toward the cliff. Or, if we're lucky, maybe just into a ditch.
The core, the very heart of Bushonomics, is cutting taxes. Especially for the wealthy.
I find it impossible to figure out what George Bush's motivations for anything are. He may have that impulse because he himself, his family, and his friends are all very rich and they'll save themselves millions of dollars over the years. Maybe it's political. As he once said, the super rich are his "base." It may be a class thing - the belief that rich people are rich because they're better and will do better things with the money. It may be theological, the mystical belief that "the market" makes everything better.
Whatever the truth is, the tax cuts were sold as economic stimulus and jobs packages with the promise that they would not create deficits. This last was based on a romantic Ayn Rand vision of millionaires racing into the backwoods to build, build, build new businesses which would create jobs, "good jobs," and new taxes would be paid by the businesses and the workers, making up for the initial deficits.
Alas, none of that ever happened.
Deficits were created.
Bush went on a war spending spree. That made them bigger. Whatever boom there was did not create sufficient revenue to the government to make up for deficits.
That triggered the next event in our saga.
Deficits normally lead to inflation.
Bankers hate inflation. So do politicians.
So Allen Greenspan, everyone's favorite economic hero, stepped in. He cut the rates that the Federal Reserve charged banks to borrow from the government.
The intent was to keep inflation low.
It sort of worked for about five years. The official, and actual, rates of inflation were pretty low.
The reason I say it only sort of worked was that, in reality, it suppressed inflation. It made the dollar worth less. As we now know, at least one third less. Oil, as it happens, is priced in dollars. Overseas suppliers of oil began to see their incomes decline. By about a third. So they did what any sensible person with the power to do it would do. They began to raise their prices.
That does not account for the full rise in the price of oil, but it triggered it, and it's a large segment of it. Since everything in America moves on oil, it's raised the cost of everything else. It doesn't account for all the cost increases we're seeing now, but it propels a significant portion of them.
This was combined with several other impulses.
Free trade has to be number one on the list.
Free trade brought cheap consumer goods into the United States from overseas. That made shoppers very happy. It kept inflation down.
It was tough on workers. It not only put a lot people out of work directly, it put downward pressure on wages all across the board. That too, helped keep inflation down.
It was also very tough on businesses that actually make things here, in the United States. The making of things, and then the support services, were outsourced, though the companies remained here, as corporate and marketing entities.
Other factors include de-regulation, non-enforcement of regulations, appointing industry representatives to regulatory agencies, and union busting.
With out-sourcing and domestic wages going down, corporations did, indeed, make record profits.
Three things came together to produce a great deal of loose cash.
First, the government cut taxes while it increased spending.
Second, the Federal Reserve made it cheap, artificially cheap, to borrow money.
Third, corporations made money - largely by pushing wages and salaries down - but had no place to put it.
But, what was there to do with all that money?
There was no place nothing being produced with the right kind of growth potential to pay back the loans. Working people were not making more money that could be used to create more consumption.
So the great ocean of money went, ultimately, to two places, from which it was supposed to be paid back - real estate and to consumers (who were making less income) for personal spending on credit.
There was growth. About a 37% increase in the GDP in actual dollars across seven years. That's about 17% in inflation adjusted dollars.
Let's go back and look at two other numbers, median income and the stock market.
They're both down.
Where was the growth?
It was in borrowing. In credit. In debt.
There's one bubble, the housing bubble, which is inside of - or a symptom of - a much larger bubble, the credit bubble. That bubble is so big that it represents almost the entire growth in the US economy for the last seven years.
At the core of it, the seed from which the poison fruit has grown, are the tax cuts.
Do tax cuts actually stimulate the economy?
Vast sums of money have gone into creating that myth. Major intellectual industries have been created and sustained to sell that story.
At the center of that claim is the Legend Of Saint Ronald Retro Reagan.
Reagan cut income taxes, big time. But raised social security and medicare taxes. That meant that rich people paid less and working people paid more. The immediate result was that economy faltered.
Then Reagan raised taxes (though not by as much as he cut them). At about the same time, oil dropped from forty dollars a barrel to twenty. The economy did grow. That is until the stock market crash of '87.
There is vastly more evidence the other way. Tax increases stimulate the economy.
