Friday, April 15, 2011

Republicans to the rescue, emergency legislation introduced

Initial unemployment claims jumped up 26,000 for last week to back up well over 400,000 indicating either job losses or the continued churning of the workforce in favor lower paid workers. Only 45% of adult Americans have
jobs which is the lowest its been since Reagan began his war on the middle class.

The average of 1.1 wage earners in a family in those days of olde when mothers stayed home with the baby had gradually climbed to 1.8 people in a family working. Now it’s often Dad who doesn’t have a job as 58,000 factories disappeared just during the Bush Administration. They only count factories with more than 25 employees, small businesses disappearing aren’t counted or the number would be really scary.

The Consumer Price Index is up sharply while core inflation continues to be weak. Translation: gas and food are shooting up toward record levels while the things we can’t afford anymore are not increasing fast enough to indicate any economic recovery. This includes wages that are officially flat but are probably going down if you don’t count the managerial class.

A bit of historical fact (right wingers cover your ears): The Soviet Union was called “socialist” but everything was organized into giant monopolistic corporations controlled by the managerial class who lived in luxury just like American corporate executives. The had a democracy but elections were a joke with the winners picked by the managerial class ( “it doesn’t matter who votes but who counts the votes” - That was either Stalin or Diebold, I can’t keep them straight)

The Obama Administration in persons of the FDIC, the Futures Commodity Trading Commission,  the Federal Reserve and the SEC have begun issuing rules that when implemented in a few months could for practical purposes halt most of the speculation in derivatives. These rules would require substantial collateral be posted in order buy and sell derivatives that are now often sold with little or nothing backing them. Derivatives are like commodity futures contracts but involve no actual commodities. Oil companies, airlines and farmers would be exempted to some degree if they own or buy actual commodities.

Banks, hedge funds and other parasites would need to put up cash or suitable collateral to guarantee losses. In theory this should knock 20 to 40% off the price of gas for example. The devil is in the details of course but they must be doing something right because the Republicans in the House have introduced emergency legislation to force a halt to all regulation until the end of 2012.

Goldman Sachs has been advising clients to sell their futures contracts and this was driving down oil for a few days but the trend has started going up again. This reversal was based on the reports that the Saudis who had promised to pump more oil to replace absent Libyan crude were lying and production hasn’t increased.

Not that they really needed to pump more oil as there are record supplies on hand already. There are also record amounts invested in the derivatives market estimated to exceed 600 trillion USD at any given time. The total economic activity of the entire planet is no more than 60 trillion USD per year. That’s everything sold, every wage paid, all economic activity everywhere from Wall Street to the darkest slum in India.

Of course nobody knows for sure how many derivatives there are since this activity is all done on dark markets, like heron trafficking only more deadly. You only get some idea what’s going on by the amount of money moving around or when it crashes the world economy like it did in 2008. (it wasn’t really poor people not paying their mortgages)

Wednesday, April 13, 2011

and he lifted the stick high over his head

President Obama invited the Republicans to his speech today and didn’t give them copies in advance. Obama proceeded to tear off their manhood and displayed it on a stick for the approval of the crowd. He started with laying the blame for the debt crisis squarely where it belongs. Keep in mind that Clinton’s long term budget would have completely paid off the National Debt by 2008, Bush called the Clinton surplus a “peace dividend” from Reagan having won the cold war and was determined to get rid of the extra money.

Obama on the Republican‘s spending, “To give you an idea of how much damage this caused to our national checkbook, consider this: in the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years.”

Later Obama lays out what the long term goal of the Republican’s is as the debt grows, “And that means more of your tax dollars will go toward paying off the interest on all the loans we keep taking out. By the end of this decade, the interest we owe on our debt could rise to nearly $1 trillion. Just the interest payments.”  In reality it could get much worse much faster if Republicans were to gain control. Much of the debt is paying less than 1% interest because of the world monetary crisis and could jump to 10 or 20 percent as it did in the early 80s since the bulk of the debt is on short term notes.

Most Americans think the Federal budget is spent on welfare and foreign aid but Obama lays it out, “So here’s the truth. Around two-thirds of our budget is spent on Medicare, Medicaid, Social Security, and national security. Programs like unemployment insurance, student loans, veterans’ benefits, and tax credits for working families take up another 20%. What’s left, after interest on the debt, is just 12 percent for everything else. That’s 12 percent for all of our other national priorities like education and clean energy; medical research and transportation; food safety and keeping our air and water clean.”

Obama continues, “Worst of all, this is a vision that says even though America can’t afford to invest in education or clean energy; even though we can’t afford to care for seniors and poor children, we can somehow afford more than $1 trillion in new tax breaks for the wealthy. Think about it. In the last decade, the average income of the bottom 90% of all working Americans actually declined.”

The President quoting a Republican, “The fact is, their vision is less about reducing the deficit than it is about changing the basic social compact in America. As Ronald Reagan’s own budget director said, there’s nothing “serious” or “courageous” about this plan. There’s nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires. There’s nothing courageous about asking for sacrifice from those who can least afford it and don’t have any clout on Capitol Hill. And this is not a vision of the America I know.”

