Saturday, October 15, 2011

Rhyming candidates

The chosen one is Perry, Whine, Whine, Whine
Pizza slices taxed by Cain, Nine, Nine, Nine
Billions from outsourcing by Mitt, Mine, Mine, Mine

Feel free to suggest more verses.

Friday, October 14, 2011

Corn as a Weapon of Mass Destruction

The number of people seeking unemployment compensation declined slightly last week but remains stubbornly above the magic 400,000 level that is regarded as the breakeven point on job creation.

Business statistics for August were all positive with substantially improved sales at the factory and wholesale levels. Inventories continued to increase for the 20th straight month indicating an overall positive business climate looking forward. Retail sales jumped 1.1% in September, almost double what economists were predicting. Ten of thirteen retail categories were up, led by auto sales and clothing retailers who also saw a big increase. The numbers were good enough to spark a 4% run up in commodity prices.

China appears to be getting a handle on inflation, now down to 6% for September. This news and a slightly more hopeful outlook concerning the Euro zone banking crisis helped drive the dollar down against the Euro which also pushed up oil prices. The USDA announced that China will buy 35 million bushels of corn this season despite China having a record crop itself. China is having a problem with food price inflation and needs to increase grain stockpiles.

Until 2009, China was a net exporter of corn but can’t keep up with the demand where it’s used mostly for hog feed. The US produces about 12 billion bushels, so China’s purchase amounts to 0.3% of production but this was still enough to push the corn price on the Chicago Board of Trade up a dime. This represents 1.2 billion dollars across the entire US market.

About 30% of China’s corn crop is used for manufacturing, mostly to make alcohol and starch which are complimentary processes. China and the US have about the same acreage dedicated to corn production but the US produces twice the total bushels, China is however well into a modernization program.

Much is made about China’s huge population, estimated to be four times that of the US, but China isn’t dependent on grain exports to bring in cash the way the US is. China is developing new food production in Africa as well as major trade deals with Brazil, and unlike the US, China can pay for what it wants with manufactured goods and technology development deals.

The US has long used grain as a weapon, destabilizing governments and forcing the migration of hungry people. The entirety of the US “illegal” immigrant problem represents the results of using corn as weapon to displace 8 million Mexican farmers by way of NAFTA. By dumping corn into Mexico at half price, American companies like Cargill drove the people off their land. Coincidently the same companies were on hand to recruit them to work in their US processing plants. Corn is no longer cheap in Mexico as it is now imported from the US at much higher prices. It’s called capitalism, get used to it or fight back.

Funny if not Tragic

Herman Cain on the poor, "Let them eat pizza"

Wednesday, October 12, 2011

Engineering the People's Currency

The Currency Exchange Rate Oversight Reform Act or as it might be more accurately described as The China Tariff Act passed the Senate 63-35 last night. It survived mainly from the efforts of Jeff Sessions of Alabama who supplied the needed Republican votes to pass it. A long standing proponent of trade deals and an anti-protectionist, this is an unusual move for the Senator that isn’t even up for re-election.

China upped its rhetoric sharply by issuing warnings of another Great Depression like the one “caused” by the 1930 Smoot-Hawley Act that raised US import tariffs sharply. This has always been a popular nugget of wisdom from the conservative re-writing of history. They often tie Smoot-Hawley to FDR despite him not taking office until 1933. US trade with the world in 1930 was a rather insignificant part of the economy and trade didn’t decline more than one would expect with a worldwide depression already in full swing.

The hue and cry on the corporate news is that we dare not anger China or they will dump all of our debt, and this would spell disaster for the US. In fact US Treasuries are selling at premium and China doesn’t hold much more than a trillion anyway, as China has been wisely limiting its exposure. The worst that would happen is that the Federal Reserve would buy up any surplus from the market under its policy of holding interest rates down. China would than hold another trillion in USD that it would need to spend or invest somewhere. Sounds more like a bonus rather than a threat.

The Republicans in the House have been adamantly opposed to passing the bill, but now information has gone out that they will likely pass some version of the Bill early in the year. House Republicans are of course all up for re-election, and their popularity has sunk to the point that the Chamber will almost certainly swing back to the Democrats.

China did start pushing its currency up on Monday with a 0.6% increase in value compared to the USD, but they pushed it down again 0.4% on Tuesday. Nothing happens to the value of the Renminbi (The People’s Currency) that isn’t engineered by the Chinese Government. China is a totalitarian oligarchy controlled by a committee of six even if the western media calls their Comrade Chairman by the erroneous title of President.

In other words they are capitalists, but by our standards, they are benevolent capitalists. China has made fantastic strides in the past 30 years while our capitalists are taking us head long toward the 18th century. Our economies are expected to pass by each other within five years as we go down and China up. Get used 18th century feudalism or fight back.

Tuesday, October 11, 2011

Spread the Enlightenment Liberally or else

The so-called Volcker Rule (named for Paul Volcker, Fed Chairman under Carter and Reagan) is another step closer to being implemented after a 3-0 vote by the FDIC. Part of the Dodd-Frank Act this rule would reinstate one of the core principles of the Glass-Stegal Act that prohibited banks that accept deposits from using their own money to gamble with on the markets. The rule still requires the approval of the SEC and the Treasury Dept, but is on track to be implemented after the end of the public comment period on Jan 13.