It may not make sense, it may be counter intuitive, but here are the facts.
What if taxes went up to over 90%?
According to the Reaganauts and Bushwackers the world would collapse! Business would grind to a halt. Investors would flee. Workers would lay down their tools.
Back in World War II, taxes did go up that high.
Americans who earned as little as $500 per year paid income tax at a 23 percent rate, while those who earned more than $1 million per year paid a 94 percent rate
The result:
The American economy expanded at an unprecedented (and unduplicated) rate between 1941 and 1945. The gross national product of the U.S., as measured in constant dollars, grew from $88.6 billion in 1939 - while the country was still suffering from the depression - to $135 billion in 1944.
EH.net (from Economic History Services)
From 1946 to 1963 the top rate fluctuated from 86% to 91%.
Average economic growth was 3.5% per year.
The current top income tax rate is 35%.
Economic growth has been, at best, 2.5%. That is if you stop counting in 2007. And don't consider the type of growth, which consisted primarily of increased debt and pyramids of borrowing.
In 1992 the top tax rate was 31%.
Bill Clinton increased it to 39.1%.
The Dow Jones average went up 360%. The number of jobs went up 237,000 per month (under Bush, as of 2007, it was just 72,000 per month.). Median household income went up (instead of down). The budget was balanced.
Both candidates are talking about tax cuts to fix the economy.
Does that make sense?
Here, in NY State, we are facing a budget crises due to the collapse in the financial markets which is where a lot of our tax revenue comes from.
The governor has a choice between raising taxes and cutting expenditures. He's a good, fairly liberal Democrat. But he polled the people and the legislature, and everyone wanted to cut spending.
That means cutting the state work force.
That means that people who had jobs and were spending money will be unemployed and spending a lot less. That means less revenue for the state and for the places that they did business with. Which means the economic crises will grow worse.
States are in a difficult position because they compete with each other for "friendly business environments," which always means, in the short term, low taxes.
This administration, and most economists, at least as they appear in the media, want us to "consume" our way out of trouble.
But the model should be the other way. We should be producing our way out of trouble.
Is that possible in a "free trade" world?
The answer is yes. Through government spending. Through the kinds of things that the market cannot, or will not, supply.
The market will not protect our coastlines. How many Katrina's and Ike's do we have to have before we understand that it is in the common good - and good for business and good for the economy - that we do so.
Most of the costs of doing so cannot be outsourced. They have to, by their nature, stay here.
The same is true for wind and solar power and rebuilding our electrical grid to make such power sources work.
The market will not produce sensible, affordable health care. The market, in fact, has produced the worst cost-to-benefit ratio in the civilized world. The market has produced more bureaucracy in health care than any government agency ever could.
An affordable, national health care system will make American business more competitive.
For those of us who pay for our own health care, it will leave more money in our pockets than most of the tax cut proposals.
The market cannot and will not produce clean air and water. It will not produce an educated population.
Why did we have so much growth - so much business growth - when we had high taxes and when the taxes on corporate profits were actually collected?
If taxes on income (personal or corporate) are high, the impulse is not to take them. Especially if they're as high as 90%. Though there's no need to go that high to start making a meaningful adjustment.
What do companies and people do when they're making money in a high tax environment? They reinvest. In producing something. Cashing out is difficult, but the value of what they own continues to grow as the reinvestments pay off. We then have to "make money the old fashioned way ... earn it."
There is a difference between my business and "business," the wealth of the nation.
In my business, I hate regulations, unions, and high taxes.
In my country, I appreciate regulations, unions, and what high taxes, if intelligently spent, do for me. Then I live in a country in which business in general does better, my investments in the stock market do better, my retirement is protected, my children's health care is affordable, and I have more hope for their future.
43 Comments so far
Show AllIT'S THE INEQUALITY, STUPID
In the 1950's, the average CEO made about 30 times the average worker. In 1980, before Reagan, the ratio was 40%. Today, the ratio is 411 to one, the highest among industrial democracies. According to The Wall Street Journal, in 2006, the CEO to average worker pay ratio was 11 to 1 in Japan, 15 to 1 in France, 20 to 1 in Canada, 21 to 1 in South Africa, and 22 to 1 in Britain.