There is much more to this speech and I personally think it is the best Progressive speech any President has given since Eisenhower’s Cross of Iron speech. It draws a real line in the sand and it is a rallying cry for Progressives that should break through to all the Reagan Democrats. People in the  middle class and the formally middle class who saw the Battle of Wisconsin as a wake up call. This is the first moment of real optimism that I’ve had in sometime.

The entire text and a video of Obama’s speech is available at

Good afternoon. It’s great to be back at GW. I want you to know that one of the reasons I kept the government open was so I could be here today with all of you. I wanted to make sure you had one more excuse to skip class. You’re welcome.

Tuesday, April 12, 2011

Wars are always about money

Today marks the start of the Civil War with the siege of Fort Sumter that lasted a mere 30 hours reducing its obsolete fortifications to ruin. Incredibly no one on either side was killed in the battle but in the next four years fully 3% of Americans would die. In the south 30% of service age men were killed, twice the rate of WWI in Europe and that was referred to as the “lost generation.”

Today’s historians are campaigning to make the Civil War all about slavery while the majority of the population continues to believe it was about “state’s rights”, what ever they think that means. Make no mistake the war was started by the 800 or so wealthy slaveholders in the south and they bloviated greatly about the northern abolitionists but the war was simply about money. Jefferson Davis fantasized about a Confederate Empire stretching into Brazil and yes it would have involved slavery then and forever.

This notion of new greatness to come had wide appeal in the South after the bank panic of 1855 had brought the cotton trade based economy to its knees and the banks were mostly in the North. The object of the attack on Fort Sumter was to capture the Federal Customs House as was subsequently done in all the port cities. Historians discount the importance of this based on the show down over this issue a generation earlier when the south backed down but it was the first thing the South did and you have to follow the money.

The 400 families that control more wealth today than the bottom 160 million Americans see themselves in the same light. Like the Southern gentleman planters they are destined to rule by birthright.  Endless war for a global empire is even more ambitious than the dreams of Jefferson Davis but so far they have been much more successful. We still have the Union but the Freedoms won with some much blood are circling the drain of history and likely to disappear forever.

Monday, April 11, 2011

Borrowing from our Children's future

Obama "won" another round in his political struggle with the Republicans by giving them as yet unspecified but by all accounts draconian budget cuts in return for not shutting down the government and collapsing the economy if not western civilization itself.

But the Republicans make no secret that they will be back demanding still more cuts for the new budget year that begins October first and more immediately they will demand “something big“ as speaker Boner put it in return for increasing the debt limit.

The Republican answer to Obama’s status quo is the Ryan budget and it is such a ridiculous document that even a tea-bagger should be able to see how absurd it is. Among the jewels it contains are forecasts of an increase in Federal revenue based on a 2.3% unemployment rate. Five percent is considered full employment, even during WWII it didn't get as low when anybody with a pulse could get a job or was drafted.

Ryan also forecasts that the older the baby boomers get, the lower the cost of Medicare will be. His mechanism for this is to eliminate Medicare insurance and replace it with vouchers to buy private insurance. This will really only save money as the people who can't pay the matching premiums out of pocket or are too sick and un-insurable will have their vouchers go unused while they die.

Social Security is also a target as the 3 trillion in the Social Security Trust Fund money is not to be repaid to retirees under the Republican plan. George Bush called the money contributed during the last thirty years and held as Treasury Bonds worthless pieces of paper. Bush and other Republicans had no problem spending the money to enrich war contractors or giving it to rich Republican cronies in tax breaks but repayment to the people to whom it is owed is not on the table.

The Republican budget also assumes that Defense spending and other mandatory spending (things like interest on Reagan's debt) and non-defense discretionary spending will drop from the current 12% of GDP to 3.5% of GDP. (Defense contractors and red states with military bases take note, not that any of these cuts will really happen)

There are also trillions in unspecified cuts in order to justify slashing the top rate of income tax rate for the rich and corporations to a maximum of 25%. No pretense is made of cutting taxes for the run of the mill taxpayer. In fact the deference between Obama’s budget and Ryan’s is about 3% but under the Republicans the poor will suffer and die while the rich will reap trillions in windfalls.

The Republicans do all this based on the panic brought about by the debt crisis. There is no “debt crisis”. It is a simple fact that you can’t borrow from our children’s future. Every penny borrowed of the 14 trillion currently owed did not come from the future but represented taxes the rich did not pay. And we did not “borrow” it from the Chinese as evidenced by your tax refund or Social Security check. It is paid in USD and not in Yuan.

Wall Street is “concerned” about a possible failure to expand the debt limit and you see this all over the corporate news because they don’t want Americans catching on to the scam. Dick Cheney said “Reagan taught us that deficits don’t matter”. He was right if we realize what is really going on. We don’t really owe this money, it’s just uncollected taxes.