Conservatives argue that the government has no right to tell the banks that they can’t use their own money anyway they want, or do what ever they want with your money for that matter. Proprietary trading was banned on June 16, 1933 only 90 days after FDR took office amid the wholesale collapse of the banking system. This Act also created a firewall between banks and other institutions like investment banks as well as insurance companies and lasted until the Gramm–Leach–Bliley Act or the Financial Services Modernization Act of 1999. It could be more accurately described as the Return to 1929 Act.

By 2006 the banks were already under water and in 2008 they were wiped out. A 14 trillion dollar bailout from the Federal Reserve was the fix and the 700 billion TARP funding from Congress was just window dressing that the banks could pretend to pay back. This made the Wall Street parasites appear to be the Masters of the Universe again when they were still trillions in the hole.

The problem with proprietary trading is that the bank is risking the capital it’s supposed to hold to protect depositors from any shock to the bank. The Bush Adm also dramatically reduced the capital reserve requirements so that the banks basically had no money to backup the bets they were making anyway, let alone protect depositors.

In fact the Dodd-Frank Act will eliminate a big chunk of the cash flow on Wall Street, and the banks are already starting to lay people off. If things get bad enough they maybe required to actually start loaning money to small business again, just to have something to do.

There is a problem with Dodd-Frank in that it gives the Federal regulatory agencies broad powers to write rules to control the banks and even break the big banks up if they get out of hand again, but that all of this can be undone if the Republicans ever come back to power. On the other hand this is nothing new, the Federal Government already has expansive powers to keep corporations and banks from doing most of the things that the Occupy Wall Street protesters are outraged about. Laws that are still on the books from the New Deal and even from the Progressive Era before that, they just have been ignored for the last 30 years.

The word Liberal comes from Liberal Enlightenment, the idea that all the people are enlightened (that is they can make decisions for the benefit of all) and not just royalty and the church are capable of such things. Today conservatives measure enlightenment or the “right to rule” as being a function of wealth, the more wealth they have, the more enlightened they are. Until enough people understand what is really going on, the “right to rule” will continue to be a function of wealth. Spread the enlightenment liberally or get used to being ruled by the rich.

Monday, October 10, 2011

Pull the band aid off quickly and get to the gangrene

Tuesday’s Republican debate promises to feature Herman Cain front and center since he now is contending for the lead in some polls. His 666 economic plan, (I’m sorry, the 999 plan, its truly evil aspects get me confused) is popular with about 25% of Republicans which is driving his poll numbers.

Even Chris Wallace on Fox News Sunday questioned the wisdom of taxing poor peoples’ food and clothing at 9%. Cain’s retort was that he wouldn’t tax big ticket items like cars so they would get a break there. Okay that would be a huge break for the poor when the go down to the Mercedes dealer where Herman Cain shops. On a $200,000 sport coupe they could enjoy an $18,000 tax windfall, which about the same as the income of a family of four that are living slightly below the poverty line.

The fact is that the average adult in the bottom 90% of the population makes less than $30,000/year. That’s why the corporate press always quotes family income instead to make the number sound more palatable at around $51,000/yr as the average family has 1.8 workers. This is up from 1.1 workers pre-Reagan. Even at that, family income has slipped about $3000 since the current Depression started, or probably even lower by now as the data isn’t that up to date.

The working poor would also pay a flat income tax of 9% with no deductions instead of the zero they pay now if they are in the bottom half of earners. Cain counters that he would do away with the Fica tax of 14% so they would really pay less. This would be true for the self employed, but not for the working poor whose employers would gain the windfall on their half of the tax while workers’ taxes increased.

The 999 plan claims to increase government revenue and Herman Cain has a panel of economists that tell him so. He won’t name any of these experts however, but he says they are names you would know. (are they the same as names of Communists in the State Dept? [Ancient history reference]) But, Michael Linden, an actual expert on taxes and budget at the Center for American Progress plugged the triple 9 into the 2007 Federal Budget, and he determined that Federal revenue would have been half as much under the pizza mogul’s plan.

The symmetry of the nines would have increased taxes on the middle class by about a third, and the top one percent would have enjoyed a 60% tax cut. Total revenue would have only been about 1.3 trillion or just enough to fund the Pentagon, the interest on the debt and little or nothing else. Not a problem if you don’t mind the government borrowing money, as the rich are happy to buy Treasury Bonds that pay nearly zero interest. That’s what happens when you let the Rich make all the money they want, by any means they want, and then don’t tax them, the money just piles up. Sort of a King Midas parable here, all that the rich touch turns to gold but they can’t spend it. They can however buy a democratic republic and turn it into a kingdom.

I’m really not sure what would happen if you did do something as stupid as this plan, but hey, what we’re doing now isn’t really any different. The bottom half of the country can’t live on what they make, the 40% above them only get by on two jobs per family. The rich buy 1.5 trillion in bonds every year and more trillions pile up corporate coffers unspent. The country isn’t broke, the one percent have all the money.

We might as well go with the 999 plan, it would get it all over sooner. Democracy was fun while it lasted. Oligarchy will be even more fun for the 1%. Get used to the oligarchy or fight back.