The US government, especially Republican government, has been pushing inequality ever higher. In the 50's, income taxes on millionaires was in the 90% range. Today it is 35%, but taxes on capital gains, where billionaires make most of their money, is only 15%. And unionization has gone from 35% to 8% in private firms. Most workers would like to belong to a union, but when pro-union workers are fired, the Republican dominated National Labor Relations Board generally breaks the law and does nothing.
In the fifties, one worker could usually support a family. Today, both husband and wife have to work, sometimes two jobs each, and earn less. AND we have to go into debt, to buy a house, or sometimes to buy groceries with a credit card. IS IT ANY WONDER THAT WE HAVE A CREDIT CRISIS? When workers' debt is high enough we can't pay the banks, and the banks and their associates start to fold. Even McCain can talk about regulating banks. But unless you start addressing inequality the inevitable crisis will be worse, although for a time it may seen to die down.
The Democrats' proposals for union card checkoff, for raising the minimum wage, for universal health care, and for fractionally higher tax rates on the rich, are all steps in the right direction. But I keep wondering: will Obama have the courage to risk the wrath of the corporations and their media and really start talking about increasing inequality the way John Edwards did? If he does he will only be saying what everybody knows - not the statistics, necessarily, but the truth of it in our guts and in our bank accounts.
I am an economist. What this man speaks of is Keynesianism. It works because of the multiplier effect government spending has on the domestic market. When Larry gets 20 dollars in tax dollars to raise a levy in the US, he is most likely to use most or all of that money in the local market, paying for his homestead, groceries, etc. When the grocer earns his money he in turn goes over to John and asks him to help fix his shop, so John gets the money back that Larry just spent on groceries and in turn goes down to the pizzeria to buy a pizza and a beer, it keeps goin. In the end, 1 dollar of local government spending turns into a lot of activity and prosperity and a lot more than 1 dollar.
When you cut taxes on the rich, they put a lot of it into hiding places where it doesn't get turned around much at all. They have so much money, they don't know what to do with it, plus the rich are usually people who hold onto their money tightly (that is why they are rich), the government doesn't do that. This leads to much lower multipliers. They also like to spend on luxury goods which usually means that money is pooled into other places where it doesn't get to move very much. People are also very risk averse, whereas governments can afford to risk on projects because of the multiplier effects (too much is pork-barrel spending and should be avoided)
If you send all of your government funding to the other side of the world, the multiplier effects end up, on the other side of the world. Except for the overcharging which is related to below.
There is one argument that goes against spending. Costs go up without competition. Therefore a government has to be vigilant when using government spending and make sure to stimulate competitive markets for funding (Halliburton anyone?).
I really appreciated this article.
Thank you for the inspiration and the truth.
What happens when the rich have much more money due to tax cuts? I wonder how much ends up in hedge funds and other ways to make money from their money (and not job creation). And what have we seen? Speculation in mortgages, speculation in oil futures, and speculation in commodities. All producing major negative effects on the economy and the people of the world.
Obviously I think tax cuts for the rich are wrong. But an important question is how are we going to adjust to a whole other way of living that respects the limits of the natural world? How many of us are willing to reduce our energy consumption to our fair share? We, as consuming Americans, are the RICH of the world. I think we must come to terms with what we are willing to pay (in taxes) to solve our problems.
I think our way out of this mess is to commit to leading the world to a sustainable future. To do the research with the stated intention of sharing the result with the rest of the world.
And we must somehow figure out how to work on our problems without the divisiveness of the current political environment.
In the article, the word "grow" appears 13 times, confirming the growth mantra.
The issue is not whether "growth" is a flawed concept. Growth itself is a vague term that has a wide variety of meanings from individual to individual and is generally viewed as "a good thing"; however, the emphasis of compounding growth as a national economic policy measured by the Dow Jones Average or Gross National Product may not encompass all the desired attributes of growth.
http://theformofmoney.blogharbor.com/blog/_archives/2006/9/6/2302146.html
I just watched the John McCain speech today. Almost had another heart attack from laughing so much. How surreal! Cindy McCain in the background doing her best bobbleheaded dashboard beauty queen look. Where's Sara? Whew! Can't help but enjoy seeing the rest of the world come crashing down now. I've already hit bottom, so I guess I'm just being vindictive. But I'd rather that the greedy and corrupt system we have, gets exposed now, before it's too late for the human race.
vote Green locally, Nader globally.
