Wednesday, May 29, 2013

A Place Upstream, if you can find it

A large sink hole opened in a DC street only blocks from the White House, it turned out to be a washed out sewer line from an improvement project done back in 96, that's 1896. This is not an unusual situation for American cities who are dependent on drainage projects done during during the Progressive Era, or at best during the New Deal. As little as possible has been done to make America work since the Reagan Revolution defined 'government as the problem, not the solution'.

The estimated $3 trillion shortfall in maintenance is just public infrastructure like the thousands of bridges waiting to collapse, but doesn't include  privately held assets like high pressure natural gas lines that are nothing but ticking time bombs. There are also the abandoned chemical waste dumps, the overloaded and failing mine waste containment ponds, or those unregulated fertilizer and chemical plants waiting to go off like a small nuke. Then there's the actual nuclear plants and their massive hot fuel containment ponds waiting to do a Chernobyl dead zone on a large swath of North America.

"But we don't have any money for that", whine the conservatives. Stuff a glowing enriched plutonium fuel rod where the sun don't shine. The fact is that the US government can and should by any and all unused production and put it to work. There are 20 million people without full time work, they could go to work tomorrow. US factories are at 80% capacity, buy everything they can make if it can be used to improve the infrastructure of the United States. And you can bet if the Uncle Sam were to let bids somebody would step up to produce it. Instead of factories at 80% of capacity, they would find a way to produce 200% of capacity.

Where would the money come from? The US is selling Treasuries at near zero interest, and failing that we can print our own money. As long as the creation of money doesn't exceed the supply of goods and services available there will be no serious inflation. Building the economy will produce the additional the revenue needed to 'pay it back', especially if the ultra-rich are no longer allowed to dodge taxes. If the rich were required to pay the current tax rate on on their income and not dodge taxes that alone would bring in an additional one trillion dollars a year without addressing offshore or corporate tax evasion. And the top marginal tax rate on really huge incomes needs to be 100%. The 'Death Tax'? Don't wait for them to die to take back the excesses of the last 30 years, unless they prefer it to be a Death Tax, then accommodate them.

Of course you would need to do all the other things that are required for a successful economy, like a trade policy, a manufacturing policy, an education policy, a farm policy, an energy policy, a banking policy. You get the idea, put smart people in charge, tell the conservatives to sit down and shut up. That is the ones you don't put in prison, and there are plenty in line for a long stint in orange.

So much for what we should be doing. Let's look at what is really happening in terms of the US becoming a third world country: a company from the People's Republic of China is seeking to purchase the biggest pork processor in the US. Gee, why would they want to do that? Pork is a favorite in China and since they have more middle class people than we have people, they need more ribs and chops. It takes corn to make nice fat pigs and we produce a lot of corn. China actually has as many acres of corn as we do, but half the yield. They would like to shift their acres to other crops, so they will get one of their colonies to produce the pigs. That would be us.

Factory farm pork production has actually been leaving the US because manure runoff has been a problem for the locals downstream. A big factory farm can produce the equivalent of the sewage from a mid-sized city, which they prefer to hold in storage ponds waiting for a big rain storm to overflow the pond. The Chinese might actually do a better job with this since they aren't crazy like US corporations, or maybe it's in one of those 'free trade' deals that state and local government can't interfere with them in anyway.  

Where does China get the money to buy something this big? Well, they aren't paying for it in Chinese Yuans. Just as they don't really loan us money the way the right would like us to believe, they are paying in USD from the $700 billion trade deficit that we run year after year. Every time you buy anything at Walmart you are helping China take over the world. Remember when we had to fight Communism? Communism won thanks to the Conservatives.  Twitter @BruceEnberg  Or meet me upstream from the 'manure holding pond', if there is such a place.







Tuesday, May 28, 2013

Not much of anything is as it seems

The stock market continues to set new record highs despite all efforts by the un-elected Fascist Kenyan Socialist in the WHITE House here to destroy America. Housing prices are rising rapidly, consumer confidence is way up, and durable goods manufacturing is up nicely. All rigged numbers from the lib-rall gub-er-ment, of course.

Of course the truth is that things are not as they appear. The right wing pundits are just plain wrong, but to give Obama credit for anything other than just keeping us from going off the cliff wouldn't be correct either.

The rightwing is sure that it's just because Obama (actually the Federal Reserve) is printing $85t a month in new money that is driving up the stock market. They explain that because bond interest is so low that people are looking for higher returns. Actually no small investor is buying stocks. The buying is partly from retirement funds who have no choice because stock investments is what they offer, and hey it's not their money, they get paid even if you lose all yours. Then there are the high speed traders that don't hold any stock for more than a few seconds, but mostly from the companies themselves.

That's right, the stock market is way up because the companies listed on the market are pumping up their own stock price with massive stock buy back programs. The executives who get paid in stock pay half the normal tax rate when they sell their stock, so you can see the advantage to keeping the price of their company's stock as high as possible.

So where does the trillions that the Fed has been printing go to? Well, it goes to rich people and big banks who are selling bonds on the open market that they have been holding. The Fed buys them from bankers at a premium price. The idea of Quantitative easing is that the 'cash hoarders' will then need to invest in something else, loan money to home buyers for example. The premium price for bonds is the carrot, the promise of inflation by printing just a little too much money thus creating 2% inflation is the stick. In a zero interest, zero inflation environment the rich tend to hoard cash waiting for deflation to kick in. If you can buy real wealth for ten cents on the dollar after an asset crash that beats any return on your investment short of visiting banks wearing a mask, or if you can swing it, wearing an expensive suit.

Oh, and another place that rich people are putting money is into corporate bonds, that's the main reason that corporations have trillions in cash on hand, that and tax evasion.

So there is constant talk of 'bubbles', you know, prices are rising too fast, the Fed is printing too much money, Wiemar Republic, wheelbarrows of money to buy bread, Hitler, Hitler, buy Glenn Beck's gold, there's a shortage of gold don't you know. (heh heh heh)

The fact is that the economy is going to collapse, no ifs, ands, or buts. It will be in the next four years or less. We have no trade policy, flat wages, no manufacturing policy, continued cash hoarding by the rich, and too big to fail banks run by too big to jail bankers. The one caveat is that the Dems could win the 2014 election, actually fund Dodd-Frank along with some other things that are already in place, and Obama might morph into 'Barry' Truman. A New Deal could bring back the American Dream. That could happen, no really, it could. Well, no promises. Twitter @BruceEnberg  Or tell me in person on the bread line.