&YYY&
As the banks and currency both collapse, as you were seriously warned that they would,
Such is what you get spending heedless trillions on needless wars blood,
As real estate worth of the Vampire States farts everywhere in a stinking flatulent flood,
Osama bin Laden must be cracking up in laughter, and so he obviously should.
The Republic of the Vampire States behavior with shameless greed, wars and stinking lies,
Still shows up in its smelly zombie corpse filled of maggots, surrounded by buzzing flies.
The brain so long ago rotted away, even before President Reagan forget his own name,
replaced with trash slogans of media by succored politicians of bought fame.
Despite losing most all else, its people are all well armed with guns, bullets and hate,
Losing jobs, petrol, social and health care, homes and wealth, how long will they wait?
In the self righteous Vampire states, forgiveness and tolerance is an American Dream
Those billionaire bankers, if they value their lives, will need a witness protection scheme.
Republican Fatso and Democrat Ass, those parties of parasites and ticks.
Which always give the wink and nod, to generous winners with corporate capitalist tricks.
After promising regulation, prudent management in looking after the nation,
Will still look after now what they always have done, their own wealth and salvation.
"If all the economists were laid end to end, they couldnt reach a conclusion."
George Bernard Shaw
We see things, not as they are, but as we are.
Anais Nin
Nickel and Dimed from The American Ruling Class!
http://www.wilypython.net/Nickel%20and%20Dimed%20.asp
First off: this article is incredibly well written. How often to we get someone to tackle the economy with a writing style like this?
Second, what we need is more than just taxes and "producing our way" out of the problem. As others have noted, we are on a planet with a finite supply of resources and the production and consumption of goods is wreaking havoc. No need to cite the symptoms, we all know them.
We need a completely new way of looking at economics. Ecological Economics and True Cost Economics are budding fields with some promising up and coming work (too bad the neoclassical textbooks have an ironic monopoly on the sale of economics books).
But what it comes down to, is we need to model our market after the way the natural world works. No waste, first of all (see "Cradle to Cradle"). Second, we need to hardwire the laws of limited competition (coined by Daniel Quinn) that keep the rest of the natural world functioning into the system.
"You may compete to the full extent of your capabilities, but you may not hunt down your competitors or destroy their food or deny them access to food."
Modeled in regard to other companies:
You may compete to the full extent of your capabilities, but you may not sabotage your competitors politically/litigiously or destroy their resources or deny them access to clients/consumers.
Modeled in regard to the market's relation to other species:
You may compete to the full extent of your capabilities, but you may not knowingly contribute to the extinction of species that share your local ecosystem, destroy their food/habitat, or deny them access to food/habitat.
And so on.
More on True Cost Economics:
http://www.adbusters.org/campaigns/truecosteconomics
"Is God willing to prevent evil, but not able? Then he is not omnipotent. Is he able, but not willing? Then he is malevolent. Is he both able and willing? Then whence cometh evil? Is he neither able nor willing? Then why call him God?" -Epicurus
Lots of anger and good points, but still not getting to the very root of the problem - where does all this money come from? It is not some kind of theoretical question, this is the very key to what is happening here - BANKETEERING http://www.rudemacedon.ca/lgi/banketeering.html - and you're not getting out of the mess until you deal with it.
Green Island - first we take back our brains, then we take our country
See my comment below.
dubet..."what's the goal of life here, anyway?
rebelnow...It's counterintuitive but when skidding sideways in snow or ice, turn into the skid.
Got gold? Got Silver? Got rice & beans?
They are still artificaly cheap if you can find any. It is an investing opportunity.
Got ammo? Got decent karma? Relax prepare to enjoy the slide. It's only a life and I've got a million more where this one came from. It's a karmic investing opportunity.
Interesting times.
Nothing exists.
The repugs have dismissed this type of thing over and over again simply by labeling it "redistribution of wealth."
It is nearly impossible to convince folks that taxes are a good thing, not bad. Managed properly, taxes are an investment in each other, in the common welfare, and in posterity.
The wealthy should pay more, in gratitude and recognition that without the working class their fortunes have no value; without the infrastructure and opportunities possible only by virtual of a sound and growing market, the monopoly game soon ends.
The only legitimate gripe is about misappropriation and mismanagement of taxes, not of the taxes themselves.
The facts have always been there, but I have yet to see anyone convinced differently once they've made up their mind that taxes and government are bad.
I wonder, anyone know what Fed profits and capital gains are per annum, and over the past few decades? The fed is after all, a private for-profit corporation, and for which it realizes gains from, let's see now, would that be interest on debt??? Which would of course be our debt, our national debt, which by their accounting is recorded as an asset!! Anyone have these numbers?
How could taxing the rich and giving to the needy be redistribution of wealth greater than the inheritence the wealthy have had from the already dead? Every person benefits from knowledge, training and infrastructure that they had no part in creating. Your parents didn't have to go to Kazahkistan and figure out which of several thousand apple varieties would go best in you lunch box and the 10,000 years of wheat, barley and hops cultivation have had much to do with the fact that there is a civilization at all.
The vast majority of what any person has is the result of some unnamed ancestor. A single man earns nothing by his labor alone. Pay back what you owe.
Fighting the forces of rather dim lighting wherever they may be found!!
No but I would venture a guess.
We are talking generational revenue, not fast money. It is guaranteed by the income taxes we pay.
Now picture a typical mortgage over 30 years, about 150% return. Then, say 60 years, about 300% or more.
Let's see, $5.5 trillion over a minimum of 60 years, $17 trillion? 2 generations of working adults.
Sooo, if that gain and profit were to be distributed back to the average household instead of private coffers...?
RONALD REGAN MYTH: I never EVER believed it! Here's why:
I was employed in my first full time job in September, 1967 in a California county social service department. I was 22 years old and very wet behind the ears. My first "caseload" as a new social worker consisted of fifty AFDC families [Aid to Families with Dependent Children]. These were the "welfare moms" of the time. Soon after I began this job, the then California Governor, Ronald Regan, in a political move to "cut welfare spending"; put a "freeze" on all "special need's" requests; and make lots of political points. In my particular caseload, this meant the grandmother who was raising her five young grandchildren could not get her anticipated and on order dentures and had to live with no teeth for the better part of the year; another family with young children lived without refrigeration in their rat infested apartment for over a year, etc, etc,etc.
In other words, the "special needs" were for ordinary things that you and I would consider "necessities", but which were not allowed under CA state welfare regulations without significant substantiation by a caseworker. Regan cut all of that out. Saving taxpayer dollars. Now, the result of this publicity stunt was that each caseworker was required to do all of the book balancing for his/her caseload and received overtime pay for the task at a double rate of pay. This "overhead" cost effectively over-spent any possible expenses that were saved by the state and merely transfered a bit of wealth from the poor to the working poor (us slobs working in the welfare dept).
Act II of my Regan experience occurred the following year when I entered the UC, Berkeley school of social work to obtain more training. (Still green and still thinking I could "help" the poor!) After months of attending classes in private homes, bars, restaurants, and wherever else we could find to meet safely as a class with a professor, one unnamed faculty decided that we should use the campus facility which was provided for us for at least one day. (I suggest that for him this was sort of a moral stance.) The "one day chosen", happened to be the day that Gov Ronald Regan in an effort to "restore order" called up the Calif National Guard, who surrounded the campus and tear gassed the entire place from overhead helicopters! We emerged from the classroom, gasping for breath and fresh air (not!) to be confronted by a huge line of guardsmen with loaded bayonets and wearing gas masks. I felt, not only fear and anger, but utter disbelief that this could happed in the United States of America!!
A year after this (1970) we remember the Kent State massacre. (Fortunately, for me, I was not there!)
Unfortunately this "Truth of Regan" turned out to be more than a once in a lifetime event. The entire country continues, after forty years, to have to deal with the monstrous worldwide results of this thinking and behavior which began way back then. We have had the likes of Nixon, Ford, Regan, Bush, and Bush interspersed with a few years of Carter and Clinton (which were not without their sins, as well). Now we face even more open-faced threats with McCain/Palin. While I have many "concerns" about our country under Biden/Obama, I have OUTRIGHT FEAR for the alternative.
Consequently, I feel we must all work to defeat the threat of a McCain/Palin ticket and put away those third party notions and nitpicking differences. This time the stakes are far higher! The issue is not whether we have a "train wreck" (we see that coming), but whether we survive it at all!
Amen. Thank you.
"I find it impossible to figure out what George Bush's motivations for anything are. He may have that impulse because he himself, his family, and his friends are all very rich and they'll save themselves millions of dollars over the years."
First, believing a monkeypuppet really makes decisions can be problematic when you are seeking answers.
Second, although there are great opportunities for the absurdly wealthy to become obscenely wealthy during periods of prosperity... having inside information on downside timing (or better yet, being in a position to control the downside timing), can provide an opportunity to "own the world".
The core tenet of Naomi Klein's disaster capitalism premise, is that the driving force behind capitalism is greed and it is most satisfied by conditions that approach chaos. If it doesn't occur naturally... then the next best approach is to create those conditions.
... and here we are.
an economy based on the private ownership and abuse of our only planet is a falsity...there is no way to continue to manufacture products out of this planet's material without reaching an end...life requires a delicate and expansive balance of interacting life forms and their support structures...too many of these lost or altered, and the house will not stand...we must give up the American Standard of Living...money, electricity, property ownership...
foraging creatures we'll once again be
whether proactive- or reactive-ly
the former may still leave us water and food
the latter may well leave us nothing but screwed
what's the goal of life here, anyway?
Earning as much money as possible by any means possible to buy a 'better' life?
Minimal living in harmony and compassion with others and our natural surroundings, leaving the planet as pristine as possible for the benefit of the souls to follow?
Given no changes in our behavior, and the end of our model's viability as an inevitability, the Crackdown begins to make sense...there will soon be a lot of unhappy campers as those only accustomed to buying any and all of the toys they want will now find themselves fighting for water and food...
No foraging allowed. Either the entire world becomes our garden and the human race defines it's function as promoting biodiversity or the entire world chokes on the smoke of our fires. No third option.
The amount of CO2 in the air is so high now that the only way to mainain our ecosystem is to put the carbon in the soil. That would take the combined efforts of the entire human race. The other option is to maintain some version of business as usual then act surprised when the arctic permafrost melts and dumps huge amounts of methane into the atmosphere cooking us off.
Interesting times.
Fighting the forces of rather dim lighting wherever they may be found!!
There is nothing wrong with deficit spending by the government, provided that the deficit is undertaken to produce something of benefit to the entire economy. The levees are a good example. Healthcare is another good example. Certainly bureaucracy is a problem, but privatizing the bureaucracy does not in any way diminish its size or improve its effectiveness or efficiency. A government that was not paid with taxes would only pay attention to the source of its income. When we pay taxes we make government dependent upon us for its income, which is a good thing. Complaints about taxation redirect attention from where it ought to be: the raising of wages and the remuneration of other victims of our economy … the public, the consumers, the natural world.
As I said yesterday, coincidentally, in Comments on another piece:
The only thing to do when your car starts sliding in the snow is turn up the radio and wait for the crash.
It's counterintuitive but when skidding sideways in snow or ice, turn into the skid. Sliding to the right, turn the wheel to the right. Sliding straight on, pump the breaks. You probably knew that already. However, I have no idea how make those suggestions analogous to the current financial nor'easter about to hit.
First rule when a slide begins on snow or ice.
Remain calm, remove your foot from the accelerator. If you are driving a manual gearbox, downshift to slow the vehicle, resist the reflex to brake. Keep the steering wheel in the direction of the slide. Do not tap the brake until the braking action of the slowing engine slows the car and the vehicle begins to correct. If you even tap those brakes too hard when the car has entered the slide, the car will increase it's slide direction, rather than correcting. Meaning the car will start doing uncontrolled doughnuts....
Bang on. Of course to induce a skid and make a u-turn much quicker during winter than you can in summer... Use the parking brake to lock the back wheels, spin your wheel in the direction you want your car to turn and hope you've planned well enough to avoid any other cars on the road.
I suppose cutting taxes like we've done is a bit analogous to using the parking brake on a freeway covered with black ice, while drinking and having cut out the seatbelt from the car.
You also need to factor in the handling characteristics to perform this on dry pavement. A car will flip if the shocks are bad, a dip in the road or... the steering wheel is turned to lock, as far as it will go, thereby jamming the suspension and tie rods, etc. into an inflexible position.
Try driving a car on only two wheels on a side. The same action of doing a 360 with the emergency brake, minus the emergency brake is the basis. Transferring mass to a pivot point, only the pivot point is higher to the point of balancing on two wheels. Rather than lowering it by using the brake, either will do, and moving the mass reward by changing direction.
Yeah. How about those Roosevelt economy ideas of the WPA etc. It's a lot better than 'Capitalist or dead.'
Try driving a car on only two wheels on a side.
No! Not a chance in hell, Bikes and motorbikes can go on two wheels, but a car has four. I'm fully in the opinion that all four should be used. (grin)
I live in the north, further north than some parts of Alaska, fun skids in winter is cool. On dry pavement it's not cool, think of the damage that sort of driving does to your tires. Now, if only the lake freezes enough this winter I'll be out there again pulling happy spins!
I forgot, with ABS brakes you no longer have to pump them in a skid. I still don't know how to make that a relevant analogy to the financial crisis though.
I don't think it takes complicated economic theories to figure out what's wrong. There are people who have worked hard all of their lives, 40 or 50 years of hard labor. They are struggling to survive. Some will freeze to death this winter according to testimony during the Congressional oil price hearings. There are 28 year-olds who are multi-millionaires because they are hedge fund managers. We have been 'Enronized' - thanks to the Congress.
Capitalism hopefully will die a death in the near future. Then we can move on to a just and fair system that puts people before money.
I agree. Capitalism has had the benefit of being nearly synonymous with democracy in the American brain. While communism and socialism are paired to evil dictators. Has the Bush regime finally given capitalism its due?
I am a bit confused by this economics lesson:
"So Allen Greenspan, everyone's favorite economic hero, stepped in. He cut the rates that the Federal Reserve charged banks to borrow from the government.
The intent was to keep inflation low."
Everything I learned in economics says that keeping the discount rate low is to promote growth and spending--not to keep inflation low. In fact, if there is inflationary pressure, one needs to RAISE the discount rate.
Dr. Dent, you are correct! Interest rates were cut not to fight inflationary pressures, but to flood the market with artificially cheap credit, grow the economy rapidly, and keep the financial system liquid in the wake of the 9-11 attacks. Inflationary pressures have forced the Fed to raise rates in recent years.
Otherwise, a very well thought out article. I'd like to know what thoughts the author has on hyperinflation, and a possible currency crash.
Dr. Dent and Mike Dub,
I agree with both of you. The Fed lowering interest rates, to the big borrowers, including the government, is not an inflationary control. It enables the saving of 'investment banks' at a low rate, including the mortgage giants who had government backing, besides General motors, $50 billion and Ford, amount unknown.
The government will pick up the tab on our backs, the backs of people, not corporations. They do not pay taxes. And when they do, it amounts to less than 1%. This is all you need to know of the current administration's cynical and corrupt collusion with 'Corporate America' to privatize and bankrupt the government. This is the 'Plunge Group,' and the 'Shock Doctrine,' and the warnings Eisenhower all rolled into one big 'Fuck You'.
It is definitely true that this is the greatest nation on earth, but it is only the blind, ignorant and uber rich that think so.
I voted for the first time in 1980, and it made a huge impression on me how so many voters -- claiming a belief in traditional values, a sound economy and a strong defense -- were duped into turning out a happily married, evanglical Christian from a small town, a graduate of the U.S. Naval Academy who saw active duty and who kept a respectible lid on the Federal deficit; and voting for a divorced ex-actor who hardly ever went to church, who lived his adult life in Hollywood, and whose actual military experience was making propaganda films stateside during WWII.
The Republican economic elite similarly have duped millions of hard-working, decent people into believing that prosperity is just around the corner (thanks to huge tax cuts for the rich) and that Roe vs. Wade is about to be overturned any day now (provided they keep control of the White House and recapture the Senate).
The cold, hard truth is that prosperity will never come of tax cuts for the rich -- the point of this superb column. Nor will the GOP ever overturn Roe vs. Wade. Their whole strategy for keep their coalition in line is to continue dangling the prize just out of reach. Because if they ever actually delivered on either, their voting base would melt away.
America is full of good people. But the sad fact is that, by definition, half of the people are below average -- in smarts, in education, in life experiences, etc. And the GOP has done a superb job of conning and keeping a majority of the below-average voters in their column.
Actually, 83 percent of Americans are below average.
Brian,
Check with articles in Scientific American on that statistic. Intelligence is not measured as simply as some believe.
In fact, as large as the middle and upper middle class appears, it could be that easily more than half are 'average.'
There is also the need for "humane' social structures to minimize the discrepancies.
"How many Katrina's and Ike's do we have to have before we understand that it is in the common good - and good for business and good for the economy - that we do so."
Ah, the common good, how many of us are interested in the common good? Hell, how many Americans ever consider the common good?
Scholar, I agree - the majority of Americans seem to be lacking something that keeps us from being duped, over and over again. That so many are willing to vote against their own and their children's best interest is telling.
Balls on political parties, what we need is an informed electorate. The only way to get that is by having a news media that informs, not distorts.
"Balls on political parties, what we need is an informed electorate. The only way to get that is by having a news media that informs, not distorts."
Yup. Sheldon Adelson is said to have become a republican because, once rich, he thought "Why should I have to pay taxes at a higher rate than anyone else?" He answered his question himself. He spent millions on pro-Iraq-war Freedoms Watch and Gingrich's divisive Drill Here Drill Now group. Millions--just a drop in his bucket--to disinform the American People for his personal political agenda.
The major Parties are a problem as are the media, but the ultrarich w/ ulterior motives are behind both.
I agree with the points made here, and they are made clearly. Its common today to look at the Reaganomic Republican policies and say they are a mistake or only benefit the rich, but as banks use promise of repayment as capiltal to make more loans, debt becomes capital. So to what extent is Beinhart correct in explaining the credit bubble as a bubble of the last seven years, and not the engine of our economy since, say, Bretton Woods?
Debt at the government level, not withstanding the hypocrisy of politicians, has usually been a factor on inflation, especially when combined with huge consumer debt and the pressure of corporate financial needs. In fact, prior to the current, and past, say, 25 years of consumer debt, the government and corporate pressures for debt from the 'Fed' fluctuated whenever the government re-established the Treasury Dept under Congressional, Constitutional, control. The last of which was under that great harbinger of the 'Great Depression,' Woodrow Wilson who, ultimately, regretted his decision. After that, and 'Herbie the Hoover' that guiding light for the wealthy during the Depression, the debts of corporations and the government required a war to increase revenue payable to the "Fed.'
Whenever Congress has performed it's Constitutional mandate to 'coin money,' it resulted in more economic growth, stability and peace.
Since the 'Fed' is a privately owned corporation, whose Board are descendents of the Rothschilds, who started the 'central bank' scam 500 years ago, have no national loyalty. Decisions are based on contractual agreements for the tax revenues, actuarial statistical models, military strength and 'available' resources, among others.
When corporate charters could be revoked based on their behavior in the 'commons.' The various faces of the 'Fed' reflects it's notoriety. As corporations more and more became defined by the SCOTUS as 'person' the 'Fed' became less vulnerable to the will of the government and the people.
This history coupled with the deregulation of financial institutions of the 'Great Puppethead Actor, more commonly, affectionately, called 'Bozo the Clown,' has caused more than one 'bubble' in real estate, more like 2.5. And don't forget $6 billion to Chrysler, mixed in with the savings and loan causative factors.
Now, about those railroad subsidies where taxpayers pay the pensions of railroad retirees...
Democrats should quit relying on polling and do what they believe is right for the public. People don't elect you to take a poll and ask them what they think you should do. We're fucking paying you to do your fucking job god damn it. Just do what you have to do and take your fucking chances. If it works, then we're with you. If it doesn't, explain and tell us how you plan to fix it and let us decide if we want to re-elect you ! Geesh !
Nicely put :-)